Table of Contents
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, 2009
Commission File No. 1-12504
THE MACERICH COMPANY
(Exact name of registrant as specified in its charter)
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|
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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)
|
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 for 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 has submitted electronically and posted on its corporate web site, if any, every Interactive Data File required to
be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding twelve (12) months (or for such shorter period that the registrant was required to
submit and post such files).
YES
o
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 7, 2009 of the registrant's common stock, par value $.01 per share: 79,299,665 shares
Table of Contents
THE MACERICH COMPANY
FORM 10-Q
INDEX
2
Table of Contents
THE MACERICH COMPANY
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except par value and share amounts)
(Unaudited)
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|
|
|
|
|
|
|
|
|
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June 30,
2009
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December 31,
2008
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ASSETS:
|
|
|
|
|
|
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|
Property, net
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|
$
|
6,360,530
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|
$
|
6,371,319
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|
Cash and cash equivalents
|
|
|
57,889
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|
|
66,529
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|
Restricted cash
|
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|
69,970
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|
61,707
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|
Marketable securities
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|
27,462
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|
|
27,943
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|
Tenant and other receivables, net
|
|
|
92,526
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|
|
118,374
|
|
Deferred charges and other assets, net
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|
317,952
|
|
|
339,662
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Loans to unconsolidated joint ventures
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|
|
638
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|
932
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|
Due from affiliates
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|
7,815
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|
|
9,124
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|
Investments in unconsolidated joint ventures
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|
1,034,166
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|
|
1,094,845
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|
|
|
|
|
|
|
|
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|
Total assets
|
|
$
|
7,968,948
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|
$
|
8,090,435
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|
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|
LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND EQUITY:
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|
|
|
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Mortgage notes payable:
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|
|
|
|
|
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|
Related parties
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$
|
369,208
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|
$
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306,859
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Others
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3,315,409
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|
3,373,116
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|
|
|
|
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|
Total
|
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3,684,617
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|
|
3,679,975
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|
Bank and other notes payable
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|
2,272,523
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|
|
2,260,443
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|
Accounts payable and accrued expenses
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|
77,137
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|
114,502
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|
Other accrued liabilities
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|
262,544
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|
289,146
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Investments in unconsolidated joint ventures
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65,071
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|
80,915
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Preferred dividends payable
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|
207
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|
|
243
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|
|
|
|
|
|
|
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Total liabilities
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6,362,099
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6,425,224
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|
|
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|
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Redeemable noncontrolling interests
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23,327
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23,327
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Commitments and contingencies
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Equity:
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Stockholders' equity:
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Common stock, $.01 par value, 250,000,000 and 145,000,000 shares authorized, 79,315,402 and 76,883,634 shares issued and outstanding at June 30, 2009
and December 31, 2008, respectively
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|
793
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|
|
769
|
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|
Additional paid-in capital
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|
1,763,120
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1,721,256
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Accumulated deficit
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|
(383,503
|
)
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|
(274,834
|
)
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|
Accumulated other comprehensive loss
|
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|
(35,936
|
)
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|
(53,425
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)
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|
|
|
|
|
|
|
|
|
Total stockholders' equity
|
|
|
1,344,474
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|
|
1,393,766
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|
|
Noncontrolling interests
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239,048
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|
|
248,118
|
|
|
|
|
|
|
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Total equity
|
|
|
1,583,522
|
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1,641,884
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|
|
|
|
|
|
|
|
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Total liabilities, redeemable noncontrolling interests and equity
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|
$
|
7,968,948
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$
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8,090,435
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The
accompanying notes are an integral part of these consolidated financial statements.
3
Table of Contents
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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2009
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2008
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2009
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2008
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|
Revenues:
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Minimum rents
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$
|
123,504
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$
|
129,831
|
|
$
|
250,976
|
|
$
|
260,979
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|
Percentage rents
|
|
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2,686
|
|
|
2,954
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5,487
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|
|
5,658
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|
Tenant recoveries
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|
62,530
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|
|
66,913
|
|
|
127,441
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|
134,570
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|
Management Companies
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9,345
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|
|
10,382
|
|
|
17,885
|
|
|
20,073
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|
|
Other
|
|
|
7,850
|
|
|
6,711
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|
|
14,904
|
|
|
13,041
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|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
|
205,915
|
|
|
216,791
|
|
|
416,693
|
|
|
434,321
|
|
|
|
|
|
|
|
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|
Expenses:
|
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|
|
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|
|
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|
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|
Shopping center and operating expenses
|
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|
67,554
|
|
|
69,008
|
|
|
138,326
|
|
|
139,631
|
|
|
Management Companies' operating expenses
|
|
|
18,872
|
|
|
20,529
|
|
|
42,302
|
|
|
38,872
|
|
|
REIT general and administrative expenses
|
|
|
4,648
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|
|
4,135
|
|
|
9,906
|
|
|
8,538
|
|
|
Depreciation and amortization
|
|
|
63,740
|
|
|
57,474
|
|
|
128,651
|
|
|
118,129
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
154,814
|
|
|
151,146
|
|
|
319,185
|
|
|
305,170
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Related parties
|
|
|
6,254
|
|
|
3,683
|
|
|
12,044
|
|
|
7,379
|
|
|
|
Other
|
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|
65,660
|
|
|
68,359
|
|
|
129,808
|
|
|
139,032
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
71,914
|
|
|
72,042
|
|
|
141,852
|
|
|
146,411
|
|
|
Gain on early extinguishment of debt
|
|
|
(7,127
|
)
|
|
|
|
|
(29,601
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total expenses
|
|
|
219,601
|
|
|
223,188
|
|
|
431,436
|
|
|
451,581
|
|
Equity in income of unconsolidated joint ventures
|
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|
14,556
|
|
|
24,946
|
|
|
30,482
|
|
|
47,244
|
|
Income tax benefit
|
|
|
380
|
|
|
689
|
|
|
1,181
|
|
|
388
|
|
(Loss) gain on sale or write down of assets
|
|
|
(25,605
|
)
|
|
489
|
|
|
(24,832
|
)
|
|
1,163
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income from continuing operations
|
|
|
(24,355
|
)
|
|
19,727
|
|
|
(7,912
|
)
|
|
31,535
|
|
|
|
|
|
|
|
|
|
|
|
Discontinued operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) gain on sale of assets
|
|
|
|
|
|
(113
|
)
|
|
(17
|
)
|
|
99,150
|
|
|
(Loss) income from discontinued operations
|
|
|
(11
|
)
|
|
414
|
|
|
(20
|
)
|
|
1,007
|
|
|
|
|
|
|
|
|
|
|
|
Total (loss) income from discontinued operations
|
|
|
(11
|
)
|
|
301
|
|
|
(37
|
)
|
|
100,157
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income
|
|
|
(24,366
|
)
|
|
20,028
|
|
|
(7,949
|
)
|
|
131,692
|
|
Less net (loss) income attributable to noncontrolling interests
|
|
|
(2,630
|
)
|
|
3,468
|
|
|
(229
|
)
|
|
20,068
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income attributable to the Company
|
|
|
(21,736
|
)
|
|
16,560
|
|
|
(7,720
|
)
|
|
111,624
|
|
Less preferred dividends
|
|
|
|
|
|
835
|
|
|
|
|
|
3,289
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income available to common stockholders
|
|
$
|
(21,736
|
)
|
$
|
15,725
|
|
$
|
(7,720
|
)
|
$
|
108,335
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per common share attributable to Companybasic:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income from continuing operations
|
|
$
|
(0.29
|
)
|
$
|
0.21
|
|
$
|
(0.12
|
)
|
$
|
0.31
|
|
|
Discontinued operations
|
|
|
|
|
|
|
|
|
|
|
|
1.17
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income available to common stockholders
|
|
$
|
(0.29
|
)
|
$
|
0.21
|
|
$
|
(0.12
|
)
|
$
|
1.48
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per common share attributable to Companydiluted:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income from continuing operations
|
|
$
|
(0.29
|
)
|
$
|
0.21
|
|
$
|
(0.12
|
)
|
$
|
0.30
|
|
|
Discontinued operations
|
|
|
|
|
|
|
|
|
|
|
|
1.17
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income available to common stockholders
|
|
$
|
(0.29
|
)
|
$
|
0.21
|
|
$
|
(0.12
|
)
|
$
|
1.47
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of common shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
77,270,000
|
|
|
73,780,000
|
|
|
77,082,000
|
|
|
73,061,000
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
|
77,270,000
|
|
|
86,781,000
|
|
|
77,082,000
|
|
|
88,465,000
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these consolidated financial statements.
4
Table of Contents
THE MACERICH COMPANY
CONSOLIDATED STATEMENTS OF EQUITY
(Dollars in thousands, except per share data)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders' Equity
|
|
|
|
|
|
|
|
|
|
Shares
|
|
Par
Value
|
|
Additional
Paid-in
Capital
|
|
Accumulated
Deficit
|
|
Accumulated
Other
Comprehensive
Loss
|
|
Total Stockholders' Equity
|
|
Noncontrolling
Interest
|
|
Total
Equity
|
|
Redeemable
Noncontrolling
Interests
|
|
Balance January 1, 2009
|
|
|
76,883,634
|
|
$
|
769
|
|
$
|
1,721,256
|
|
$
|
(274,834
|
)
|
$
|
(53,425
|
)
|
$
|
1,393,766
|
|
$
|
248,118
|
|
$
|
1,641,884
|
|
$
|
23,327
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
|
|
|
|
|
|
|
|
|
(7,720
|
)
|
|
|
|
|
(7,720
|
)
|
|
(521
|
)
|
|
(8,241
|
)
|
|
292
|
|
|
Interest rate swap/cap agreements
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17,489
|
|
|
17,489
|
|
|
|
|
|
17,489
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
(7,720
|
)
|
|
17,489
|
|
|
9,769
|
|
|
(521
|
)
|
|
9,248
|
|
|
292
|
|
Amortization of share and unit-based plans
|
|
|
171,612
|
|
|
2
|
|
|
8,837
|
|
|
|
|
|
|
|
|
8,839
|
|
|
|
|
|
8,839
|
|
|
|
|
Employee stock purchases
|
|
|
23,202
|
|
|
|
|
|
368
|
|
|
|
|
|
|
|
|
368
|
|
|
|
|
|
368
|
|
|
|
|
Distributions paid ($1.40) per share
|
|
|
|
|
|
|
|
|
|
|
|
(100,949
|
)
|
|
|
|
|
(100,949
|
)
|
|
|
|
|
(100,949
|
)
|
|
|
|
Distributions to noncontrolling interests
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(16,233
|
)
|
|
(16,233
|
)
|
|
(292
|
)
|
Issuance of common shares
|
|
|
2,236,954
|
|
|
22
|
|
|
36,216
|
|
|
|
|
|
|
|
|
36,238
|
|
|
|
|
|
36,238
|
|
|
|
|
Contributions from noncontrolling interests
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,741
|
|
|
4,741
|
|
|
|
|
Other
|
|
|
|
|
|
|
|
|
(515
|
)
|
|
|
|
|
|
|
|
(515
|
)
|
|
|
|
|
(515
|
)
|
|
|
|
Redemption of noncontrolling interests
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(99
|
)
|
|
(99
|
)
|
|
|
|
Adjustment of noncontrolling interest in Operating Partnership
|
|
|
|
|
|
|
|
|
(3,042
|
)
|
|
|
|
|
|
|
|
(3,042
|
)
|
|
3,042
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance June 30, 2009
|
|
|
79,315,402
|
|
$
|
793
|
|
$
|
1,763,120
|
|
$
|
(383,503
|
)
|
$
|
(35,936
|
)
|
$
|
1,344,474
|
|
$
|
239,048
|
|
$
|
1,583,522
|
|
$
|
23,327
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5
Table of Contents
THE MACERICH COMPANY
CONSOLIDATED STATEMENTS OF EQUITY (Continued)
(Dollars in thousands, except per share data)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders' Equity
|
|
|
|
|
|
|
|
|
|
Shares
|
|
Par
Value
|
|
Additional
Paid-in
Capital
|
|
Accumulated
Deficit
|
|
Accumulated
Other
Comprehensive
Loss
|
|
Total
Common
Stockholders'
Equity
|
|
Noncontrolling
Interest
|
|
Total
Equity
|
|
Redeemable
Noncontrolling
Interests
|
|
Balance January 1, 2008
|
|
|
72,311,763
|
|
$
|
723
|
|
$
|
1,428,124
|
|
$
|
(203,505
|
)
|
$
|
(24,508
|
)
|
$
|
1,200,834
|
|
$
|
230,529
|
|
$
|
1,431,363
|
|
$
|
322,619
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
108,335
|
|
|
|
|
|
108,335
|
|
|
19,776
|
|
|
128,111
|
|
|
292
|
|
|
Reclassification of deferred losses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
285
|
|
|
285
|
|
|
|
|
|
285
|
|
|
|
|
|
Interest rate swap/cap agreements
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(201
|
)
|
|
(201
|
)
|
|
|
|
|
(201
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
108,335
|
|
|
84
|
|
|
108,419
|
|
|
19,776
|
|
|
128,195
|
|
|
292
|
|
Amortization of share and unit-based plans
|
|
|
185,503
|
|
|
2
|
|
|
10,615
|
|
|
|
|
|
|
|
|
10,617
|
|
|
|
|
|
10,617
|
|
|
|
|
Exercise of stock options
|
|
|
38,750
|
|
|
|
|
|
991
|
|
|
|
|
|
|
|
|
991
|
|
|
|
|
|
991
|
|
|
|
|
Employee stock purchases
|
|
|
6,494
|
|
|
|
|
|
363
|
|
|
|
|
|
|
|
|
363
|
|
|
|
|
|
363
|
|
|
|
|
Distributions paid ($1.60) per share
|
|
|
|
|
|
|
|
|
|
|
|
(116,261
|
)
|
|
|
|
|
(116,261
|
)
|
|
|
|
|
(116,261
|
)
|
|
|
|
Distributions to noncontrolling interests
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(21,712
|
)
|
|
(21,712
|
)
|
|
(292
|
)
|
Preferred dividends
|
|
|
|
|
|
|
|
|
(3,289
|
)
|
|
|
|
|
|
|
|
(3,289
|
)
|
|
|
|
|
(3,289
|
)
|
|
|
|
Contributions from noncontrolling interests
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,035
|
|
|
10,035
|
|
|
|
|
Conversion of noncontrolling interests to common shares
|
|
|
58,624
|
|
|
1
|
|
|
1,768
|
|
|
|
|
|
|
|
|
1,769
|
|
|
(1,769
|
)
|
|
|
|
|
|
|
Conversion of preferred shares to common shares
|
|
|
2,022,860
|
|
|
20
|
|
|
55,750
|
|
|
|
|
|
|
|
|
55,770
|
|
|
|
|
|
55,770
|
|
|
|
|
Redemption of noncontrolling interests
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(96,564
|
)
|
Reversal of adjustments to redemption value of redeemable noncontrolling interests
|
|
|
|
|
|
|
|
|
202,728
|
|
|
|
|
|
|
|
|
202,728
|
|
|
|
|
|
202,728
|
|
|
(202,728
|
)
|
Other
|
|
|
|
|
|
|
|
|
106
|
|
|
|
|
|
|
|
|
106
|
|
|
|
|
|
106
|
|
|
|
|
Adjustment of noncontrolling interest in Operating Partnership
|
|
|
|
|
|
|
|
|
(36,441
|
)
|
|
|
|
|
|
|
|
(36,441
|
)
|
|
36,441
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance June 30, 2008
|
|
|
74,623,994
|
|
$
|
746
|
|
$
|
1,660,715
|
|
$
|
(211,431
|
)
|
$
|
(24,424
|
)
|
$
|
1,425,606
|
|
$
|
273,300
|
|
$
|
1,698,906
|
|
$
|
23,327
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these consolidated financial statements.
6
Table of Contents
THE MACERICH COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Six Months
Ended June 30,
|
|
|
|
2009
|
|
2008
|
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
Net (loss) income
|
|
$
|
(7,949
|
)
|
$
|
131,692
|
|
|
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
|
|
|
|
|
|
|
|
|
|
Gain on early extinguishment of debt
|
|
|
(29,601
|
)
|
|
|
|
|
|
Loss (gain) on sale or write down of assets
|
|
|
24,832
|
|
|
(1,163
|
)
|
|
|
Loss (gain) on sale of assets of discontinued operations
|
|
|
17
|
|
|
(99,150
|
)
|
|
|
Depreciation and amortization
|
|
|
134,561
|
|
|
122,542
|
|
|
|
Amortization of net discount on mortgage and bank and other notes payable
|
|
|
301
|
|
|
2,774
|
|
|
|
Amortization of share and unit-based plans
|
|
|
5,036
|
|
|
5,695
|
|
|
|
Equity in income of unconsolidated joint ventures
|
|
|
(30,482
|
)
|
|
(47,244
|
)
|
|
|
Distributions of income from unconsolidated joint ventures
|
|
|
5,698
|
|
|
14,922
|
|
|
|
Changes in assets and liabilities, net of acquisitions and dispositions:
|
|
|
|
|
|
|
|
|
|
|
Tenant and other receivables, net
|
|
|
17,163
|
|
|
25,645
|
|
|
|
|
Other assets
|
|
|
9,503
|
|
|
(2,885
|
)
|
|
|
|
Accounts payable and accrued expenses
|
|
|
(55,080
|
)
|
|
(25,475
|
)
|
|
|
|
Due from affiliates
|
|
|
1,309
|
|
|
(366
|
)
|
|
|
|
Other accrued liabilities
|
|
|
(9,521
|
)
|
|
(19,741
|
)
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
|
65,787
|
|
|
107,246
|
|
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
Acquisitions of property, development, redevelopment and property improvements
|
|
|
(97,336
|
)
|
|
(326,724
|
)
|
|
Redemption of Rochester Properties
|
|
|
|
|
|
(18,873
|
)
|
|
Maturities of marketable securities
|
|
|
638
|
|
|
807
|
|
|
Deferred leasing costs
|
|
|
(17,287
|
)
|
|
(18,127
|
)
|
|
Distributions from unconsolidated joint ventures
|
|
|
96,758
|
|
|
48,999
|
|
|
Contributions to unconsolidated joint ventures
|
|
|
(19,391
|
)
|
|
(142,124
|
)
|
|
Proceeds from loans to unconsolidated joint ventures
|
|
|
294
|
|
|
188
|
|
|
Proceeds from sale of assets
|
|
|
8,394
|
|
|
3,282
|
|
|
Restricted cash
|
|
|
(8,263
|
)
|
|
(628
|
)
|
|
|
|
|
|
|
|
Net cash used in investing activities
|
|
|
(36,193
|
)
|
|
(453,200
|
)
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
Proceeds from mortgages, bank and other notes payable
|
|
|
242,917
|
|
|
871,788
|
|
|
Payments on mortgages, bank and other notes payable
|
|
|
(146,661
|
)
|
|
(414,856
|
)
|
|
Repurchase of Senior Notes
|
|
|
(50,704
|
)
|
|
|
|
|
Deferred financing costs
|
|
|
(3,172
|
)
|
|
(5,744
|
)
|
|
Proceeds from share and unit-based plans
|
|
|
368
|
|
|
1,354
|
|
|
Dividends and distributions
|
|
|
(80,982
|
)
|
|
(128,981
|
)
|
|
Dividends to preferred stockholders / preferred unitholders
|
|
|
|
|
|
(9,073
|
)
|
|
|
|
|
|
|
|
Net cash (used in) provided by financing activities
|
|
|
(38,234
|
)
|
|
314,488
|
|
|
|
|
|
|
|
|
Net decrease in cash
|
|
|
(8,640
|
)
|
|
(31,466
|
)
|
Cash and cash equivalents, beginning of period
|
|
|
66,529
|
|
|
85,273
|
|
|
|
|
|
|
|
Cash and cash equivalents, end of period
|
|
$
|
57,889
|
|
$
|
53,807
|
|
|
|
|
|
|
|
Supplemental cash flow information:
|
|
|
|
|
|
|
|
|
Cash payments for interest, net of amounts capitalized
|
|
$
|
137,150
|
|
$
|
143,125
|
|
|
|
|
|
|
|
Non-cash transactions:
|
|
|
|
|
|
|
|
|
Acquisition of noncontrolling interests in 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
|
|
$
|
47,750
|
|
$
|
55,156
|
|
|
|
|
|
|
|
|
Accrued preferred dividend payable
|
|
$
|
207
|
|
$
|
1,112
|
|
|
|
|
|
|
|
|
Acquisition of property by assumption of mortgage note payable
|
|
$
|
|
|
$
|
15,775
|
|
|
|
|
|
|
|
|
Stock dividend
|
|
$
|
38,564
|
|
$
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these consolidated financial statements.
7
Table of Contents
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, 2009, the Company was the sole general
partner of and held an 87% ownership interest in The Macerich Partnership, L.P. (the "Operating Partnership"). The Company was organized to qualify as a real estate investment trust ("REIT")
under the Internal Revenue Code of 1986, as amended.
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. Summary of Significant Accounting Policies:
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."
The
unaudited interim consolidated financial statements should be read in conjunction with the Company's audited consolidated financial statements and notes thereto included in the
Company's Current Report on Form 8-K filed May 27, 2009. 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
8
Table of Contents
THE MACERICH COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share amounts)
(Unaudited)
2. Summary of Significant Accounting Policies: (Continued)
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, 2008 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, net:
Included in tenant and other receivables, net is an allowance for doubtful accounts of $5,907 and $3,754 at June 30, 2009 and
December 31, 2008, respectively.
Included
in tenant and other receivables, net 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, 2009
and December 31, 2008, the note had a balance of $9,338 and $9,450, respectively.
On
January 1, 2008, as part of the Rochester Redemption (See Note 16Discontinued 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, 2009 and December 31, 2008 was $11,763.
Accounting Pronouncements Adopted on January 1, 2009:
Financial
Accounting Standards Board ("FASB") issued FASB Staff Position ("FSP") Statement on Financial Accounting Standards ("SFAS") No. 157-2, "Effective Date of FASB Statement
No. 157," deferred 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 to fiscal years beginning after November 15, 2008. FSP SFAS No. 157-4, "Determining Fair Value When the Volume and Level of Activity
for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly," reaffirmed the need to use judgment to ascertain if a formerly active market has become
inactive and in determining fair values when markets have become inactive. The adoption of FSP SFAS No. 157-2 and FSP SFAS 157-4 did not have a material impact on the Company's
consolidated financial statements.
SFAS
No. 141(R), "Business Combinations," requires an acquiring entity to recognize acquired assets and assumed liabilities in a transaction at fair value as of the acquisition
date and changes the accounting treatment for certain items, including acquisition costs, which will be required to be expensed as incurred. The adoption of SFAS No. 141(R) did not have a
material impact on the Company's consolidated financial statements.
SFAS
No. 161, "Disclosures about Derivative Instruments and Hedging Activities, an amendment of FASB Statement No. 133," amends and expands the disclosure requirements of
SFAS No. 133. SFAS No. 161 requires qualitative disclosures about objectives and strategies for using derivatives and quantitative disclosures about the fair value of and gains and
losses on derivative instruments. As a result of the Company's adoption of SFAS No. 161, the Company has expanded its disclosures
9
Table of Contents
THE MACERICH COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share amounts)
(Unaudited)
2. Summary of Significant Accounting Policies: (Continued)
concerning
its derivative instruments and hedging activities. See Note 5Derivative Instruments and Hedging Activities.
Emerging
Issues Task Force ("EITF") No. 07-5, "Determining Whether an Instrument (or Embedded Feature) Is Indexed to an Entity's Own Stock," provides a new
two-step model to be applied in determining whether a financial instrument or an embedded feature is indexed
to an issuer's own stock and thus able to qualify for the SFAS No. 133 paragraph 11(a) scope exception. Paragraph 11(a) of SFAS No. 133, Accounting for Derivatives and
Hedging Activities, specifies that a contract that would otherwise meet the definition of a derivative but is both (a) indexed to the Company's own stock and (b) classified in
stockholders' equity in the statement of financial position would not be considered a derivative financial instrument. The adoption of EITF No. 07-05 did not have a material impact on the
Company's consolidated financial statements.
SFAS
No. 160, "Noncontrolling Interests in Consolidated Financial StatementsAn Amendment of ARB No. 51," requires that noncontrolling interests be presented as
a component of consolidated stockholders' equity and eliminates "minority interest accounting" such that the amount of net income attributable to the noncontrolling interests will be presented as part
of consolidated net income on the consolidated statements of operations.
FSP
APB 14-1, "Accounting for Convertible Debt Instruments That May Be Settled In Cash Upon Conversion (Including Partial Cash Settlement)," requires the initial
proceeds from convertible debt that may be settled in cash to be bifurcated between a liability component and an equity component. The objective of the guidance is to require the liability and equity
components of convertible debt to be separately accounted for in a manner such that the interest expense recorded on the convertible debt would not equal the contractual rate of interest on the
convertible debt, but instead would be recorded at a rate that would reflect the issuer's conventional non-convertible debt borrowing rate at the date of issuance. This is accomplished
through the creation of a discount on the debt that would be accreted using the effective interest method as additional non-cash interest expense over the period the debt is expected to
remain outstanding.
FSP
EITF No. 03-6-1, "Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities," provides that instruments
granted in share-based payment transactions are participating securities prior to vesting and, therefore, need to be included in the earnings allocation in computing earnings per share under the
two-class method described SFAS No. 128, "Earnings per Share."
See
Note 21Cumulative Effect of Adoption of Accounting Principles for a summary of the impact of the adoption of SFAS No. 160, FSP APB 14-1
and FSP EITF No. 03-6-1 on the Company's consolidated financial statements.
FSP
SFAS 107-1 and APB 28-1, "Interim Disclosures about Fair Value of Financial Instruments," requires disclosures on a quarterly basis that provide
qualitative and quantitative information about fair value estimates for all those financial instruments not measured on the balance sheet at fair value. The Company has provided these disclosures in
Note 10Mortgage Notes Payable and Note 11Bank and Other Notes Payable.
10
Table of Contents
THE MACERICH COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share amounts)
(Unaudited)
2. Summary of Significant Accounting Policies: (Continued)
FSP
SFAS No. 115-2 and SFAS No. 124-2, "Recognition and Presentation of Other-Than-Temporary Impairments," requires
increased and more timely disclosures regarding expected cash flows, credit losses, and an aging of securities with unrealized losses. The adoption of FSP SFAS No. 115-2 and SFAS
No. 124-2 did not have a significant impact on the Company's consolidated financial statements.
Other Recent Accounting Pronouncements:
On April 1, 2009, the Company adopted the provisions of SFAS No. 165, "Subsequent Events." SFAS No. 165
establishes principles and requirements for evaluating and reporting subsequent events and distinguishes which subsequent events should be recognized in the financial statements versus which
subsequent events should be disclosed in the financial statements. The adoption of SFAS No. 165 did not have a material impact on the Company's consolidated financial statements.
On
April 1, 2009, the Company adopted FSP SFAS 141(R)-1, "Accounting for Assets Acquired and Liabilities Assumed in a Business Combination That Arise from
Contingencies." FSP SFAS 141(R)-1 addresses application issues on the accounting for contingencies in a business combination. The adoption of FSP SFAS 141(R)-1
did not have any impact on the Company's consolidated financial statements.
In
June 2009, the Financial Accounting Standards Board ("FASB") issued SFAS No. 166, "Accounting for Transfers of Financial Assetsan amendment of FASB
No. 140." SFAS No. 166 removes the concept of a qualifying special-purpose entity from SFAS No. 140, "Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilitiesa replacement of FASB Statement 125" and removes the exception from applying FASB Interpretation ("FIN") No. 46, "Consolidation of Variable Interest
Entities (revised December 2003)," to qualifying special-purpose entities. SFAS No. 166 requires a transferor to consider all arrangements or agreements made contemporaneously with, or in
contemplation of, a transfer of a financial asset in order to determine whether a transferor and all of the entities included in the transferor's financial statements being presented have surrendered
control of the transferred financial asset. SFAS No. 166 is effective for fiscal years beginning after November 15, 2009 and should be applied prospectively. Early adoption of this
statement is prohibited. The Company believes that this statement will not have a material impact on its results of operations or financial condition.
In
June 2009, the FASB issued SFAS No. 167, "Amendments to FASB Interpretation No. 46 (R)." SFAS No. 167 retains the scope of FIN No. 46(R) with the addition
of entities previously considered qualifying special-purpose entities, as the concept of these entities was eliminated in SFAS No. 166. SFAS No. 167 amends certain guidance in FIN
No. 46(R) for determining whether an entity is a variable interest entity. It is possible that application of this revised guidance will change an enterprise's assessment of which entities with
which it is involved are variable interest entities. SFAS No. 167 requires ongoing reassessments of whether an enterprise is the primary beneficiary of a variable interest entity. SFAS
No. 167 also amends FIN No. 46(R) to require additional disclosures about an enterprise's involvement in variable interest entities, which will enhance the information provided to users
of financial statements. SFAS No. 167 is effective for fiscal years beginning after November 15, 2009. Earlier application is prohibited. The Company is currently evaluating the impact
of future adoption of SFAS No. 167 on its results of operations and financial condition.
11
Table of Contents
THE MACERICH COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share amounts)
(Unaudited)
3. Earnings per Share ("EPS"):
The following table reconciles the numerator and denominator used in the computation of earnings per share for the three and six months ended June 30, 2009 and 2008.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three
Months Ended
June 30,
|
|
For the Six
Months Ended
June 30,
|
|
|
|
2009
|
|
2008
|
|
2009
|
|
2008
|
|
Numerator
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income from continuing operations
|
|
$
|
(24,355
|
)
|
$
|
19,727
|
|
$
|
(7,912
|
)
|
$
|
31,535
|
|
(Loss) income from discontinued operations
|
|
|
(11
|
)
|
|
301
|
|
|
(37
|
)
|
|
100,157
|
|
Income (loss) attributable to noncontrolling interests
|
|
|
2,630
|
|
|
(3,468
|
)
|
|
229
|
|
|
(20,068
|
)
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income attributable to the Company
|
|
|
(21,736
|
)
|
|
16,560
|
|
|
(7,720
|
)
|
|
111,624
|
|
Preferred dividends
|
|
|
|
|
|
(835
|
)
|
|
|
|
|
(3,289
|
)
|
Allocation of earnings to participating securities
|
|
|
(1,019
|
)
|
|
(217
|
)
|
|
(1,231
|
)
|
|
(478
|
)
|
|
|
|
|
|
|
|
|
|
|
Numerator for basic earnings per sharenet (loss) income available to common stockholders
|
|
|
(22,755
|
)
|
|
15,508
|
|
|
(8,951
|
)
|
|
107,857
|
|
Effect of assumed conversions:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Partnership units
|
|
|
|
|
|
2,590
|
|
|
|
|
|
18,665
|
|
|
Convertible preferred stock
|
|
|
|
|
|
|
|
|
|
|
|
3,289
|
|
|
|
|
|
|
|
|
|
|
|
Numerator for diluted earnings per sharenet (loss) income available to common stockholders
|
|
$
|
(22,755
|
)
|
$
|
18,098
|
|
$
|
(8,951
|
)
|
$
|
129,811
|
|
|
|
|
|
|
|
|
|
|
|
Denominator
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator for basic earnings per shareweighted average number of common shares outstanding
|
|
|
77,270
|
|
|
73,780
|
|
|
77,082
|
|
|
73,061
|
|
Effect of dilutive securities:(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Partnership units(2)
|
|
|
|
|
|
12,539
|
|
|
|
|
|
12,546
|
|
|
Share and unit-based plans(3)
|
|
|
|
|
|
462
|
|
|
|
|
|
398
|
|
|
Convertible preferred stock(4)
|
|
|
|
|
|
|
|
|
|
|
|
2,460
|
|
|
|
|
|
|
|
|
|
|
|
Denominator for diluted earnings per shareweighted average number of common shares outstanding
|
|
|
77,270
|
|
|
86,781
|
|
|
77,082
|
|
|
88,465
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per common sharebasic:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income from continuing operations
|
|
$
|
(0.29
|
)
|
$
|
0.21
|
|
$
|
(0.12
|
)
|
$
|
0.31
|
|
|
Discontinued operations
|
|
|
|
|
|
|
|
|
|
|
|
1.17
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income available to common stockholders
|
|
$
|
(0.29
|
)
|
$
|
0.21
|
|
$
|
(0.12
|
)
|
$
|
1.48
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per common sharediluted:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income from continuing operations
|
|
$
|
(0.29
|
)
|
$
|
0.21
|
|
$
|
(0.12
|
)
|
$
|
0.30
|
|
|
Discontinued operations
|
|
|
|
|
|
|
|
|
|
|
|
1.17
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income available to common stockholders
|
|
$
|
(0.29
|
)
|
$
|
0.21
|
|
$
|
(0.12
|
)
|
$
|
1.47
|
|
|
|
|
|
|
|
|
|
|
|
-
(1)
-
The
Senior Notes (See Note 11Bank and Other Notes Payable) are excluded from diluted EPS for the three and six months ended
June 30, 2009 and 2008 as their effect would be antidilutive to net (loss) income available to common stockholders.
-
(2)
-
Diluted
EPS excludes 11,700,000 and 11,677,000 partnership units for the three and six months ended June 30, 2009, respectively, as their effect was
antidilutive to net loss available to common stockholders.
12
Table of Contents
THE MACERICH COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share amounts)
(Unaudited)
3. Earnings per Share ("EPS"): (Continued)
-
(3)
-
Diluted
EPS excludes 1,257,384 of unexercised stock appreciation rights and 132,500 of unexercised stock options for the three and six months ended
June 30, 2009 as their effect was antidilutive to net loss available to common stockholders.
-
(4)
-
The
then outstanding convertible preferred stock (See Note 13Cumulative Convertible Redeemable Preferred Stock) was convertible 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.
The noncontrolling interests of the Operating Partnership as reflected in the Company's consolidated statements of operations have been allocated
for EPS calculations as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three
Months Ended
June 30,
|
|
For the Six
Months Ended
June 30,
|
|
|
|
2009
|
|
2008
|
|
2009
|
|
2008
|
|
(Loss) income from continuing operations
|
|
$
|
(3,292
|
)
|
$
|
2,544
|
|
$
|
(1,164
|
)
|
$
|
3,984
|
|
Discontinued operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) gain on sale of assets
|
|
|
|
|
|
(15
|
)
|
|
(2
|
)
|
|
14,535
|
|
|
(Loss) income from discontinued operations
|
|
|
(1
|
)
|
|
61
|
|
|
(3
|
)
|
|
146
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
(3,293
|
)
|
$
|
2,590
|
|
$
|
(1,169
|
)
|
$
|
18,665
|
|
|
|
|
|
|
|
|
|
|
|
13
Table of Contents
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 various joint ventures or properties jointly owned with third parties. The Operating Partnership's interest in each joint venture as of
June 30, 2009 is as follows:
|
|
|
|
|
Joint Venture
|
|
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 AssociatesBroadway Plaza
|
|
|
50.0
|
%
|
Macerich SanTan Phase 2 SPE LLCSanTan Village Power Center
|
|
|
34.9
|
%
|
MetroRising AMS Holding LLCMetrocenter Mall
|
|
|
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/Queen Creek Commercial LLC
|
|
|
37.9
|
%
|
Westcor/Queen Creek LLC
|
|
|
37.7
|
%
|
Westcor/Queen Creek Medical LLC
|
|
|
37.7
|
%
|
Westcor/Queen Creek Residential LLC
|
|
|
37.7
|
%
|
Westcor/Surprise Auto Park LLC
|
|
|
33.3
|
%
|
Westpen Associates
|
|
|
50.0
|
%
|
Wilshire BuildingTenants in Common
|
|
|
30.0
|
%
|
WM Ridgmar, L.P.
|
|
|
50.0
|
%
|
-
(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.
14
Table of Contents
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 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, therefore, accounts for these joint ventures using the equity method of
accounting.
The
Company has recently made the following investments and dispositions in unconsolidated joint ventures:
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 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.
On
December 19, 2008, the Company sold a fee and/or ground leasehold interest in three freestanding Mervyn's department stores to Pacific Premier Retail Trust, one of the
Company's joint ventures, for $43,405, resulting in a gain on sale of assets of $1,511. The Company's pro rata share of the proceeds was used to pay down the Company's line of credit. See Mervyn's in
Note 15Acquisitions and in Note 16Discontinued Operations.
Combined
and condensed balance sheets and statements of operations are presented below for all unconsolidated joint ventures.
15
Table of Contents
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,
2009
|
|
December 31,
2008
|
|
Assets(1):
|
|
|
|
|
|
|
|
|
Properties, net
|
|
$
|
4,710,733
|
|
$
|
4,706,823
|
|
|
Other assets
|
|
|
407,842
|
|
|
531,976
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
5,118,575
|
|
$
|
5,238,799
|
|
|
|
|
|
|
|
Liabilities and partners' capital(1):
|
|
|
|
|
|
|
|
|
Mortgage notes payable(2)
|
|
$
|
4,229,209
|
|
$
|
4,244,270
|
|
|
Other liabilities
|
|
|
187,689
|
|
|
215,975
|
|
|
Company's capital
|
|
|
396,067
|
|
|
434,504
|
|
|
Outside partners' capital
|
|
|
305,610
|
|
|
344,050
|
|
|
|
|
|
|
|
Total liabilities and partners' capital
|
|
$
|
5,118,575
|
|
$
|
5,238,799
|
|
|
|
|
|
|
|
Investments in unconsolidated joint ventures:
|
|
|
|
|
|
|
|
|
Company's capital
|
|
$
|
396,067
|
|
$
|
434,504
|
|
|
Basis adjustment(3)
|
|
|
573,028
|
|
|
579,426
|
|
|
|
|
|
|
|
|
Investments in unconsolidated joint ventures
|
|
$
|
969,095
|
|
$
|
1,013,930
|
|
|
|
|
|
|
|
|
AssetsInvestments in unconsolidated joint ventures
|
|
$
|
1,034,166
|
|
$
|
1,094,845
|
|
|
LiabilitiesInvestments in unconsolidated joint ventures
|
|
|
(65,071
|
)
|
|
(80,915
|
)
|
|
|
|
|
|
|
|
|
$
|
969,095
|
|
$
|
1,013,930
|
|
|
|
|
|
|
|
-
(1)
-
These
amounts include the assets and liabilities of the following significant subsidiaries as of June 30, 2009 and December 31, 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
SDG
Macerich
Properties, L.P.
|
|
Pacific
Premier
Retail
Trust
|
|
Tysons
Corner
LLC
|
|
As of June 30, 2009:
|
|
|
|
|
|
|
|
|
|
|
Total Assets
|
|
$
|
859,603
|
|
$
|
1,079,450
|
|
$
|
329,486
|
|
Total Liabilities
|
|
$
|
818,347
|
|
$
|
963,547
|
|
$
|
338,518
|
|
As of December 31, 2008:
|
|
|
|
|
|
|
|
|
|
|
Total Assets
|
|
$
|
882,117
|
|
$
|
1,148,831
|
|
$
|
328,064
|
|
Total Liabilities
|
|
$
|
823,550
|
|
$
|
976,506
|
|
$
|
333,307
|
|
-
(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, 2009 and
16
Table of Contents
THE MACERICH COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share amounts)
(Unaudited)
4. Investments in Unconsolidated Joint Ventures: (Continued)
December 31,
2008, a total of $17,440 and $16,898, respectively, could become recourse debt to the Company.
Included
in mortgage notes payable are amounts due to affiliates of Northwestern Mutual Life ("NML") of $415,392 and $211,098 as of June 30, 2009 and December 31, 2008,
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
$4,213 and $2,054 for the three months ended June 30, 2009 and 2008, respectively, and $7,511 and $4,159 for the six months ended June 30, 2009 and 2008, respectively.
-
(3)
-
This
represents the difference between the cost of an 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 underlying assets. The amortization of this difference was $1,247 and $1,876 for the three months
ended June 30, 2009 and 2008, respectively, and $5,111 and $4,364 for the six months ended June 30, 2009 and 2008, respectively.
17
Table of Contents
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, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Minimum rents
|
|
$
|
22,493
|
|
$
|
32,034
|
|
$
|
14,504
|
|
$
|
67,915
|
|
$
|
136,946
|
|
|
Percentage rents
|
|
|
410
|
|
|
861
|
|
|
239
|
|
|
1,786
|
|
|
3,296
|
|
|
Tenant recoveries
|
|
|
11,849
|
|
|
12,199
|
|
|
9,539
|
|
|
33,514
|
|
|
67,101
|
|
|
Other
|
|
|
850
|
|
|
973
|
|
|
492
|
|
|
4,558
|
|
|
6,873
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
|
35,602
|
|
|
46,067
|
|
|
24,774
|
|
|
107,773
|
|
|
214,216
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shopping center and operating expenses
|
|
|
13,711
|
|
|
13,286
|
|
|
8,040
|
|
|
42,010
|
|
|
77,047
|
|
|
Interest expense
|
|
|
11,641
|
|
|
12,451
|
|
|
3,964
|
|
|
27,769
|
|
|
55,825
|
|
|
Depreciation and amortization
|
|
|
7,776
|
|
|
8,959
|
|
|
4,504
|
|
|
26,008
|
|
|
47,247
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
33,128
|
|
|
34,696
|
|
|
16,508
|
|
|
95,787
|
|
|
180,119
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain (loss) on sale of assets
|
|
|
46
|
|
|
|
|
|
|
|
|
(59
|
)
|
|
(13
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
2,520
|
|
$
|
11,371
|
|
$
|
8,266
|
|
$
|
11,927
|
|
$
|
34,084
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company's equity in net income
|
|
$
|
1,260
|
|
$
|
5,784
|
|
$
|
4,133
|
|
$
|
3,379
|
|
$
|
14,556
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18
Table of Contents
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, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Minimum rents
|
|
$
|
45,479
|
|
$
|
64,801
|
|
$
|
29,146
|
|
$
|
137,716
|
|
$
|
277,142
|
|
|
Percentage rents
|
|
|
1,244
|
|
|
1,417
|
|
|
382
|
|
|
3,268
|
|
|
6,311
|
|
|
Tenant recoveries
|
|
|
24,133
|
|
|
24,452
|
|
|
18,618
|
|
|
67,564
|
|
|
134,767
|
|
|
Other
|
|
|
1,686
|
|
|
1,970
|
|
|
885
|
|
|
9,799
|
|
|
14,340
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
|
72,542
|
|
|
92,640
|
|
|
49,031
|
|
|
218,347
|
|
|
432,560
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shopping center and operating expenses
|
|
|
27,967
|
|
|
26,969
|
|
|
15,704
|
|
|
83,290
|
|
|
153,930
|
|
|
Interest expense
|
|
|
23,157
|
|
|
24,679
|
|
|
7,962
|
|
|
55,737
|
|
|
111,535
|
|
|
Depreciation and amortization
|
|
|
15,024
|
|
|
17,842
|
|
|
8,954
|
|
|
52,299
|
|
|
94,119
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
66,148
|
|
|
69,490
|
|
|
32,620
|
|
|
191,326
|
|
|
359,584
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain on sale of assets
|
|
|
44
|
|
|
|
|
|
|
|
|
117
|
|
|
161
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
6,438
|
|
$
|
23,150
|
|
$
|
16,411
|
|
$
|
27,138
|
|
$
|
73,137
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company's equity in net income
|
|
$
|
3,219
|
|
$
|
11,774
|
|
$
|
8,206
|
|
$
|
7,283
|
|
$
|
30,482
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Significant
accounting policies used by the unconsolidated joint ventures are similar to those used by the Company.
19
Table of Contents
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 interest rate swap and cap agreements
(collectively, "interest rate agreements") 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 net income. No
ineffectiveness was recorded in net income during the three or six months ended June 30, 2009 or 2008. 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, 2009, two 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, 2009, the Company's derivative
instruments did not contain any credit risk related contingent features or collateral arrangements.
The
Company reclassified $44 and $285 for the three and six months ended June 30, 2008, respectively, related to treasury rate lock transactions settled in prior years from
accumulated other comprehensive income to earnings.
Amounts
paid (received) as a result of interest rate agreements are recorded as an addition (reduction) of interest expense. The Company recorded other comprehensive (loss) income
related to the marking-to-market of interest rate agreements of ($15,501) and $23,656 for the three months ended June 30, 2009 and 2008, respectively and $17,489 and
($201) for the six months ended June 30, 2009 and 2008, respectively. The amount expected to be reclassified to interest expense in the next 12 months is immaterial.
The
following derivatives were outstanding at June 30, 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property/Entity
|
|
Notional
Amount
|
|
Product
|
|
Rate
|
|
Maturity
|
|
Fair
Value
|
|
La Cumbre Plaza(1)(2)
|
|
$
|
30,000
|
|
Cap
|
|
|
7.12
|
%
|
|
8/9/2009
|
|
$
|
|
|
Panorama Mall(1)(2)
|
|
|
50,000
|
|
Cap
|
|
|
6.65
|
%
|
|
3/1/2010
|
|
|
|
|
The Oaks(2)
|
|
|
150,000
|
|
Cap
|
|
|
6.25
|
%
|
|
7/1/2010
|
|
|
|
|
The Operating Partnership(3)
|
|
|
450,000
|
|
Swap
|
|
|
4.80
|
%
|
|
4/15/2010
|
|
|
(14,401
|
)
|
The Operating Partnership(3)
|
|
|
400,000
|
|
Swap
|
|
|
5.08
|
%
|
|
4/25/2011
|
|
|
(24,543
|
)
|
Westside Pavilion(2)
|
|
|
175,000
|
|
Cap
|
|
|
5.50
|
%
|
|
6/1/2010
|
|
|
|
|
-
(1)
-
Derivative
is not designated as a hedge.
-
(2)
-
See
additional disclosure in Note 10Mortgage Notes Payable.
-
(3)
-
See
additional disclosure in Note 11Bank and Other Notes Payable.
20
Table of Contents
THE MACERICH COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share amounts)
(Unaudited)
5. Derivative Instruments and Hedging Activities: (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset Derivatives
|
|
Liability Derivatives
|
|
|
|
|
|
June 30,
2009
|
|
December 31,
2008
|
|
|
|
June 30,
2009
|
|
December 31,
2008
|
|
|
|
Balance
Sheet
Location
|
|
Fair
Value
|
|
Fair
Value
|
|
Balance
Sheet
Location
|
|
Fair
Value
|
|
Fair
Value
|
|
Derivatives designated as hedging instruments under SFAS No. 133
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate cap agreements
|
|
Other assets
|
|
$
|
|
|
$
|
2
|
|
Other liabilities
|
|
$
|
|
|
$
|
|
|
|
Interest rate swap agreements
|
|
Other assets
|
|
|
|
|
|
|
|
Other liabilities
|
|
|
38,944
|
|
|
56,434
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total derivatives designated as hedging instruments under SFAS No. 133
|
|
|
|
|
|
|
|
2
|
|
|
|
|
38,944
|
|
|
56,434
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives not designated as hedging instruments under SFAS No. 133
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate cap agreements
|
|
Other assets
|
|
|
|
|
|
|
|
Other liabilities
|
|
|
|
|
|
|
|
|
Interest rate swap agreements
|
|
Other assets
|
|
|
|
|
|
|
|
Other liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total derivatives not designated as hedging instruments under SFAS No. 133
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total derivatives
|
|
|
|
$
|
|
|
$
|
2
|
|
|
|
$
|
38,944
|
|
$
|
56,434
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6. Fair Value:
Derivatives:
The fair values of interest rate 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 agreements. The variable interest rates used in the calculation of projected
receipts on the interest rate 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, "Fair Value Measurements," 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 of default by itself and its counterparties. However, as of
June 30, 2009 and December 31, 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
21
Table of Contents
THE MACERICH COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share amounts)
(Unaudited)
6. Fair Value: (Continued)
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.
Long-Lived Assets:
In accordance with SFAS No. 144, "Accounting for Impairment or Disposal of Long-Lived Assets,"
long-lived assets held and used with a carrying value of $89,445 were written down to their fair value of $62,450, resulting in an impairment charge of $26,995, which was recorded to
(loss) gain on sale or write down of assets for the three and six months ended June 30, 2009. The fair value was determined by the proceeds received on sales of the assets subsequent to
June 30, 2009. See Note 22Subsequent Events.
The
following table presents certain of the Company's long-lived assets held and used and derivative instruments measured at fair value as of June 30, 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quoted Prices in
Active Markets for
Identical Assets and
Liabilities (Level 1)
|
|
Significant Other
Observable
Inputs (Level 2)
|
|
Significant
Unobservable
Inputs (Level 3)
|
|
Total
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-lived assets held and used
|
|
$
|
|
|
$
|
62,450
|
|
$
|
|
|
$
|
62,450
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative Instruments
|
|
$
|
|
|
$
|
38,944
|
|
$
|
|
|
$
|
38,944
|
|
7. Property:
Property consists of the following:
|
|
|
|
|
|
|
|
|
|
June 30,
2009
|
|
December 31,
2008
|
|
Land
|
|
$
|
1,149,612
|
|
$
|
1,135,013
|
|
Building improvements
|
|
|
5,250,063
|
|
|
5,190,049
|
|
Tenant improvements
|
|
|
334,742
|
|
|
327,877
|
|
Equipment and furnishings
|
|
|
107,729
|
|
|
101,991
|
|
Construction in progress
|
|
|
603,163
|
|
|
600,773
|
|
|
|
|
|
|
|
|
|
|
7,445,309
|
|
|
7,355,703
|
|
Less accumulated depreciation
|
|
|
(1,084,779
|
)
|
|
(984,384
|
)
|
|
|
|
|
|
|
|
|
$
|
6,360,530
|
|
$
|
6,371,319
|
|
|
|
|
|
|
|
The
above schedule also includes the properties purchased in connection with the acquisition of Mervyn's and Boscov's freestanding stores acquired in 2008 (See
Note 15Acquisitions).
22
Table of Contents
THE MACERICH COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share amounts)
(Unaudited)
7. Property: (Continued)
Depreciation
expense was $53,399 and $44,772 for the three months ended June 30, 2009 and 2008, respectively and $106,022 and $91,560 for the six months ended June 30, 2009
and 2008, respectively.
The
Company recognized a gain on the sale of land of $1,453 and $489 during the three months ended June 30, 2009 and 2008, respectively and $2,807 and $1,163 for the six months
ended June 30, 2009 and 2008, respectively. The Company wrote off $63 and $644 of development costs during the three months and six months ended June 30, 2009, respectively. In addition,
the Company recorded an impairment charge of $26,995 for the three and six months ended June 30, 2009 related to the write down of assets sold in July 2009. (See Note 6Fair
Value).
8. Marketable Securities:
Marketable Securities consists of the following:
|
|
|
|
|
|
|
|
|
|
June 30,
2009
|
|
December 31,
2008
|
|
Government debt securities, at par value
|
|
$
|
28,470
|
|
$
|
29,108
|
|
Less discount
|
|
|
(1,008
|
)
|
|
(1,165
|
)
|
|
|
|
|
|
|
|
|
|
27,462
|
|
|
27,943
|
|
Unrealized gain
|
|
|
2,828
|
|
|
4,347
|
|
|
|
|
|
|
|
Fair value
|
|
$
|
30,290
|
|
$
|
32,290
|
|
|
|
|
|
|
|
Future
contractual maturities of marketable securities at June 30, 2009 are as follows:
|
|
|
|
|
1 year or less
|
|
$
|
1,299
|
|
2 to 5 years
|
|
|
4,091
|
|
6 to 10 years
|
|
|
23,080
|
|
|
|
|
|
|
|
$
|
28,470
|
|
|
|
|
|
The
proceeds from maturities and interest receipts from the marketable securities are restricted to the service of the $26,699 note on which the Company remains obligated following the
sale of Greeley Mall in July 2006 (See Note 11Bank and Other Notes Payable). The Company accounts for its investments in marketable securities as
held-to-maturity debt securities under the provisions of SFAS No. 115, "Accounting for Certain Investments in Debt and Equity Securities," as the Company has the intent
and the ability to hold these securities until maturity.
Accordingly, investments in marketable securities are carried at their amortized cost. The discount on marketable securities is amortized into interest income on a straight-line basis over
the term of the notes, which approximates the effective interest method.
23
Table of Contents
THE MACERICH COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share amounts)
(Unaudited)
9. Deferred Charges And Other Assets, net:
Deferred charges and other assets, net consists of the following:
|
|
|
|
|
|
|
|
|
|
|
June 30,
2009
|
|
December 31,
2008
|
|
Leasing
|
|
$
|
149,262
|
|
$
|
139,374
|
|
Financing
|
|
|
53,717
|
|
|
54,256
|
|
Intangible assets resulting from SFAS No. 141(R) allocations:
|
|
|
|
|
|
|
|
|
In-place lease values
|
|
|
163,175
|
|
|
175,428
|
|
|
Leasing commissions and legal costs
|
|
|
54,380
|
|
|
57,832
|
|
|
|
|
|
|
|
|
|
|
420,534
|
|
|
426,890
|
|
Less accumulated amortization(1)
|
|
|
(187,430
|
)
|
|
(181,579
|
)
|
|
|
|
|
|
|
|
|
|
233,104
|
|
|
245,311
|
|
Other assets
|
|
|
84,848
|
|
|
94,351
|
|
|
|
|
|
|
|
|
|
$
|
317,952
|
|
$
|
339,662
|
|
|
|
|
|
|
|
-
(1)
-
Accumulated
amortization includes $104,240 and $104,600 relating to intangibles resulting from SFAS No. 141(R) allocations at June 30, 2009
and December 31, 2008, respectively. Amortization expense for SFAS No. 141(R) allocations was $4,815 and $8,168 for the three months ended June 30, 2009 and 2008, respectively and
$11,645 and $17,239 for the six months ended June 30, 2009 and 2008, respectively.
The
allocated values of above market leases included in deferred charges and other assets, net, and below market leases included in other accrued liabilities, related to SFAS
No. 141(R), consist of the following:
|
|
|
|
|
|
|
|
|
|
June 30,
2009
|
|
December 31,
2008
|
|
Above Market Leases
|
|
|
|
|
|
|
|
Original allocated value
|
|
$
|
54,619
|
|
$
|
71,808
|
|
Less accumulated amortization
|
|
|
(34,954
|
)
|
|
(49,014
|
)
|
|
|
|
|
|
|
|
|
$
|
19,665
|
|
$
|
22,794
|
|
|
|
|
|
|
|
Below Market Leases
|
|
|
|
|
|
|
|
Original allocated value
|
|
$
|
157,137
|
|
$
|
185,976
|
|
Less accumulated amortization
|
|
|
(83,690
|
)
|
|
(108,197
|
)
|
|
|
|
|
|
|
|
|
$
|
73,447
|
|
$
|
77,779
|
|
|
|
|
|
|
|
24
Table of Contents
THE MACERICH COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share amounts)
(Unaudited)
10. Mortgage Notes Payable:
Mortgage notes payable consists of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Carrying Amount of Mortgage Notes(a)
|
|
|
|
|
|
|
|
|
|
June 30, 2009
|
|
December 31, 2008
|
|
|
|
|
|
|
|
Property Pledged as Collateral
|
|
Other
|
|
Related Party
|
|
Other
|
|
Related Party
|
|
Interest
Rate
|
|
Monthly
Payment
Term(b)
|
|
Maturity
Date
|
|
Capitola Mall
|
|
$
|
|
|
$
|
36,537
|
|
$
|
|
|
$
|
37,497
|
|
|
7.13
|
%
|
|
380
|
|
|
2011
|
|
Cactus Power Center(c)
|
|
|
662
|
|
|
|
|
|
654
|
|
|
|
|
|
1.67
|
%
|
|
1
|
|
|
2011
|
|
Carmel Plaza(d)
|
|
|
25,562
|
|
|
|
|
|
25,805
|
|
|
|
|
|
7.45
|
%
|
|
202
|
|
|
2009
|
|
Chandler Fashion Center
|
|
|
164,788
|
|
|
|
|
|
166,500
|
|
|
|
|
|
5.50
|
%
|
|
1,043
|
|
|
2012
|
|
Chesterfield Towne Center(e)
|
|
|
53,260
|
|
|
|
|
|
54,111
|
|
|
|
|
|
9.07
|
%
|
|
548
|
|
|
2024
|
|
Danbury Fair Mall
|
|
|
166,524
|
|
|
|
|
|
169,889
|
|
|
|
|
|
4.64
|
%
|
|
1,225
|
|
|
2011
|
|
Deptford Mall
|
|
|
172,500
|
|
|
|
|
|
172,500
|
|
|
|
|
|
5.41
|
%
|
|
778
|
|
|
2013
|
|
Deptford Mall
|
|
|
15,547
|
|
|
|
|
|
15,642
|
|
|
|
|
|
6.46
|
%
|
|
101
|
|
|
2016
|
|
Fiesta Mall
|
|
|
84,000
|
|
|
|
|
|
84,000
|
|
|
|
|
|
4.98
|
%
|
|
341
|
|
|
2015
|
|
Flagstaff Mall
|
|
|
37,000
|
|
|
|
|
|
37,000
|
|
|
|
|
|
5.03
|
%
|
|
153
|
|
|
2015
|
|
FlatIron Crossing
|
|
|
182,435
|
|
|
|
|
|
184,248
|
|
|
|
|
|
5.26
|
%
|
|
1,102
|
|
|
2013
|
|
Freehold Raceway Mall
|
|
|
168,644
|
|
|
|
|
|
171,726
|
|
|
|
|
|
4.68
|
%
|
|
1,184
|
|
|
2011
|
|
Fresno Fashion Fair
|
|
|
84,251
|
|
|
84,251
|
|
|
84,706
|
|
|
84,705
|
|
|
6.76
|
%
|
|
1,104
|
|
|
2015
|
|
Great Northern Mall
|
|
|
39,225
|
|
|
|
|
|
39,591
|
|
|
|
|
|
5.11
|
%
|
|
234
|
|
|
2013
|
|
Hilton Village
|
|
|
8,556
|
|
|
|
|
|
8,547
|
|
|
|
|
|
5.27
|
%
|
|
37
|
|
|
2012
|
|
La Cumbre Plaza(d)(f)
|
|
|
30,000
|
|
|
|
|
|
30,000
|
|
|
|
|
|
1.70
|
%
|
|
30
|
|
|
2009
|
|
Northridge Mall(g)
|
|
|
72,000
|
|
|
|
|
|
79,657
|
|
|
|
|
|
8.20
|
%
|
|
453
|
|
|
2011
|
|
Oaks, The(h)
|
|
|
165,000
|
|
|
|
|
|
165,000
|
|
|
|
|
|
2.37
|
%
|
|
284
|
|
|
2011
|
|
Oaks, The(i)
|
|
|
81,756
|
|
|
|
|
|
65,525
|
|
|
|
|
|
3.02
|
%
|
|
165
|
|
|
2011
|
|
Pacific View
|
|
|
86,604
|
|
|
|
|
|
87,382
|
|
|
|
|
|
7.20
|
%
|
|
602
|
|
|
2011
|
|
Panorama Mall(j)
|
|
|
50,000
|
|
|
|
|
|
50,000
|
|
|
|
|
|
1.37
|
%
|
|
48
|
|
|
2010
|
|
Paradise Valley Mall(k)
|
|
|
|
|
|
|
|
|
20,259
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prescott Gateway
|
|
|
60,000
|
|
|
|
|
|
60,000
|
|
|
|
|
|
5.86
|
%
|
|
289
|
|
|
2011
|
|
Promenade at Casa Grande(l)
|
|
|
96,168
|
|
|
|
|
|
97,209
|
|
|
|
|
|
1.77
|
%
|
|
138
|
|
|
2009
|
|
Queens Center(m)(n)
|
|
|
64,777
|
|
|
64,776
|
|
|
88,913
|
|
|
|
|
|
7.78
|
%
|
|
961
|
|
|
2013
|
|
Queens Center(n)
|
|
|
105,644
|
|
|
105,644
|
|
|
106,657
|
|
|
106,657
|
|
|
7.00
|
%
|
|
1,591
|
|
|
2013
|
|
Rimrock Mall
|
|
|
41,799
|
|
|
|
|
|
42,155
|
|
|
|
|
|
7.57
|
%
|
|
320
|
|
|
2011
|
|
Salisbury, Center at
|
|
|
115,000
|
|
|
|
|
|
115,000
|
|
|
|
|
|
5.83
|
%
|
|
555
|
|
|
2016
|
|
Santa Monica Place
|
|
|
77,274
|
|
|
|
|
|
77,888
|
|
|
|
|
|
7.79
|
%
|
|
606
|
|
|
2010
|
|
SanTan Village Regional Center(o)
|
|
|
132,669
|
|
|
|
|
|
126,573
|
|
|
|
|
|
3.02
|
%
|
|
284
|
|
|
2011
|
|
Shoppingtown Mall
|
|
|
42,216
|
|
|
|
|
|
43,040
|
|
|
|
|
|
5.01
|
%
|
|
319
|
|
|
2011
|
|
South Plains Mall(p)
|
|
|
57,469
|
|
|
|
|
|
57,721
|
|
|
|
|
|
9.49
|
%
|
|
454
|
|
|
2029
|
|
South Towne Center
|
|
|
89,393
|
|
|
|
|
|
89,915
|
|
|
|
|
|
6.39
|
%
|
|
554
|
|
|
2015
|
|
Towne Mall
|
|
|
14,120
|
|
|
|
|
|
14,366
|
|
|
|
|
|
4.99
|
%
|
|
100
|
|
|
2012
|
|
Tucson La Encantada
|
|
|
|
|
|
78,000
|
|
|
|
|
|
78,000
|
|
|
5.84
|
%
|
|
364
|
|
|
2012
|
|
Twenty Ninth Street(q)
|
|
|
106,225
|
|
|
|
|
|
115,000
|
|
|
|
|
|
5.45
|
%
|
|
465
|
|
|
2011
|
|
Valley River Center
|
|
|
120,000
|
|
|
|
|
|
120,000
|
|
|
|
|
|
5.59
|
%
|
|
558
|
|
|
2016
|
|
Valley View Center
|
|
|
125,000
|
|
|
|
|
|
125,000
|
|
|
|
|
|
5.81
|
%
|
|
596
|
|
|
2011
|
|
Victor Valley, Mall of(r)
|
|
|
100,000
|
|
|
|
|
|
100,000
|
|
|
|
|
|
2.18
|
%
|
|
160
|
|
|
2011
|
|
Vintage Faire Mall
|
|
|
62,769
|
|
|
|
|
|
63,329
|
|
|
|
|
|
7.92
|
%
|
|
508
|
|
|
2010
|
|
Westside Pavilion(s)
|
|
|
175,000
|
|
|
|
|
|
175,000
|
|
|
|
|
|
3.02
|
%
|
|
338
|
|
|
2011
|
|
Wilton Mall
|
|
|
41,572
|
|
|
|
|
|
42,608
|
|
|
|
|
|
4.79
|
%
|
|
349
|
|
|
2029
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
3,315,409
|
|
$
|
369,208
|
|
$
|
3,373,116
|
|
$
|
306,859
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
(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
approximates the effective interest method. The interest rate disclosed represents the effective interest rate, including the debt premium (discounts) and deferred finance cost.
25
Table of Contents
THE MACERICH COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share amounts)
(Unaudited)
10. Mortgage Notes Payable: (Continued)
|
|
|
|
|
|
|
|
Property Pledged as
Collateral
|
|
June 30,
2009
|
|
December 31,
2008
|
|
Danbury Fair Mall
|
|
$
|
7,069
|
|
$
|
9,166
|
|
Deptford Mall
|
|
|
(39
|
)
|
|
(41
|
)
|
Freehold Raceway Mall
|
|
|
7,223
|
|
|
8,940
|
|
Great Northern Mall
|
|
|
(123
|
)
|
|
(137
|
)
|
Hilton Village
|
|
|
(44
|
)
|
|
(53
|
)
|
Paradise Valley Mall
|
|
|
|
|
|
99
|
|
Shoppingtown Mall
|
|
|
2,110
|
|
|
2,648
|
|
Towne Mall
|
|
|
324
|
|
|
371
|
|
Wilton Mall
|
|
|
530
|
|
|
1,263
|
|
|
|
|
|
|
|
|
|
$
|
17,050
|
|
$
|
22,256
|
|
|
|
|
|
|
|
-
(b)
-
This
represents the monthly payment of principal and interest.
-
(c)
-
The
construction loan on the property provides for total borrowings of up to $101,000, bears interest at LIBOR plus a spread of 1.10% to 1.35% depending on
certain conditions and matures on March 14, 2011, with two one-year extension options. At June 30, 2009 and December 31, 2008, the total interest rate was 1.67% and
3.23%, respectively.
-
(d)
-
The
Company is in negotiations to extend the loan.
-
(e)
-
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 was ($403) and $33 for the three months ended June 30, 2009 and 2008, respectively
and ($331) and $113, for the six months ended June 30, 2009 and 2008, respectively.
-
(f)
-
The
loan bears interest at LIBOR plus 0.88% and matures on August 9, 2009. The loan is covered by an interest rate cap agreement that effectively
prevents LIBOR from exceeding 7.12%. See Note 5Derivative Instruments and Hedging Activities. At June 30, 2009 and December 31, 2008, the total interest rate was
1.70% and 2.58%, respectively.
-
(g)
-
On
June 1, 2009, the Company extended the loan until January 1, 2011 at an interest rate of 8.20%.
-
(h)
-
The
loan bears interest at LIBOR plus 1.75% and matures on July 10, 2011 with two one-year extension options. At June 30, 2009 and
December 31, 2008, the total interest rate was 2.37% and 3.48%, respectively. The loan is covered by an interest rate cap agreement that effectively prevents LIBOR from exceeding 6.25% over the
loan term. See Note 5Derivative Instruments and Hedging Activities.
-
(i)
-
The
construction loan allows for total borrowings of up to $135,000, bears interest at LIBOR plus a spread of 1.75% to 2.10%, depending on certain
conditions and matures on July 10, 2011, with two one-year extension options. At June 30, 2009 and December 31, 2008, the total interest rate was 3.02% and 4.24%,
respectively.
-
(j)
-
The
loan bears interest at LIBOR plus 0.85% and matures on February 28, 2010, with a one-year extension option. The loan is covered by an
interest rate cap agreement that effectively prevents LIBOR from exceeding 6.65%. See Note 5Derivative Instruments and Hedging Activities. At June 30, 2009 and
December 31, 2008, the total interest rate was 1.37% and 1.62%, respectively.
-
(k)
-
The
loan was paid off in full on May 1, 2009. The Company has a commitment for a new $90,000 loan with a three-year term.
-
(l)
-
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 on August 16, 2009, with two one-year extension options, subject to provisions of the loan agreement. At June 30, 2009 and December 31,
2008, the total interest rate was 1.77% and 3.35%, respectively.
-
(m)
-
On
February 2, 2009, the Company replaced the existing loan on the property with a new $130,000 loan that bears interest at 7.78% and matures on
March 1, 2013. NML funded 50% of the loan proceeds.
26
Table of Contents
THE MACERICH COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share amounts)
(Unaudited)
10. Mortgage Notes Payable: (Continued)
-
(n)
-
On
July 30, 2009, the Company sold a 49% interest on the property. See Note 22Subsequent Events.
-
(o)
-
The
construction loan on the property that allows for total borrowings of up to $150,000 and 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, 2009 and December 31, 2008, the total interest
rate was 3.02% and 3.91%, respectively.
-
(p)
-
On
March 1, 2009, the interest rate on the loan increased from 7.49% to 9.49% and the loan was extended until March 1, 2029.
-
(q)
-
On
March 25, 2009, the loan agreement was modified to bear interest at LIBOR plus 3.40% and matures on June 5, 2011, with a
one-year extension option. At June 30, 2009 and December 31, 2008, the total interest rate was 5.45% and 2.20%, respectively.
-
(r)
-
The
loan bears interest at LIBOR plus 1.60% and matures on May 6, 2011, with two one-year extension options. At June 30, 2009 and
December 31, 2008, the total interest rate on the loan was 2.18% and 3.74%, respectively.
-
(s)
-
The
loan bears interest at LIBOR plus 2.00% and matures on June 5, 2011, with two one-year extension options. At June 30, 2009 and
December 31, 2008, the total interest rate on the loan was 3.02% and 4.07%, respectively. The loan is covered by an interest rate cap agreement that effectively prevents LIBOR from exceeding
5.50% until June 1, 2010. See Note 5Derivative Instruments and Hedging Activities.
Most of the mortgage loan agreements contain a prepayment penalty provision for the early extinguishment of the debt.
The
Company expects all 2009 loan maturities will be refinanced, extended and/or paid-off from the Company's line of credit.
Total
interest expense capitalized was $4,763 and $8,584 for the three months ended June 30, 2009 and 2008, respectively and $9,823 and $15,637 for the six months ended
June 30, 2009 and 2008, respectively.
Related
party mortgage notes payable are amounts due to affiliates of NML. See Note 18Related Party Transactions, for interest expense associated with loans from NML.
The
fair value of mortgage notes payable at June 30, 2009 and December 31, 2008 was $3,523,589 and $3,529,762, respectively, based on current interest rates for comparable
loans. The method for
computing fair value was determined using a present value model and an interest rate that included a credit value adjustment based on the estimated value of the property that serves as collateral for
the underlying debt.
11. Bank and Other Notes Payable:
Bank and other notes payable consist of the following:
Convertible Senior Notes ("Senior Notes"):
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
27
Table of Contents
THE MACERICH COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share amounts)
(Unaudited)
11. Bank and Other Notes Payable: (Continued)
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 date of issuance of the Senior Notes. 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
Company purchased two capped calls ("Capped Calls") from affiliates of the initial purchasers of the Senior Notes that effectively increased the conversion price 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.
During
the three and six months ended June 30, 2009, the Company repurchased and retired $27,500 and $84,315 of the Senior Notes for $18,950 and $50,705 and recorded a gain on
extinguishment of $7,127 and $29,601, respectively. The repurchase was funded by borrowings under the Company's line of credit.
The
carrying value of the Senior Notes at June 30, 2009 and December 31, 2008 was $613,324 and $687,654, respectively, which included unamortized discount of $29,526 and
$39,511, respectively. As of June 30, 2009 and December 31, 2008, the effective interest rate was 5.41%. The fair value of the Senior Notes at June 30, 2009 and
December 31, 2008 was $504,637 and $379,435, respectively, based on the quoted market price on each date.
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. See Note 5Derivative Instruments and Hedging Activities. As of
June 30, 2009 and December 31, 2008, borrowings outstanding were $1,190,000 and $1,099,500, at an average interest rate, excluding the $400,000 swapped portion, of 1.69% and 3.19%,
respectively. The fair value of the Company's line of credit at June 30, 2009 and December 31, 2008 was $1,152,959 and $1,067,631, respectively, based on a present value model using
current interest rate spreads offered to the Company for comparable debt.
28
Table of Contents
THE MACERICH COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share amounts)
(Unaudited)
11. Bank and Other Notes Payable: (Continued)
Term Loan:
The Company has a five-year term loan that bears interest at LIBOR plus 1.50% and matures on April 26, 2010. The
loan is covered by an interest rate swap agreement that effectively fixed the interest rate of the term loan at 6.30% until maturity. See Note 5Derivative Instruments and Hedging
Activities. As of June 30, 2009 and December 31, 2008, the note had a balance outstanding of $442,500 and $446,250, respectively, with an effective interest rate of 6.50%. The fair value
of the term loan at June 30, 2009 and December 31, 2008 was $446,010 and $452,240, respectively, based on a present value model using current interest rate spreads offered to the Company
for comparable debt. On July 30, 2009 and August 3, 2009, the Company paid down the note by $180,000 and $20,000, respectively, from the proceeds received from the sales of five Mervyn's
freestanding stores and the sale of a 49% ownership interest in Queens Center. See Note 22Subsequent Events.
Greeley Note:
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 8Marketable 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, 2009 and December 31, 2008, the note had a balance outstanding of $26,699
and $27,038, respectively. The fair value of the note at June 30, 2009 and December 31, 2008 was $19,552 and $19,074, respectively, based on current interest rates for comparable loans.
The method for computing fair value was determined using a present value model and an interest rate that included a credit value adjustment based on the estimated value of the property that serves as
collateral for the underlying debt.
As
of June 30, 2009 and December 31, 2008, the Company was in compliance with all applicable loan covenants under its debt agreements.
12. Noncontrolling Interests:
The Company allocates net income to the Operating Partnership based on the weighted average ownership interest during the period. The 13% limited partnership interest of the Operating
Partnership not owned by the Company at June 30, 2009 is reflected in these consolidated financial statements as permanent equity.
The
interests in the Operating Partnership are known as OP Units. OP Units not held by the Company are redeemable, at the election of the holder, and the Company may redeem them for the
Company's stock or cash, at the Company's option. The redemption value for each OP Unit as of any balance sheet date is the amount equal to the average of the closing price per share of the Company's
common stock, par value $0.01 per share, as reported on the New York Stock Exchange for the ten trading days ending on the respective balance sheet date. Accordingly, as of June 30, 2009 and
December 31, 2008, the aggregate redemption value of the then-outstanding OP Units not owned by the Company was $205,190 and $227,091, respectively.
29
Table of Contents
THE MACERICH COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share amounts)
(Unaudited)
12. Noncontrolling Interests: (Continued)
The
Company issued common and preferred units of MACWH, LP in April 2005 in connection with the acquisition of the Wilmorite portfolio. The common and preferred units of
MACWH, LP are redeemable at the election of the holder and the Company may redeem them for cash or shares of the Company's stock at the Company's option and are classified as permanent equity.
Included
in permanent equity are outside ownership interests in various consolidated joint ventures. The joint ventures do not have rights that require the Company to redeem the
ownership interests in either cash or stock.
The
outside ownership interests in the Company's joint venture in Shoppingtown Mall have a purchase option for $24,000. In addition, under certain conditions as defined by the
partnership agreement, these partners have the right to "put" their partnership interests to the Company. Due to the redemption feature of the ownership interest in Shoppingtown Mall, these
noncontrolling interests have been included in temporary equity.
13. 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 was convertible on a one-for-one basis into common stock and paid a quarterly dividend equal to the greater of
$0.46 per share, or the dividend then payable on a share of common stock.
The
holder of the Series A Preferred Stock had redemption rights if a change in control of the Company occurred, as defined under the Articles Supplementary. Under such
circumstances, the holder of the Series A Preferred Stock was entitled to require the Company to redeem its shares, to the extent the Company had funds legally available therefor, at a price
equal to 105% of its liquidation preference plus accrued and unpaid dividends. The Series A Preferred Stock holder also had the right to require the Company to repurchase its shares if the
Company failed 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 were legally available
therefor.
No
dividends could be declared or paid on any class of common or other junior stock to the extent that dividends on Series A Preferred Stock had not been declared and/or paid.
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. On September 17, 2008, the holder of the Series A Preferred Stock converted the remaining 1,044,271 shares to common shares.
14. Stockholders' Equity:
On June 8, 2009, the Company amended its articles of incorporation to increase the number of common shares authorized from 145,000,000 common shares to 250,000,000 common shares.
30
Table of Contents
THE MACERICH COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share amounts)
(Unaudited)
14. Stockholders' Equity: (Continued)
On
June 22, 2009, the Company issued 2,236,954 common shares to its common stockholders and OP Unit holders in connection with a declaration of a quarterly dividend of
$0.60 per share of common stock on May 1, 2009, consisting of a combination of cash and shares of the Company's common stock. The cash component of the dividend (not including cash paid in lieu
of fractional shares) was 10% in the aggregate, or $0.06 per share, with the balance paid in shares of the Company's common stock.
In
accordance with the provisions of IRS Revenue Procedure 2009-15, stockholders were asked to make an election to receive the dividend all in cash or all in shares. To the
extent that more than 10% of cash was elected in the aggregate, the cash portion was prorated. Stockholders who elected to receive the dividend in cash received a cash payment of at least $0.06 per
share. Stockholders who did not make an election received 10% in cash and 90% in shares of common stock. The number of shares issued as a result of the dividend was calculated based on the volume
weighted average trading prices of the Company's common stock on the New York Stock Exchange on June 10, June 11 and June 12, 2009 of $19.9927.
The
Company has elected to account for the stock portion of its distribution as a stock issuance as opposed to a stock dividend. Accordingly, the impact of the shares issued is reflected
in the Company's earnings per share calculation on a prospective basis. The issuance of the stock dividend resulted in a reduction of $0.01 on both basic and diluted earnings per share for the three
months ended June 30, 2009.
15. Acquisitions:
The Company has completed the following acquisitions:
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. In connection with the acquisition of the Mervyn's portfolio and applying
SFAS No. 141(R), the Company recorded intangible assets of $110.7 million and intangible liabilities of $59.0 million. The results of operations include these properties since the
acquisition date.
Boscov's:
On May 20, 2008, the Company purchased a fee simple interest 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.
31
Table of Contents
THE MACERICH COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share amounts)
(Unaudited)
16. Discontinued Operations:
The following operations were recently discontinued:
Mervyn's:
In July 2008, Mervyn's filed for bankruptcy protection and announced in October 2008 its plans to liquidate all merchandise, auction
its store leases and wind down its business. The Company had 45 former Mervyn's stores in its portfolio. The Company owned the ground leasehold and/or fee simple interest in 44 of those stores and the
remaining store was owned by a third party but was located at one of the Centers.
In
September 2008, the Company recorded a write-down of $5,214 due to the anticipated rejection of six of the Company's leases by Mervyn's. In addition, the Company
terminated its former plan to sell the 29 Mervyn's stores located at shopping centers not owned or managed by the Company. The Company's decision was based on current conditions in the credit market
and the assumption that a better return could be obtained by holding and operating the assets. As a result of the change in plans to sell, the Company recorded a loss of $5,347 in (loss) gain on sale
or write-down of assets in order to adjust the carrying value of these assets for depreciation expense that otherwise would have been recognized had these assets been continuously
classified as held and used.
In
December 2008, Kohl's and Forever 21 assumed a total of 23 of the Mervyn's leases and the remaining 22 leases were rejected by Mervyn's under the bankruptcy laws. As a result, the
Company wrote off the unamortized intangible assets and liabilities related to the rejected and unassumed leases in December 2008. The Company wrote off $27,655 of unamortized intangible assets
related to lease in place values, leasing commissions and legal costs to depreciation and amortization. Unamortized intangible assets of $14,881 relating to above market leases and unamortized
intangible liabilities of $24,523 relating to below market leases were written off to minimum rents.
On
December 19, 2008, the Company sold a fee and/or ground leasehold interest in three freestanding Mervyn's department stores (collectively referred to as the "PPRT Mervyn's") to
Pacific Premier Retail Trust, one of the Company's joint ventures, for $43,405, resulting in a gain on sale of assets of $1,511. The Company's pro rata share of the proceeds was used to pay down the
Company's line of credit.
Rochester Redemption:
On January 1, 2008, a subsidiary of the Operating Partnership, at the election of the holders, redeemed the 3,426,609
participating convertible preferred units ("PCPUs"). As a result of the redemption, the Company received the 16.32% noncontrolling 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 $224,393, 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%
32
Table of Contents
THE MACERICH COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share amounts)
(Unaudited)
16. Discontinued Operations: (Continued)
interest
in the indebtedness of the Non-Rochester Properties, which had an estimated fair value of $105,962. 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 $99,082 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 noncontrolling interest. This exchange is referred to herein as the "Rochester Redemption."
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 following
table represents the debt measured at fair value on January 1, 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
January 1, 2008
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt on Non-Rochester Properties
|
|
$
|
|
|
$
|
71,032
|
|
$
|
34,930
|
|
$
|
105,962
|
|
The
source of the Level 2 inputs involved the use of the nominal weekly average of the U.S. treasury rates. The source of the Level 3 inputs was based on comparable credit
spreads on the estimated value of the property that serves as the underlying collateral of the debt.
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 noncontrolling
interests 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, 2009 and 2008 for all of the above dispositions as discontinued operations.
33
Table of Contents
THE MACERICH COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share amounts)
(Unaudited)
16. Discontinued Operations: (Continued)
Revenues
and (loss) income from discontinued operations consist of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three
Months Ended
June 30,
|
|
For the Six
Months Ended
June 30,
|
|
|
|
2009
|
|
2008
|
|
2009
|
|
2008
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Scottsdale/101
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
10
|
|
|
Holiday Village
|
|
|
|
|
|
|
|
|
|
|
|
338
|
|
|
Great Falls Marketplace
|
|
|
|
|
|
43
|
|
|
|
|
|
(21
|
)
|
|
PPRT Mervyn's
|
|
|
|
|
|
1,017
|
|
|
|
|
|
2,129
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
|
|
$
|
1,060
|
|
$
|
|
|
$
|
2,456
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income from discontinued operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Scottsdale/101
|
|
$
|
(2
|
)
|
$
|
(3
|
)
|
$
|
(11
|
)
|
$
|
(1
|
)
|
|
Holiday Village
|
|
|
(9
|
)
|
|
|
|
|
(9
|
)
|
|
338
|
|
|
Great Falls Marketplace
|
|
|
|
|
|
31
|
|
|
|
|
|
(33
|
)
|
|
PPRT Mervyn's
|
|
|
|
|
|
386
|
|
|
|
|
|
703
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(11
|
)
|
$
|
414
|
|
$
|
(20
|
)
|
$
|
1,007
|
|
|
|
|
|
|
|
|
|
|
|
17. Commitments and Contingencies:
The Company has certain properties subject to non-cancelable operating ground leases. The leases expire at various times through 2107, 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. Ground rent expenses were $2,052 and $1,818 for
the three months ended June 30, 2009 and 2008, respectively and $4,087 and $3,365 for the six months ended June 30, 2009 and 2008, respectively. No contingent rent was incurred during
the three or six months ended June 30, 2009 and 2008.
As
of June 30, 2009 and December 31, 2008, the Company was contingently liable for $20,148 and $19,699, respectively, 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 a liability to the Company. In addition, the Company has a $24,000
letter of credit that serves as collateral for a liability assumed in the acquisition of a property.
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, 2009, the Company had $75,248 in outstanding obligations under these construction agreements which it
believes will be settled in 2009.
34
Table of Contents
THE MACERICH COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share amounts)
(Unaudited)
18. Related-Party Transactions:
Certain unconsolidated joint ventures and third-parties 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 insurance costs and other administrative expenses.
The
following are fees charged to unconsolidated joint ventures and third-party managed properties:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three
Months Ended
June 30,
|
|
For the Six
Months Ended
June 30,
|
|
|
|
2009
|
|
2008
|
|
2009
|
|
2008
|
|
Management Fees
|
|
|
|
|
|
|
|
|
|
|
|
|
|
MMC
|
|
$
|
2,934
|
|
$
|
2,960
|
|
$
|
5,903
|
|
$
|
5,885
|
|
Westcor Management Companies
|
|
|
1,913
|
|
|
1,863
|
|
|
3,862
|
|
|
3,718
|
|
Wilmorite Management Companies
|
|
|
418
|
|
|
416
|
|
|
828
|
|
|
835
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
5,265
|
|
$
|
5,239
|
|
$
|
10,593
|
|
$
|
10,438
|
|
|
|
|
|
|
|
|
|
|
|
Development and Leasing Fees
|
|
|
|
|
|
|
|
|
|
|
|
|
|
MMC
|
|
$
|
1,091
|
|
$
|
96
|
|
$
|
1,561
|
|
$
|
195
|
|
Westcor Management Companies
|
|
|
1,228
|
|
|
2,982
|
|
|
2,325
|
|
|
4,601
|
|
Wilmorite Management Companies
|
|
|
225
|
|
|
438
|
|
|
525
|
|
|
876
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
2,544
|
|
$
|
3,516
|
|
$
|
4,411
|
|
$
|
5,672
|
|
|
|
|
|
|
|
|
|
|
|
Certain
mortgage notes on the properties are held by NML (See Note 10Mortgage Notes Payable). Interest expense in connection with these notes was $6,254 and $3,678
for the three months ended June 30, 2009 and 2008, respectively and $12,044 and $7,372 for the six months ended June 30, 2009 and 2008, respectively. Included in accounts payable and
accrued expenses is interest payable to these partners of $1,964 and $1,609 at June 30, 2009 and December 31, 2008, respectively.
As
of June 30, 2009 and December 31, 2008, the Company had loans to unconsolidated joint ventures of $638 and $932, respectively. Interest income associated with these
notes was ($3) and $9 for the three months ended June 30, 2009 and 2008, respectively and $13 and $21 for the six months ended June 30, 2009 and 2008, 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 $7,815 and $9,124 at June 30, 2009 and December 31, 2008, respectively, represents unreimbursed costs and fees due from unconsolidated joint ventures
under management agreements.
35
Table of Contents
THE MACERICH COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share amounts)
(Unaudited)
19. 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. In addition,
the Company has established an Employee Stock Purchase Plan to allow employees to purchase the Company's common stock at a discount.
On
February 25, 2009, the Company reduced its workforce by 142 employees out of a total of approximately 2,845 regular and temporary employees. This reduction in workforce was a
result of the Company's review and realignment of its strategic priorities, including its expectation of reduced development and redevelopment activity in the near future. As part of the plan, the
Company accelerated the vesting of the share and unit-based awards of certain terminated employees. As a result of the modification of the awards, the Company recorded a reduction in
compensation cost of $487.
On
March 6, 2009, the Company granted 1,600,002 restricted stock units ("RSUs") to certain officers of the Company as an additional component of compensation. The outstanding RSUs
vest over three years and the compensation cost related to the grants is determined by the market value at the grant date and is amortized over the vesting period on a straight-line basis.
RSUs are subject to restrictions determined by the Company's compensation committee.
The
Company records compensation expense on a straight-line basis for awards, with the exception of the market-indexed awards granted under the Long-Term
Incentive Plan ("LTIP"). The following summarizes the compensation cost under the share and unit-based plans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three
Months Ended
June 30,
|
|
For the Six
Months Ended
June 30,
|
|
|
|
2009
|
|
2008
|
|
2009
|
|
2008
|
|
LTIP units
|
|
$
|
909
|
|
$
|
1,710
|
|
$
|
1,967
|
|
$
|
2,985
|
|
Stock awards
|
|
|
1,568
|
|
|
2,645
|
|
|
3,674
|
|
|
5,993
|
|
Stock units
|
|
|
944
|
|
|
|
|
|
1,214
|
|
|
|
|
Stock options
|
|
|
148
|
|
|
148
|
|
|
295
|
|
|
296
|
|
Stock Appreciation Rights ("SARs")
|
|
|
742
|
|
|
795
|
|
|
1,368
|
|
|
1,014
|
|
Phantom stock units
|
|
|
151
|
|
|
162
|
|
|
321
|
|
|
329
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
4,462
|
|
$
|
5,460
|
|
$
|
8,839
|
|
$
|
10,617
|
|
|
|
|
|
|
|
|
|
|
|
The
Company capitalized share and unit-based compensation costs of $2,041 and $2,651 for the three months ended June 30, 2009 and 2008, respectively and $3,803 and
$4,922 for the six months ended June 30, 2009 and 2008, respectively.
36
Table of Contents
THE MACERICH COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share amounts)
(Unaudited)
19. 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
|
|
SARs
|
|
|
|
Units
|
|
Weighted
Average
Grant Date
Fair Value
|
|
Shares
|
|
Weighted
Average
Grant Date
Fair Value
|
|
Units
|
|
Weighted
Average
Grant Date
Fair Value
|
|
Units
|
|
Weighted
Average
Grant Date
Fair Value
|
|
Balance at January 1, 2009
|
|
|
299,350
|
|
$
|
57.02
|
|
|
275,181
|
|
$
|
74.68
|
|
|
3,209
|
|
$
|
83.88
|
|
|
1,228,384
|
|
$
|
7.68
|
|
|
Granted
|
|
|
|
|
|
|
|
|
6,500
|
|
|
8.21
|
|
|
19,020
|
|
|
9.81
|
|
|
29,000
|
|
|
1.17
|
|
|
Vested
|
|
|
(46,410
|
)
|
|
65.29
|
|
|
(151,829
|
)
|
|
76.34
|
|
|
(20,624
|
)
|
|
15.57
|
|
|
(91,050
|
)
|
|
7.68
|
|
|
Forfeited
|
|
|
|
|
|
|
|
|
(460
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at June 30, 2009
|
|
|
252,940
|
|
$
|
55.50
|
|
|
129,392
|
|
$
|
69.41
|
|
|
1,605
|
|
$
|
83.88
|
|
|
1,166,334
|
|
$
|
7.51
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20. 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.
37
Table of Contents
THE MACERICH COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share amounts)
(Unaudited)
20. 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,
|
|
|
|
2009
|
|
2008
|
|
2009
|
|
2008
|
|
Current
|
|
$
|
1
|
|
$
|
7
|
|
$
|
(89
|
)
|
$
|
|
|
Deferred
|
|
|
379
|
|
|
682
|
|
|
1,270
|
|
|
388
|
|
|
|
|
|
|
|
|
|
|
|
Total income tax benefit
|
|
$
|
380
|
|
$
|
689
|
|
$
|
1,181
|
|
$
|
388
|
|
|
|
|
|
|
|
|
|
|
|
SFAS
No. 109, "Income Taxes," 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 of $14,952 and $13,830 were included in deferred charges
and other assets, net at June 30, 2009 and December 31, 2008, respectively.
The
Company had an unrecognized tax benefit, in accordance with FASB Interpretation No. 48, "Accounting for Uncertainty in Income Taxes," of $2,569 and $2,201 at June 30,
2009 and December 31, 2008, respectively. As a result of tax positions taken during the current year, an increase in the unrecognized tax benefit of $369 was included in the Company's
consolidated statement of operations.
The
tax years 2005-2008 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.
21. Cumulative Effect of Adoption of Accounting Principles:
Retrospective Adjustments Related to Convertible Debt:
On January 1, 2009, the Company adopted FSP APB 14-1. The adoption of FSP APB 14-1
requires the Company to retrospectively allocate the initial proceeds from the Senior Notes between a liability component and an equity component based on the fair value calculated based on the
present value of contractual cash flows discounted at an appropriate comparable non-convertible debt borrowing rate at the date of issuance of the Senior Notes. As a result, the Company
allocated $869,351 of the initial $940,500 proceeds to the liability component and the remaining $71,149 of proceeds to the equity component at the date of issuance of the Senior Notes.
38
Table of Contents
THE MACERICH COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share amounts)
(Unaudited)
21. Cumulative Effect of Adoption of Accounting Principles: (Continued)
Retrospective Adjustments Related to Noncontrolling Interests:
Effective January 1, 2009, the Company adopted the provisions of SFAS No. 160, which requires a noncontrolling interest
in a subsidiary to be reported as equity and the amount of consolidated net income specifically attributable to the noncontrolling interest to be included within consolidated net income. SFAS
No. 160 also requires consistency in the manner of reporting
changes in the parent's ownership interest and requires fair value measurement of any noncontrolling equity investment retained in a deconsolidation. In connection with the retrospective adoption of
SFAS No. 160, the Company also performed a concurrent review and retrospectively adopted the measurement provisions of EITF D-98.
The
Company's reassessment of EITF D-98 resulted in the continued classification of its redeemable equity interest in one of its consolidated joint ventures as temporary
equity due to the possibility that the Company could be required to redeem this interest for cash upon the occurrence of certain events outside the control of the Company. The carrying amount of the
redeemable equity interest is equal to its liquidation value, which is the amount payable upon the occurrence of such event.
The
Company's reassessment of EITF D-98 resulted in the reclassification of the OP Units and the common and preferred units of MACWH, LP to permanent equity. The OP
Units and the common and preferred units of MACWH, LP are redeemable at the election of the holder and the Company may redeem them for cash or shares of stock of the Company at the Company's
election. In addition, the Company reclassified outside ownership interests in various consolidated joint ventures to permanent equity.
Further,
as a result of the adoption of SFAS No. 160, net income attributable to noncontrolling interests is now excluded from the determination of consolidated net income. In
addition, the individual components of other comprehensive income are now presented in the aggregate, with the portion attributable to noncontrolling interests deducted from comprehensive income
attributable to common stockholders. Corresponding changes have also been made to the accompanying consolidated statements of cash flows.
39
Table of Contents
THE MACERICH COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share amounts)
(Unaudited)
21. Cumulative Effect of Adoption of Accounting Principles: (Continued)
The following is a summary of the impact of adoption of these standards on the financial statements of prior periods and includes reclassifications relating to discontinued operations
(See Note 16Discontinued Operations):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As Previously
Reported
|
|
Adoption of
FSP
APB 14-1
|
|
Reclassification
Adjustments(1)
|
|
As Adjusted
|
|
Consolidated Statement of Operations for the three months ended June 30, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Minimum rents
|
|
$
|
123,604
|
|
$
|
|
|
$
|
6,227
|
|
$
|
129,831
|
|
|
Tenant recoveries
|
|
|
65,646
|
|
|
|
|
|
1,267
|
|
|
66,913
|
|
|
|
Total revenues
|
|
|
209,297
|
|
|
|
|
|
7,494
|
|
|
216,791
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shopping center and operating expenses
|
|
|
67,255
|
|
|
|
|
|
1,753
|
|
|
69,008
|
|
|
Depreciation and amortization
|
|
|
56,811
|
|
|
|
|
|
663
|
|
|
57,474
|
|
|
Interest expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
64,823
|
|
|
3,536
|
|
|
|
|
|
68,359
|
|
|
|
Total expenses
|
|
|
217,236
|
|
|
3,536
|
|
|
2,416
|
|
|
223,188
|
|
Income from continuing operations
|
|
|
18,185
|
|
|
(3,536
|
)
|
|
5,078
|
|
|
19,727
|
|
Discontinued operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from discontinued operations
|
|
|
5,493
|
|
|
|
|
|
(5,079
|
)
|
|
414
|
|
Total income from discontinued operations
|
|
|
5,380
|
|
|
|
|
|
(5,079
|
)
|
|
301
|
|
Net income
|
|
|
23,565
|
|
|
(3,536
|
)
|
|
(1
|
)
|
|
20,028
|
|
Less net income attributable to noncontrolling interests
|
|
|
3,936
|
|
|
(467
|
)
|
|
(1
|
)
|
|
3,468
|
|
Net income attributable to the Company
|
|
|
19,629
|
|
|
(3,069
|
)
|
|
|
|
|
16,560
|
|
Net income available to common stockholders
|
|
|
18,794
|
|
|
(3,069
|
)
|
|
|
|
|
15,725
|
|
Earnings per common share attributable to Companybasic:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations
|
|
|
0.19
|
|
|
(0.04
|
)
|
|
0.06
|
|
|
0.21
|
|
|
Discontinued operations
|
|
|
0.06
|
|
|
|
|
|
(0.06
|
)
|
|
|
|
|
Net income available to common stockholders
|
|
|
0.25
|
|
|
(0.04
|
)
|
|
|
|
|
0.21
|
|
Earnings per common share attributable to Companydiluted:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations
|
|
|
0.19
|
|
|
(0.04
|
)
|
|
0.06
|
|
|
0.21
|
|
|
Discontinued operations
|
|
|
0.06
|
|
|
|
|
|
(0.06
|
)
|
|
|
|
|
Net income available to common stockholders
|
|
|
0.25
|
|
|
(0.04
|
)
|
|
|
|
|
0.21
|
|
40
Table of Contents
THE MACERICH COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share amounts)
(Unaudited)
21. Cumulative Effect of Adoption of Accounting Principles: (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As Previously
Reported
|
|
Adoption of
FSP
APB 14-1
|
|
Reclassification
Adjustments(1)
|
|
As Adjusted
|
|
Consolidated Statement of Operations for the six months ended June 30, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Minimum rents
|
|
$
|
249,435
|
|
$
|
|
|
$
|
11,544
|
|
$
|
260,979
|
|
|
Tenant recoveries
|
|
|
132,035
|
|
|
|
|
|
2,535
|
|
|
134,570
|
|
|
Other
|
|
|
13,040
|
|
|
|
|
|
1
|
|
|
13,041
|
|
|
|
Total revenues
|
|
|
420,241
|
|
|
|
|
|
14,080
|
|
|
434,321
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shopping center and operating expenses
|
|
|
136,172
|
|
|
|
|
|
3,459
|
|
|
139,631
|
|
|
Depreciation and amortization
|
|
|
117,518
|
|
|
|
|
|
611
|
|
|
118,129
|
|
|
|
|
301,100
|
|
|
|
|
|
4,070
|
|
|
305,170
|
|
|
Interest expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
131,954
|
|
|
7,078
|
|
|
|
|
|
139,032
|
|
|
|
Total expenses
|
|
|
440,433
|
|
|
7,078
|
|
|
4,070
|
|
|
451,581
|
|
Income from continuing operations
|
|
|
28,603
|
|
|
(7,078
|
)
|
|
10,010
|
|
|
31,535
|
|
Discontinued operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from discontinued operations
|
|
|
11,018
|
|
|
|
|
|
(10,011
|
)
|
|
1,007
|
|
Total income from discontinued operations
|
|
|
110,168
|
|
|
|
|
|
(10,011
|
)
|
|
100,157
|
|
Net income
|
|
|
138,771
|
|
|
(7,078
|
)
|
|
(1
|
)
|
|
131,692
|
|
Less net income attributable to noncontrolling interests
|
|
|
21,060
|
|
|
(992
|
)
|
|
|
|
|
20,068
|
|
Net income attributable to the Company
|
|
|
117,711
|
|
|
(6,086
|
)
|
|
(1
|
)
|
|
111,624
|
|
Net income available to common stockholders
|
|
|
114,422
|
|
|
(6,086
|
)
|
|
(1
|
)
|
|
108,335
|
|
Earnings per common share attributable to Companybasic:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations
|
|
|
0.28
|
|
|
(0.08
|
)
|
|
0.11
|
|
|
0.31
|
|
|
Discontinued operations
|
|
|
1.29
|
|
|
|
|
|
(0.12
|
)
|
|
1.17
|
|
|
Net income available to common stockholders
|
|
|
1.57
|
|
|
(0.08
|
)
|
|
(0.01
|
)
|
|
1.48
|
|
Earnings per common share attributable to Companydiluted:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations
|
|
|
0.31
|
|
|
(0.07
|
)
|
|
0.06
|
|
|
0.30
|
|
|
Discontinued operations
|
|
|
1.24
|
|
|
|
|
|
(0.07
|
)
|
|
1.17
|
|
|
Net income available to common stockholders
|
|
|
1.55
|
|
|
(0.07
|
)
|
|
(0.01
|
)
|
|
1.47
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As Previously
Reported
|
|
Restatement
Adjustment
|
|
Reclassification
Adjustments(1)
|
|
As Restated
|
|
Consolidated Statement of Cash Flows for the six months ended June 30, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
117,711
|
|
$
|
(7,084
|
)
|
$
|
21,065
|
|
$
|
131,692
|
|
Amortization of net discount on mortgage and bank and other notes payable
|
|
|
(4,305
|
)
|
|
7,084
|
|
|
(5
|
)
|
|
2,774
|
|
-
(1)
-
Reclassification
adjustments include the reclassifications of the results of operations of sold properties to discontinued operations and the adoptions of
SFAS No. 160 and EITF No. 03-06-1.
41
Table of Contents
THE MACERICH COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share amounts)
(Unaudited)
21. Cumulative Effect of Adoption of Accounting Principles: (Continued)
The following is the pro forma impact for the three and six months ended June 30, 2009 had the Company not adopted FSP
APB 14-1:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As Computed
Before
Adoption
|
|
As Reported
|
|
Adjustment
|
|
Consolidated Statement of Operations for the three months ended June 30, 2009
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
$
|
63,393
|
|
$
|
65,660
|
|
$
|
2,267
|
|
|
Gain on early extinguishment of debt
|
|
|
(8,324
|
)
|
|
(7,127
|
)
|
|
1,197
|
|
|
|
Total expenses
|
|
|
216,137
|
|
|
219,601
|
|
|
3,464
|
|
Loss from continuing operations
|
|
|
(20,891
|
)
|
|
(24,355
|
)
|
|
(3,464
|
)
|
Net loss
|
|
|
(20,902
|
)
|
|
(24,366
|
)
|
|
(3,464
|
)
|
Less net loss attributable to noncontrolling interests
|
|
|
(2,174
|
)
|
|
(2,630
|
)
|
|
(456
|
)
|
Net loss attributable to the Company
|
|
|
(18,728
|
)
|
|
(21,736
|
)
|
|
(3,008
|
)
|
Net loss available to common stockholders
|
|
|
(18,728
|
)
|
|
(21,736
|
)
|
|
(3,008
|
)
|
Earnings per common share attributable to Companybasic:
|
|
|
|
|
|
|
|
|
|
|
|
Loss from continuing operations
|
|
|
(0.26
|
)
|
|
(0.29
|
)
|
|
(0.03
|
)
|
|
Net loss available to common stockholders
|
|
|
(0.26
|
)
|
|
(0.29
|
)
|
|
(0.03
|
)
|
Earnings per common share attributable to Companydiluted:
|
|
|
|
|
|
|
|
|
|
|
|
Loss from continuing operations
|
|
|
(0.26
|
)
|
|
(0.29
|
)
|
|
(0.03
|
)
|
|
Net loss available to common stockholders
|
|
|
(0.26
|
)
|
|
(0.29
|
)
|
|
(0.03
|
)
|
Consolidated Statement of Operations for the six months ended June 30, 2009
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
124,972
|
|
|
129,808
|
|
|
4,836
|
|
|
Gain on early extinguishment of debt
|
|
|
(33,419
|
)
|
|
(29,601
|
)
|
|
3,818
|
|
|
|
Total expenses
|
|
|
422,782
|
|
|
431,436
|
|
|
8,654
|
|
Income (loss) from continuing operations
|
|
|
742
|
|
|
(7,912
|
)
|
|
(8,654
|
)
|
Net income (loss)
|
|
|
705
|
|
|
(7,949
|
)
|
|
(8,654
|
)
|
Less net income (loss) attributable to noncontrolling interests
|
|
|
910
|
|
|
(229
|
)
|
|
(1,139
|
)
|
Net loss income attributable to the Company
|
|
|
(205
|
)
|
|
(7,720
|
)
|
|
(7,515
|
)
|
Net loss income available to common stockholders
|
|
|
(205
|
)
|
|
(7,720
|
)
|
|
(7,515
|
)
|
Earnings per common share attributable to Companybasic:
|
|
|
|
|
|
|
|
|
|
|
|
Loss from continuing operations
|
|
|
|
|
|
(0.12
|
)
|
|
(0.12
|
)
|
|
Net loss available to common stockholders
|
|
|
|
|
|
(0.12
|
)
|
|
(0.12
|
)
|
Earnings per common share attributable to Companydiluted:
|
|
|
|
|
|
|
|
|
|
|
|
Loss from continuing operations
|
|
|
|
|
|
(0.12
|
)
|
|
(0.12
|
)
|
|
Net loss available to common stockholders
|
|
|
|
|
|
(0.12
|
)
|
|
(0.12
|
)
|
22. Subsequent Events:
On July 31, 2009, the Company announced a quarterly dividend of $0.60 per share of common stock, consisting of a combination of cash and shares of the Company's common stock. The
dividend is payable on September 21, 2009 to stockholders of record at the close of business on August 12, 2009.
In
order to comply with REIT taxable income distribution requirements, while retaining capital and enhancing the Company's financial flexibility, the Company has determined that the
aggregate cash component of the dividend (other than cash paid in lieu of fractional shares) will not exceed 10% in the aggregate, or $0.06 per share, with the balance payable in shares of the
Company's common stock.
42
Table of Contents
THE MACERICH COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share amounts)
(Unaudited)
22. Subsequent Events: (Continued)
In
accordance with the provisions of IRS Revenue Procedure 2009-15, stockholders will be asked to make an election to receive the dividend all in cash or all in shares. To
the extent that more than 10% of cash is elected in the aggregate, the cash portion will be prorated. Stockholders who elect to receive the dividend in cash will receive a cash payment of at least
$0.06 per share. Stockholders who do not make an election will receive 10% in cash and 90% in shares of common stock. The number of shares issued as a result of the dividend will be calculated based
on the volume weighted average trading prices of the Company's common stock on the New York Stock Exchange on September 9, 2009 through September 11, 2009.
The
Company expects the dividend to be a taxable dividend to stockholders, regardless of whether a particular stockholder receives the dividend in the form of cash or shares. The Company
reserves the right to pay the dividend entirely in cash.
The
Company may again in the future distribute taxable dividends that are payable partially in stock. Taxable stockholders receiving such dividends are required to include the full
amount of the dividend as income to the extent of the Company's current and accumulated earnings and profits for federal income tax purposes, and may therefore have a tax liability in excess of the
cash they receive.
On
July 14, 2009, the Company sold Village Center, a 170,801 square foot urban village property, for $11,811 (See Note 6Fair Value). The Company used the
proceeds from the sale to pay down the term loan and for general corporate purposes.
During
the period of July 15, 2009 through July 30, 2009, the Company sold five of the Mervyn's stores for approximately $50,829 in total proceeds (See
Note 6Fair Value). The Company used the proceeds from the sales to pay down the term loan and for general corporate purposes.
On
July 30, 2009, the Company sold a 49% interest in Queen Center, a 966,499 square foot urban shopping center, for approximately $150,000. The Company used the proceeds from the
sale to pay down the term loan.
The
Company evaluated activity through August 7, 2009 (the issue date of these Consolidated Financial Statements) and concluded that no subsequent events other than the
transactions noted above have occurred that would require recognition or additional disclosure.
43
Table of Contents
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
IMPORTANT INFORMATION 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, development, leasing and operational activities and
opportunities, including the performance of its retailers;
-
-
the Company's acquisition, disposition and other strategies;
-
-
regulatory matters pertaining to compliance with governmental regulations;
-
-
the Company's capital expenditure plans and expectations for obtaining capital for expenditures;
-
-
the Company's expectations regarding its financial condition or results of operations; and
-
-
the Company's expectations for refinancing its indebtedness and entering into joint venture arrangements.
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 our Annual Report on Form 10-K for
the year ended December 31, 2008, 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, unless required by law to do so.
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 Operating Partnership. As of June 30,
2009, the Operating Partnership owned or had an ownership interest in 72 regional shopping centers and 20 community shopping centers totaling approximately 76 million square feet of gross
leasable area. These 92 regional and community shopping centers are referred to hereinafter as the "Centers", unless the context otherwise requires. The Company is a self-administered and
self-managed REIT and conducts all of its operations through the Operating Partnership and the Company's Management Companies.
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The
following discussion is based primarily on the consolidated financial statements of the Company for the three and six months ended June 30, 2009 and 2008. It compares the
results of operations for the three months ended June 30, 2009 to the results of operations for the three months ended June 30, 2008 and the results of operations and cash flows for the
six months ended June 30, 2009 to the results of operations and cash flows for the six months ended June 30, 2008. This information should be read in conjunction with the accompanying
consolidated financial statements and notes thereto.
Management's
Discussion and Analysis of Financial Condition and Results of Operations has been updated to reflect the adjustment of the consolidated statements of operations and cash
flows for the three and six months ended June 30, 2008 for the adoption of FSP APB 14-1, "Accounting for Convertible Debt That May Be Settled In Cash Upon Conversion
(Including Partial Cash Settlement)," and Statement of Financial Accounting Standards ("SFAS") No. 160, "Noncontrolling Interests in Consolidated Financial StatementsAn Amendment
of ARB
No 51." For a more detailed description of the adjustment, see Note 21Cumulative Effect of Adoption of Accounting Principles of the Company's Consolidated Financial Statements.
Acquisitions and Dispositions:
On January 1, 2008, a subsidiary of the Operating Partnership, at the election of the holders, redeemed its 3.4 million
Class A participating convertible preferred units ("PCPUs"). As a result of the redemption, the Company received the 16.32% noncontrolling interest in the portion of the Wilmorite portfolio
acquired on April 25, 2005 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," including
approximately $18.0 million 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 $106.0 million. 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 $99.1 million 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 noncontrolling interest. 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 $515.0 million. The Company's share of the purchase price was funded by the assumption of a pro rata share of the $205.0 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.
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.
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On
May 20, 2008, the Company purchased a fee simple interest 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 $15.2 million mortgage note on the property and by borrowings under the Company's line of credit.
The
Boscov's store 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 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.
On
December 19, 2008, the Company sold a fee and/or ground leasehold interest in three freestanding Mervyn's department stores to Pacific Premier Retail Trust, one of the
Company's joint ventures, for $43.4 million, resulting in a gain on sale of assets of $1.5 million. The Company's pro rata share of the proceeds was used to pay down the Company's line
of credit.
Mervyn's:
In July 2008, Mervyn's filed for bankruptcy protection and announced in October its plans to liquidate all merchandise, auction its
store leases and wind down its business. The Company had 45 former Mervyn's stores in its portfolio. The Company owned the ground leasehold and/or fee simple interest in 44 of those stores and the
remaining store was owned by a third party but is located at one of the Centers. In connection with the acquisition of the Mervyn's portfolio (See Note 15Acquisitions of the
Company's Consolidated Financial Statements) and applying SFAS No. 141(R), the Company recorded intangible assets of $110.7 million and intangible liabilities of $59.0 million.
In
September 2008, the Company recorded a write-down of $5.2 million due to the anticipated rejection of six of the Company's leases by Mervyn's. In addition, the
Company terminated its former plan to sell the 29 Mervyn's stores located at shopping centers not owned or managed by the Company. (See Note 16Discontinued Operations of the
Company's Consolidated
Financial Statements). The Company's decision was based on current conditions in the credit market and the assumption that a better return could be obtained by holding and operating the assets. As a
result of the change in plans to sell, the Company recorded a loss of $5.3 million in order to adjust the carrying value of these assets for depreciation expense that otherwise would have been
recognized had these assets been continuously classified as held and used.
In
December 2008, Kohl's and Forever 21 assumed a total of 23 of the Mervyn's leases and the remaining 22 leases were rejected by Mervyn's under the bankruptcy laws. As a result, the
Company wrote off the unamortized intangible assets and liabilities related to the rejected and unassumed leases in December 2008. The Company wrote off $27.7 million of unamortized intangible
assets related to lease in place values, leasing commissions and legal costs to depreciation and amortization. Unamortized intangible assets of $14.9 million relating to above market leases and
unamortized intangible liabilities of $24.5 million relating to below market leases were written off to minimum rents.
During
the period of July 15, 2009 through July 30, 2009, the Company sold five of the Mervyn's stores for approximately $50.8 million in total proceeds. As a result
of the sale and in accordance with SFAS No. 144, "Accounting for Impairment or Disposal of Long-Lived Assets," the Company recorded an impairment charge of $26.0 million to
loss on sale or write down of assets for the three and six months ended June 30, 2009. See Note 22Subsequent Events of the Company's Consolidated Financial Statements.
The
Mervyn's stores acquired in 2007 and 2008 are referred to herein as the "Mervyn's Properties."
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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 2Summary of Significant Accounting Policies of the Company's Consolidated Financial Statements. 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 recognized as revenues in the period the applicable expenses are incurred. Other tenants pay a fixed rate and these tenant
recoveries' revenues are recognized on a straight-line basis over the term of the related leases.
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Property:
The Company capitalizes costs incurred in redevelopment and development of properties in accordance with 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 buildings under development include
specifically identifiable costs. The capitalized costs include pre-construction costs essential to the development of the property, development 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 repair expenses are charged to operations as incurred. Costs for major replacements and betterments, which includes HVAC equipment, roofs, parking lots, etc., 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 (R), "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.
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
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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 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.
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 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.
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 the renewal term. Leasing commissions and legal
costs are amortized on
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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
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In-place lease values
|
|
Remaining lease term plus an estimate for renewal
|
Leasing commissions and legal costs
|
|
5 - 10 years
|
Results of Operations
Many of the variations in the results of operations, discussed below, occurred due to the transactions described above, including the
2008 Acquistion Property, the Mervyn's Properties and the Redevelopment Centers. For the comparison of the three and six months ended June 30, 2009 to the three and six months ended
June 30, 2008, the "Same Centers" include all consolidated Centers, excluding the 2008 Acquistion Property, the Mervyn's Properties and the Redevelopment Centers.
The
"Redevelopment Centers" include The Oaks, Northgate Mall, Santa Monica Place and Shoppingtown Mall.
Unconsolidated
joint ventures are reflected using the equity method of accounting. The Company's pro rata share of the results from these Centers is reflected in the Consolidated
Statements of Operations as equity in income from unconsolidated joint ventures.
Comparison of Three Months Ended June 30, 2009 and 2008
Revenues:
Minimum and percentage rents (collectively referred to as "rental revenue") decreased by $6.6 million, or 5.0%, from 2008 to
2009. The decrease in rental revenue is attributed to a decrease of $5.6 million from the Mervyn's Properties and $3.1 million from the Same Centers, offset in part by an increase of
$1.8 million from the Redevelopment Centers and an increase of $0.3 million from the 2008 Acquisition Property. The decrease in rental revenues from the Mervyn's Properties is due to the
rejection of the leases by Mervyn's in 2008 offset in part by the assumption of 23 of the leases by Kohl's and/or Forever 21 in December 2008. The Company is currently seeking replacement tenants for
the vacant Mervyn's spaces. If these spaces are not leased this trend will continue throughout 2009. The decrease in the revenues from the Same Centers is primarily attributable to decreases in
occupancy, lease termination income and amortization of above and below market leases.
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 decreased from $2.6 million in 2008 to $2.5 million in 2009. The amortization of straight-line rents was $1.9 million in 2008 and 2009. Lease termination
income decreased from $1.8 million in 2008 to $0.9 million in 2009.
Tenant
recoveries decreased $4.4 million, or 6.6%, from 2008 to 2009. The decrease in tenant recoveries is attributed to a decrease of $3.2 million from the Same Centers,
$1.2 million from the Mervyn's Properties and $0.1 million from the Redevelopment Centers offset in part by an increase of $0.1 million from the 2008 Acquisition Property. The
decrease from Same Centers is due to a decrease of recoverable operating expenses, utilities and property taxes.
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Management Companies' revenues decreased by $1.0 million from 2008 to 2009, primarily due to a decrease in leasing and development fees from joint ventures
and third-party managed properties.
Shopping Center and Operating Expenses:
Shopping center and operating expenses decreased $1.5 million, or 2.1%, from 2008 to 2009. The decrease in shopping center and
operating expenses is due to a decrease of $2.6 million from the Same Centers relating to decreases in recoverable operating expenses, utilities and property taxes. This is offset in part by an
increase of $0.7 million from the Mervyn's Properties, $0.2 million from the Redevelopment Centers and $0.1 million from the 2008 Acquisition Property.
Management Companies' Operating Expenses:
The Management Companies' operating expenses decreased $1.7 million from 2008 to 2009 in connection with the implementation of
the Company's workforce reduction plan in 2009.
REIT General and Administrative Expenses:
REIT general and administrative expenses increased by $0.5 million from 2008 to 2009. The increase is primarily due to an
increase in compensation expense in 2009.
Depreciation and Amortization:
Depreciation and amortization increased $6.3 million from 2008 to 2009. The increase in depreciation and amortization is
primarily attributed to an increase of $2.8 million from the Redevelopment Centers, $2.4 million from the Same Centers, $1.0 million from the Mervyn's Properties and
$0.1 million from the 2008 Acquisition Property.
Interest Expense:
Interest expense decreased $0.1 million from 2008 to 2009. The decrease in interest expense was primarily attributed to a
decrease of $4.3 million from borrowing on the Company's line of credit and $3.8 million from the convertible senior notes ("Senior Notes") offset in part by an increase of
$4.6 million from the Redevelopment Centers, $3.3 million from the Same Centers and $0.1 million from the 2008 Acquisition Property.
The
decrease in interest expense on the Company's line of credit was due to a decrease in the weighted average interest rate of 4.53% in 2008 to 3.36% in 2009 due to lower LIBOR rates
and spreads. The decrease in interest expense on the Senior Notes is due to the reduction of the Senior Notes outstanding from a weighted-average of $950.0 million in 2008 to
$613.3 million in 2009.
The
above interest expense items are net of capitalized interest, which decreased from $8.6 million in 2008 to $4.8 million in 2009 primarily due to a decrease in interest
rates.
Gain on Early Extinguishment of Debt:
The Company recorded a gain of $7.1 million on the early extinguishment of $27.5 million of the Senior Notes in 2009 (See
"Liquidity and Capital Resources".)
Equity in Income of Unconsolidated Joint Ventures:
The equity in income of unconsolidated joint ventures decreased $10.4 million from 2008 to 2009. The decrease in equity in
income of unconsolidated joint ventures primarily results from a $6.6 million termination fee received in 2008 from a development contract and a decrease of $1.6 million in gain on sale
of assets in 2009 compared to 2008.
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(Loss) Gain on Sale or Write Down of Assets:
The Company recorded a loss on sale or write down of assets of $25.6 million in 2009 as compared to a gain on sale of assets of
$0.5 million in 2008. The loss on sale or write down of assets in 2009 is primarily attributed to a $26.0 million adjustment to reduce the carrying value of five Mervyn's stores. See
Note 22Subsequent Events of the Company's Consolidated Financial Statements.
Funds From Operations ("FFO"):
Primarily as a result of the factors mentioned above, FFOdiluted decreased 39.9% from $99.6 million in 2008 to
$59.9 million in 2009. For disclosure of net income, the most directly comparable GAAP financial measure, for the periods and a reconciliation of FFO and FFOdiluted to net income
available to common stockholders, see "Funds from Operations."
Comparison of Six Months Ended June 30, 2009 and 2008
Revenues:
Rental revenue decreased by $10.2 million, or 3.8%, from 2008 to 2009. The decrease in rental revenue is attributed to a
decrease of $8.7 million from the Mervyn's Properties and $5.2 million from the Same Centers, offset in part by an increase of $2.9 million from the Redevelopment Centers and
$0.8 million from the 2008 Acquisition Property. The decrease in rental revenues from the Mervyn's Properties is due to the rejection of the leases by Mervyn's in 2008 offset in part by the
assumption of 23 of the leases by Kohl's and/or Forever 21 in December 2008. The Company is currently seeking replacement tenants for the vacant Mervyn's spaces. If these spaces are not leased
this trend will continue throughout 2009. The decrease in the revenues from the Same Centers is primarily attributable to decreases in occupancy, lease termination income and amortization of above and
below market leases.
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 decreased from $6.1 million in 2008 to $5.5 million in 2009. The amortization of straight-line rents decreased from $3.3 million in 2008 to $3.2 million
in 2009. Lease termination income decreased from $3.9 million in 2008 to $2.0 million in 2009.
Tenant
recoveries decreased $7.1 million, or 5.3%, from 2008 to 2009. The decrease in tenant recoveries is attributed to a decrease of $4.6 million from the Same Centers,
$2.8 million from the Mervyn's Properties offset in part by an increase of $0.2 million from the 2008 Acquisition Property and
$0.1 million from the Redevelopment Centers. The decrease from Same Centers is due to a decrease of recoverable operating expenses, utilities and property taxes.
Management
Companies' revenues decreased by $2.2 million from 2008 to 2009, primarily due to a decrease in leasing and development fees from joint ventures and third-party managed
properties.
Shopping Center and Operating Expenses:
Shopping center and operating expenses decreased $1.3 million, or 0.9%, from 2008 to 2009. The decrease in shopping center and
operating expenses is due to a decrease of $3.0 million from the Same Centers relating to decreases in recoverable operating expenses, utilities and property taxes. This is offset in part by an
increase of $0.8 from the Mervyn's Properties, $0.3 million from the 2008 Acquisition Property and $0.2 million from the Redevelopment Centers.
Management Companies' Operating Expenses:
The Management Companies' operating expenses increased $3.4 million from 2008 to 2009 in connection with the implementation of
the Company's workforce reduction plan in 2009.
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REIT General and Administrative Expenses:
REIT general and administrative expenses increased by $1.4 million from 2008 to 2009. The increase is primarily due to an
increase in compensation expense in 2009.
Depreciation and Amortization:
Depreciation and amortization increased $10.5 million from 2008 to 2009. The increase in depreciation and amortization is
primarily attributed to an increase of $4.8 million from the Same Centers, $3.0 million from the Mervyn's Properties, $2.4 million from the Redevelopment Centers and
$0.3 million from the 2008 Acquisition Property.
Interest Expense:
Interest expense decreased $4.6 million from 2008 to 2009. The decrease in interest expense was primarily attributed to a
decrease of $10.4 million from borrowing on the Company's line of credit, $6.2 million from the Senior Notes and $0.2 million from the term loans offset in part by an increase of
$7.4 million from the Redevelopment Centers, $4.6 million from the Same Centers and $0.3 million from the 2008 Acquisition Property.
The
decrease in interest expense on the Company's line of credit was due to a decrease in the weighted average interest rate of 4.97% in 2008 to 3.40% in 2009 due to lower LIBOR rates
and spreads. The decrease in interest expense on the Senior Notes is due to the reduction of the Senior Notes outstanding from a weighted-average of $950.0 million in 2008 to
$613.3 million in 2009. The increase in interest expense on the Redevelopment Centers is primarily attributed to increased development activity.
The
above interest expense items are net of capitalized interest, which decreased from $15.6 million in 2008 to $9.8 million in 2009 primarily due to a decrease in interest
rates.
Gain on Early Extinguishment of Debt:
The Company recorded a gain of $29.6 million on the early extinguishment of $84.3 million of the Senior Notes in 2009
(See "Liquidity and Capital Resources".)
Equity in Income of Unconsolidated Joint Ventures:
The equity in income of unconsolidated joint ventures decreased $16.8 million from 2008 to 2009. The decrease in equity in
income of unconsolidated joint ventures is due to a decrease of $6.6 million related to a termination fee received in 2008, decreases in rental revenue of various joint ventures and a
$2.9 million decrease in gains from sales of assets in 2009 compared to 2008.
(Loss) Gain on Sale or Write Down of Assets:
The Company recorded a loss on sale or write down of assets of $24.8 million in 2009 as compared to a gain on sale of assets of
$1.2 million in 2008. The loss on sale or write down of assets in 2009 is primarily attributed to a $26.0 million adjustment to reduce the carrying value of five Mervyn's stores. See
Note 22Subsequent Events of the Company's Consolidated Financial Statements.
Discontinued Operations:
Income from discontinued operations decreased $100.2 million from 2008 to 2009. The decrease is primarily due to the
$99.3 million gain from the Rochester Redemption in 2008. See "Management's Overview and SummaryAcquisitions and Dispositions." As a result of the Rochester Redemption, the Company
classified the results of operations for these properties to discontinued operations for all periods presented.
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Noncontrolling Interests
Income attributable to noncontrolling interests decreased $20.3 million from 2008 to 2009. The decrease is primarily attributed
to a decrease in net income as discussed above and a decrease in the weighted average interest in the Operating Partnership not owned by the Company from 14.7% in 2008 to 13.2% in 2009.
Funds From Operations:
Primarily as a result of the factors mentioned above, FFOdiluted decreased 15.3% from $192.1 million in 2008 to
$162.8 million in 2009. For disclosure of net income, the most directly comparable GAAP financial measure, for the periods and a reconciliation of FFO and FFOdiluted to net income
available to common stockholders, see "Funds from Operations."
Operating Activities:
Cash flow from operations decreased from $107.2 million in 2008 to $65.8 million in 2009. The decrease was primarily due
to changes in assets and liabilities in 2008 compared to 2009 and the results at the Centers as discussed above.
Investing Activities:
Cash used in investing activities decreased from $453.2 million in 2008 to $36.2 million in 2009. The decrease in cash
used in investing activities was primarily due to decreases in capital expenditures of $229.4 million and contributions to unconsolidated joint ventures of $122.7 million and an increase
in distributions from unconsolidated joint ventures of $47.8 million. In addition, the Company incurred $18.9 million in expenditures for the Rochester Redemption in 2008.
The
decrease in contributions to unconsolidated joint ventures is primarily due to the Company's purchase of a pro rata share of The Shops at North Bridge for $155.0 million in
2008. The decrease in capital expenditures is primarily due to the purchase of a ground leasehold and fee simple interest in two Mervyn's freestanding stores in 2008 and the decrease in development
activity in 2009. See "Management's Overview and SummaryAcquisitions and Dispositions for a discussion of the acquisition of The Shops at North Bridge and Mervyn's. The increase in
distributions from unconsolidated joint ventures is due to the receipt of the Company's pro rata share of loan proceeds from refinancing activities at various unconsolidated joint ventures in 2009.
Financing Activities:
Cash flow from financing activities decreased $352.7 million from 2008 to 2009. The decrease in cash from financing activities
was primarily attributed to decreases in cash provided by mortgages, bank and other notes payable of $628.9 million and payments on mortgages, bank and other notes payable of
$268.2 million. In addition, the Company paid $50.7 million to repurchase and retire $84.3 million of Senior Notes (see "Liquidity and Capital Resources.")
Liquidity and Capital Resources
Although general market liquidity is constrained, the Company anticipates meeting its liquidity needs for its operating expenses and
debt service and dividend requirements through cash generated from operations, working capital reserves and/or borrowings under its unsecured line of credit. Additional liquidity was provided as a
result of the Company reducing its quarterly dividend to $0.60 per share and paying 90% of that dividend in stock. In addition, further liquidity will be provided as a result of the Company's
announced payment of a portion of its next quarterly dividend in stock, which is payable on September 21, 2009. (See Note 22Subsequent Events of the Company's Consolidated
Financial Statements). The form, timing and or amount of future dividends will be at the discretion of the Company's Board of Directors.
54
Table of Contents
The following tables summarize capital expenditures incurred at the Centers:
|
|
|
|
|
|
|
|
|
|
For the Six
Months Ended
June 30,
|
|
(Dollars in thousands)
|
|
2009
|
|
2008
|
|
Consolidated Centers:
|
|
|
|
|
|
|
|
Acquisitions of property and equipment
|
|
$
|
5,672
|
|
$
|
69,094
|
|
Development, redevelopment and expansion of Centers
|
|
|
108,318
|
|
|
266,288
|
|
Renovations of Centers
|
|
|
4,043
|
|
|
4,739
|
|
Tenant allowances
|
|
|
4,799
|
|
|
6,445
|
|
Deferred leasing charges
|
|
|
11,211
|
|
|
12,256
|
|
|
|
|
|
|
|
|
|
$
|
134,043
|
|
$
|
358,822
|
|
|
|
|
|
|
|
Joint Venture Centers (at Company's pro rata share):
|
|
|
|
|
|
|
|
Acquisitions of property and equipment
|
|
$
|
1,039
|
|
$
|
265,834
|
|
Development, redevelopment and expansion of Centers
|
|
|
21,202
|
|
|
16,372
|
|
Renovations of Centers
|
|
|
1,206
|
|
|
6,017
|
|
Tenant allowances
|
|
|
1,609
|
|
|
3,653
|
|
Deferred leasing charges
|
|
|
1,440
|
|
|
1,741
|
|
|
|
|
|
|
|
|
|
$
|
26,496
|
|
$
|
293,617
|
|
|
|
|
|
|
|
Management
expects levels to be incurred in future years for tenant allowances and deferred leasing charges to be comparable or less than 2008 and that capital for those expenditures
will be available from working capital, cash flow from operations, borrowings on property specific debt or unsecured corporate borrowings. The Company expects to incur between $100 million to
$180 million in 2009 for
development, redevelopment, expansion and renovations. Capital for these major expenditures, developments and/or redevelopments has been, and is expected to continue to be, obtained from a combination
of equity or debt financings, which include borrowings under the Company's line of credit and construction loans. In addition, the Company has generated additional liquidity in the past through joint
venture transactions and the sale of non-core assets, and may continue to do so in the future, as evidenced by the July 2009 non-core asset sales and the recent sale of a 49%
interest in Queens Center to a joint venture partner. Furthermore, equity financing may be available to the Company through a shelf registration statement the Company filed in November 2008, which
registered an unspecified amount of common stock, preferred stock, debt securities, warrants, rights and units.
Current
turmoil in the capital and credit markets has significantly limited access to debt and equity financing for many companies. As demonstrated by recent activity, the Company was
able to access capital throughout 2008 and the six months ended June 30, 2009. However, there is no assurance the Company will be able to do so in future periods or on similar terms and
conditions. 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. As a result of the
volatility in the capital and commercial lending markets, the Company may be required to finance more of its business activities with borrowings under its line of credit rather than with public and
private unsecured debt and equity securities, fixed-rate mortgage financing and other traditional sources. In addition, in the event that the Company has significant tenant defaults as a
result of the overall economy and general market conditions, the Company could have a decrease in cash flow from operations, which could create further borrowings under its line of credit. These
events could result in an increase in the Company's proportion of variable-rate debt, which could cause it to become subject to increased interest rate fluctuations in the future.
55
Table of Contents
The
Company's total outstanding loan indebtedness at June 30, 2009 was $8.0 billion (including $2.3 billion of unsecured debt and $2.0 billion of its pro rata
share of joint venture debt). The majority of the Company's debt consists of fixed-rate conventional mortgages payable collateralized by individual properties. The Company has arranged
financing for new loans at Paradise Valley Mall and Northgate of $90.0 million and $80.0 million, respectively. In addition, the Company's joint venture that owns Village of Corte Madera
has arranged for a new $80 million loan that will replace the existing $63.0 million loan. Upon completion of these three loans, the Company will have approximately $55.6 million
in remaining loans (excluding loans with extension options) with maturities in 2009. The Company expects these remaining loans to be refinanced, extended and/or paid off from the Company's line of
credit.
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 date of issuance of the Senior Notes. 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. During the six months ended June 30, 2009, the Company repurchased and retired $84.5 million of the Senior Notes for
$49.8 million and recorded a gain on extinguishment of $29.6 million. The repurchases were funded by borrowings under the Company's line of credit. The carrying value of the Senior Notes
at June 30, 2009 and December 31, 2008 was $613.3 million and $687.7 million, respectively, which included an unamortized discount of $29.5 million and
$39.5 million, respectively.
The
Company purchased two capped calls (\"Capped Calls") from affiliates of the initial purchasers of the Senior Notes that effectively increased the conversion price 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
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 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 $400.0 million of the
outstanding balance of the line of credit at 6.23% until April 25, 2011. As of June 30, 2009 and December 31, 2008, borrowings outstanding were $1.2 billion and
$1.1 billion, at an average interest rate, excluding the $400.0 million swapped portion, of 1.69% and 3.19%, respectively.
The
Company obtained a five-year term loan that bears interest at LIBOR plus 1.50% and matures on April 26, 2010. The loan is covered by an interest rate swap
agreement that effectively fixed the interest rate of the term loan at 6.30% until maturity. As of June 30, 2009 and December 31, 2008, the note had a balance outstanding of
$442.5 million and $446.3 million, respectively, with an effective
56
Table of Contents
interest
rate of 6.50%. During the period of July 15, 2009 to July 30, 2009, the Company sold five of the Mervyn's stores and sold a 49% interest in Queens Center for a total of
approximately $200.6 million in total proceeds. The Company used the proceeds from these sales to make principal payments of $180.0 million and $20.0 million on the term loan on
July 30, 2009 and August 3, 2009, respectively.
Dividends
and distributions for the six months ended June 30, 2009 were $81.0 million. A total of $65.8 million of the dividends and distributions were funded by cash flows
provided by operations. The remaining $15.2 million was funded through distributions received from unconsolidated joint ventures which are included as return of investment distributions in the
cash flows from investing activities section of the Company's consolidated statement of cash flows.
At
June 30, 2009, the Company was in compliance with all applicable loan covenants under its debt agreements.
At
June 30, 2009, the Company had cash and cash equivalents available of $57.9 million.
Off-Balance Sheet Arrangements:
The Company has an ownership interest in a number of unconsolidated joint ventures as detailed in Note 4 to the Company's
Consolidated Financial Statements included herein. The Company accounts for those investments that 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."
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.
The
following reflects the maximum amount of debt principal that could recourse to the Company at June 30, 2009 (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
|
|
|
8,785
|
|
|
6/1/2011
|
|
|
|
|
|
|
|
|
|
|
$
|
17,440
|
|
|
|
|
|
|
|
|
|
|
|
Additionally,
as of June 30, 2009, the Company is contingently liable for $20.1 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 a liability to the Company.
57
Table of Contents
The following is a schedule of long-term contractual obligations as of June 30, 2009 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)
|
|
$
|
6,254,561
|
|
$
|
725,343
|
|
$
|
3,766,502
|
|
$
|
782,970
|
|
$
|
979,746
|
|
Operating lease obligations(1)
|
|
|
822,550
|
|
|
12,356
|
|
|
25,655
|
|
|
24,653
|
|
|
759,886
|
|
Purchase obligations(1)
|
|
|
75,248
|
|
|
75,248
|
|
|
|
|
|
|
|
|
|
|
Other long-term liabilities(2)
|
|
|
404,959
|
|
|
404,959
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
7,557,318
|
|
$
|
1,217,906
|
|
$
|
3,792,157
|
|
$
|
807,623
|
|
$
|
1,739,632
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
(1)
-
See
Note 17Commitments and Contingencies of the Company's Consolidated Financial Statements.
-
(2)
-
Amount
includes $2,569 of unrecognized tax benefits associated with FIN 48. See Note 20Income Taxes of the Company's Consolidated
Financial Statements.
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 depreciate in value ratably on a straight-line basis over time. FFO on a fully
diluted basis is one of the measures investors find most useful in measuring the dilutive impact of outstanding convertible securities. FFO does not represent cash flow from operations as defined by
GAAP, should not be considered as an alternative to net income as defined by GAAP and is not indicative of cash available to fund all cash flow needs. FFO, as presented, may not be comparable to
similarly titled measures reported by other real estate investment trusts. The reconciliation of FFO and FFO-diluted to net (loss) income available to common stockholders is provided
below.
58
Table of Contents
The
following reconciles net (loss) 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,
|
|
|
|
2009
|
|
2008(5)
|
|
2009
|
|
2008(5)
|
|
Net (loss) incomeavailable to common stockholders
|
|
$
|
(21,736
|
)
|
$
|
15,725
|
|
$
|
(7,720
|
)
|
$
|
108,335
|
|
Adjustments to reconcile net income to FFObasic:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noncontrolling interest in the Operating Partnership
|
|
|
(3,293
|
)
|
|
2,590
|
|
|
(1,169
|
)
|
|
18,665
|
|
|
Loss (gain) on sale or write-down of consolidated assets(1)
|
|
|
25,605
|
|
|
(376
|
)
|
|
24,849
|
|
|
(100,313
|
)
|
|
Add: loss (gain) on undepreciated assetsconsolidated assets(1)
|
|
|
1,143
|
|
|
241
|
|
|
2,497
|
|
|
574
|
|
|
Add: noncontrolling interest share of loss (gain) on sale of consolidated joint ventures(1)
|
|
|
310
|
|
|
248
|
|
|
310
|
|
|
589
|
|
|
Less: write-down of consolidated assets(1)
|
|
|
(27,058
|
)
|
|
|
|
|
(27,639
|
)
|
|
|
|
|
Gain on sale of assets from unconsolidated entities(2)
|
|
|
(3
|
)
|
|
(1,604
|
)
|
|
(11
|
)
|
|
(2,923
|
)
|
|
Add: gain on sale of undepreciated assetsfrom unconsolidated entities (pro rata)
|
|
|
3
|
|
|
1,116
|
|
|
2
|
|
|
2,436
|
|
|
|
Add noncontrolling interest on sale of undepreciated consolidated entities
|
|
|
|
|
|
487
|
|
|
|
|
|
487
|
|
|
|
Less write down of unconsolidated entities(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization on consolidated centers
|
|
|
63,740
|
|
|
57,774
|
|
|
128,651
|
|
|
118,901
|
|
|
Less: depreciation and amortization attributable to noncontrolling interest on consolidated joint ventures
|
|
|
(1,064
|
)
|
|
(788
|
)
|
|
(2,130
|
)
|
|
(1,361
|
)
|
|
Depreciation and amortization on joint ventures(2)
|
|
|
25,908
|
|
|
25,755
|
|
|
52,409
|
|
|
48,034
|
|
|
Less: depreciation on personal property
|
|
|
(3,635
|
)
|
|
(2,358
|
)
|
|
(7,289
|
)
|
|
(4,600
|
)
|
|
|
|
|
|
|
|
|
|
|
FFObasic
|
|
|
59,920
|
|
|
98,810
|
|
|
162,760
|
|
|
188,824
|
|
Additional adjustments to arrive at FFOdiluted:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impact of convertible preferred stock
|
|
|
|
|
|
835
|
|
|
|
|
|
3,289
|
|
|
Impact of convertible debt
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FFOdiluted
|
|
$
|
59,920
|
|
$
|
99,645
|
|
$
|
162,760
|
|
$
|
192,113
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of FFO shares outstanding for:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FFObasic(3)
|
|
|
88,970
|
|
|
86,319
|
|
|
88,759
|
|
|
85,607
|
|
Adjustments for the impact of dilutive securities in computing FFO-diluted:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Convertible preferred stock
|
|
|
|
|
|
1,852
|
|
|
|
|
|
2,460
|
|
|
Share and unit-based compensation plans
|
|
|
|
|
|
462
|
|
|
|
|
|
398
|
|
|
|
|
|
|
|
|
|
|
|
FFOdiluted(4)
|
|
|
88,970
|
|
|
88,633
|
|
|
88,759
|
|
|
88,465
|
|
|
|
|
|
|
|
|
|
|
|
-
(1)
-
The
net total of these line items equal the loss (gain) on sales of depreciated assets. These line items are included in this reconciliation to provide the
Company's investors with more detailed information and does not represent a departure from FFO as defined by NAREIT.
-
(2)
-
Unconsolidated
assets are presented at the Company's pro rata share.
-
(3)
-
Calculated
based upon basic net income as adjusted to reach basic FFO. As of June 30, 2009 and 2008, 11.8 million and 12.5 million OP
Units were outstanding, respectively.
-
(4)
-
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. The MACWH, LP
preferred units were antidilutive to the calculations for the
59
Table of Contents
three
and six months eneded June 30, 2009 and 2008 and were not included in the above calculations.
-
(5)
-
Net
(loss) incomeavailable to common stockholders and FFO have been reduced by $3.0 million and $3.5 million for three months
ended June 30, 2008, respectively, and $6.1 million and $7.1 million for the six months ended June 30, 2008, respectively, due to the retrospective adoption of FSP
APB 14-1.
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, 2009 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,
|
|
|
|
|
|
|
|
|
|
2010
|
|
2011
|
|
2012
|
|
2013
|
|
2014
|
|
Thereafter
|
|
Total
|
|
FV
|
|
CONSOLIDATED CENTERS:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long term debt:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed rate(1)
|
|
$
|
513,297
|
|
$
|
1,000,840
|
|
$
|
1,055,694
|
|
$
|
501,831
|
|
$
|
234,850
|
|
$
|
923,148
|
|
$
|
4,229,660
|
|
$
|
3,981,165
|
|
|
Average interest rate
|
|
|
6.42
|
%
|
|
6.23
|
%
|
|
5.61
|
%
|
|
6.68
|
%
|
|
5.44
|
%
|
|
6.13
|
%
|
|
6.11
|
%
|
|
|
|
|
Floating rate
|
|
|
176,169
|
|
|
1,171,225
|
|
|
380,087
|
|
|
|
|
|
|
|
|
|
|
|
1,727,481
|
|
|
1,665,582
|
|
|
Average interest rate
|
|
|
1.65
|
%
|
|
2.27
|
%
|
|
2.74
|
%
|
|
|
|
|
|
|
|
|
|
|
2.32
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total debtConsolidated Centers
|
|
$
|
689,466
|
|
$
|
2,172,065
|
|
$
|
1,435,781
|
|
$
|
501,831
|
|
$
|
234,850
|
|
$
|
923,148
|
|
$
|
5,957,141
|
|
$
|
5,646,747
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
JOINT VENTURE CENTERS:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long term debt (at Company's pro rata share):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed rate
|
|
$
|
174,359
|
|
$
|
94,797
|
|
$
|
200,606
|
|
$
|
42,865
|
|
$
|
311,245
|
|
$
|
987,322
|
|
$
|
1,811,194
|
|
$
|
1,683,253
|
|
|
Average interest rate
|
|
|
6.17
|
%
|
|
6.00
|
%
|
|
6.91
|
%
|
|
5.58
|
%
|
|
5.83
|
%
|
|
5.85
|
%
|
|
6.01
|
%
|
|
|
|
|
Floating rate
|
|
|
96,173
|
|
|
102,783
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
198,956
|
|
|
192,112
|
|
|
Average interest rate
|
|
|
1.26
|
%
|
|
1.37
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1.32
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total debtJoint Venture Centers
|
|
$
|
270,532
|
|
$
|
197,580
|
|
$
|
200,606
|
|
$
|
42,865
|
|
$
|
311,245
|
|
$
|
987,322
|
|
$
|
2,010,150
|
|
$
|
1,875,365
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
(1)
-
Fixed
rate debt includes the $442.5 million floating rate term note and $400.0 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, 2009 and December 31, 2008 was $4.2 billion and
$4.4 billion, respectively. The average interest rate on fixed rate debt at June 30, 2009 and December 31, 2008 was 6.11% and 5.72%, respectively. The consolidated Centers' total
floating rate debt at June 30, 2009 and December 31, 2008 was $1.7 billion and $1.6 billion, respectively. The average interest rate on floating rate debt at
June 30, 2009 and December 31, 2008 was 2.32% and 3.32%, respectively.
The
Company's pro rata share of the Joint Venture Centers' fixed rate debt at June 30, 2009 and December 31, 2008 was $1.8 billion. The average interest rate on
fixed rate debt at June 30, 2009 and December 31, 2008 was 6.01% and 5.83%, respectively. The Company's pro rata share of the Joint Venture Centers' floating rate debt at June 30,
2009 and December 31, 2008 was $199.0 million and $181.5 million, respectively. The average interest rate on the floating rate debt at June 30, 2009 and December 31,
2008 was 1.32% and 2.36%, respectively.
60
Table of Contents
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).
The
following are outstanding derivatives at June 30, 2009 (amounts in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property/Entity
|
|
Notional
Amount
|
|
Product
|
|
Rate
|
|
Maturity
|
|
Company's
Ownership
|
|
Fair
Value(1)
|
|
Camelback Colonnade
|
|
$
|
41,500
|
|
Cap
|
|
|
8.54
|
%
|
|
11/17/2009
|
|
|
75
|
%
|
$
|
|
|
Desert Sky Mall
|
|
|
51,500
|
|
Cap
|
|
|
7.65
|
%
|
|
3/15/2010
|
|
|
50
|
%
|
|
|
|
La Cumbre Plaza(2)
|
|
|
30,000
|
|
Cap
|
|
|
7.12
|
%
|
|
8/9/2009
|
|
|
100
|
%
|
|
|
|
Metrocenter Mall
|
|
|
112,000
|
|
Cap
|
|
|
7.25
|
%
|
|
2/15/2010
|
|
|
15
|
%
|
|
|
|
Metrocenter Mall
|
|
|
21,597
|
|
Cap
|
|
|
7.25
|
%
|
|
2/15/2010
|
|
|
15
|
%
|
|
|
|
Panorama Mall(2)
|
|
|
50,000
|
|
Cap
|
|
|
6.65
|
%
|
|
3/1/2010
|
|
|
100
|
%
|
|
|
|
The Oaks
|
|
|
150,000
|
|
Cap
|
|
|
6.25
|
%
|
|
7/1/2010
|
|
|
100
|
%
|
|
|
|
The Operating Partnership
|
|
|
450,000
|
|
Swap
|
|
|
4.80
|
%
|
|
4/15/2010
|
|
|
100
|
%
|
|
(14,401
|
)
|
The Operating Partnership
|
|
|
400,000
|
|
Swap
|
|
|
5.08
|
%
|
|
4/25/2011
|
|
|
100
|
%
|
|
(24,543
|
)
|
Westside Pavilion
|
|
|
175,000
|
|
Cap
|
|
|
5.50
|
%
|
|
6/1/2010
|
|
|
100
|
%
|
|
|
|
-
(1)
-
Fair
value at the Company's ownership percentage.
-
(2)
-
Derivative
is not designated as a hedge.
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 $19.3 million per year based on $1.9 billion outstanding of floating rate debt at June 30, 2009.
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
As required by Rule 13a-15(b) under the Securities Exchange Act of 1934, management carried out an evaluation, under
the supervision and with the participation of the Company's Chief Executive Officer and Chief Financial Officer, of the effectiveness of the Company's disclosure controls and procedures as of the end
of the period covered by this Quarterly Report on Form 10-Q. Based on their evaluation as of June 30, 2009, 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, or persons performing similar functions, 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 Securities Exchange Act of 1934) 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.
61
Table of Contents
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
There have been no material changes to the risk factors relating to the Company set forth under the caption "Item 1A. Risk
Factors" in the Company's Annual Report on Form 10-K for the year ended December 31, 2008.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 3. Defaults Upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders
The following matters were voted upon at the Annual Meeting of Stockholders held on June 8, 2009 and each director nominee was
elected and each proposal was approved or ratified:
(a) The
election of three persons as directors of the Company to serve until the annual meeting of stockholders in 2010 and until their respective successors are duly
elected and qualify:
|
|
|
|
|
|
|
|
|
|
|
|
|
For
|
|
Against
|
|
Abstain
|
|
Arthur M. Coppola
|
|
|
64,251,583
|
|
|
735,302
|
|
|
25,928
|
|
James S. Cownie
|
|
|
56,699,562
|
|
|
7,788,050
|
|
|
525,201
|
|
Mason G. Ross
|
|
|
64,158,754
|
|
|
331,379
|
|
|
522,680
|
|
(b) The
ratification of the selection of Deloitte & Touche LLP as the Company's independent public accountants for the fiscal year ending December 31,
2009.
|
|
|
|
|
Votes
|
|
|
|
For:
|
|
|
64,969,945
|
|
Against:
|
|
|
31,893
|
|
Abstain:
|
|
|
10,975
|
|
(c) The
approval of the Company's Amended and Restated 2003 Equity Incentive Plan.
|
|
|
|
|
Votes
|
|
|
|
For:
|
|
|
43,402,193
|
|
Against:
|
|
|
17,105,377
|
|
Abstain:
|
|
|
244,680
|
|
Broker non-votes:
|
|
|
4,260,563
|
|
62
Table of Contents
(d) The
approval of an amendment to the Company's charter to increase its authorized shares of common stock to 250,000,000 and its total number of authorized shares of stock
to 325,000,000.
|
|
|
|
|
Votes
|
|
|
|
For:
|
|
|
61,895,070
|
|
Against:
|
|
|
3,082,878
|
|
Abstain:
|
|
|
34,865
|
|
There
were no broker non-votes for any of the above described matters, except for the approval of the Company's Amended and Restated 2003 Equity Incentive Plan.
Item 5. Other Information
Not Applicable
63
Table of Contents
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 (with respect to the first paragraph)
|
|
3.1.3****
|
|
Articles Supplementary of the Company (Series D Preferred Stock)
|
|
3.1.4#
|
|
Articles Supplementary of the Company
|
|
3.1.5#**
|
|
Articles of Amendment of the Company (declassification of the Board)
|
|
3.1.6##
|
|
Articles Supplementary of the Company
|
|
3.1.7
|
|
Articles of Amendment of the Company (increased authorized shares)
|
|
3.2##
|
|
Amended and Restated Bylaws of the Company (February 5, 2009)
|
|
4.1###
|
|
Form of Common Stock Certificate
|
|
4.2####
|
|
Form of Preferred Stock Certificate (Series D Preferred Stock)
|
|
4.3#*
|
|
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)
|
|
10.1
|
|
Twelfth Amendment to the Amended and Restated Limited Partnership Agreement of the Operating Partnership
|
|
10.2(1)#***
|
|
2003 Equity Incentive Plan, as amended and restated as of June 8, 2009
|
|
31.1
|
|
Section 302 Certification of Arthur Coppola, Chief Executive Officer
|
|
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 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 5, 2009, 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.
64
Table of Contents
-
####
-
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.
-
#**
-
Previously
filed as an exhibit to the Company's Annual Report on Form 10-K for the year ended December 31, 2008, and incorporated
herein by reference.
-
#***
-
Previously
filed as an exhibit to the Company's Current Report on Form 8-K, event date June 8, 2009, and incorporated herein by reference.
-
(1)
-
Represents
a management contract, or compensatory plan, contract or arrangement required to be filed pursuant to Regulation S-K.
65
Table of Contents
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.
|
|
|
|
|
|
|
THE MACERICH COMPANY
|
|
|
By:
|
|
/s/ THOMAS E. O'HERN
Thomas E. O'Hern
Senior Executive Vice President and Chief Financial Officer
(Principal Financial Officer)
|
Date:
August 7, 2009
66
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