- Annual Report (10-K)
February 26 2010 - 12:57PM
Edgar (US Regulatory)
Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2009
Commission File No. 1-12504
THE MACERICH COMPANY
(Exact name of registrant as specified in its charter)
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MARYLAND
(State or other jurisdiction
of incorporation or organization)
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95-4448705
(I.R.S. Employer
Identification Number)
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401 Wilshire Boulevard, Suite 700, Santa Monica, California 90401
(Address of principal executive office, including zip code)
Registrant's
telephone number, including area code
(310) 394-6000
Securities
registered pursuant to Section 12(b) of the Act
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Title of each class
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Name of each exchange on which registered
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Common Stock, $0.01 Par Value
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New York Stock Exchange
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Indicate
by check mark if the registrant is well-known seasoned issuer, as defined in Rule 405 of the Securities Act
YES
ý
NO
o
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act
YES
o
NO
ý
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such report) and (2) has been subject to such filing requirements for the past
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 (§ 232.405 of this chapter) during the preceding 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 if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment on to
this Form 10-K.
ý
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. (Check one):
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Large accelerated filer
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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
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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
The aggregate market value of voting and non-voting common equity held by non-affiliates of the registrant was approximately
$1.4 billion as of the last business day of the registrant's most recent completed second fiscal quarter based upon the price at which the common shares were last sold on that day.
Number
of shares outstanding of the registrant's common stock, as of February 16, 2010:
96,652,642 shares
DOCUMENTS INCORPORATED BY REFERENCE
Portions
of the proxy statement for the annual stockholders meeting to be held in 2010 are incorporated by reference into Part III of this Form 10-K
THE MACERICH COMPANY
ANNUAL REPORT ON FORM 10-K
FOR THE YEAR ENDED DECEMBER 31, 2009
INDEX
Table of Contents
PART I
IMPORTANT FACTORS RELATED TO FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K of The Macerich Company (the "Company") contains or incorporates by reference
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-K and include statements regarding, among other
matters:
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expectations regarding the Company's growth;
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the Company's beliefs regarding its acquisition, redevelopment, development, leasing and operational activities and
opportunities, including the performance of its retailers;
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the Company's acquisition, disposition and other strategies;
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regulatory matters pertaining to compliance with governmental regulations;
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the Company's capital expenditure plans and expectations for obtaining capital for expenditures;
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the Company's expectations regarding its financial condition or results of operations; and
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the Company's expectations for refinancing its indebtedness, entering into new debt obligations 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 we make concerning risks and other factors that may affect our business and operating results, including those
made in "Item 1A. Risk Factors" of this Annual Report on Form 10-K, as well as our other reports filed with the Securities and Exchange Commission ("SEC"). 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.
ITEM 1. BUSINESS
General
The Company is involved in the acquisition, ownership, development, redevelopment, management and leasing of regional and community
shopping centers located throughout the United States. The Company is the sole general partner of, and owns a majority of the ownership interests in, The Macerich Partnership, L.P., a Delaware
limited partnership (the "Operating Partnership"). As of December 31, 2009, the Operating Partnership owned or had an ownership interest in 72 regional shopping centers and 14 community
shopping centers totaling approximately 75 million square feet of gross leasable area ("GLA"). These 86 regional and community shopping centers are referred to herein as the "Centers," and
consist of consolidated Centers ("Consolidated Centers") and unconsolidated joint venture Centers ("Unconsolidated Joint Venture Centers") as set forth in "Item 2Properties,"
unless the context otherwise requires. The Company is a self-administered and self-managed real estate
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investment
trust ("REIT") and conducts all of its operations through the Operating Partnership and the Company's management companies, Macerich Property Management Company, LLC, a single member
Delaware limited liability company, Macerich Management Company, 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. All seven of the management companies are collectively referred to herein as the "Management
Companies."
The
Company was organized as a Maryland corporation in September 1993. All references to the Company in this Annual Report on Form 10-K include the Company, those
entities owned or controlled by the Company and predecessors of the Company, unless the context indicates otherwise.
Financial
information regarding the Company for each of the last three fiscal years is contained in the Company's Consolidated Financial Statements included in Item 15. Exhibits
and Financial Statement Schedules.
Recent Developments
On July 30, 2009, the Company sold a 49% ownership interest in Queens Center to a third party for approximately
$152.7 million, resulting in a gain on sale of assets of $154.2 million. The Company used the proceeds from the sale of the ownership interest in the property to pay down the Company's
term loan and for general corporate purposes. As of the date of the sale, the Company has accounted for the operations of Queens Center under the equity method of accounting.
On
September 3, 2009, the Company formed a joint venture with a third party, whereby the Company sold a 75% interest in FlatIron Crossing and received approximately
$123.8 million in cash proceeds for the overall transaction. The Company used the proceeds from the sale of the ownership interest in the property to pay down the Company's term loan and for
general corporate purposes. As part of this transaction, the Company issued three warrants for an aggregate of 1,250,000 shares of common stock of the Company. (See
Note 15Stockholders' Equity in the Company's Notes to the Consolidated Financial Statements). As of the date of the sale, the Company has accounted for the operations of FlatIron
Crossing under the equity method of accounting.
On
September 29, 2009, the Company sold a leasehold interest in a former Mervyn's store for $4.5 million, resulting in a gain on sale of assets of $4.1 million. The
Company used the proceeds from the sale to pay down the Company's line of credit and for general corporate purposes.
On
September 30, 2009, the Company formed a joint venture with a third party, whereby the third party acquired a 49.9% interest in Freehold Raceway Mall and Chandler Fashion
Center. The Company received approximately $174.6 million in cash proceeds for the overall transaction. The Company used the proceeds from this transaction to pay down the Company's line of
credit and for general corporate purposes. As part of this transaction, the Company issued a warrant for an aggregate of 935,358 shares
of common stock of the Company. (See Note 15Stockholders' Equity in the Company's Notes to the Consolidated Financial Statements). The transaction has been accounted for as a
profit-sharing arrangement, and accordingly the assets, liabilities and operations of the properties remain on the books of the Company and a co-venture obligation was established for the
amount of $168.2 million representing the net cash proceeds received from the third party less the value allocated to the warrant.
In
addition, in 2009 the Company sold six non-core community centers for $83.2 million and sold five former Mervyn's stores for approximately $52.7 million. The Company
used the proceeds from
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these
sales to pay down the Company's line of credit and term loan and for general corporate purposes.
On February 2, 2009, the Company refinanced the existing loan on Queens Center with a $130.0 million loan that bears
interest at a rate of 7.78% and matures on March 1, 2013. The Company used the net loan proceeds to pay down the Company's line of credit and for general corporate purposes. On July 30,
2009, 49.0% of the loan balance on Queens Center was assumed by a third party in connection with the sale to that party of a 49.0% interest in the underlying property. See "Recent
DevelopmentsAcquisitions and Dispositions."
On
May 1, 2009, the Company paid off the existing loan on Paradise Valley Mall. On August 31, 2009, the Company placed a new $85.0 million loan on the property that
bears interest at LIBOR plus 4.0% with a total interest rate floor of 5.50% and matures on August 31, 2012 with two one-year extension options.
On
May 11, 2009, Pacific Premier Retail Trust, one of the Company's joint ventures, replaced the existing loan on the Redmond Office with a new $62.0 million loan that
bears interest at 7.52% and matures on May 15, 2014. The Company used its pro rata share of the net loan proceeds to pay down the Company's line of credit and for general corporate purposes.
On
June 10, 2009, the Company's joint venture in The Shops at North Bridge replaced its existing loan with a new $205.0 million loan that bears interest at 7.52% and
matures on June 15, 2016.
On
August 21, 2009, Pacific Premier Retail Trust, one of the Company's joint ventures, replaced the existing loan on Redmond Town Center with a $74.0 million draw on a
credit facility that is cross-collateralized by Redmond Town Center, Cross Court Plaza and Northpoint Plaza, bears interest at LIBOR plus 4.0% with a 2.0% LIBOR floor and matures on August 21,
2011, with a one-year extension option. On February 1, 2010, the joint venture borrowed an additional $81.0 million under the facility and paid off the existing loans on Cascade Mall,
Kitsap Mall and Kitsap Place and added those properties as collateral.
On
September 3, 2009, 75.0% of the loan balance on FlatIron Crossing was assumed by a third party in connection with the sale to that party of a 75.0% interest in the underlying
property. See "Recent DevelopmentsAcquisitions and Dispositions."
On
September 10, 2009, the Company's joint venture refinanced the existing loan on Biltmore Fashion Park, a $60.0 million loan that bears interest at 8.25% and matures on
October 1, 2014.
On
September 30, 2009, 49.9% of the loan balances on Freehold Raceway Mall and Chandler Fashion Center were assumed by a third party in connection with the Company entering into a
co-venture arrangement with that party. See "Recent DevelopmentsAcquisitions and Dispositions."
On
October 27, 2009, the Company completed an offering of 12,000,000 newly issued shares of its common stock, as well as an additional 1,800,000 newly issued shares of common
stock in connection with the underwriters' exercise of its over-allotment option. The net proceeds of the offering, after giving effect to the issuance and sale of all 13,800,000 shares of
common stock at an initial price to the public of $29.00 per share, were approximately $383.4 million after deducting underwriting discounts, commissions and other transaction costs. The
Company used the net proceeds of the offering to pay down its line of credit.
On
October 29, 2009, the Company's joint venture in Corte Madera replaced the existing loan on the property with a new $80.0 million loan that bears interest at 7.27% and
matures on November 1, 2016. The Company used its pro rata share of the net loan proceeds to pay down the Company's line of credit and for general corporate purposes.
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On
December 29, 2009, the Company placed a construction loan on Northgate Mall that allows for borrowings of up to $60.0 million, bears interest at LIBOR plus 4.5% with a
total interest rate floor of 6.0% and matures on January 1, 2013, with two one-year extension options. The loan also includes a provision that allows for additional borrowings of up
to $20.0 million, depending on certain conditions. The net loan proceeds were used to pay down the Company's line of credit and for general corporate purposes.
During
the year ended December 31, 2009, the Company paid off its $446.3 million term loan that was scheduled to mature on April 26, 2010. As a result, the Company
recognized a loss of $0.7 million on the early extinguishment of debt. The repayment was funded from the proceeds from the sale of the ownership interests in Queens Center and FlatIron
Crossing, and through additional borrowings under the Company's line of credit.
During
the year ended December 31, 2009, the Company repurchased and retired $89.1 million of convertible senior notes ("Senior Notes") for $53.4 million. This early
retirement of debt resulted in a gain of $29.8 million on early extinguishment of debt. The repurchases were funded through additional borrowings under the Company's line of credit.
Northgate Mall, the Company's 712,771 square foot regional mall in Marin County, California, opened the first phase of its
redevelopment on November 12, 2009. New anchor Kohl's was joined by retailers H&M, BJ's Restaurant, Children's Place, Chipotle, Gymboree, Hot Topic, PacSun, Panera Bread, See's Candies,
Sunglass Hut, Tilly's and Vans. As of December 31, 2009, the Company incurred approximately $66.5 million of redevelopment costs for this Center and is estimating it will incur
approximately $12.5 million of additional costs in 2010.
Santa
Monica Place in Santa Monica, California, is scheduled to open in August 2010 with anchors Bloomingdale's and Nordstrom. The Company recently announced deals with Tony Burch, Ben
Bridge Jewelers and Charles David. As of December 31, 2009, the Company incurred approximately $163.2 million of redevelopment costs for this Center and is estimating it will incur
approximately $101.8 million of additional costs in 2010.
The Shopping Center Industry
There are several types of retail shopping centers, which are differentiated primarily based on size and marketing strategy. Regional
shopping centers generally contain in excess of 400,000 square feet of GLA and are typically anchored by two or more department or large retail stores ("Anchors") and are referred to as "Regional
Shopping Centers" or "Malls." Regional Shopping Centers also typically contain numerous diversified retail stores ("Mall Stores"), most of which are national or regional retailers typically located
along corridors connecting the Anchors. Community Shopping Centers, also referred to as "strip centers", "urban villages" or "specialty centers," are retail shopping centers that are designed to
attract local or neighborhood customers and are typically anchored by one or more supermarkets, discount department stores and/or drug stores. Community Shopping Centers typically contain 100,000
square feet to 400,000 square feet of GLA. In addition, freestanding retail stores are located along the perimeter of the shopping centers ("Freestanding Stores"). Mall Stores and Freestanding Stores
over 10,000 square feet are also referred to as "Big Box." Anchors, Mall Stores and Freestanding Stores and other tenants typically contribute funds for the maintenance of the common areas, property
taxes, insurance, advertising and other expenditures related to the operation of the shopping center.
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A Regional Shopping Center draws from its trade area by offering a variety of fashion merchandise, hard goods and services and
entertainment, often in an enclosed, climate controlled environment with convenient parking. Regional Shopping Centers provide an array of retail shops and entertainment facilities and often serve as
the town center and the preferred gathering place for community, charity, and promotional events.
Regional
Shopping Centers have generally provided owners with relatively stable income despite the cyclical nature of the retail business. This stability is due both to the diversity of
tenants and to the typical dominance of Regional Shopping Centers in their trade areas.
Regional
Shopping Centers have different strategies with regard to price, merchandise offered and tenant mix, and are generally tailored to meet the needs of their trade areas. Anchor
tenants are
located along common areas in a configuration designed to maximize consumer traffic for the benefit of the Mall Stores. Mall GLA, which generally refers to GLA contiguous to the Anchors for tenants
other than Anchors, is leased to a wide variety of smaller retailers. Mall Stores typically account for the majority of the revenues of a Regional Shopping Center.
Business of the Company
The Company has a long-term four-pronged business strategy that focuses on the acquisition, leasing and management,
redevelopment and development of Regional Shopping Centers.
Acquisitions.
The Company focuses on well-located, quality Regional Shopping Centers that can be dominant in their trade area and have
strong revenue enhancement potential. The Company subsequently seeks to improve operating performance and returns from these properties through leasing, management and redevelopment. Since its initial
public offering, the Company has acquired interests in shopping centers nationwide. The Company believes that it is geographically well positioned to cultivate and maintain ongoing relationships with
potential sellers and financial institutions and to act quickly when acquisition opportunities arise. (See "Recent DevelopmentsAcquisitions and Dispositions").
Leasing and Management.
The Company believes that the shopping center business requires specialized skills across a broad array of
disciplines for
effective and profitable operations. For this reason, the Company has developed a fully integrated real estate organization with in-house acquisition, accounting, development, finance,
leasing, legal, marketing, property management and redevelopment expertise. In addition, the Company emphasizes a philosophy of decentralized property management, leasing and marketing performed by
on-site professionals. The Company believes that this strategy results in the optimal operation, tenant mix and drawing power of each Center, as well as the ability to quickly respond to
changing competitive conditions of the Center's trade area.
The
Company believes that on-site property managers can most effectively operate the Centers. Each Center's property manager is responsible for overseeing the operations,
marketing, maintenance and security functions at the Center. Property managers focus special attention on controlling operating costs, a key element in the profitability of the Centers, and seek to
develop strong relationships with and to be responsive to the needs of retailers.
Similarly,
the Company generally utilizes on-site and regionally located leasing managers to better understand the market and the community in which a Center is located. The
Company continually assesses and fine tunes each Center's tenant mix, identifies and replaces underperforming tenants and seeks to optimize existing tenant sizes and configurations.
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On
a selective basis, the Company provides property management and leasing services for third parties. The Company currently manages five malls and three community centers for third
party owners on a fee basis.
Redevelopment.
One of the major components of the Company's growth strategy is its ability to redevelop acquired properties. For this
reason, the
Company has built a staff of redevelopment professionals who have primary responsibility for identifying redevelopment opportunities that they believe will result in enhanced long-term
financial returns and market position for the Centers. The redevelopment professionals oversee the design and construction of the projects in addition to obtaining required governmental approvals.
(See "Recent DevelopmentsRedevelopment and Development Activity").
Development.
The Company pursues ground-up development projects on a selective basis. The Company has supplemented its strong
acquisition, operations and redevelopment skills with its ground-up development expertise to further increase growth opportunities. (See "Recent DevelopmentsRedevelopment and
Development Activity").
As of December 31, 2009, the Centers consist of 72 Regional Shopping Centers and 14 Community Shopping Centers totaling
approximately 75 million square feet of GLA. The 72 Regional Shopping Centers in the Company's portfolio average approximately 955,000 square feet of GLA and range in size from
2.2 million square feet of GLA at Tysons Corner Center to 314,305 square feet of GLA at Panorama Mall. The Company's 14 Community Shopping Centers have an average of approximately 276,000
square feet of GLA. As of December 31, 2009, the Centers included 300 Anchors totaling approximately 39.4 million square feet of GLA and approximately 8,500 Mall Stores and Freestanding
Stores totaling approximately 35.2 million square feet of GLA.
There are numerous owners and developers of real estate that compete with the Company in its trade areas. There are six other publicly
traded mall companies in the United States and several large private mall companies, any of which under certain circumstances could compete against the Company for an acquisition, an Anchor or a
tenant. In addition, private equity firms compete with the Company in terms of acquisitions. This results in competition for both acquisition of centers and for tenants or Anchors to occupy space. The
existence of competing shopping centers could have a material adverse impact on the Company's ability to lease space and on the level of rent that can be achieved. There is also increasing competition
from other retail formats and technologies, such as lifestyle centers, power centers, Internet shopping, home shopping networks, factory outlet centers, discount shopping clubs and
mail-order services that could adversely affect the Company's revenues.
In
making leasing decisions, the Company believes that retailers consider the following material factors relating to a center: quality, design and location, including consumer
demographics; rental rates; type and quality of Anchors and retailers at the center; and management and operational experience and strategy of the center. The Company believes it is able to compete
effectively for retail tenants in its local markets based on these criteria in light of the overall size, quality and diversity of its portfolio of Centers.
The Centers derived approximately 79% of their total rents for the year ended December 31, 2009 from Mall Stores and
Freestanding Stores under 10,000 square feet. Big Box and Anchor tenants accounted for 21.0% of total rents for the year ended December 31, 2009. One tenant accounted for
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approximately
2.5% of total rents of the Company, and no other single tenant accounted for more than 2.4% of total rents as of December 31, 2009.
The
following retailers (including their subsidiaries) represent the 10 largest rent payers in the Company's portfolio (including joint ventures) based upon total rents in place as of
December 31, 2009:
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Tenant
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Primary DBA's
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Number of
Locations
in the
Portfolio
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% of Total
Rents(1)
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Gap Inc.
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Gap, Banana Republic, Old Navy
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94
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2.5
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%
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Limited Brands, Inc.
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Victoria Secret, Bath and Body
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144
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2.4
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%
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Forever 21, Inc.
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Forever 21, XXI Forever
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48
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1.9
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%
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Foot Locker, Inc.
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Footlocker, Champs Sports, Lady Footlocker
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143
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1.7
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%
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Abercrombie & Fitch Co.
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Abercrombie & Fitch, Abercrombie, Hollister
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81
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1.6
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%
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AT&T Mobility LLC(2)
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AT&T Wireless, Cingular Wireless
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29
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1.3
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%
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Luxottica Group
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Lenscrafters, Sunglass Hut
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156
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1.3
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%
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American Eagle Outfitters, Inc.
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American Eagle Outfitters
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66
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1.3
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%
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Macy's, Inc.
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Macy's, Bloomingdale's
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65
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1.0
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%
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Signet Group PLC
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Kay Jewelers, Weisfield Jewelers
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76
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1.0
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%
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(1)
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Total
rents include minimum rents and percentage rents.
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(2)
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Includes
AT&T Mobility office headquarters located at Redmond Town Center.
Mall Store and Freestanding Store leases generally provide for tenants to pay rent comprised of a base (or "minimum") rent and a
percentage rent based on sales. In some
cases, tenants pay only minimum rent, and in other cases, tenants pay only percentage rent. Historically, most leases for Mall Stores and Freestanding Stores contained provisions that allowed the
Centers to recover their costs for maintenance of the common areas, property taxes, insurance, advertising and other expenditures related to the operations of the Center. Since January 2005, the
Company generally began entering into leases that require tenants to pay a stated amount for such operating expenses, generally excluding property taxes, regardless of the expenses the Company
actually incurs at any Center.
Tenant
space of 10,000 square feet and under in the portfolio at December 31, 2009 comprises 69.1% of all Mall Store and Freestanding Store space. The Company uses tenant spaces
of 10,000 square feet and under for comparing rental rate activity. Mall Store and Freestanding Store space greater than 10,000 square feet is inconsistent in size and configuration throughout the
Company's portfolio and as a result does not lend itself to a meaningful comparison of rental rate activity with the Company's other space. Most of the non-anchor space over 10,000 square
feet is not physically connected to the mall, does not share the same common area amenities and does not benefit from the foot traffic in the mall. As a result, space greater than 10,000 square feet
has a unique rent structure that is inconsistent with mall space under 10,000 square feet. Mall Store and Freestanding Store space under 10,000 square feet is more consistent in terms of shape and
configuration and, as such, the Company is able to provide a meaningful comparison of rental rate activity for this space.
When
an existing lease expires, the Company is often able to enter into a new lease with a higher base rent component. The average base rent for new Mall Store and Freestanding Store
leases at the Consolidated Centers, 10,000 square feet and under, executed during 2009 was $38.15 per square foot, or 11.9% higher than the average base rent for all Mall Stores and Freestanding
Stores at the Consolidated Centers, 10,000 square feet and under, expiring during 2009 of $34.10 per square foot.
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The following tables set forth the average base rent per square foot for the Centers, as of December 31 for each of the past five
years:
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I.
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Mall Stores and Freestanding Stores, GLA under 10,000 square feet:
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For the Years Ended December 31,
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Average Base
Rent Per
Square Foot(1)
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Avg. Base Rent
Per Sq.Ft. on
Leases Executed
During the Year(2)
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Avg. Base Rent
Per Sq. Ft. on
Leases Expiring
During the Year(3)
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Consolidated Centers:
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2009
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$
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37.77
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$
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38.15
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$
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34.10
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2008
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$
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41.39
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$
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42.70
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$
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35.14
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2007
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$
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38.49
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$
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43.23
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$
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34.21
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2006
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$
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37.55
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$
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38.40
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$
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31.92
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2005
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$
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34.23
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$
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35.60
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$
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30.71
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Unconsolidated Joint Venture Centers:
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2009
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$
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45.56
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$
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43.52
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$
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37.56
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2008
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$
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42.14
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$
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49.74
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$
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37.61
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2007
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$
|
38.72
|
|
$
|
47.12
|
|
$
|
34.87
|
|
2006
|
|
$
|
37.94
|
|
$
|
41.43
|
|
$
|
36.19
|
|
2005
|
|
$
|
36.35
|
|
$
|
39.08
|
|
$
|
30.18
|
|
-
II.
-
Big Box and Anchors:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Years Ended December 31,
|
|
Average Base
Rent Per
Square Foot(1)
|
|
Avg. Base Rent
Per Sq.Ft. on
Leases Executed
During the Year(2)
|
|
Number of
Leases
Executed
during the
Year
|
|
Avg. Base Rent
Per Sq. Ft. on
Leases Expiring
During the Year(3)
|
|
Number of
Leases
Expiring
during the
Year
|
|
Consolidated Centers:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
$
|
9.66
|
|
$
|
10.13
|
|
|
19
|
|
$
|
20.84
|
|
|
5
|
|
2008
|
|
$
|
9.53
|
|
$
|
11.44
|
|
|
26
|
|
$
|
9.21
|
|
|
18
|
|
2007
|
|
$
|
9.08
|
|
$
|
18.51
|
|
|
17
|
|
$
|
20.13
|
|
|
3
|
|
2006
|
|
$
|
8.36
|
|
$
|
13.06
|
|
|
15
|
|
$
|
8.47
|
|
|
4
|
|
2005
|
|
$
|
7.81
|
|
$
|
10.70
|
|
|
18
|
|
$
|
17.91
|
|
|
2
|
|
Unconsolidated Joint Venture Centers:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
$
|
11.60
|
|
$
|
31.73
|
|
|
16
|
|
$
|
19.98
|
|
|
16
|
|
2008
|
|
$
|
11.16
|
|
$
|
14.38
|
|
|
14
|
|
$
|
10.59
|
|
|
5
|
|
2007
|
|
$
|
10.89
|
|
$
|
18.21
|
|
|
13
|
|
$
|
11.03
|
|
|
5
|
|
2006
|
|
$
|
9.69
|
|
$
|
15.90
|
|
|
14
|
|
$
|
7.53
|
|
|
2
|
|
2005
|
|
$
|
9.32
|
|
$
|
20.17
|
|
|
11
|
|
$
|
2.27
|
|
|
1
|
|
-
(1)
-
Average
base rent per square foot is based on spaces occupied as of December 31 for each of the Centers. The leases for Tucson La Encantada and the
expansion area of Queens Center were excluded for 2005 because they were under redevelopment. The leases for Promenade at Casa Grande, SanTan Village Power Center and SanTan Village Regional Center
were excluded for 2007 and 2008 because they were under development. The leases for The Market at Estrella Falls and Santa Monica Place were excluded for 2008 and 2009 because they were under
development and redevelopment, respectively.
-
(2)
-
The
average base rent per square foot on leases executed during the year represents the actual rent to be paid on a per square foot basis during the first
twelve months. The leases for Tucson La Encantada and the expansion area of Queens Center were excluded for 2005 because they were
8
Table of Contents
under
redevelopment. The leases for Promenade at Casa Grande, SanTan Village Power Center and SanTan Village Regional Center were excluded for 2007 and 2008 because they were under development. The
leases for The Market at Estrella Falls and Santa Monica Place were excluded for 2008 and 2009 because they were under development and redevelopment, respectively.
-
(3)
-
The
average base rent per square foot on leases expiring during the year represents the final year of minimum rent, on a cash basis. The leases for Tucson
La Encantada and the expansion area of Queens Center were excluded for 2005 because they were under redevelopment. The leases for Promenade at Casa Grande, SanTan Village Power Center and SanTan
Village Regional Center were excluded for 2007 and 2008 because they were under development. The leases for The Market at Estrella Falls and Santa Monica Place were excluded for 2008 and 2009 because
they were under development and redevelopment, respectively.
A major factor contributing to tenant profitability is cost of occupancy, which consists of tenant occupancy costs charged by the
Company. Tenant expenses included in this calculation are minimum rents, percentage rents and recoverable expenditures, which consist primarily of property operating expenses, real estate taxes and
repair and maintenance expenditures. These tenant charges are collectively referred to as tenant occupancy costs. These tenant occupancy costs are compared to tenant sales. A low cost of occupancy
percentage shows more capacity for the Company to increase rents at the time of lease renewal than a high cost of occupancy percentage. The following table summarizes occupancy costs for Mall Store
and Freestanding Store tenants in the Centers as a percentage of total Mall Store sales for the last five years:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For Years Ended December 31,
|
|
|
|
2009
|
|
2008
|
|
2007
|
|
2006
|
|
2005
|
|
Consolidated Centers:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Minimum rents
|
|
|
9.1
|
%
|
|
8.9
|
%
|
|
8.0
|
%
|
|
8.1
|
%
|
|
8.3
|
%
|
Percentage rents
|
|
|
0.4
|
%
|
|
0.4
|
%
|
|
0.4
|
%
|
|
0.4
|
%
|
|
0.5
|
%
|
Expense recoveries(1)
|
|
|
4.7
|
%
|
|
4.4
|
%
|
|
3.8
|
%
|
|
3.7
|
%
|
|
3.6
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14.2
|
%
|
|
13.7
|
%
|
|
12.2
|
%
|
|
12.2
|
%
|
|
12.4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
Unconsolidated Joint Venture Centers:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Minimum rents
|
|
|
9.4
|
%
|
|
8.2
|
%
|
|
7.3
|
%
|
|
7.2
|
%
|
|
7.4
|
%
|
Percentage rents
|
|
|
0.4
|
%
|
|
0.4
|
%
|
|
0.5
|
%
|
|
0.6
|
%
|
|
0.5
|
%
|
Expense recoveries(1)
|
|
|
4.3
|
%
|
|
3.9
|
%
|
|
3.2
|
%
|
|
3.1
|
%
|
|
3.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14.1
|
%
|
|
12.5
|
%
|
|
11.0
|
%
|
|
10.9
|
%
|
|
10.9
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
-
(1)
-
Represents
real estate tax and common area maintenance charges.
9
Table of Contents
The following tables show scheduled lease expirations (for Centers owned as of December 31, 2009) for the next ten years,
assuming that none of the tenants exercise renewal options:
I. Mall Stores and Freestanding Stores under 10,000 square feet:
Consolidated Centers:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ending December 31,
|
|
Number of
Leases
Expiring
|
|
Approximate
GLA of Leases
Expiring(1)
|
|
% of Total Leased
GLA Represented
by Expiring
Leases(1)
|
|
Ending Base Rent
per Square Foot of
Expiring Leases(1)
|
|
% of Base Rent
Represented by
Expiring Leases(1)
|
|
2010
|
|
|
405
|
|
|
734,699
|
|
|
11.33
|
%
|
$
|
37.02
|
|
|
10.91
|
%
|
2011
|
|
|
393
|
|
|
811,159
|
|
|
12.51
|
%
|
$
|
37.01
|
|
|
12.04
|
%
|
2012
|
|
|
317
|
|
|
722,842
|
|
|
11.15
|
%
|
$
|
35.29
|
|
|
10.23
|
%
|
2013
|
|
|
273
|
|
|
606,831
|
|
|
9.36
|
%
|
$
|
37.15
|
|
|
9.04
|
%
|
2014
|
|
|
237
|
|
|
510,594
|
|
|
7.88
|
%
|
$
|
35.87
|
|
|
7.34
|
%
|
2015
|
|
|
209
|
|
|
519,385
|
|
|
8.01
|
%
|
$
|
37.53
|
|
|
7.81
|
%
|
2016
|
|
|
220
|
|
|
543,483
|
|
|
8.38
|
%
|
$
|
40.11
|
|
|
8.74
|
%
|
2017
|
|
|
292
|
|
|
754,655
|
|
|
11.64
|
%
|
$
|
40.57
|
|
|
12.28
|
%
|
2018
|
|
|
256
|
|
|
636,338
|
|
|
9.81
|
%
|
$
|
40.79
|
|
|
10.41
|
%
|
2019
|
|
|
180
|
|
|
468,021
|
|
|
7.22
|
%
|
$
|
43.21
|
|
|
8.11
|
%
|
Unconsolidated Joint Venture Centers (at the Company's pro rata share):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ending December 31,
|
|
Number of
Leases
Expiring
|
|
Approximate
GLA of Leases
Expiring(1)
|
|
% of Total Leased
GLA Represented
by Expiring
Leases(1)
|
|
Ending Base Rent
per Square Foot of
Expiring Leases(1)
|
|
% of Base Rent
Represented by
Expiring Leases(1)
|
|
2010
|
|
|
536
|
|
|
531,222
|
|
|
13.76
|
%
|
$
|
38.39
|
|
|
11.35
|
%
|
2011
|
|
|
451
|
|
|
489,538
|
|
|
12.68
|
%
|
$
|
39.20
|
|
|
10.68
|
%
|
2012
|
|
|
360
|
|
|
370,953
|
|
|
9.61
|
%
|
$
|
42.13
|
|
|
8.70
|
%
|
2013
|
|
|
330
|
|
|
360,034
|
|
|
9.33
|
%
|
$
|
46.77
|
|
|
9.37
|
%
|
2014
|
|
|
318
|
|
|
371,575
|
|
|
9.63
|
%
|
$
|
49.41
|
|
|
10.22
|
%
|
2015
|
|
|
301
|
|
|
372,277
|
|
|
9.65
|
%
|
$
|
53.50
|
|
|
11.09
|
%
|
2016
|
|
|
298
|
|
|
357,090
|
|
|
9.25
|
%
|
$
|
51.54
|
|
|
10.24
|
%
|
2017
|
|
|
256
|
|
|
363,346
|
|
|
9.41
|
%
|
$
|
45.78
|
|
|
9.26
|
%
|
2018
|
|
|
211
|
|
|
275,964
|
|
|
7.15
|
%
|
$
|
50.79
|
|
|
7.80
|
%
|
2019
|
|
|
195
|
|
|
234,524
|
|
|
6.08
|
%
|
$
|
58.75
|
|
|
7.67
|
%
|
10
Table of Contents
II. Big Box and Anchors:
Consolidated Centers:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ending December 31,
|
|
Number of
Leases
Expiring
|
|
Approximate
GLA of Leases
Expiring(1)
|
|
% of Total Leased
GLA Represented
by Expiring
Leases(1)
|
|
Ending Base Rent
per Square Foot of
Expiring Leases(1)
|
|
% of Base Rent
Represented by
Expiring Leases(1)
|
|
2010
|
|
|
10
|
|
|
313,587
|
|
|
3.66
|
%
|
$
|
10.64
|
|
|
4.40
|
%
|
2011
|
|
|
13
|
|
|
585,637
|
|
|
6.84
|
%
|
$
|
6.87
|
|
|
5.30
|
%
|
2012
|
|
|
29
|
|
|
1,769,667
|
|
|
20.68
|
%
|
$
|
5.99
|
|
|
13.97
|
%
|
2013
|
|
|
11
|
|
|
336,464
|
|
|
3.93
|
%
|
$
|
10.72
|
|
|
4.75
|
%
|
2014
|
|
|
18
|
|
|
827,491
|
|
|
9.67
|
%
|
$
|
7.39
|
|
|
8.05
|
%
|
2015
|
|
|
14
|
|
|
916,199
|
|
|
10.70
|
%
|
$
|
5.26
|
|
|
6.35
|
%
|
2016
|
|
|
12
|
|
|
715,430
|
|
|
8.36
|
%
|
$
|
6.08
|
|
|
5.73
|
%
|
2017
|
|
|
16
|
|
|
382,273
|
|
|
4.47
|
%
|
$
|
15.01
|
|
|
7.56
|
%
|
2018
|
|
|
20
|
|
|
377,204
|
|
|
4.41
|
%
|
$
|
15.01
|
|
|
7.46
|
%
|
2019
|
|
|
16
|
|
|
355,612
|
|
|
4.15
|
%
|
$
|
13.83
|
|
|
6.48
|
%
|
Unconsolidated Joint Venture Centers (at the Company's pro rata share):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ending December 31,
|
|
Number of
Leases
Expiring
|
|
Approximate
GLA of Leases
Expiring(1)
|
|
% of Total Leased
GLA Represented
by Expiring
Leases(1)
|
|
Ending Base Rent
per Square Foot of
Expiring Leases(1)
|
|
% of Base Rent
Represented by
Expiring Leases(1)
|
|
2010
|
|
|
26
|
|
|
476,985
|
|
|
7.75
|
%
|
$
|
15.63
|
|
|
8.69
|
%
|
2011
|
|
|
18
|
|
|
350,072
|
|
|
5.69
|
%
|
$
|
7.30
|
|
|
2.98
|
%
|
2012
|
|
|
27
|
|
|
627,269
|
|
|
10.20
|
%
|
$
|
12.94
|
|
|
9.47
|
%
|
2013
|
|
|
28
|
|
|
523,790
|
|
|
8.51
|
%
|
$
|
21.26
|
|
|
12.98
|
%
|
2014
|
|
|
34
|
|
|
737,573
|
|
|
11.99
|
%
|
$
|
14.65
|
|
|
12.59
|
%
|
2015
|
|
|
36
|
|
|
890,264
|
|
|
14.47
|
%
|
$
|
12.49
|
|
|
12.97
|
%
|
2016
|
|
|
27
|
|
|
461,563
|
|
|
7.50
|
%
|
$
|
17.43
|
|
|
9.38
|
%
|
2017
|
|
|
14
|
|
|
197,687
|
|
|
3.21
|
%
|
$
|
23.22
|
|
|
5.35
|
%
|
2018
|
|
|
10
|
|
|
366,694
|
|
|
5.96
|
%
|
$
|
4.47
|
|
|
1.91
|
%
|
2019
|
|
|
7
|
|
|
72,030
|
|
|
1.17
|
%
|
$
|
46.90
|
|
|
3.94
|
%
|
-
(1)
-
The
ending base rent per square foot on leases expiring during the period represents the final year minimum rent, on a cash basis, for tenant leases
expiring during the year. Currently, 57% of leases have provisions for future consumer price index increases that are not reflected in ending base rent. Leases for Santa Monica Place have been
excluded from the Consolidated Centers because it is under development.
Anchors have traditionally been a major factor in the public's identification with Regional Shopping Centers. Anchors are generally
department stores whose merchandise appeals to a broad range of shoppers. Although the Centers receive a smaller percentage of their operating income from Anchors than from Mall Stores and
Freestanding Stores, strong Anchors play an important part in maintaining customer traffic and making the Centers desirable locations for Mall Store and Freestanding Store tenants.
Anchors
either own their stores, the land under them and in some cases adjacent parking areas, or enter into long-term leases with an owner at rates that are lower than the
rents charged to tenants of Mall Stores and Freestanding Stores. Each Anchor, that owns its own store, and certain Anchors that lease their stores, enter into reciprocal easement agreements with the
owner of the Center covering, among other things, operational matters, initial construction and future expansion.
Anchors
accounted for approximately 6.9% of the Company's total minimum rent for the year ended December 31, 2009.
11
Table of Contents
The
following table identifies each Anchor, each parent company that owns multiple Anchors and the number of square feet owned or leased by each such Anchor or parent company in the
Company's portfolio at December 31, 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
Number of
Anchor Stores
|
|
GLA Owned
by Anchor
|
|
GLA Leased
by Anchor
|
|
Total GLA
Occupied
by Anchor
|
|
Macy's Inc.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Macy's
|
|
|
53
|
|
|
5,212,558
|
|
|
3,421,845
|
|
|
8,634,403
|
|
|
Bloomingdale's(1)
|
|
|
2
|
|
|
255,888
|
|
|
102,000
|
|
|
357,888
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
55
|
|
|
5,468,446
|
|
|
3,523,845
|
|
|
8,992,291
|
|
Sears Holdings Corporation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sears
|
|
|
48
|
|
|
3,303,956
|
|
|
3,238,020
|
|
|
6,541,976
|
|
|
Great Indoors, The
|
|
|
1
|
|
|
131,051
|
|
|
|
|
|
131,051
|
|
|
K-Mart
|
|
|
1
|
|
|
86,479
|
|
|
|
|
|
86,479
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
50
|
|
|
3,521,486
|
|
|
3,238,020
|
|
|
6,759,506
|
|
J.C. Penney
|
|
|
45
|
|
|
4,145,973
|
|
|
1,869,157
|
|
|
6,015,130
|
|
Dillard's
|
|
|
24
|
|
|
636,569
|
|
|
3,444,317
|
|
|
4,080,886
|
|
Nordstrom(2)
|
|
|
14
|
|
|
1,351,723
|
|
|
995,691
|
|
|
2,347,414
|
|
Target
|
|
|
11
|
|
|
664,110
|
|
|
811,905
|
|
|
1,476,015
|
|
The Bon-Ton Stores, Inc.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Younkers
|
|
|
6
|
|
|
397,119
|
|
|
212,058
|
|
|
609,177
|
|
|
Bon-Ton, The
|
|
|
1
|
|
|
71,222
|
|
|
|
|
|
71,222
|
|
|
Herberger's
|
|
|
4
|
|
|
402,573
|
|
|
|
|
|
402,573
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
11
|
|
|
870,914
|
|
|
212,058
|
|
|
1,082,972
|
|
Forever 21(3)
|
|
|
9
|
|
|
542,551
|
|
|
324,601
|
|
|
867,152
|
|
Kohl's
|
|
|
6
|
|
|
279,400
|
|
|
239,902
|
|
|
519,302
|
|
Boscov's
|
|
|
3
|
|
|
301,350
|
|
|
174,717
|
|
|
476,067
|
|
Neiman Marcus
|
|
|
3
|
|
|
220,071
|
|
|
221,379
|
|
|
441,450
|
|
Home Depot
|
|
|
3
|
|
|
274,402
|
|
|
120,530
|
|
|
394,932
|
|
Wal-Mart
|
|
|
2
|
|
|
|
|
|
371,527
|
|
|
371,527
|
|
Costco
|
|
|
2
|
|
|
166,718
|
|
|
154,701
|
|
|
321,419
|
|
Lord & Taylor
|
|
|
3
|
|
|
320,007
|
|
|
|
|
|
320,007
|
|
Burlington Coat Factory
|
|
|
3
|
|
|
74,585
|
|
|
186,570
|
|
|
261,155
|
|
Dick's Sporting Goods
|
|
|
3
|
|
|
257,241
|
|
|
|
|
|
257,241
|
|
Von Maur
|
|
|
3
|
|
|
246,249
|
|
|
|
|
|
246,249
|
|
Belk
|
|
|
3
|
|
|
51,240
|
|
|
149,685
|
|
|
200,925
|
|
La Curacao
|
|
|
1
|
|
|
|
|
|
164,656
|
|
|
164,656
|
|
Barneys New York
|
|
|
2
|
|
|
62,046
|
|
|
81,398
|
|
|
143,444
|
|
Lowe's
|
|
|
1
|
|
|
|
|
|
135,197
|
|
|
135,197
|
|
Saks Fifth Avenue
|
|
|
1
|
|
|
92,000
|
|
|
|
|
|
92,000
|
|
L.L. Bean
|
|
|
1
|
|
|
75,778
|
|
|
|
|
|
75,778
|
|
Cabela's(4)
|
|
|
1
|
|
|
|
|
|
75,000
|
|
|
75,000
|
|
Best Buy
|
|
|
1
|
|
|
|
|
|
65,841
|
|
|
65,841
|
|
Richman Gordman
1
/
2
Price
|
|
|
1
|
|
|
60,000
|
|
|
|
|
|
60,000
|
|
Sports Authority
|
|
|
1
|
|
|
52,250
|
|
|
|
|
|
52,250
|
|
Bealls
|
|
|
1
|
|
|
40,000
|
|
|
|
|
|
40,000
|
|
Vacant Anchors(5)
|
|
|
12
|
|
|
1,173,543
|
|
|
|
|
|
1,173,543
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
276
|
|
|
20,948,652
|
|
|
16,560,697
|
|
|
37,509,349
|
|
Anchors at centers not owned by the Company(6)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Forever 21
|
|
|
6
|
|
|
|
|
|
479,726
|
|
|
479,726
|
|
Kohl's
|
|
|
3
|
|
|
|
|
|
270,390
|
|
|
270,390
|
|
Burlington Coat Factory(7)
|
|
|
1
|
|
|
|
|
|
83,232
|
|
|
83,232
|
|
Vacant Anchors(6)
|
|
|
14
|
|
|
|
|
|
1,081,415
|
|
|
1,081,415
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
300
|
|
|
20,948,652
|
|
|
18,475,460
|
|
|
39,424,112
|
|
|
|
|
|
|
|
|
|
|
|
-
(1)
-
The
above table includes a 102,000 square foot Bloomingdale's store scheduled to open at Santa Monica Place in August 2010.
12
Table of Contents
-
(2)
-
The
above table includes a 122,000 square foot Nordstrom store scheduled to open at Santa Monica Place in August 2010.
-
(3)
-
The
above table includes a 154,000 square foot Forever 21 store scheduled to open at Fresno Fashion Fair in Summer 2010.
-
(4)
-
Cabela's
is scheduled to open a 75,000 square foot store at Mesa Mall in Spring 2010.
-
(5)
-
The
Company is currently seeking various replacement tenants and/or contemplating redevelopment opportunities for these vacant sites.
-
(6)
-
The
Company owns a portfolio of 24 former Mervyn's stores located at shopping centers not owned by the Company. Of these 24 stores, six have been leased to
Forever 21, three have been leased to Kohl's, one has been leased to Burlington Coat Factory and the remaining 14 are vacant. The Company is currently seeking various replacement tenants for these
vacant sites.
-
(7)
-
Burlington
Coat Factory is scheduled to open an 83,232 square foot store at Chula Vista Center in March 2010.
Environmental Matters
Each of the Centers has been subjected to an Environmental Site AssessmentPhase I (which involves review of
publicly available information and general property inspections, but does not involve soil sampling or ground water analysis) completed by an environmental consultant.
Based
on these assessments, and on other information, the Company is aware of the following environmental issues that may reasonably result in costs associated with future investigation
or remediation, or in environmental liability:
-
-
Asbestos.
The Company has conducted asbestos-containing
materials ("ACM") surveys at various locations within the Centers. The surveys indicate that ACMs are present or suspected in certain areas, primarily vinyl floor tiles, mastics, roofing
materials, drywall tape and joint compounds. The identified ACMs are generally non-friable, in good condition, and possess low probabilities for disturbance. At certain Centers
where ACMs are present or suspected, however, some ACMs have been or may be classified as "friable," and ultimately may require removal under certain conditions. The Company has
developed and implemented an operations and maintenance ("O&M") plan to manage ACMs in place.
-
-
Underground Storage Tanks.
Underground storage tanks
("USTs") are or were present at certain Centers, often in connection with tenant operations at gasoline stations or automotive tire, battery and accessory service centers located at such Centers. USTs
also may be or have been present at properties neighboring certain Centers. Some of these tanks have either leaked or are suspected to have leaked. Where leakage has occurred, investigation,
remediation, and monitoring costs may be incurred by the Company if responsible current or former tenants, or other responsible parties, are unavailable to pay such costs.
-
-
Chlorinated Hydrocarbons.
The presence of chlorinated
hydrocarbons such as perchloroethylene ("PCE") and its degradation byproducts have been detected at certain Centers, often in connection with tenant dry cleaning operations. Where PCE has been
detected, the Company may incur investigation, remediation and monitoring costs if responsible current or former tenants, or other responsible parties, are unavailable to pay such costs.
See
"Risk FactorsPossible environmental liabilities could adversely affect us."
Insurance
Each of the Centers has comprehensive liability, fire, extended coverage and rental loss insurance with insured limits customarily
carried for similar properties. The Company does not insure certain types of losses (such as losses from wars) because they are either uninsurable or not economically
13
Table of Contents
insurable.
In addition, while the Company or the relevant joint venture, as applicable, further carries specific earthquake insurance on the Centers located in California, the policies are subject to
a deductible equal to 5% of the total insured value of each Center, a $100,000 per occurrence minimum and a combined annual aggregate loss limit of $150 million on these Centers. The Company or
the relevant joint venture, as applicable, carries specific earthquake insurance on the Centers located in the Pacific Northwest. However, the policies are subject to a deductible equal to 2% of the
total insured value of each Center, a $50,000 per occurrence minimum and a combined annual aggregate loss limit of $800 million on these Centers. While the Company or the relevant joint venture
also carries terrorism insurance on the Centers, the policies are subject to a $50,000 deductible and a combined annual aggregate loss of $800 million. Each Center has environmental insurance
covering eligible third-party losses, remediation and non-owned disposal sites, subject to a $100,000 deductible and a
$20 million five-year aggregate limit. Some environmental losses are not covered by this insurance because they are uninsurable or not economically insurable. Furthermore, the
Company carries title insurance on substantially all of the Centers for less than their full value.
Qualification as a Real Estate Investment Trust
The Company elected to be taxed as a REIT under the Internal Revenue Code of 1986, as amended (the "Code"), commencing with its first
taxable year ended December 31, 1994, and intends to conduct its operations so as to continue to qualify as a REIT under the Code. As a REIT, the Company generally will not be subject to
federal and state income taxes on its net taxable income that it currently distributes to stockholders. Qualification and taxation as a REIT depends on the Company's ability to meet certain dividend
distribution tests, share ownership requirements and various qualification tests prescribed in the Code.
Employees
As of December 31, 2009, the Company and the Management Companies had 2,749 regular and temporary employees, including executive
officers (9), personnel in the areas of acquisitions and business development (39), property management/marketing (419), leasing (133), redevelopment/development (98), financial services
(286) and legal affairs (61). In addition, in an effort to minimize operating costs, the Company generally maintains its own security and guest services staff (1,685) and in some cases
maintenance staff (19). Unions represent twenty-two of these employees. The Company primarily engages a third party to handle maintenance at the Centers. The Company believes that
relations with its employees are good.
Seasonality
For a discussion of the extent to which the Company's business may be seasonal, see "Item 7Management's Discussion
and Analysis of Financial Condition and Results of OperationsManagement's Overview and SummarySeasonality."
Available Information; Website Disclosure; Corporate Governance Documents
The Company's corporate website address is
www.macerich.com
. The Company makes available free-of-charge through this website its
reports on
Forms 10-K, 10-Q and 8-K and all amendments thereto, as soon as reasonably practicable after the reports have been filed with, or furnished to, the SEC.
These reports are available under the heading "InvestingSEC Filings", through a free hyperlink to a third-party service. Information provided on our website is not incorporated by
reference into this Form 10-K.
14
Table of Contents
The following documents relating to Corporate Governance are available on the Company's website at
www.macerich.com
under
"InvestingCorporate Governance":
You
may also request copies of any of these documents by writing to:
ITEM 1A. RISK FACTORS
The following factors, among others, could cause our actual results to differ materially from those contained
in forward-looking statements made in this Annual Report on Form 10-K and presented elsewhere by our management from time to time. These factors, among others, may have a material
adverse effect on our business, financial condition, operating results and cash flows, and you should carefully consider them. It is not possible to predict or identify all such factors. You should
not consider this list to be a complete statement of all potential risks or uncertainties, and we may update them in our future periodic reports.
We invest primarily in shopping centers, which are subject to a number of significant risks that are beyond our control.
Real property investments are subject to varying degrees of risk that may affect the ability of our Centers to generate sufficient
revenues to meet operating and other expenses, including debt service, lease payments, capital expenditures and tenant improvements, and to make distributions to us and our stockholders. For purposes
of this "Risk Factor" section, Centers wholly owned by us are referred to as "Wholly Owned Centers" and Centers that are partly but not wholly owned by us are referred to as "Joint Venture Centers." A
number of factors may decrease the income generated by the Centers, including:
-
-
the national economic climate (including a continuation or worsening of the recent economic downturn and constrained
capital and credit markets);
-
-
the regional and local economy (which may be negatively impacted by rising unemployment, declining real estate values,
increased foreclosures, higher taxes, plant closings, industry slowdowns, union activity, adverse weather conditions, natural disasters, terrorist activities and other factors);
-
-
local real estate conditions (such as an oversupply of, or a reduction in demand for, retail space or retail goods,
decreases in rental rates, declining real estate values and the availability and creditworthiness of current and prospective tenants);
-
-
levels of consumer spending, consumer confidence, and seasonal spending (especially during the holiday season when many
retailers generate a disproportionate amount of their annual profits);
-
-
perceptions by retailers or shoppers of the safety, convenience and attractiveness of a Center;
and
-
-
increased costs of maintenance, insurance and operations (including real estate taxes).
Income
from shopping center properties and shopping center values are also affected by applicable laws and regulations, including tax, environmental, safety and zoning laws.
15
Table of Contents
A continuation or worsening of recent adverse economic conditions and disruptions in the capital and credit markets could harm our business, results of operations and
financial condition.
The U.S. economy, the real estate industry as a whole, and the local markets in which our Centers are located have in recent years
experienced adverse economic conditions, resulting in an economic recession as well as disruptions in the capital and credit markets. These adverse economic conditions have caused dramatic declines in
the stock and housing markets, increases in foreclosures, unemployment and living costs as well as limited access to credit, which have adversely impacted consumer spending levels and the operating
results of our tenants. If these conditions continue or worsen, or if similar conditions occur in the future, our tenants may also have difficulties obtaining capital at adequate or historical levels
to finance their ongoing business and operations. These events could impact our tenants' ability to meet their lease obligations due to poor operating results, lack of liquidity, bankruptcy or other
reasons. Our ability to lease space and negotiate
rents at advantageous rates has been and, may continue to be, adversely affected in this type of economic environment, and more tenants may seek rent relief. Any of these events could harm our
business, results of operations and financial condition.
Some of our Centers are geographically concentrated and, as a result, are sensitive to local economic and real estate conditions.
A significant percentage of our Centers are located in California and Arizona, and eight Centers in the aggregate are located in New
York, New Jersey and Connecticut. Many of these states have been more adversely affected by weak economic and real estate conditions than have other states. To the extent that weak economic or real
estate conditions, including as a result of the factors described in the preceding risk factors, or other factors continue to affect or affect California, Arizona, New York, New Jersey or Connecticut
(or their respective regions) more severely than other areas of the country, our financial performance could be negatively impacted.
We are in a competitive business.
There are numerous owners and developers of real estate that compete with us in our trade areas. There are six other publicly traded
mall companies in the United States and several large private mall companies, any of which under certain circumstances could compete against us for an acquisition of an Anchor or a tenant. In
addition, other REITs, private real estate companies, and financial buyers compete with us in terms of acquisitions. This results in competition for both the acquisition of properties or centers and
for tenants or Anchors to occupy space. Competition for property acquisitions may result in increased purchase prices and may adversely affect our ability to make suitable property acquisitions on
favorable terms. The existence of competing shopping centers could have a material adverse impact on our ability to lease space and on the level of rents that can be achieved. There is also increasing
competition from other retail formats and technologies, such as lifestyle centers, power centers, Internet shopping, home shopping networks, factory outlet centers, discount shopping clubs and
mail-order services that could adversely affect our revenues.
Our Centers depend on tenants to generate rental revenues.
Our revenues and funds available for distribution will be reduced if:
-
-
a significant number of our tenants are unable (due to poor operating results, capital constraints, bankruptcy, terrorist
activities or other reasons) to meet their obligations;
-
-
we are unable to lease a significant amount of space in the Centers on economically favorable terms;
or
-
-
for any other reason, we are unable to collect a significant amount of rental payments.
16
Table of Contents
A
decision by an Anchor or other significant tenant to cease operations at a Center could also have an adverse effect on our financial condition. The closing of an Anchor or other
significant tenant may allow other Anchors and/or other tenants to terminate their leases, seek rent relief and/or cease operating their stores at the Center or otherwise adversely affect occupancy at
the Center. In addition, Anchors and/or tenants at one or more Centers might terminate their leases as a result of mergers, acquisitions, consolidations, dispositions or bankruptcies in the retail
industry. The bankruptcy and/or closure of retail stores, or sale of an Anchor or store to a less desirable retailer, may reduce occupancy levels, customer traffic and rental income, or otherwise
adversely affect our financial performance. Furthermore, if the store sales of retailers operating in the Centers decline sufficiently due to adverse economic conditions or for any other reason,
tenants might be unable to pay their minimum rents or expense recovery charges. In the event of a default by a lessee, the affected Center may experience delays and costs in enforcing its rights as
lessor.
Given
current economic conditions, we believe there is an increased risk that store sales of Anchors and/or tenants operating in our Centers may decrease in future periods, which may
negatively affect our Anchors' and/or tenants' ability to satisfy their lease obligations and may increase the possibility of consolidations, dispositions or bankruptcies of our tenants and/or closure
of their stores.
Our acquisition and real estate development strategies may not be successful.
Our historical growth in revenues, net income and funds from operations has been in part tied to the acquisition and redevelopment of
shopping centers. Many factors, including the availability and cost of capital, our total amount of debt outstanding, our ability to obtain financing on attractive terms, if at all, interest rates and
the availability of attractive acquisition targets, among others, will affect our ability to acquire and redevelop additional properties in the future. We may not be successful in pursuing acquisition
opportunities, and newly acquired properties may not perform as well as expected. Expenses arising from our efforts to complete acquisitions, redevelop properties or increase our market penetration
may have a material adverse effect on our business, financial condition and results of operations. We face competition for acquisitions primarily from other REITs, as well as from private real estate
companies and financial buyers. Some of our competitors have greater financial and other resources. Increased competition for shopping center acquisitions may result in increased purchase prices and
may impact adversely our ability to acquire additional properties on favorable terms. We cannot guarantee that we will be able to implement our growth strategy successfully or manage our expanded
operations effectively and profitably.
We
may not be able to achieve the anticipated financial and operating results from newly acquired assets. Some of the factors that could affect anticipated results
are:
-
-
our ability to integrate and manage new properties, including increasing occupancy rates and rents at such properties;
-
-
the disposal of non-core assets within an expected time frame; and
-
-
our ability to raise long-term financing to implement a capital structure at a cost of capital consistent with
our business strategy.
Our
business strategy also includes the selective development and construction of retail properties. Any development, redevelopment and construction activities that we may undertake will
be subject to the risks of real estate development, including lack of financing, construction delays, environmental requirements, budget overruns, sunk costs and lease-up. Furthermore,
occupancy rates and rents at a newly completed property may not be sufficient to make the property profitable. Real estate development activities are also subject to risks relating to the inability to
obtain, or delays in obtaining, all necessary zoning, land-use, building, and occupancy and other required governmental permits and authorizations. If any of the above events occur, our
ability to pay dividends to our stockholders and service our indebtedness could be adversely affected.
17
Table of Contents
We may be unable to sell properties quickly because real estate investments are relatively illiquid.
Investments in real estate are relatively illiquid, which limits our ability to adjust our portfolio in response to changes in economic
or other conditions. Moreover, there are some limitations under federal income tax laws applicable to REITs that limit our ability to sell assets. In addition, because our properties are generally
mortgaged to secure our debts, we may not be able to obtain a release of a lien on a mortgaged property without the payment of the associated debt and/or a substantial prepayment penalty, which
restricts our ability to dispose of a property, even though the sale might otherwise be desirable. Furthermore, the number of prospective buyers interested in purchasing shopping centers is limited.
Therefore, if we want to sell one or more of our Centers, we may not be able to dispose of it in the desired time period and may receive less consideration than we originally invested in the Center.
We have substantial debt that could affect our future operations.
Our total outstanding loan indebtedness at December 31, 2009 was $6.8 billion (which includes $1.3 billion of
unsecured debt and $2.3 billion of our pro rata share of joint venture debt). Approximately $247.2 million of such indebtedness matures in 2010 (excluding loans with extensions and
refinancing transactions that have recently closed). As a result of this substantial indebtedness, we are required to use a material portion of our cash flow to service principal and interest on our
debt, which limits the cash flow available for other business opportunities. We are also subject to the risks normally associated with debt financing, including the risk that our cash flow from
operations will be insufficient to meet required debt service and that rising interest rates could adversely affect our debt service costs. In addition, our use of interest rate hedging arrangements
may expose us to additional risks, including that the counterparty to the arrangement may fail to honor its obligations and that termination of these arrangements typically involves costs such as
transaction fees or breakage costs. Furthermore, a majority of our Centers are mortgaged to secure payment of
indebtedness, and if income from the Center is insufficient to pay that indebtedness, the Center could be foreclosed upon by the mortgagee resulting in a loss of income and a decline in our total
asset value.
We are obligated to comply with financial and other covenants that could affect our operating activities.
Our unsecured credit facilities contain financial covenants, including interest coverage requirements, as well as limitations on our
ability to incur debt, make dividend payments and make certain acquisitions. These covenants may restrict our ability to pursue certain business initiatives or certain transactions that might
otherwise be advantageous. In addition, failure to meet certain of these financial covenants could cause an event of default under and/or accelerate some or all of such indebtedness which could have a
material adverse effect on us.
We depend on external financings for our growth and ongoing debt service requirements.
We depend primarily on external financings, principally debt financings, to fund the growth of our business and to ensure that we can
meet ongoing maturities of our outstanding debt. Our access to financing depends on the willingness of banks, lenders and other institutions to lend to us based on their underwriting criteria which
can fluctuate with market conditions and on conditions in the capital markets in general. Recently, turmoil in the capital and credit markets has significantly limited access to debt and equity
financing for many companies. We cannot assure you that we will be able to obtain the financing we need for future growth or to meet our debt service as obligations mature, or that the financing will
be available to us on acceptable terms, or at all. Any such refinancing could also impose more restrictive terms.
18
Table of Contents
Inflation may adversely affect our financial condition and results of operations.
If inflation increases in the future, we may experience any or all of the following:
-
-
Difficulty in replacing or renewing expiring leases with new leases at higher rents;
-
-
Decreasing tenant sales as a result of decreased consumer spending which could adversely affect the ability of our tenants
to meet their rent obligations and/or result in lower percentage rents; and
-
-
An inability to receive reimbursement from our tenants for their share of certain operating expenses, including common
area maintenance, real estate taxes and insurance.
Certain individuals have substantial influence over the management of both us and the Operating Partnership, which may create conflicts of interest.
Under the limited partnership agreement of the Operating Partnership, we, as the sole general partner, are responsible for the
management of the Operating Partnership's business and affairs. Three of the principals of the Operating Partnership serve as executive officers of us, and each principal is a member of our board of
directors. Accordingly, these principals have substantial influence over our management and the management of the Operating Partnership. As a result, certain decisions concerning our operations or
other matters affecting us may present conflicts of interest for these individuals.
The tax consequences of the sale of some of the Centers and certain holdings of the principals may create conflicts of interest.
The principals will experience negative tax consequences if some of the Centers are sold. As a result, the principals may not favor a
sale of these Centers even though such a sale may benefit our other stockholders. In addition, the principals may have different interests than our stockholders because they are significant holders of
the Operating Partnership.
If we were to fail to qualify as a REIT, we will have reduced funds available for distributions to our stockholders.
We believe that we currently qualify as a REIT. No assurance can be given that we will remain qualified as a REIT. Qualification as a
REIT involves the application of highly technical and complex Internal Revenue Code provisions for which there are only limited judicial or administrative interpretations. The complexity of these
provisions and of the applicable income tax regulations is greater in the case of a REIT structure like ours that holds assets in partnership form. The determination of various factual matters and
circumstances not entirely within our control, including determinations by our partners in the Joint Venture Centers, may affect our continued qualification as a REIT. In addition, legislation, new
regulations, administrative interpretations or court decisions could significantly change the tax laws with respect to our qualification as a REIT or the U.S. federal income tax consequences of that
qualification.
If
in any taxable year we were to fail to qualify as a REIT, we will suffer the following negative results:
-
-
we will not be allowed a deduction for distributions to stockholders in computing our taxable income; and
-
-
we will be subject to U.S. federal income tax on our taxable income at regular corporate rates.
In
addition, if we were to lose our REIT status, we will be prohibited from qualifying as a REIT for the four taxable years following the year during which the qualification was lost,
absent relief under statutory provisions. As a result, net income and the funds available for distributions to our
19
Table of Contents
stockholders
would be reduced for at least five years and the fair market value of our shares could be materially adversely affected. Furthermore, the Internal Revenue Service could challenge our REIT
status for past periods, which if successful could result in us owing a material amount of tax for prior periods. It is possible that future economic, market, legal, tax or other considerations might
cause our board of directors to revoke our REIT election.
Even
if we remain qualified as a REIT, we might face other tax liabilities that reduce our cash flow. Further, we might be subject to federal, state and local taxes on our income and
property. Any of these taxes would decrease cash available for distributions to stockholders.
Complying with REIT requirements might cause us to forego otherwise attractive opportunities.
In order to qualify as a REIT for U.S. federal income tax purposes, we must satisfy tests concerning, among other things, our sources
of income, the nature of our assets, the amounts we distribute to our stockholders and the ownership of our stock. We may also be required to make distributions to our stockholders at disadvantageous
times or when we do not have funds readily available for distribution. Thus, compliance with REIT requirements may cause us to forego opportunities we would otherwise pursue.
In
addition, the REIT provisions of the Internal Revenue Code impose a 100% tax on income from "prohibited transactions." Prohibited transactions generally include sales of assets that
constitute inventory or other property held for sale in the ordinary course of business, other than foreclosure property. This 100% tax could impact our desire to sell assets and other investments at
otherwise opportune times if we believe such sales could be considered a prohibited transaction.
Complying with REIT requirements may force us to borrow or take other measures to make distributions to our stockholders.
As a REIT, we generally must distribute 90% of our annual taxable income (subject to certain adjustments) to our stockholders. From
time to time, we might generate taxable income greater than our net income for financial reporting purposes, or our taxable income might be greater than our cash flow available for distributions to
our stockholders. If we do not have other funds available in these situations, we might be unable to distribute 90% of our taxable income as required by the REIT rules. In that case, we would need to
borrow funds, liquidate or sell a portion of our properties or investments (potentially at disadvantageous or unfavorable prices), in certain limited cases distribute a combination of cash and stock
(at our stockholders' election but subject to an aggregate cash limit established by the Company) or find another alternative source of funds. These alternatives could increase our costs or reduce our
equity. In addition, to the extent we borrow funds to pay distributions, the amount of cash available to us in future periods will be decreased by the amount of cash flow we will need to service
principal and interest on the amounts we borrow, which will limit cash flow available to us for other investments or business opportunities.
Outside partners in Joint Venture Centers result in additional risks to our stockholders.
We own partial interests in property partnerships that own 47 Joint Venture Centers as well as fee title to a site that is
ground-leased to a property partnership that owns a Joint Venture Center and several development sites. We may acquire partial interests in additional properties through joint venture arrangements.
Investments in Joint Venture Centers involve risks different from those of investments in Wholly Owned Centers.
We
may have fiduciary responsibilities to our partners that could affect decisions concerning the Joint Venture Centers. Third parties may share control of major decisions relating to
the Joint Venture Centers, including decisions with respect to sales, refinancings and the timing and amount of additional
20
Table of Contents
capital
contributions, as well as decisions that could have an adverse impact on our status. For example, we may lose our management and other rights relating to the Joint Venture Centers
if:
-
-
we fail to contribute our share of additional capital needed by the property partnerships;
-
-
we default under a partnership agreement for a property partnership or other agreements relating to the property
partnerships or the Joint Venture Centers; or
-
-
with respect to certain of the Joint Venture Centers, if certain designated key employees no longer are employed in the
designated positions.
In
addition, some of our outside partners control the day-to-day operations of eight Joint Venture Centers (NorthPark Center, West Acres Center, Eastland Mall,
Granite Run Mall, Lake Square Mall, NorthPark Mall, South Park Mall and Valley Mall). We, therefore, do not control cash distributions from these Centers, and the lack of cash distributions from these
Centers could jeopardize our ability to maintain our qualification as a REIT. Furthermore, certain
Joint Venture Centers have debt that could become recourse debt to us if the Joint Venture Center is unable to discharge such debt obligation.
Our holding company structure makes us dependent on distributions from the Operating Partnership.
Because we conduct our operations through the Operating Partnership, our ability to service our debt obligations and pay dividends to
our stockholders is strictly dependent upon the earnings and cash flows of the Operating Partnership and the ability of the Operating Partnership to make distributions to us. Under the Delaware
Revised Uniform Limited Partnership Act, the Operating Partnership is prohibited from making any distribution to us to the extent that at the time of the distribution, after giving effect to the
distribution, all liabilities of the Operating Partnership (other than some non-recourse liabilities and some liabilities to the partners) exceed the fair value of the assets of the
Operating Partnership. An inability to make cash distributions from the Operating Partnership could jeopardize our ability to maintain qualification as a REIT.
Possible environmental liabilities could adversely affect us.
Under various federal, state and local environmental laws, ordinances and regulations, a current or previous owner or operator of real
property may be liable for the costs of removal or remediation of hazardous or toxic substances on, under or in that real property. These laws often impose liability whether or not the owner or
operator knew of, or was responsible for, the presence of hazardous or toxic substances. The costs of investigation, removal or remediation of hazardous or toxic substances may be substantial. In
addition, the presence of hazardous or toxic substances, or the failure to remedy environmental hazards properly, may adversely affect the owner's or operator's ability to sell or rent affected real
property or to borrow money using affected real property as collateral.
Persons
or entities that arrange for the disposal or treatment of hazardous or toxic substances may also be liable for the costs of removal or remediation of hazardous or toxic
substances at the disposal or treatment facility, whether or not that facility is owned or operated by the person or entity arranging for the disposal or treatment of hazardous or toxic substances.
Laws exist that impose liability for release of asbestos containing materials ("ACMs") into the air, and third parties may seek recovery from owners or operators of real property for personal injury
associated with exposure to ACMs. In connection with our ownership, operation, management, development and redevelopment of the Centers, or any other centers or properties we acquire in the
future, we may be potentially liable under these laws and may incur costs in responding to these liabilities.
Some of our properties are subject to potential natural or other disasters.
Some of our Centers are located in areas that are subject to natural disasters, including our Centers in California or in other areas
with higher risk of earthquakes, our Centers in flood plains or
21
Table of Contents
in
areas that may be adversely affected by tornados, as well as our Centers in coastal regions that may be adversely affected by increases in sea levels or in the frequency or severity of hurricanes
and tropical storms.
Uninsured losses could adversely affect our financial condition.
Each of our Centers has comprehensive liability, fire, extended coverage and rental loss insurance with insured limits customarily
carried for similar properties. We do not insure certain types of losses (such as losses from wars), because they are either uninsurable or not economically insurable. In addition, while we or the
relevant joint venture, as applicable, carries specific earthquake insurance on the Centers located in California, the policies are subject to a deductible equal to 5% of the total insured value of
each Center, a $100,000 per occurrence minimum and a combined annual aggregate loss limit of $150 million on these Centers. We or the relevant joint venture, as applicable, carries specific
earthquake insurance on the Centers located in the Pacific Northwest. However, the policies are subject to a deductible equal to 2% of the total insured value of each Center, a $50,000 per occurrence
minimum and a combined annual aggregate loss limit of $800 million on these Centers. While we or the relevant joint venture also carries terrorism insurance on the Centers, the policies are
subject to a $50,000 deductible and a combined annual aggregate loss of $800 million. Each Center has environmental insurance covering eligible third-party losses, remediation and
non-owned disposal sites, subject to a $100,000 deductible and a $20 million five-year aggregate limit. Some environmental losses are not covered by this insurance
because they are uninsurable or not economically insurable. Furthermore, we carry title insurance on substantially all of the Centers for less than their full value.
If
an uninsured loss or a loss in excess of insured limits occurs, we could lose all or a portion of the capital we have invested in a property, as well as the anticipated future revenue
from the property, but may remain obligated for any mortgage debt or other financial obligations related to the property.
An ownership limit and certain anti-takeover defenses could inhibit a change of control or reduce the value of our common stock.
The Ownership Limit.
In order for us to maintain our qualification as a REIT, not more than 50% in value of our outstanding stock
(after taking into
account options to acquire stock) may be owned, directly or indirectly, by five or fewer individuals (as defined in the Internal Revenue Code to include some entities that would not ordinarily be
considered "individuals") during the last half of a taxable year. Our Charter restricts ownership of more than 5% (the "Ownership Limit") of the lesser of the number or value of our outstanding shares
of stock by any single stockholder or a group of stockholders (with limited exceptions for some holders of limited partnership interests in the Operating Partnership, and their respective families and
affiliated entities, including all three principals). In addition to enhancing preservation of our status as a REIT, the Ownership Limit may:
-
-
have the effect of delaying, deferring or preventing a change in control of us or other transaction without the approval
of our board of directors, even if the change in control or other transaction is in the best interest of our stockholders; and
-
-
limit the opportunity for our stockholders to receive a premium for their common stock or preferred stock that they might
otherwise receive if an investor were attempting to acquire a block of stock in excess of the Ownership Limit or otherwise effect a change in control of us.
Our
board of directors, in its sole discretion, may waive or modify (subject to limitations) the Ownership Limit with respect to one or more of our stockholders, if it is satisfied that
ownership in excess of this limit will not jeopardize our status as a REIT.
Selected Provisions of our Charter and Bylaws.
Some of the provisions of our Charter and bylaws may have the effect of delaying,
deferring or
preventing a third party from making an acquisition proposal for us and may inhibit a change in control that some, or a majority, of our stockholders might
22
Table of Contents
believe
to be in their best interest or that could give our stockholders the opportunity to realize a premium over the then-prevailing market prices for our shares. These provisions
include the following:
-
-
a staggered board of directors (which will be fully declassified in 2011) and limitations on the removal of directors,
which may make the replacement of incumbent directors more time-consuming and difficult;
-
-
advance notice requirements for stockholder nominations of directors and stockholder proposals to be considered at
stockholder meetings;
-
-
the obligation of the directors to consider a variety of factors (in addition to maximizing stockholder value) with
respect to a proposed business combination or other change of control transaction;
-
-
the authority of the directors to classify or reclassify unissued shares and issue one or more series of common stock or
preferred stock;
-
-
the authority to create and issue rights entitling the holders thereof to purchase shares of stock or other securities or
property from us; and
-
-
limitations on the amendment of our Charter and bylaws, the dissolution or change in control of us, and the liability of
our directors and officers.
Selected Provisions of Maryland Law.
The Maryland General Corporation Law prohibits business combinations between a Maryland
corporation and an
interested stockholder (which includes any person who beneficially holds 10% or more of the voting power of the corporation's outstanding voting stock or any affiliate or associate of ours who was the
beneficial owner, directly or indirectly, of 10% or more of the voting power of the corporation's outstanding stock at any time within the two year period prior to the date in question) or its
affiliates for five years following the most recent date on which the interested stockholder became an interested stockholder and, after the five-year period, requires the recommendation
of the board of directors and two super-majority stockholder votes to approve a business combination unless the stockholders receive a minimum price determined by the statute. As permitted by Maryland
law, our Charter exempts from these provisions any business combination between us and the principals and their respective affiliates and related persons. Maryland law also allows the board of
directors to exempt particular business combinations before the interested stockholder becomes an interested stockholder. Furthermore, a person is not an interested stockholder if the transaction by
which he or she would otherwise have become an interested stockholder is approved in advance by the board of directors.
The
Maryland General Corporation Law also provides that the acquirer of certain levels of voting power in electing directors of a Maryland corporation (one-tenth or more but
less than one-third, one-third or more but less than a majority and a majority or more) is not entitled to vote the shares in excess of the applicable threshold, unless voting
rights for the shares are approved by holders of two-thirds of the disinterested shares or unless the acquisition of the shares has been specifically or generally approved or exempted from
the statute by a provision in our Charter or bylaws adopted before the acquisition of the shares. Our Charter exempts from these provisions voting rights of shares owned or acquired by the principals
and their respective affiliates and related persons. Our bylaws also contain a provision exempting from this statute any acquisition by any person of shares of our common stock. There can be no
assurance that this bylaw will not be amended or eliminated in the future. The Maryland General Corporation Law and our Charter also contain supermajority voting requirements with respect to our
ability to amend our Charter, dissolve, merge, or sell all or substantially all of our assets.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
23
Table of Contents
ITEM 2. PROPERTIES
The following table sets forth certain information regarding the Centers and other locations that are wholly owned or partly owned by
the Company:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company's
Ownership(1)
|
|
Name of
Center/Location(2)
|
|
Year of
Original
Construction/
Acquisition
|
|
Year of Most
Recent
Expansion/
Renovation
|
|
Total
GLA(3)
|
|
Mall and
Freestanding
GLA
|
|
Percentage
of Mall and
Freestanding
GLA Leased
|
|
Anchors
|
CONSOLIDATED CENTERS:
|
100%
|
|
Capitola Mall(4)
Capitola, California
|
|
|
1977/1995
|
|
|
1988
|
|
|
487,970
|
|
|
196,373
|
|
|
87.8
|
%
|
Macy's, Kohl's, Sears
|
50.1%
|
|
Chandler Fashion Center
Chandler, Arizona
|
|
|
2001/2002
|
|
|
|
|
|
1,325,543
|
|
|
640,383
|
|
|
97.1
|
%
|
Dillard's, Macy's, Nordstrom, Sears
|
100%
|
|
Chesterfield Towne Center(5)
Richmond, Virginia
|
|
|
1975/1994
|
|
|
2000
|
|
|
1,032,283
|
|
|
423,548
|
|
|
86.9
|
%
|
J.C. Penney, Macy's, Sears
|
100%
|
|
Danbury Fair(5)
Danbury, Connecticut
|
|
|
1986/2005
|
|
|
1991
|
|
|
1,292,176
|
|
|
495,968
|
|
|
97.3
|
%
|
J.C. Penney, Lord & Taylor, Macy's, Sears
|
100%
|
|
Deptford Mall
Deptford, New Jersey
|
|
|
1975/2006
|
|
|
1990
|
|
|
1,039,120
|
|
|
342,678
|
|
|
99.6
|
%
|
Boscov's, J.C. Penney, Macy's, Sears
|
100%
|
|
Fiesta Mall
Mesa, Arizona
|
|
|
1979/2004
|
|
|
2009
|
|
|
926,325
|
|
|
408,134
|
|
|
91.3
|
%
|
Dillard's, Macy's, Sears
|
100%
|
|
Flagstaff Mall
Flagstaff, Arizona
|
|
|
1979/2002
|
|
|
2007
|
|
|
347,076
|
|
|
143,064
|
|
|
91.4
|
%
|
Dillard's, J.C. Penney, Sears
|
50.1%
|
|
Freehold Raceway Mall
Freehold, New Jersey
|
|
|
1990/2005
|
|
|
2007
|
|
|
1,665,399
|
|
|
873,775
|
|
|
96.8
|
%
|
J.C. Penney, Lord & Taylor, Macy's, Nordstrom, Sears
|
100%
|
|
Fresno Fashion Fair
Fresno, California
|
|
|
1970/1996
|
|
|
2006
|
|
|
956,296
|
|
|
395,415
|
|
|
95.9
|
%
|
Forever 21(6), J.C. Penney, Macy's (two)
|
100%
|
|
Great Northern Mall(5)
Clay, New York
|
|
|
1988/2005
|
|
|
|
|
|
894,061
|
|
|
564,073
|
|
|
89.4
|
%
|
Macy's, Sears
|
100%
|
|
Green Tree Mall
Clarksville, Indiana
|
|
|
1968/1975
|
|
|
2005
|
|
|
791,448
|
|
|
285,863
|
|
|
68.1
|
%
|
Burlington Coat Factory, Dillard's J.C. Penney, Sears
|
100%
|
|
La Cumbre Plaza(4)
Santa Barbara, California
|
|
|
1967/2004
|
|
|
1989
|
|
|
491,716
|
|
|
174,716
|
|
|
86.1
|
%
|
Macy's, Sears
|
100%
|
|
Northridge Mall
Salinas, California
|
|
|
1972/2003
|
|
|
1994
|
|
|
892,824
|
|
|
355,844
|
|
|
93.9
|
%
|
Forever 21, J.C. Penney, Macy's, Sears
|
100%
|
|
Oaks, The
Thousand Oaks, California
|
|
|
1978/2002
|
|
|
2009
|
|
|
1,104,132
|
|
|
546,639
|
|
|
98.1
|
%
|
J.C. Penney, Macy's (two), Nordstorm
|
100%
|
|
Pacific View
Ventura, California
|
|
|
1965/1996
|
|
|
2001
|
|
|
970,424
|
|
|
321,610
|
|
|
91.2
|
%
|
J.C. Penney, Macy's, Sears, Target
|
100%
|
|
Panorama Mall
Panorama, California
|
|
|
1955/1979
|
|
|
2005
|
|
|
314,305
|
|
|
149,305
|
|
|
99.4
|
%
|
Wal-Mart
|
100%
|
|
Paradise Valley Mall
Phoenix, Arizona
|
|
|
1979/2002
|
|
|
2009
|
|
|
1,152,333
|
|
|
372,204
|
|
|
88.0
|
%
|
Costco, Dillard's, J.C. Penney, Macy's, Sears
|
100%
|
|
Prescott Gateway
Prescott, Arizona
|
|
|
2002/2002
|
|
|
2004
|
|
|
589,854
|
|
|
345,666
|
|
|
84.6
|
%
|
Dillard's, J.C. Penney, Sears
|
51.3%
|
|
Promenade at Casa Grande
Casa Grande, Arizona
|
|
|
2007/
|
|
|
2009
|
|
|
926,155
|
|
|
488,782
|
|
|
91.3
|
%
|
Dillard's, J.C.Penney, Kohl's, Target
|
100%
|
|
Rimrock Mall
Billings, Montana
|
|
|
1978/1996
|
|
|
1999
|
|
|
600,839
|
|
|
289,169
|
|
|
90.1
|
%
|
Dillard's (two), Herberger's, J.C. Penney
|
100%
|
|
Rotterdam Square
Schenectady, New York
|
|
|
1980/2005
|
|
|
1990
|
|
|
581,326
|
|
|
271,551
|
|
|
85.5
|
%
|
K-Mart, Macy's, Sears
|
100%
|
|
Salisbury, Centre at
Salisbury, Maryland
|
|
|
1990/1995
|
|
|
2005
|
|
|
856,895
|
|
|
359,479
|
|
|
94.4
|
%
|
Boscov's, J.C. Penney, Macy's, Sears
|
84.9%
|
|
SanTan Village Regional Center
Gilbert, Arizona
|
|
|
2007/
|
|
|
2009
|
|
|
946,855
|
|
|
626,855
|
|
|
98.7
|
%
|
Dillard's, Macy's
|
100%
|
|
Somersville Towne Center
Antioch, California
|
|
|
1966/1986
|
|
|
2004
|
|
|
349,274
|
|
|
176,089
|
|
|
92.7
|
%
|
Macy's, Sears
|
100%
|
|
South Plains Mall(5)
Lubbock, Texas
|
|
|
1972/1998
|
|
|
1995
|
|
|
1,164,443
|
|
|
422,656
|
|
|
85.2
|
%
|
Bealls, Dillard's (two), J.C. Penney, Sears
|
100%
|
|
South Towne Center
Sandy, Utah
|
|
|
1987/1997
|
|
|
1997
|
|
|
1,278,378
|
|
|
501,866
|
|
|
95.8
|
%
|
Dillard's, Forever 21, J.C. Penney, Macy's, Target
|
100%
|
|
Towne Mall
Elizabethtown, Kentucky
|
|
|
1985/2005
|
|
|
1989
|
|
|
352,029
|
|
|
181,157
|
|
|
75.2
|
%
|
Belk, J.C. Penney, Sears
|
100%
|
|
Twenty Ninth Street(4)
Boulder, Colorado
|
|
|
1963/1979
|
|
|
2007
|
|
|
830,159
|
|
|
538,505
|
|
|
84.6
|
%
|
Home Depot, Macy's
|
100%
|
|
Valley River Center(5)
Eugene, Oregon
|
|
|
1969/2006
|
|
|
2007
|
|
|
916,134
|
|
|
340,070
|
|
|
91.6
|
%
|
J.C. Penney, Macy's, Sports Authority
|
24
Table of Contents
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company's
Ownership(1)
|
|
Name of
Center/Location(2)
|
|
Year of
Original
Construction/
Acquisition
|
|
Year of Most
Recent
Expansion/
Renovation
|
|
Total
GLA(3)
|
|
Mall and
Freestanding
GLA
|
|
Percentage
of Mall and
Freestanding
GLA Leased
|
|
Anchors
|
100%
|
|
Valley View Center
Dallas, Texas
|
|
|
1973/1996
|
|
|
2004
|
|
|
1,032,480
|
|
|
577,047
|
|
|
73.8
|
%
|
J.C. Penney, Sears
|
100%
|
|
Victor Valley, Mall of(5)
Victorville, California
|
|
|
1986/2004
|
|
|
2001
|
|
|
544,534
|
|
|
270,685
|
|
|
95.9
|
%
|
Forever 21, J.C. Penney, Sears
|
100%
|
|
Vintage Faire Mall
Modesto, California
|
|
|
1977/1996
|
|
|
2008
|
|
|
1,124,710
|
|
|
424,361
|
|
|
91.9
|
%
|
Forever 21, J.C. Penney, Macy's (two), Sears
|
100%
|
|
Westside Pavilion
Los Angeles, California
|
|
|
1985/1998
|
|
|
2007
|
|
|
739,822
|
|
|
381,694
|
|
|
97.5
|
%
|
Macy's, Nordstrom
|
100%
|
|
Wilton Mall(5)
Saratoga Springs, New York
|
|
|
1990/2005
|
|
|
1998
|
|
|
740,824
|
|
|
455,220
|
|
|
92.6
|
%
|
The Bon-Ton, J.C. Penney, Sears
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total/Average Consolidated Centers
|
|
|
29,258,142
|
|
|
13,340,444
|
|
|
91.2
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
UNCONSOLIDATED JOINT VENTURE CENTERS (VARIOUS PARTNERS):
|
33.3%
|
|
Arrowhead Towne Center
Glendale, Arizona
|
|
|
1993/2002
|
|
|
2004
|
|
|
1,196,849
|
|
|
389,072
|
|
|
95.8
|
%
|
Dick's Sporting Goods, Dillard's, Forever 21, J.C. Penney, Macy's, Sears
|
50%
|
|
Biltmore Fashion Park
Phoenix, Arizona
|
|
|
1963/2003
|
|
|
2006
|
|
|
578,992
|
|
|
273,992
|
|
|
84.2
|
%
|
Macy's, Saks Fifth Avenue
|
50%
|
|
Broadway Plaza(4)
Walnut Creek, California
|
|
|
1951/1985
|
|
|
1994
|
|
|
662,439
|
|
|
216,942
|
|
|
97.6
|
%
|
Macy's (two), Nordstrom
|
50.1%
|
|
Corte Madera, Village at
Corte Madera, California
|
|
|
1985/1998
|
|
|
2005
|
|
|
440,131
|
|
|
222,131
|
|
|
92.3
|
%
|
Macy's, Nordstrom
|
50%
|
|
Desert Sky Mall(5)
Phoenix, Arizona
|
|
|
1981/2002
|
|
|
2007
|
|
|
892,642
|
|
|
282,147
|
|
|
79.3
|
%
|
Burlington Coat Factory, Dillard's, La Curacao, Sears
|
25%
|
|
FlatIron Crossing
Broomfield, Colorado
|
|
|
2000/2002
|
|
|
2009
|
|
|
1,467,566
|
|
|
823,825
|
|
|
97.2
|
%
|
Dick's Sporting Goods, Dillard's, Macy's, Nordstrom
|
50%
|
|
Inland Center(4)
San Bernardino, California
|
|
|
1966/2004
|
|
|
2004
|
|
|
932,759
|
|
|
204,888
|
|
|
94.7
|
%
|
Forever 21, Macy's, Sears
|
15%
|
|
Metrocenter Mall(4)
Phoenix, Arizona
|
|
|
1973/2005
|
|
|
2006
|
|
|
1,121,718
|
|
|
594,469
|
|
|
77.7
|
%
|
Dillard's, Macy's, Sears
|
50%
|
|
North Bridge, The Shops at(4)
Chicago, Illinois
|
|
|
1998/2008
|
|
|
|
|
|
679,639
|
|
|
419,639
|
|
|
91.6
|
%
|
Nordstrom
|
50%
|
|
NorthPark Center(4)
Dallas, Texas
|
|
|
1965/2004
|
|
|
2005
|
|
|
1,947,956
|
|
|
895,636
|
|
|
95.0
|
%
|
Barneys New York, Dillard's, Macy's, Neiman Marcus, Nordstrom
|
51%
|
|
Queens Center(4)
Queens, New York
|
|
|
1973/1995
|
|
|
2004
|
|
|
967,840
|
|
|
411,116
|
|
|
98.1
|
%
|
J.C. Penney, Macy's
|
50%
|
|
Ridgmar
Fort Worth, Texas
|
|
|
1976/2005
|
|
|
2000
|
|
|
1,273,501
|
|
|
399,528
|
|
|
89.9
|
%
|
Dillard's, J.C. Penney, Macy's, Neiman Marcus, Sears
|
50%
|
|
Scottsdale Fashion Square
Scottsdale, Arizona
|
|
|
1961/2002
|
|
|
2009
|
|
|
1,939,632
|
|
|
955,306
|
|
|
90.4
|
%
|
Barneys New York, Dillard's, Macy's, Neiman Marcus, Nordstrom
|
33.3%
|
|
Superstition Springs Center(4)
Mesa, Arizona
|
|
|
1990/2002
|
|
|
2002
|
|
|
1,204,759
|
|
|
441,465
|
|
|
95.0
|
%
|
Best Buy, Burlington Coat Factory, Dillard's, J.C. Penney, Macy's, Sears
|
50%
|
|
Tysons Corner Center(4)
McLean, Virginia
|
|
|
1968/2005
|
|
|
2005
|
|
|
2,207,342
|
|
|
1,319,100
|
|
|
97.3
|
%
|
Bloomingdale's, L.L. Bean, Lord & Taylor, Macy's, Nordstrom
|
19%
|
|
West Acres
Fargo, North Dakota
|
|
|
1972/1986
|
|
|
2001
|
|
|
970,334
|
|
|
417,779
|
|
|
96.2
|
%
|
Herberger's, J.C. Penney, Macy's, Sears
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total/Average Unconsolidated Joint Venture Centers (Various Partners)
|
|
|
18,484,099
|
|
|
8,267,035
|
|
|
92.7
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PACIFIC PREMIER RETAIL TRUST(7):
|
51%
|
|
Cascade Mall
Burlington, Washington
|
|
|
1989/1999
|
|
|
1998
|
|
|
586,585
|
|
|
262,349
|
|
|
87.8
|
%
|
J.C. Penney, Macy's (two), Sears, Target
|
51%
|
|
Kitsap Mall
Silverdale, Washington
|
|
|
1985/1999
|
|
|
1997
|
|
|
849,053
|
|
|
389,070
|
|
|
91.0
|
%
|
J.C. Penney, Kohl's, Macy's, Sears
|
51%
|
|
Lakewood Center
Lakewood, California
|
|
|
1953/1975
|
|
|
2001
|
|
|
2,033,670
|
|
|
968,323
|
|
|
92.4
|
%
|
Costco, Forever 21, Home Depot, J.C. Penney, Macy's, Target
|
51%
|
|
Los Cerritos Center
Cerritos, California
|
|
|
1971/1999
|
|
|
ongoing
|
|
|
1,143,613
|
|
|
488,010
|
|
|
98.4
|
%
|
Forever 21, Macy's, Nordstrom, Sears
|
25
Table of Contents
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company's
Ownership(1)
|
|
Name of
Center/Location(2)
|
|
Year of
Original
Construction/
Acquisition
|
|
Year of Most
Recent
Expansion/
Renovation
|
|
Total
GLA(3)
|
|
Mall and
Freestanding
GLA
|
|
Percentage
of Mall and
Freestanding
GLA Leased
|
|
Anchors
|
51%
|
|
Redmond Town Center(4)
Redmond, Washington
|
|
|
1997/1999
|
|
|
2004
|
|
|
1,276,583
|
|
|
1,166,583
|
|
|
94.6
|
%
|
Macy's
|
51%
|
|
Stonewood Mall(4)
Downey, California
|
|
|
1953/1997
|
|
|
1991
|
|
|
930,093
|
|
|
356,333
|
|
|
94.6
|
%
|
J.C. Penney, Kohl's, Macy's, Sears
|
51%
|
|
Washington Square
Portland, Oregon
|
|
|
1974/1999
|
|
|
2005
|
|
|
1,458,734
|
|
|
523,707
|
|
|
84.9
|
%
|
Dick's Sporting Goods, J.C. Penney, Macy's, Nordstrom, Sears
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total/Average Pacific Premier Retail Trust
|
|
|
8,278,331
|
|
|
4,154,375
|
|
|
92.5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SDG MACERICH PROPERTIES, L.P.(7):
|
50%
|
|
Eastland Mall(4)
Evansville, Indiana
|
|
|
1978/1998
|
|
|
1996
|
|
|
1,040,949
|
|
|
551,805
|
|
|
95.6
|
%
|
Dillard's, J.C. Penney, Macy's
|
50%
|
|
Empire Mall(4)
Sioux Falls, South Dakota
|
|
|
1975/1998
|
|
|
2000
|
|
|
1,364,921
|
|
|
619,399
|
|
|
96.4
|
%
|
J.C. Penney, Kohl's, Macy's, Richman Gordman
1
/
2
Price, Sears, Target, Younkers
|
50%
|
|
Granite Run Mall
Media, Pennsylvania
|
|
|
1974/1998
|
|
|
1993
|
|
|
1,032,675
|
|
|
531,866
|
|
|
86.7
|
%
|
Boscov's, J.C. Penney, Sears
|
50%
|
|
Lake Square Mall
Leesburg, Florida
|
|
|
1980/1998
|
|
|
1995
|
|
|
559,088
|
|
|
263,051
|
|
|
80.2
|
%
|
Belk, J.C. Penney, Sears, Target
|
50%
|
|
Lindale Mall
Cedar Rapids, Iowa
|
|
|
1963/1998
|
|
|
1997
|
|
|
688,616
|
|
|
383,053
|
|
|
92.1
|
%
|
Sears, Von Maur, Younkers
|
50%
|
|
Mesa Mall
Grand Junction, Colorado
|
|
|
1980/1998
|
|
|
2003
|
|
|
848,369
|
|
|
407,161
|
|
|
92.2
|
%
|
Cabela's(8), Herberger's, J.C. Penney, Sears, Target
|
50%
|
|
NorthPark Mall
Davenport, Iowa
|
|
|
1973/1998
|
|
|
2001
|
|
|
1,072,428
|
|
|
421,972
|
|
|
88.5
|
%
|
Dillard's, J.C. Penney, Sears, Von Maur, Younkers
|
50%
|
|
Rushmore Mall
Rapid City, South Dakota
|
|
|
1978/1998
|
|
|
1992
|
|
|
725,403
|
|
|
422,302
|
|
|
86.5
|
%
|
Herberger's, J.C. Penney, Sears
|
50%
|
|
Southern Hills Mall
Sioux City, Iowa
|
|
|
1980/1998
|
|
|
2003
|
|
|
792,737
|
|
|
479,160
|
|
|
86.5
|
%
|
J.C. Penney, Sears, Younkers
|
50%
|
|
SouthPark Mall
Moline, Illinois
|
|
|
1974/1998
|
|
|
1990
|
|
|
1,017,106
|
|
|
439,050
|
|
|
83.1
|
%
|
Dillard's, J.C. Penney, Sears, Von Maur, Younkers
|
50%
|
|
SouthRidge Mall
Des Moines, Iowa
|
|
|
1975/1998
|
|
|
1998
|
|
|
859,748
|
|
|
470,996
|
|
|
74.6
|
%
|
J.C. Penney, Sears, Target, Younkers
|
50%
|
|
Valley Mall(5)
Harrisonburg, Virginia
|
|
|
1978/1998
|
|
|
1992
|
|
|
506,333
|
|
|
191,255
|
|
|
85.9
|
%
|
Belk, J.C. Penney, Target
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total/Average SDG Macerich Properties, L.P.
|
|
|
10,508,373
|
|
|
5,181,070
|
|
|
88.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total/Average Unconsolidated Joint Venture Centers
|
|
|
37,270,803
|
|
|
17,602,480
|
|
|
91.3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total/Average before Community Centers
|
|
|
66,528,945
|
|
|
30,942,924
|
|
|
91.3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COMMUNITY / SPECIALTY CENTERS:
|
100%
|
|
Borgata, The(9)
Scottsdale, Arizona
|
|
|
1981/2002
|
|
|
2006
|
|
|
93,706
|
|
|
93,706
|
|
|
72.2
|
%
|
|
50%
|
|
Boulevard Shops(7)
Chandler, Arizona
|
|
|
2001/2002
|
|
|
2004
|
|
|
184,822
|
|
|
184,822
|
|
|
98.4
|
%
|
|
75%
|
|
Camelback Colonnade(5)(7)
Phoenix, Arizona
|
|
|
1961/2002
|
|
|
1994
|
|
|
619,101
|
|
|
539,101
|
|
|
97.0
|
%
|
|
100%
|
|
Carmel Plaza(9)
Carmel, California
|
|
|
1974/1998
|
|
|
2006
|
|
|
110,954
|
|
|
110,954
|
|
|
67.7
|
%
|
|
50%
|
|
Chandler Festival(7)
Chandler, Arizona
|
|
|
2001/2002
|
|
|
|
|
|
503,572
|
|
|
368,375
|
|
|
94.4
|
%
|
Lowe's
|
50%
|
|
Chandler Gateway(7)
Chandler, Arizona
|
|
|
2001/2002
|
|
|
|
|
|
255,289
|
|
|
124,238
|
|
|
60.5
|
%
|
The Great Indoors
|
50%
|
|
Chandler Village Center(7)
Chandler, Arizona
|
|
|
2004/2002
|
|
|
2006
|
|
|
273,418
|
|
|
130,285
|
|
|
95.7
|
%
|
Target
|
32.9%
|
|
Estrella Falls, The Market at(7)
Goodyear, Arizona
|
|
|
2009/
|
|
|
2009
|
|
|
233,692
|
|
|
233,692
|
|
|
91.9
|
%
|
|
100%
|
|
Flagstaff Mall, The Marketplace at(4)(9)
Flagstaff, Arizona
|
|
|
2007/
|
|
|
|
|
|
267,527
|
|
|
146,997
|
|
|
72.6
|
%
|
Home Depot
|
100%
|
|
Hilton Village(4)(9)
Scottsdale, Arizona
|
|
|
1982/2002
|
|
|
|
|
|
96,956
|
|
|
96,956
|
|
|
86.4
|
%
|
|
24.5%
|
|
Kierland Commons(7)
Scottsdale, Arizona
|
|
|
1999/2005
|
|
|
2003
|
|
|
436,783
|
|
|
436,783
|
|
|
95.9
|
%
|
|
26
Table of Contents
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company's
Ownership(1)
|
|
Name of
Center/Location(2)
|
|
Year of
Original
Construction/
Acquisition
|
|
Year of Most
Recent
Expansion/
Renovation
|
|
Total
GLA(3)
|
|
Mall and
Freestanding
GLA
|
|
Percentage
of Mall and
Freestanding
GLA Leased
|
|
Anchors
|
100%
|
|
Paradise Village Office Park II(9)
Phoenix, Arizona
|
|
|
1982/2002
|
|
|
|
|
|
46,834
|
|
|
46,834
|
|
|
100.0
|
%
|
|
34.9%
|
|
SanTan Village Power Center(7)
Gilbert, Arizona
|
|
|
2004/
|
|
|
2007
|
|
|
491,037
|
|
|
284,510
|
|
|
86.1
|
%
|
Wal-Mart
|
100%
|
|
Tucson La Encantada(9)
Tucson, Arizona
|
|
|
2002/2002
|
|
|
2005
|
|
|
249,890
|
|
|
249,890
|
|
|
88.8
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total/Average Community / Specialty Centers
|
|
|
3,863,581
|
|
|
3,047,143
|
|
|
89.7
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total before major development and redevelopment properties and other assets
|
|
|
70,392,526
|
|
|
33,990,067
|
|
|
91.1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
MAJOR DEVELOPMENT AND REDEVELOPMENT PROPERTIES(9):
|
100%
|
|
Northgate Mall
San Rafael, California
|
|
|
1964/1986
|
|
|
2009 ongoing
|
|
|
712,771
|
|
|
242,440
|
|
|
(10
|
)
|
Kohl's, Macy's, Sears
|
100%
|
|
Santa Monica Place
Santa Monica, California
|
|
|
1980/1999
|
|
|
2009 ongoing
|
|
|
524,000
|
|
|
300,000
|
|
|
(10
|
)
|
Bloomingdale's(11), Nordstrom(11)
|
100%
|
|
Shoppingtown Mall
Dewitt, New York
|
|
|
1954/2005
|
|
|
2000
|
|
|
967,186
|
|
|
554,627
|
|
|
(10
|
)
|
J.C. Penney, Macy's, Sears
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Major Development and Redevelopment Properties
|
|
|
2,203,957
|
|
|
1,097,067
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER ASSETS:
|
100%
|
|
Former Mervyn's(9)(12)
|
|
|
Various/2007
|
|
|
|
|
|
1,081,415
|
|
|
|
|
|
|
|
|
100%
|
|
Forever 21(9)(12)
|
|
|
Various/2007
|
|
|
|
|
|
479,726
|
|
|
|
|
|
|
|
|
100%
|
|
Kohl's(9)(12)
|
|
|
Various/2007
|
|
|
|
|
|
270,390
|
|
|
|
|
|
|
|
|
100%
|
|
Burlington Coat Factory(9)(12)(13)
|
|
|
Various/2007
|
|
|
|
|
|
83,232
|
|
|
|
|
|
|
|
|
100%
|
|
Paradise Village ground leases
Phoenix, Arizona(9)
|
|
|
Various/2002
|
|
|
|
|
|
89,359
|
|
|
89,359
|
|
|
46.4
|
%
|
|
30%
|
|
Wilshire Boulevard(7)
Santa Monica, CA
|
|
|
1978/2007
|
|
|
|
|
|
40,000
|
|
|
40,000
|
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Other Assets
|
|
|
2,044,122
|
|
|
129,359
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Grand Total at December 31, 2009
|
|
|
74,640,605
|
|
|
35,216,493
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
(1)
-
The
Company'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.
-
(2)
-
With
respect to 69 Centers, the underlying land controlled by the Company is owned in fee entirely by the Company, or, in the case of Joint Venture Centers,
by the joint venture property partnership or limited liability company. With respect to the remaining 17 Centers, the underlying land controlled by the Company is owned by third parties and leased to
the Company, the property partnership or the limited liability company pursuant to long-term ground leases. Under the terms of a typical ground lease, the Company, the property partnership
or the limited liability company pays rent for the use of the land and is generally responsible for all costs and expenses associated with the building and improvements. In some cases, the Company,
the property partnership or the limited liability company has an option or right of first refusal to purchase the land. The termination dates of the ground leases range from 2011 to 2132.
-
(3)
-
Includes
GLA attributable to Anchors (whether owned or non-owned) and Mall and Freestanding Stores as of December 31, 2009.
-
(4)
-
Portions
of the land on which the Center is situated are subject to one or more ground leases.
-
(5)
-
These
properties have a vacant Anchor location. The Company is currently seeking various replacement tenants and/or contemplating redevelopment
opportunities for these vacant sites.
-
(6)
-
Forever
21 is scheduled to open a 154,000 square foot store at Fresno Fashion Fair in Summer 2010.
-
(7)
-
Included
in Unconsolidated Joint Venture Centers.
-
(8)
-
Cabela's
is scheduled to open a 75,000 square foot store at Mesa Mall in Spring 2010.
-
(9)
-
Included
in Consolidated Centers.
-
(10)
-
Tenant
spaces have been intentionally held off the market and remain vacant because of major development or redevelopment plans. As a result, the Company
believes the percentage of mall and freestanding GLA leased at these major development properties is not meaningful data.
-
(11)
-
Santa
Monica Place closed for redevelopment in January 2008 and is scheduled to reopen in August 2010 with a Bloomingdale's and a Nordstrom.
-
(12)
-
The
Company owns a portfolio of 24 former Mervyn's stores located at shopping centers not owned by the Company. Of these 24 stores, six have been
leased to Forever 21, three have been leased to Kohl's, one has been leased to Burlington Coat Factory and the remaining 14 former Mervyn's locations are vacant. The Company is currently seeking
replacement tenants for these vacant sites. With respect to 12 of the 24 stores, the underlying land is owned in fee entirely by the Company. With respect to the remaining 12 stores, the underlying
land is owned by third parties and leased to the Company pursuant to long-term building or ground leases. Under the terms of a typical building or ground lease, the Company pays rent for
the use of the building or land and is generally responsible for all costs and expenses associated with the building and improvements. In some cases, the Company has an option or right of first
refusal to purchase the land. The termination dates of the ground leases range from 2015 to 2027.
-
(13)
-
Burlington
Coat Factory is scheduled to open an 83,232 square foot store at Chula Vista Center in March 2010, in a space previously occupied by
Mervyn's.
27
Table of Contents
Mortgage Debt
The following table sets forth certain information regarding the mortgages encumbering the Centers, including those Centers in which
the Company has less than a 100% interest. The information set forth below is as of December 31, 2009 (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property Pledged as Collateral
|
|
Fixed or
Floating
|
|
Annual
Interest
Rate(1)
|
|
Carrying
Amount(1)
|
|
Annual
Debt
Service
|
|
Maturity
Date
|
|
Balance Due
on Maturity
|
|
Earliest Date
Notes Can Be
Defeased or Be
Prepaid
|
Consolidated Centers:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capitola Mall(2)
|
|
Fixed
|
|
|
7.13
|
%
|
$
|
35,550
|
|
$
|
4,560
|
|
|
5/15/11
|
|
$
|
32,724
|
|
Any Time
|
Carmel Plaza(3)
|
|
Fixed
|
|
|
8.15
|
%
|
|
24,309
|
|
|
2,424
|
|
|
5/1/10
|
|
|
24,109
|
|
Any Time
|
Chandler Fashion Center(4)
|
|
Fixed
|
|
|
5.50
|
%
|
|
163,028
|
|
|
12,514
|
|
|
11/1/12
|
|
|
152,097
|
|
Any Time
|
Chesterfield Towne Center(5)
|
|
Fixed
|
|
|
9.07
|
%
|
|
52,369
|
|
|
6,576
|
|
|
1/1/24
|
|
|
1,087
|
|
Any Time
|
Danbury Fair Mall
|
|
Fixed
|
|
|
4.64
|
%
|
|
163,111
|
|
|
14,700
|
|
|
2/1/11
|
|
|
155,205
|
|
Any Time
|
Deptford Mall
|
|
Fixed
|
|
|
5.41
|
%
|
|
172,500
|
|
|
9,336
|
|
|
1/15/13
|
|
|
172,500
|
|
Any Time
|
Deptford Mall
|
|
Fixed
|
|
|
6.46
|
%
|
|
15,451
|
|
|
1,212
|
|
|
6/1/16
|
|
|
13,877
|
|
Any Time
|
Fiesta Mall
|
|
Fixed
|
|
|
4.98
|
%
|
|
84,000
|
|
|
4,092
|
|
|
1/1/15
|
|
|
84,000
|
|
Any Time
|
Flagstaff Mall
|
|
Fixed
|
|
|
5.03
|
%
|
|
37,000
|
|
|
1,836
|
|
|
11/1/15
|
|
|
37,000
|
|
Any Time
|
Freehold Raceway Mall(4)
|
|
Fixed
|
|
|
4.68
|
%
|
|
165,546
|
|
|
14,208
|
|
|
7/7/11
|
|
|
155,522
|
|
Any Time
|
Fresno Fashion Fair(6)
|
|
Fixed
|
|
|
6.76
|
%
|
|
167,561
|
|
|
13,248
|
|
|
8/1/15
|
|
|
154,596
|
|
Any Time
|
Great Northern Mall
|
|
Fixed
|
|
|
5.11
|
%
|
|
38,854
|
|
|
2,808
|
|
|
12/1/13
|
|
|
35,566
|
|
Any Time
|
Hilton Village
|
|
Fixed
|
|
|
5.27
|
%
|
|
8,564
|
|
|
444
|
|
|
2/1/12
|
|
|
8,600
|
|
Any Time
|
La Cumbre Plaza(7)
|
|
Floating
|
|
|
2.11
|
%
|
|
30,000
|
|
|
336
|
|
|
12/9/10
|
|
|
30,000
|
|
Any Time
|
Northgate, The Mall at(8)
|
|
Floating
|
|
|
6.90
|
%
|
|
8,844
|
|
|
528
|
|
|
1/1/13
|
|
|
8,844
|
|
Any Time
|
Northridge Mall(9)
|
|
Fixed
|
|
|
8.20
|
%
|
|
71,486
|
|
|
5,436
|
|
|
1/1/11
|
|
|
70,481
|
|
Any Time
|
Oaks, The(10)
|
|
Floating
|
|
|
2.28
|
%
|
|
165,000
|
|
|
3,276
|
|
|
7/10/11
|
|
|
165,000
|
|
Any Time
|
Oaks, The(11)
|
|
Fixed
|
|
|
6.90
|
%
|
|
88,297
|
|
|
2,071
|
|
|
7/10/11
|
|
|
88,297
|
|
Any Time
|
Oaks, The(11)
|
|
Floating
|
|
|
2.83
|
%
|
|
3,927
|
|
|
77
|
|
|
7/10/11
|
|
|
3,297
|
|
Any Time
|
Pacific View
|
|
Fixed
|
|
|
7.20
|
%
|
|
85,797
|
|
|
7,224
|
|
|
8/31/11
|
|
|
83,046
|
|
Any Time
|
Panorama Mall(12)
|
|
Floating
|
|
|
1.31
|
%
|
|
50,000
|
|
|
552
|
|
|
2/28/10
|
|
|
50,000
|
|
Any Time
|
Paradise Valley Mall(13)
|
|
Floating
|
|
|
6.30
|
%
|
|
85,000
|
|
|
4,680
|
|
|
8/31/12
|
|
|
82,250
|
|
Any Time
|
Prescott Gateway
|
|
Fixed
|
|
|
5.86
|
%
|
|
60,000
|
|
|
3,468
|
|
|
12/1/11
|
|
|
60,000
|
|
Any Time
|
Promenade at Casa Grande(14)
|
|
Floating
|
|
|
1.70
|
%
|
|
86,617
|
|
|
1,428
|
|
|
8/16/10
|
|
|
86,617
|
|
Any Time
|
Rimrock Mall
|
|
Fixed
|
|
|
7.57
|
%
|
|
41,430
|
|
|
3,840
|
|
|
10/1/11
|
|
|
40,025
|
|
Any Time
|
Salisbury, Center at
|
|
Fixed
|
|
|
5.83
|
%
|
|
115,000
|
|
|
6,660
|
|
|
5/1/16
|
|
|
115,000
|
|
Any Time
|
Santa Monica Place
|
|
Fixed
|
|
|
7.79
|
%
|
|
76,652
|
|
|
7,272
|
|
|
11/1/10
|
|
|
75,544
|
|
Any Time
|
SanTan Village Regional Center(15)
|
|
Floating
|
|
|
2.93
|
%
|
|
136,142
|
|
|
3,408
|
|
|
6/13/11
|
|
|
136,142
|
|
Any Time
|
Shoppingtown Mall
|
|
Fixed
|
|
|
5.01
|
%
|
|
41,381
|
|
|
3,828
|
|
|
5/11/11
|
|
|
38,968
|
|
Any Time
|
South Plains Mall(16)
|
|
Fixed
|
|
|
9.49
|
%
|
|
53,936
|
|
|
5,448
|
|
|
3/1/29
|
|
|
|
|
Any Time
|
South Towne Center
|
|
Fixed
|
|
|
6.39
|
%
|
|
88,854
|
|
|
6,648
|
|
|
11/5/15
|
|
|
81,161
|
|
Any Time
|
Towne Mall
|
|
Fixed
|
|
|
4.99
|
%
|
|
13,869
|
|
|
1,200
|
|
|
11/1/12
|
|
|
12,316
|
|
Any Time
|
Tucson La Encantada(2)
|
|
Fixed
|
|
|
5.84
|
%
|
|
77,497
|
|
|
4,344
|
|
|
6/1/12
|
|
|
74,931
|
|
Any Time
|
Twenty Ninth Street(17)
|
|
Fixed
|
|
|
10.02
|
%
|
|
106,703
|
|
|
5,604
|
|
|
3/25/11
|
|
|
104,425
|
|
Any Time
|
Valley River Center
|
|
Fixed
|
|
|
5.59
|
%
|
|
120,000
|
|
|
6,696
|
|
|
2/1/16
|
|
|
120,000
|
|
Any Time
|
Valley View Center
|
|
Fixed
|
|
|
5.81
|
%
|
|
125,000
|
|
|
7,152
|
|
|
1/1/11
|
|
|
125,000
|
|
Any Time
|
Victor Valley, Mall of(18)
|
|
Floating
|
|
|
2.09
|
%
|
|
100,000
|
|
|
1,836
|
|
|
5/6/11
|
|
|
100,000
|
|
Any Time
|
Vintage Faire Mall
|
|
Fixed
|
|
|
7.92
|
%
|
|
62,186
|
|
|
6,096
|
|
|
9/1/10
|
|
|
61,372
|
|
Any Time
|
Westside Pavilion(19)
|
|
Floating
|
|
|
3.24
|
%
|
|
175,000
|
|
|
3,912
|
|
|
6/5/11
|
|
|
175,000
|
|
Any Time
|
Wilton Mall(20)
|
|
Fixed
|
|
|
11.08
|
%
|
|
39,575
|
|
|
4,188
|
|
|
11/1/29
|
|
|
|
|
Any Time
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
3,236,036
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
28
Table of Contents
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property Pledged as Collateral
|
|
Fixed or
Floating
|
|
Annual
Interest
Rate(1)
|
|
Carrying
Amount(1)
|
|
Annual
Debt
Service
|
|
Maturity
Date
|
|
Balance Due
on Maturity
|
|
Earliest Date
Notes Can Be
Defeased or Be
Prepaid
|
Unconsolidated Joint Venture Centers (at Company's Pro Rata Share):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Arrowhead Towne Center (33.3%)
|
|
Fixed
|
|
|
6.38
|
%
|
$
|
25,416
|
|
$
|
2,217
|
|
|
10/1/11
|
|
$
|
24,060
|
|
Any Time
|
Biltmore Fashion Park (50%)
|
|
Fixed
|
|
|
8.25
|
%
|
|
29,967
|
|
|
2,641
|
|
|
10/1/14
|
|
|
28,725
|
|
4/1/12
|
Boulevard Shops (50%)(21)
|
|
Floating
|
|
|
1.15
|
%
|
|
10,700
|
|
|
123
|
|
|
12/17/10
|
|
|
10,700
|
|
Any Time
|
Broadway Plaza (50%)(2)
|
|
Fixed
|
|
|
6.12
|
%
|
|
73,785
|
|
|
5,460
|
|
|
8/15/15
|
|
|
67,443
|
|
Any Time
|
Camelback Colonnade (75%)(22)
|
|
Floating
|
|
|
1.11
|
%
|
|
31,125
|
|
|
293
|
|
|
10/9/10
|
|
|
31,125
|
|
Any Time
|
Cascade (51%)(23)
|
|
Fixed
|
|
|
5.28
|
%
|
|
19,435
|
|
|
1,362
|
|
|
7/1/10
|
|
|
19,342
|
|
Any Time
|
Chandler Festival (50%)
|
|
Fixed
|
|
|
6.39
|
%
|
|
14,850
|
|
|
1,086
|
|
|
11/1/15
|
|
|
14,145
|
|
Any Time
|
Chandler Gateway (50%)
|
|
Fixed
|
|
|
6.37
|
%
|
|
9,450
|
|
|
691
|
|
|
11/1/15
|
|
|
9,001
|
|
Any Time
|
Chandler Village Center (50%)(24)
|
|
Floating
|
|
|
1.43
|
%
|
|
8,643
|
|
|
112
|
|
|
1/15/11
|
|
|
8,643
|
|
Any Time
|
Corte Madera, The Village at (50.1%)
|
|
Fixed
|
|
|
7.27
|
%
|
|
40,048
|
|
|
3,265
|
|
|
11/1/16
|
|
|
36,696
|
|
11/1/12
|
Desert Sky Mall (50%)(25)
|
|
Floating
|
|
|
1.33
|
%
|
|
25,750
|
|
|
343
|
|
|
3/4/10
|
|
|
25,750
|
|
Any Time
|
Eastland Mall (50%)
|
|
Fixed
|
|
|
5.80
|
%
|
|
84,000
|
|
|
4,867
|
|
|
6/1/16
|
|
|
84,000
|
|
Any Time
|
Empire Mall (50%)
|
|
Fixed
|
|
|
5.81
|
%
|
|
88,150
|
|
|
5,104
|
|
|
6/1/16
|
|
|
88,150
|
|
Any Time
|
Estrella Falls, The Market at (32.9%)(26)
|
|
Floating
|
|
|
2.52
|
%
|
|
11,590
|
|
|
231
|
|
|
6/1/11
|
|
|
11,590
|
|
Any Time
|
FlatIron Crossing (25%)(27)
|
|
Fixed
|
|
|
5.26
|
%
|
|
45,144
|
|
|
3,306
|
|
|
12/1/13
|
|
|
41,047
|
|
Any Time
|
Granite Run (50%)
|
|
Fixed
|
|
|
5.84
|
%
|
|
58,291
|
|
|
4,311
|
|
|
6/1/16
|
|
|
51,604
|
|
Any Time
|
Inland Center (50%)
|
|
Fixed
|
|
|
5.06
|
%
|
|
25,602
|
|
|
1,280
|
|
|
2/11/11
|
|
|
25,602
|
|
Any Time
|
Kierland Greenway (24.5%)
|
|
Fixed
|
|
|
6.02
|
%
|
|
15,035
|
|
|
1,144
|
|
|
1/1/13
|
|
|
13,679
|
|
Any Time
|
Kierland Main Street (24.5%)
|
|
Fixed
|
|
|
4.99
|
%
|
|
3,696
|
|
|
184
|
|
|
1/2/13
|
|
|
3,507
|
|
Any Time
|
Kierland Tower Lofts (15%)(28)
|
|
Floating
|
|
|
3.25
|
%
|
|
1,049
|
|
|
56
|
|
|
11/18/10
|
|
|
1,049
|
|
Any Time
|
Kitsap Mall/Place (51%)(23)
|
|
Fixed
|
|
|
8.14
|
%
|
|
28,342
|
|
|
2,755
|
|
|
6/1/10
|
|
|
28,143
|
|
Any Time
|
Lakewood Center (51%)
|
|
Fixed
|
|
|
5.43
|
%
|
|
127,500
|
|
|
6,899
|
|
|
6/1/15
|
|
|
127,500
|
|
Any Time
|
Los Cerritos Center (51%)(29)
|
|
Floating
|
|
|
1.12
|
%
|
|
102,000
|
|
|
951
|
|
|
7/1/11
|
|
|
102,000
|
|
Any Time
|
Mesa Mall (50%)
|
|
Fixed
|
|
|
5.82
|
%
|
|
43,625
|
|
|
2,528
|
|
|
6/1/16
|
|
|
43,625
|
|
Any Time
|
Metrocenter Mall (15%)(30)
|
|
Floating
|
|
|
1.71
|
%
|
|
16,800
|
|
|
197
|
|
|
2/9/10
|
|
|
16,800
|
|
Any Time
|
Metrocenter Mall (15%)(31)
|
|
Floating
|
|
|
3.68
|
%
|
|
3,240
|
|
|
119
|
|
|
2/9/10
|
|
|
3,240
|
|
Any Time
|
North Bridge, The Shops at (50%)(2)
|
|
Fixed
|
|
|
7.52
|
%
|
|
102,037
|
|
|
8,600
|
|
|
6/15/16
|
|
|
94,258
|
|
Any Time
|
NorthPark Center (50%)(32)
|
|
Fixed
|
|
|
8.33
|
%
|
|
40,514
|
|
|
3,996
|
|
|
5/10/12
|
|
|
38,919
|
|
Any Time
|
Northpark Center (50%)(32)
|
|
Fixed
|
|
|
5.97
|
%
|
|
90,660
|
|
|
6,409
|
|
|
5/10/12
|
|
|
86,928
|
|
Any Time
|
NorthPark Land (50%)
|
|
Fixed
|
|
|
8.33
|
%
|
|
39,133
|
|
|
3,860
|
|
|
5/10/12
|
|
|
37,592
|
|
Any Time
|
Pacific Premier Retail Trust (51%)(23)
|
|
Floating
|
|
|
7.28
|
%
|
|
37,740
|
|
|
2,264
|
|
|
8/21/11
|
|
|
37,740
|
|
Any Time
|
Queens Center (51%)(33)
|
|
Fixed
|
|
|
7.78
|
%
|
|
65,602
|
|
|
5,879
|
|
|
3/1/13
|
|
|
62,186
|
|
Any Time
|
Queens Center (51%)(6)(33)
|
|
Fixed
|
|
|
7.00
|
%
|
|
106,708
|
|
|
9,736
|
|
|
3/1/13
|
|
|
99,094
|
|
Any Time
|
Redmond Office (51%)
|
|
Fixed
|
|
|
7.52
|
%
|
|
31,213
|
|
|
3,057
|
|
|
5/15/14
|
|
|
27,561
|
|
Any Time
|
Ridgmar (50%)
|
|
Fixed
|
|
|
6.11
|
%
|
|
28,700
|
|
|
1,743
|
|
|
4/11/10
|
|
|
28,700
|
|
Any Time
|
Rushmore (50%)
|
|
Fixed
|
|
|
5.82
|
%
|
|
47,000
|
|
|
2,723
|
|
|
6/1/16
|
|
|
47,000
|
|
Any Time
|
SanTan Village Power Center (34.9%)
|
|
Fixed
|
|
|
5.33
|
%
|
|
15,705
|
|
|
837
|
|
|
2/1/12
|
|
|
15,705
|
|
Any Time
|
Scottsdale Fashion Square (50%)
|
|
Fixed
|
|
|
5.66
|
%
|
|
275,000
|
|
|
15,565
|
|
|
7/8/13
|
|
|
275,000
|
|
Any Time
|
Southern Hills (50%)
|
|
Fixed
|
|
|
5.82
|
%
|
|
50,750
|
|
|
2,940
|
|
|
6/1/16
|
|
|
50,750
|
|
Any Time
|
Stonewood Mall (51%)
|
|
Fixed
|
|
|
7.44
|
%
|
|
36,749
|
|
|
3,298
|
|
|
12/11/10
|
|
|
36,244
|
|
Any Time
|
Superstition Springs Center (33.3%)(34)
|
|
Floating
|
|
|
0.60
|
%
|
|
22,498
|
|
|
136
|
|
|
9/9/10
|
|
|
22,498
|
|
Any Time
|
Tyson's Corner Center (50%)
|
|
Fixed
|
|
|
4.78
|
%
|
|
162,411
|
|
|
11,232
|
|
|
2/17/14
|
|
|
146,711
|
|
Any Time
|
Valley Mall (50%)
|
|
Fixed
|
|
|
5.85
|
%
|
|
22,670
|
|
|
118
|
|
|
6/1/16
|
|
|
20,085
|
|
Any Time
|
Washington Square (51%)
|
|
Fixed
|
|
|
6.04
|
%
|
|
115,983
|
|
|
8,439
|
|
|
1/1/16
|
|
|
105,324
|
|
Any Time
|
Washington Square (51%)
|
|
Fixed
|
|
|
6.00
|
%
|
|
10,085
|
|
|
734
|
|
|
1/1/16
|
|
|
9,159
|
|
Any Time
|
West Acres (19%)
|
|
Fixed
|
|
|
6.41
|
%
|
|
12,543
|
|
|
1,069
|
|
|
10/1/16
|
|
|
10,316
|
|
Any Time
|
Wilshire Building (30%)
|
|
Fixed
|
|
|
6.35
|
%
|
|
1,804
|
|
|
154
|
|
|
1/1/33
|
|
|
|
|
Any Time
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
2,258,738
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
(1)
-
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. The debt premiums (discounts) are being amortized into interest expense over the term of the related debt,
in a manner which approximates the effective interest method. The annual interest rate in the above table represents the effective interest rate, including the debt premiums (discounts), loan finance
costs and notional amounts covered by interest rate swap agreements.
29
Table of Contents
The debt premiums (discounts) as of December 31, 2009 consisted of the following (dollars in thousands):
Consolidated Centers
|
|
|
|
|
Property Pledged as Collateral
|
|
|
|
Danbury Fair Mall
|
|
$
|
4,938
|
|
Deptford Mall
|
|
|
(36
|
)
|
Freehold Raceway Mall
|
|
|
5,507
|
|
Great Northern Mall
|
|
|
(110
|
)
|
Hilton Village
|
|
|
(36
|
)
|
Shoppingtown Mall
|
|
|
1,565
|
|
Towne Mall
|
|
|
277
|
|
|
|
|
|
|
|
$
|
12,105
|
|
|
|
|
|
|
|
|
|
|
Property Pledged as Collateral
|
|
|
|
Arrowhead Towne Center
|
|
$
|
191
|
|
Kierland Greenway
|
|
|
444
|
|
Tysons Corner
|
|
|
2,366
|
|
Wilshire Building
|
|
|
(121
|
)
|
|
|
|
|
|
|
$
|
2,880
|
|
|
|
|
|
-
(2)
-
Northwestern
Mutual Life ("NML") is the lender of this loan. NML is considered a related party as it is a joint venture partner with the
Company in Broadway Plaza.
-
(3)
-
The
loan was extended to May 1, 2010 and has extension options to extend the maturity date to May 1, 2011.
-
(4)
-
On
September 30, 2009, 49.9% of the loan was assumed by a third party in connection with entering into a co-venture arrangement with that
unrelated party. See "Recent DevelopmentsAcquisitions and Dispositions".
-
(5)
-
In
addition to monthly principal and interest payments, contingent interest, as defined in the loan agreement, may be due to the extent that 35% of the
amount by which the property's gross receipts exceeds a base amount. Contingent interest expense recognized by the Company was ($331) for the year ended December 31, 2009.
-
(6)
-
NML
is the lender for 50% of the loan.
-
(7)
-
The
loan bears interest at LIBOR plus 0.88%. On December 30, 2009, the loan was extended to December 9, 2010 with extension options through
June 9, 2012, subject to certain conditions. The loan is covered by an interest rate cap agreement that effectively prevents LIBOR from exceeding 3.0% over the loan term. The total interest
rate was 2.11% at December 31, 2009.
-
(8)
-
On
December 29, 2009, the Company placed a construction loan on the property that allows for total borrowings of up to $60,000, bears interest at
LIBOR plus 4.50% with a total interest rate floor of 6.0% and matures on January 1, 2013, with two one-year extension options. The loan includes an option for additional borrowings
of up to $20,000, depending on certain conditions. At December 31, 2009, the total interest rate was 6.90%.
-
(9)
-
On
June 1, 2009, the Company extended the loan until January 1, 2011 at an interest rate of 8.20%. On February 12, 2010, the entire
loan was paid off.
-
(10)
-
The
loan bears interest at LIBOR plus 1.75% and matures on July 10, 2011, with two one-year extension options. The loan is covered by an
interest rate cap agreement that effectively prevents LIBOR from exceeding 6.25% over the loan term. At December 31, 2009, the total interest rate was 2.28%.
-
(11)
-
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. The Company placed an interest rate swap agreement on the loan that effectively converts $88,297 of the
loan amount from floating rate debt to fixed rate debt of 6.90% until April 15, 2010. At December 31, 2009, the total interest rate, excluding the swapped portion, was 2.83%.
30
Table of Contents
-
(12)
-
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% over the loan term. At December 31, 2009, the total interest rate was 1.31%. The Company is in the process of
extending this loan.
-
(13)
-
On
May 1, 2009, the existing loan was paid off in full. On August 31, 2009, the Company placed a new $85,000 loan on the property that bears
interest at LIBOR plus 4.0% with a total interest rate floor of 5.50% and matures on August 31, 2012, with two one-year extension options. The loan is covered by an interest rate
cap agreement that effectively prevents LIBOR from exceeding 5.0% over the loan term. At December 31, 2009, the total interest rate was 6.30%.
-
(14)
-
The
loan bears interest at LIBOR plus a spread of 1.20% to 1.40%, depending on certain conditions. The loan matures on August 16, 2010, with a
one-year extension option, subject to certain conditions. At December 31, 2009, the total interest rate was 1.70%.
-
(15)
-
The
construction loan on the property 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 December 31, 2009, the total interest rate was 2.93%.
-
(16)
-
On
March 1, 2009, the interest rate on the loan was increased from 7.49% to 9.49% and the loan was extended to March 1, 2029.
-
(17)
-
On
March 25, 2009, the loan was modified to bear interest at LIBOR plus 3.40% and matures on March 25, 2011, with a one-year
extension option. The Company placed an interest rate swap agreement on the loan that effectively converts the loan from floating rate debt to fixed rate debt of 10.02% until April 15, 2010.
-
(18)
-
The
loan bears interest at LIBOR plus 1.60% and matures on May 6, 2011, with two one-year extension options. At December 31,
2009, the total interest rate on the new loan was 2.09%.
-
(19)
-
The
loan bears interest at LIBOR plus 2.00% and matures on June 5, 2011, with two one-year extension options. The loan is covered by an
interest rate cap agreement that effectively prevents LIBOR from exceeding 5.50% until June 1, 2010. At December 31, 2009, the total interest rate on the loan was 3.24%.
-
(20)
-
On
November 1, 2009, the interest rate on the loan was increased from 8.58% to 11.08% and the loan was extended to November 1, 2029.
-
(21)
-
The
loan bears interest at LIBOR plus 0.90% and matures on December 17, 2010. At December 31, 2009, the total interest rate was 1.15%.
-
(22)
-
The
loan bears interest at LIBOR plus 0.69% and matures on October 9, 2010. The loan is covered by an interest rate cap agreement that effectively
prevents LIBOR from exceeding 8.54% over the loan term. At December 31, 2009, the total interest rate was 1.11%.
-
(23)
-
On
August 21, 2009, the joint venture replaced the existing loans on Redmond Town Center with a $74,000 loan draw on its credit facility that is
cross-collateralized by Redmond Town Center, Cross Court Plaza and Northpoint Plaza, bears interest at LIBOR plus 4.0% with a 2.0% LIBOR floor and matures on August 21, 2011, with a
one-year extension option. On February 1, 2010, the joint venture borrowed an additional $81,000 under the facility and paid off the existing loans on Cascade Mall, Kitsap Mall and
Kitsap Place and added those properties as collateral. At December 31, 2009, the total interest rate was 7.28%.
-
(24)
-
The
loan bears interest at LIBOR plus 1.00% and matures on January 15, 2011. At December 31, 2009, the total interest rate was 1.43%.
-
(25)
-
The
loan bears interest at LIBOR plus 1.10% and matures on March 4, 2010, with a one-year extension option. The loan is covered by an
interest rate cap agreement that effectively prevents LIBOR from exceeding 7.65% over the term. At December 31, 2009, the total interest rate was 1.33%.
-
(26)
-
The
construction loan allows for total borrowings of up to $80,000, bears interest at LIBOR plus a spread of 1.50% to 1.60%, depending on certain
conditions, and matures on June 1, 2011, with two one-year extension options. At December 31, 2009, the total interest rate was 2.52%.
-
(27)
-
On
September 3, 2009, 75.0% of the loan was assumed by third party in connection with a sale to that party of 75.0% of the underlying property. See
"Recent DevelopmentsAcquisitions and Dispositions".
-
(28)
-
The
loan bears interest at LIBOR plus 3.0% and matures in November 2010. At December 31, 2009, the total interest rate was 3.25%.
31
Table of Contents
-
(29)
-
The
original loan bears interest at LIBOR plus 0.55% and matures in July 2011. On August 18, 2009, the joint ventured borrowed an additional $70,000
at a rate of LIBOR plus 0.90%. The loan is covered by an interest rate cap agreement that effectively prevents LIBOR from exceeding 8.55% until July 1, 2010. At December 31, 2009, the
total interest rate was 1.12%.
-
(30)
-
The
loan bears interest at LIBOR plus 0.94% with a maturity date of February 9, 2010. The majority owner of the joint venture is currently
negotiating with the lender. At December 31, 2009, the total interest rate was 1.71%.
-
(31)
-
The
construction loan bears interest at LIBOR plus 3.45% with a maturity date of February 9, 2010. The majority owner of the joint venture is
currently negotiating with the lender. At December 31, 2009, the total interest rate was 3.68%.
-
(32)
-
Contingent
interest, as defined in the loan agreement, is due upon the occurrence of certain capital events and is equal to 15% of proceeds less a base
amount.
-
(33)
-
On
July 30, 2009, 49.0% of the loan was assumed by a third party in connection with a sale to that party of 49.0% of the underlying property. See
"Recent DevelopmentsAcquisitions and Dispositions".
-
(34)
-
The
loan bears interest at LIBOR plus 0.37% and matures on September 9, 2010, with a one-year extension option. The loan is covered by
an interest rate cap agreement that effectively prevents LIBOR from exceeding 8.63% over the loan term. At December 31, 2009, the total interest rate was 0.60%.
ITEM 3. LEGAL PROCEEDINGS
None of the Company, the Operating Partnership, the Management Companies or their respective affiliates are currently involved in any
material legal proceedings nor, to the Company's knowledge, are any material legal proceedings 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 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
32
Table of Contents
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
The common stock of the Company is listed and traded on the New York Stock Exchange under the symbol "MAC". The common stock began
trading on March 10, 1994 at a price of $19 per share. In 2009, the Company's shares traded at a high of $38.22 and a low of $5.45.
As
of February 16, 2010, there were approximately 754 stockholders of record. The following table shows high and low closing prices per share of common stock during each quarter
in 2009 and 2008 and dividends/distributions per share of common stock declared and paid by quarter:
|
|
|
|
|
|
|
|
|
|
|
|
|
Market Quotation
Per Share
|
|
|
|
|
|
Dividends/
Distributions
Declared/Paid
|
|
Quarter Ended
|
|
High
|
|
Low
|
|
March 31, 2009
|
|
$
|
20.45
|
|
$
|
5.45
|
|
$
|
0.80
|
|
June 30, 2009
|
|
|
21.81
|
|
|
5.95
|
|
|
0.60
|
(1)
|
September 30, 2009
|
|
|
35.60
|
|
|
14.46
|
|
|
0.60
|
(1)
|
December 31, 2009
|
|
|
38.22
|
|
|
26.67
|
|
|
0.60
|
(1)
|
March 31, 2008
|
|
|
72.38
|
|
|
57.50
|
|
|
0.80
|
|
June 30, 2008
|
|
|
76.50
|
|
|
60.52
|
|
|
0.80
|
|
September 30, 2008
|
|
|
70.98
|
|
|
51.52
|
|
|
0.80
|
|
December 31, 2008
|
|
|
62.70
|
|
|
8.31
|
|
|
0.80
|
|
-
(1)
-
The
dividend was paid 10% in cash and 90% in shares of common stock in accordance with stockholder elections (subject to proration).
At
December 31, 2008, the stockholders had converted all of the Company's outstanding shares of its Series A cumulative convertible redeemable preferred stock
("Series A Preferred Stock"). There was no established public trading market for the Series A Preferred Stock. The Series A Preferred Stock was issued on February 25, 1998.
Preferred stock dividends were accrued quarterly and paid in arrears. The Series A 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. 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. The following table shows the dividends per share of Series A Preferred Stock declared and paid by quarter in
2008:
|
|
|
|
|
|
|
|
|
|
Series A Preferred
Stock Dividend
|
|
Quarter Ended
|
|
Declared
|
|
Paid
|
|
March 31, 2008
|
|
$
|
0.80
|
|
$
|
0.80
|
|
June 30, 2008
|
|
|
0.80
|
|
|
0.80
|
|
September 30, 2008
|
|
|
0.80
|
|
|
0.80
|
|
December 31, 2008
|
|
|
N/A
|
|
|
0.80
|
|
To
maintain its qualification as a REIT, the Company is required each year to distribute to stockholders at least 90% of its net taxable income after certain adjustments. Beginning
during the second quarter of 2009, the Company paid its quarterly dividends in a combination of cash and shares of common stock, with the cash limited to 10% of the total dividend. Paying all or a
portion of the dividend in a combination of cash and common stock would allow the Company to satisfy its REIT taxable income distribution requirement under existing requirements of the Code, while
enhancing the Company's financial flexibility and balance sheet strength. The decision to declare and pay dividends on
33
Table of Contents
common
stock in the future, as well as the timing, amount and composition of future dividends, will be determined in the sole discretion of the Company's board of directors and will depend on actual
and projected cash flow, financial condition, funds from operations, earnings, capital requirements, the annual REIT distribution requirements, contractual prohibitions or other restrictions,
applicable law and such other factors as the board of directors deems relevant. For example, under the Company's existing financing arrangements, the Company may pay cash dividends and make other
distributions
based on a formula derived from funds from operations (See "Item 7. Management's Discussion and Analysis of Financial Condition and Results of OperationsFunds From Operations") and
only if no default under the financing agreements has occurred, unless, under certain circumstances, payment of the distribution is necessary to enable the Company to continue to qualify as a REIT
under the Code.
34
Table of Contents
Stock Performance Graph
The following graph provides a comparison, from December 31, 2004 through December 31, 2009, of the yearly percentage
change in the cumulative total stockholder return (assuming reinvestment of dividends) of the Company, the Standard & Poor's ("S&P") 500 Index, the S&P Midcap 400 Index and the FTSE NAREIT
Equity Index, an industry index of publicly-traded REITs (including the Company). The Company is providing the S&P Midcap 400 Index since it is a company within such index.
The
graph assumes that the value of the investment in each of the Company's common stock and the indices was $100 at the beginning of the period. The graph further assumes the
reinvestment of dividends.
Upon
written request directed to the Secretary of the Company, the Company will provide any stockholder with a list of the REITs included in the FTSE NAREIT Equity Index. The historical
information set forth below is not necessarily indicative of future performance. Data for the FTSE NAREIT Equity Index, the S&P 500 Index and the S&P Midcap 400 Index were provided to the
Company by Research Data Group, Inc.
Copyright©
2010 S&P, a division of The McGraw-Hill Companies Inc. All rights reserved.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12/31/04
|
|
12/31/05
|
|
12/31/06
|
|
12/31/07
|
|
12/31/08
|
|
12/31/09
|
|
The Macerich Company
|
|
$
|
100.00
|
|
$
|
111.47
|
|
$
|
149.27
|
|
$
|
126.74
|
|
$
|
34.88
|
|
$
|
79.81
|
|
S&P 500 Index
|
|
|
100.00
|
|
|
104.91
|
|
|
121.48
|
|
|
128.16
|
|
|
80.74
|
|
|
102.11
|
|
S&P Midcap 400 Index
|
|
|
100.00
|
|
|
112.55
|
|
|
124.17
|
|
|
134.08
|
|
|
85.50
|
|
|
117.46
|
|
FTSE NAREIT Equity Index
|
|
|
100.00
|
|
|
112.16
|
|
|
151.49
|
|
|
127.72
|
|
|
79.53
|
|
|
101.79
|
|
Recent Sales of Unregistered Securities
On December 4, 2009, the Company, as general partner of the Operating Partnership, issued 6,963 shares of common stock of the Company
upon the redemption of 6,963 common partnership units of the Operating Partnership. These shares of common stock were issued in a private placement to two limited partners of the Operating
Partnership, each an accredited investor, pursuant to Section 4(2) of the Securities Act of 1933, as amended.
35
Table of Contents
ITEM 6. SELECTED FINANCIAL DATA
The following sets forth selected financial data for the Company on a historical basis. The following data should be read in
conjunction with the consolidated financial statements (and the notes thereto) of the Company and "Management's Discussion and Analysis of Financial Condition and Results of Operations," each included
elsewhere in this Form 10-K. All amounts are in thousands except per share data.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
|
|
2009
|
|
2008
|
|
2007
|
|
2006
|
|
2005
|
|
OPERATING DATA:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Minimum rents(1)
|
|
$
|
474,261
|
|
$
|
528,571
|
|
$
|
466,071
|
|
$
|
429,343
|
|
$
|
383,856
|
|
|
|
Percentage rents
|
|
|
16,631
|
|
|
19,048
|
|
|
25,917
|
|
|
23,817
|
|
|
23,596
|
|
|
|
Tenant recoveries
|
|
|
244,101
|
|
|
262,238
|
|
|
242,012
|
|
|
224,340
|
|
|
192,769
|
|
|
|
Management Companies
|
|
|
40,757
|
|
|
40,716
|
|
|
39,752
|
|
|
31,456
|
|
|
26,128
|
|
|
|
Other
|
|
|
29,904
|
|
|
30,298
|
|
|
27,090
|
|
|
28,355
|
|
|
22,287
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
|
805,654
|
|
|
880,871
|
|
|
800,842
|
|
|
737,311
|
|
|
648,636
|
|
Shopping center and operating expenses
|
|
|
258,174
|
|
|
281,613
|
|
|
253,258
|
|
|
230,463
|
|
|
200,305
|
|
Management Companies' operating expenses
|
|
|
79,305
|
|
|
77,072
|
|
|
73,761
|
|
|
56,673
|
|
|
52,840
|
|
REIT general and administrative expenses
|
|
|
25,933
|
|
|
16,520
|
|
|
16,600
|
|
|
13,532
|
|
|
12,106
|
|
Depreciation and amortization
|
|
|
262,063
|
|
|
269,938
|
|
|
209,101
|
|
|
193,589
|
|
|
168,917
|
|
Interest expense
|
|
|
267,045
|
|
|
295,072
|
|
|
260,862
|
|
|
259,958
|
|
|
226,432
|
|
(Gain) loss on early extinguishment of debt(2)
|
|
|
(29,161
|
)
|
|
(84,143
|
)
|
|
877
|
|
|
1,835
|
|
|
1,666
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total expenses
|
|
|
863,359
|
|
|
856,072
|
|
|
814,459
|
|
|
756,050
|
|
|
662,266
|
|
Equity in income of unconsolidated joint ventures(3)
|
|
|
68,160
|
|
|
93,831
|
|
|
81,458
|
|
|
86,053
|
|
|
76,303
|
|
Co-venture expense(4)
|
|
|
(2,262
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax benefit (provision)(5)
|
|
|
4,761
|
|
|
(1,126
|
)
|
|
470
|
|
|
(33
|
)
|
|
2,031
|
|
Gain (loss) on sale or write down of assets
|
|
|
161,937
|
|
|
(30,911
|
)
|
|
12,146
|
|
|
(84
|
)
|
|
1,253
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations
|
|
|
174,891
|
|
|
86,593
|
|
|
80,457
|
|
|
67,197
|
|
|
65,957
|
|
Discontinued operations:(6)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) gain on sale or write down of assets
|
|
|
(40,171
|
)
|
|
99,625
|
|
|
(2,376
|
)
|
|
241,816
|
|
|
277
|
|
|
Income from discontinued operations
|
|
|
4,530
|
|
|
8,797
|
|
|
27,981
|
|
|
31,546
|
|
|
21,468
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total (loss) income from discontinued operations
|
|
|
(35,641
|
)
|
|
108,422
|
|
|
25,605
|
|
|
273,362
|
|
|
21,745
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
139,250
|
|
|
195,015
|
|
|
106,062
|
|
|
340,559
|
|
|
87,702
|
|
Less net income (loss) attributable to noncontrolling interests
|
|
|
18,508
|
|
|
28,966
|
|
|
29,827
|
|
|
96,010
|
|
|
(11,953
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to the Company
|
|
|
120,742
|
|
|
166,049
|
|
|
76,235
|
|
|
244,549
|
|
|
99,655
|
|
Less preferred dividends
|
|
|
|
|
|
4,124
|
|
|
10,058
|
|
|
10,083
|
|
|
9,649
|
|
Less adjustment to redemption value of redeemable noncontrolling interests
|
|
|
|
|
|
|
|
|
2,046
|
|
|
17,062
|
|
|
183,620
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) available to common stockholders
|
|
$
|
120,742
|
|
$
|
161,925
|
|
$
|
64,131
|
|
$
|
217,404
|
|
$
|
(93,614
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per common share ("EPS") attributable to the Companybasic:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations
|
|
$
|
1.83
|
|
$
|
0.92
|
|
$
|
0.79
|
|
$
|
0.64
|
|
$
|
0.73
|
|
|
Discontinued operations
|
|
|
(0.38
|
)
|
|
1.25
|
|
|
0.09
|
|
|
2.41
|
|
|
(2.33
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) available to common stockholders
|
|
$
|
1.45
|
|
$
|
2.17
|
|
$
|
0.88
|
|
$
|
3.05
|
|
$
|
(1.60
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
EPS attributable to the Companydiluted:(7)(8)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations
|
|
$
|
1.83
|
|
$
|
0.92
|
|
$
|
0.79
|
|
$
|
0.72
|
|
$
|
0.73
|
|
|
Discontinued operations
|
|
|
(0.38
|
)
|
|
1.25
|
|
|
0.09
|
|
|
2.31
|
|
|
(2.33
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) available to common stockholders
|
|
$
|
1.45
|
|
$
|
2.17
|
|
$
|
0.88
|
|
$
|
3.03
|
|
$
|
(1.60
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
36
Table of Contents
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31,
|
|
|
|
2009
|
|
2008
|
|
2007
|
|
2006
|
|
2005
|
|
BALANCE SHEET DATA:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment in real estate (before accumulated depreciation)
|
|
$
|
6,697,259
|
|
$
|
7,355,703
|
|
$
|
7,078,802
|
|
$
|
6,356,156
|
|
$
|
6,017,546
|
|
Total assets
|
|
$
|
7,252,471
|
|
$
|
8,090,435
|
|
$
|
7,937,097
|
|
$
|
7,373,676
|
|
$
|
6,986,005
|
|
Total mortgage and notes payable
|
|
$
|
4,531,634
|
|
$
|
5,940,418
|
|
$
|
5,703,180
|
|
$
|
4,993,879
|
|
$
|
5,424,730
|
|
Redeemable noncontrolling interests(9)
|
|
$
|
20,591
|
|
$
|
23,327
|
|
$
|
322,619
|
|
$
|
322,710
|
|
$
|
306,700
|
|
Series A preferred stock(10)
|
|
$
|
|
|
$
|
|
|
$
|
83,495
|
|
$
|
98,934
|
|
$
|
98,934
|
|
Equity(11)
|
|
$
|
2,128,466
|
|
$
|
1,641,884
|
|
$
|
1,434,701
|
|
$
|
1,653,578
|
|
$
|
847,568
|
|
OTHER DATA:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Funds from operations ("FFO")diluted(12)
|
|
$
|
344,108
|
|
$
|
461,515
|
|
$
|
396,556
|
|
$
|
383,122
|
|
$
|
336,831
|
|
Cash flows provided by (used in):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating activities
|
|
$
|
120,890
|
|
$
|
251,947
|
|
$
|
326,070
|
|
$
|
211,850
|
|
$
|
235,296
|
|
|
Investing activities
|
|
$
|
302,356
|
|
$
|
(558,956
|
)
|
$
|
(865,283
|
)
|
$
|
(126,736
|
)
|
$
|
(131,948
|
)
|
|
Financing activities
|
|
$
|
(396,520
|
)
|
$
|
288,265
|
|
$
|
355,051
|
|
$
|
29,208
|
|
$
|
(20,349
|
)
|
Number of Centers at year end
|
|
|
86
|
|
|
92
|
|
|
94
|
|
|
91
|
|
|
97
|
|
Regional Mall portfolio occupancy
|
|
|
91.3
|
%
|
|
92.3
|
%
|
|
93.1
|
%
|
|
93.4
|
%
|
|
93.3
|
%
|
Regional Mall portfolio sales per square foot(13)
|
|
$
|
407
|
|
$
|
441
|
|
$
|
467
|
|
$
|
452
|
|
$
|
417
|
|
Weighted average number of shares outstandingEPS basic
|
|
|
81,226
|
|
|
74,319
|
|
|
71,768
|
|
|
70,826
|
|
|
59,279
|
|
Weighted average number of shares outstandingEPS diluted(8)(9)
|
|
|
81,226
|
|
|
86,794
|
|
|
84,760
|
|
|
88,058
|
|
|
73,573
|
|
Distributions declared per common share
|
|
$
|
2.60
|
|
$
|
3.20
|
|
$
|
2.93
|
|
$
|
2.75
|
|
$
|
2.63
|
|
-
(1)
-
Included
in minimum rents is amortization of above and below-market leases of $9.6 million, $22.5 million, $10.3 million,
$11.8 million and $10.7 million for the years ended December 31, 2009, 2008, 2007, 2006 and 2005, respectively.
-
(2)
-
The
Company repurchased $89.1 million and $222.8 million of its Senior Notes during the years ended December 31, 2009 and 2008,
respectively, that resulted in gain of $29.8 million and $84.1 million on the early extinguishment of debt for the years ended December 31, 2009 and 2008, respectively. The gain
on early extinguishment of debt for the year ended December 31, 2009, was offset in part by a loss of $0.6 million on the early extinguishment of the term loan.
-
(3)
-
On
July 30, 2009, the Company sold a 49% ownership interest in Queens Center to a third party for approximately $152.7 million, resulting in a
gain on sale of assets of $154.2 million. The Company used the proceeds from the sale of the ownership interest in the property to pay down the term loan and for general corporate purposes. As
of the date of the sale, the Company has accounted for the operations of Queens Center under the equity method of accounting.
-
-
On
September 3, 2009, the Company formed a joint venture with a third party, whereby the Company sold a 75% interest in FlatIron Crossing
and received approximately $123.8 million in cash proceeds for the overall transaction. The Company used the proceeds from the sale of the ownership interest in the property to pay down the
term loan and for general corporate purposes. As part of this transaction, the Company issued three warrants for an aggregate of approximately 1.3 million shares of common stock of the Company.
(See Note 15Stockholders' Equity in the Company's Notes to the Consolidated Financial Statements). As of the date of the sale, the Company has accounted for the operations of
FlatIron Crossing under the equity method of accounting.
-
(4)
-
On
September 30, 2009, the Company formed a joint venture with a third party, whereby the third party acquired a 49.9% interest in Freehold Raceway
Mall and Chandler Fashion Center. The Company received approximately $174.6 million in cash proceeds for the overall transaction. The Company used the proceeds from this transaction to pay down
the Company's line of credit and
37
Table of Contents
for
general corporate purposes. As part of this transaction, the Company issued a warrant for an aggregate of approximately 0.9 million shares of common stock of the Company. (See
Note 15Stockholders' Equity in the Notes to the Company's Consolidated Financial
Statements). The transaction has been accounted for as a profit-sharing arrangement, and accordingly the assets, liabilities and operations of the properties remain on the books of the Company and a
co-venture obligation was established for the amount of $168.2 million representing the net cash proceeds received from the third party less costs allocated to the warrant.
-
(5)
-
The
Company's Taxable REIT Subsidiaries are subject to corporate level income taxes (See Note 24Income Taxes in the Company's Notes to
the Consolidated Financial Statements).
-
(6)
-
Discontinued
operations include the following:
-
-
On
January 5, 2005, the Company sold Arizona Lifestyle Galleries. The sale of this property resulted in a gain on sale of asset of
$0.3 million. The results of operations for the period January 1, 2005 to January 5, 2005 have been reclassified to discontinued operations.
-
-
On
June 9, 2006, the Company sold Scottsdale 101 and the results for the period January 1, 2006 to June 9, 2006 and for the
year ended December 31, 2005 have been classified as discontinued operations. The sale of Scottsdale 101 resulted in a gain on sale of asset of $62.7 million.
-
-
The
Company sold Park Lane Mall on July 13, 2006 and the results for the period January 1, 2006 to July 13, 2006 and for
the year ended December 31, 2005 have been classified as discontinued operations. The sale of Park Lane Mall resulted in a gain on sale of asset of $5.9 million.
-
-
The
Company sold Greeley Mall and Holiday Village Mall in a combined sale on July 27, 2006, and the results for the period
January 1, 2006 to July 27, 2006 and the year ended December 31, 2005 have been classified as discontinued operations. The sale of these properties resulted in a gain on sale of
assets of $28.7 million.
-
-
The
Company sold Great Falls Marketplace on August 11, 2006, and the results for the period January 1, 2006 to August 11,
2006 and for the year ended December 31, 2005 have been classified as discontinued operations. The sale of Great Falls Marketplace resulted in a gain on sale of asset of $11.8 million.
-
-
The
Company sold Citadel Mall, Crossroads Mall and Northwest Arkansas Mall in a combined sale on December 29, 2006, and the results for
the period January 1, 2006 to December 29, 2006 and the year ended December 31, 2005 have been classified as discontinued operations. The sale of these properties resulted in a
gain on sale of assets of $132.7 million.
-
-
In
addition, the Company recorded an additional loss of $2.4 million in 2007 related to the sale of properties in 2006.
-
-
On
January 1, 2008, MACWH, LP, a subsidiary of the Operating Partnership, at the election of the holders, redeemed the
3.4 million participating convertible preferred units ("PCPUs") in exchange for the 16.32% noncontrolling interest in the Non-Rochester Properties, in exchange for the Company's
ownership interest in the Rochester Properties. As a result of the Rochester Redemption, the Company recognized a gain of $99.1 million on the exchange (See
Note 17Discontinued OperationsRochester Redemption in the Company's Notes to the Consolidated Financial Statements).
-
-
The
Company sold the fee simple and/or ground leasehold interests in three former Mervyn's stores to Pacific Premier Retail Trust, one of its
joint ventures, on December 19, 2008, and the results for the period of January 1, 2008 to December 19, 2008 and for the year ended December 31, 2007 have been classified
as discontinued operations. The sale of these interests resulted in a gain on sale of assets of $1.5 million.
-
-
In
June 2009, the Company recorded an impairment charge of $26.0 million, as it relates to the fee and/or ground leasehold interests in
five former Mervyn's stores due to the anticipated loss on the sale of these properties in July 2009. The Company subsequently sold the properties in July 2009 for $52.7 million in total
proceeds, resulting in an additional $0.5 million loss related to transaction
38
Table of Contents
costs.
The Company used the proceeds from the sales to pay down the Company's term loan and for general corporate purposes.
-
-
In
June 2009, the Company recorded an impairment charge of $1.0 million, as it related to the anticipated loss on the sale of Village
Center, a 170,801 square foot urban village property, in July 2009. The Company subsequently sold the property on July 14, 2009 for $11.9 million in total proceeds, resulting in a
gain of $0.1 million related to a change in estimate in transaction costs. The Company used the proceeds from the sale to pay down the term loan and for general corporate purposes.
-
-
On
September 29, 2009, the Company sold a leasehold interest in a former Mervyn's store for $4.5 million, resulting in a gain on
sale of $4.1 million. The Company used the proceeds from the sale to pay down the Company's line of credit and for general corporate purposes.
-
-
During
the fourth quarter of 2009, the Company sold five non-core community centers for $71.3 million, resulting in an aggregate loss on
sales of $16.9 million. The Company used the proceeds from these sales to pay down the Company's line of credit and for general corporate purposes.
-
-
The
Company has classified the results of operations and gain or loss on sale for all of the above dispositions during the year ended
December 31, 2009 as discontinued operations for the years ended December 31, 2009, 2008, 2007, 2006 and 2005.
39
Table of Contents
-
-
Total
revenues and income from discontinued operations were:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
|
(Dollars in millions)
|
|
2009
|
|
2008
|
|
2007
|
|
2006
|
|
2005
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Scottsdale/101
|
|
$
|
|
|
$
|
|
|
$
|
0.1
|
|
$
|
4.7
|
|
$
|
9.8
|
|
|
|
Park Lane Mall
|
|
|
|
|
|
|
|
|
|
|
|
1.5
|
|
|
3.1
|
|
|
|
Holiday Village
|
|
|
|
|
|
0.3
|
|
|
0.2
|
|
|
2.9
|
|
|
5.2
|
|
|
|
Greeley Mall
|
|
|
|
|
|
|
|
|
|
|
|
4.3
|
|
|
7.0
|
|
|
|
Great Falls Marketplace
|
|
|
|
|
|
|
|
|
|
|
|
1.8
|
|
|
2.7
|
|
|
|
Citadel Mall
|
|
|
|
|
|
|
|
|
|
|
|
15.7
|
|
|
15.3
|
|
|
|
Northwest Arkansas Mall
|
|
|
|
|
|
|
|
|
|
|
|
12.9
|
|
|
12.6
|
|
|
|
Crossroads Mall
|
|
|
|
|
|
|
|
|
|
|
|
11.5
|
|
|
10.9
|
|
|
|
Mervyn's
|
|
|
3.0
|
|
|
11.8
|
|
|
0.5
|
|
|
|
|
|
|
|
|
|
Rochester Properties
|
|
|
|
|
|
|
|
|
83.1
|
|
|
80.0
|
|
|
51.7
|
|
|
|
Village Center
|
|
|
0.9
|
|
|
2.0
|
|
|
2.1
|
|
|
1.9
|
|
|
1.9
|
|
|
|
Village Plaza
|
|
|
1.8
|
|
|
2.1
|
|
|
2.1
|
|
|
2.1
|
|
|
1.9
|
|
|
|
Village Crossroads
|
|
|
2.1
|
|
|
2.6
|
|
|
2.7
|
|
|
2.2
|
|
|
1.8
|
|
|
|
Village Square I
|
|
|
0.6
|
|
|
0.7
|
|
|
0.7
|
|
|
0.7
|
|
|
0.7
|
|
|
|
Village Square II
|
|
|
1.3
|
|
|
1.9
|
|
|
1.9
|
|
|
1.8
|
|
|
1.8
|
|
|
|
Village Fair North
|
|
|
3.3
|
|
|
3.6
|
|
|
3.7
|
|
|
3.5
|
|
|
3.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
13.0
|
|
$
|
25.0
|
|
$
|
97.1
|
|
$
|
147.5
|
|
$
|
129.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Scottsdale/101
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
0.8
|
|
$
|
0.2
|
|
|
|
Park Lane Mall
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.8
|
|
|
|
Holiday Village
|
|
|
|
|
|
0.3
|
|
|
0.2
|
|
|
1.2
|
|
|
2.8
|
|
|
|
Greeley Mall
|
|
|
|
|
|
|
|
|
(0.1
|
)
|
|
0.6
|
|
|
0.9
|
|
|
|
Great Falls Marketplace
|
|
|
|
|
|
|
|
|
|
|
|
1.1
|
|
|
1.7
|
|
|
|
Citadel Mall
|
|
|
|
|
|
|
|
|
(0.1
|
)
|
|
2.5
|
|
|
1.8
|
|
|
|
Northwest Arkansas Mall
|
|
|
|
|
|
|
|
|
|
|
|
3.4
|
|
|
2.9
|
|
|
|
Crossroads Mall
|
|
|
|
|
|
|
|
|
|
|
|
2.3
|
|
|
3.2
|
|
|
|
Mervyn's
|
|
|
|
|
|
2.5
|
|
|
0.2
|
|
|
|
|
|
|
|
|
|
Rochester Properties
|
|
|
|
|
|
|
|
|
21.9
|
|
|
14.5
|
|
|
3.9
|
|
|
|
Village Center
|
|
|
0.4
|
|
|
0.6
|
|
|
0.6
|
|
|
0.6
|
|
|
0.2
|
|
|
|
Village Plaza
|
|
|
0.8
|
|
|
1.3
|
|
|
1.1
|
|
|
1.1
|
|
|
0.7
|
|
|
|
Village Crossroads
|
|
|
1.1
|
|
|
1.4
|
|
|
1.5
|
|
|
1.1
|
|
|
0.6
|
|
|
|
Village Square I
|
|
|
0.2
|
|
|
0.3
|
|
|
0.4
|
|
|
0.4
|
|
|
0.2
|
|
|
|
Village Square II
|
|
|
0.4
|
|
|
0.8
|
|
|
0.9
|
|
|
0.9
|
|
|
0.5
|
|
|
|
Village Fair North
|
|
|
1.6
|
|
|
1.6
|
|
|
1.4
|
|
|
1.0
|
|
|
1.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
4.5
|
|
$
|
8.8
|
|
$
|
28.0
|
|
$
|
31.5
|
|
$
|
21.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
(7)
-
Assumes
the conversion of Operating Partnership units to the extent they are dilutive to the EPS computation. It also assumes the conversion of
MACWH, LP common and preferred units to the extent that they are dilutive to the EPS computation.
-
(8)
-
Includes
the dilutive effect, if any, of share and unit-based compensation plans and Senior Notes calculated using the treasury stock method and
the dilutive effect, if any, of all other dilutive securities calculated using the "if converted" method.
-
(9)
-
Redeemable
noncontrolling interests include the PCPUs and other redeemable equity interests not included within equity.
-
(10)
-
The
holder of the Series A Preferred Stock converted approximately 0.6 million, 0.7 million, 1.3 million and 1.0 million
shares to common shares on October 18, 2007, May 6, 2008, May 8, 2008 and September 17, 2008, respectively. As of December 31, 2008, there was no Series A
Preferred Stock outstanding.
40
Table of Contents
-
(11)
-
Equity
includes the noncontrolling interests in the Operating Partnership, nonredeemable interests in consolidated joint ventures and common and
non-participating preferred units of MACWH, L.P.
-
(12)
-
The
Company uses FFO in addition to net income to report its operating and financial results and considers FFO and FFOdiluted as supplemental
measures for the real estate industry and a supplement to Generally Accepted Accounting Principles ("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.
The Company also adjusts FFO for the noncontrolling interest due to redemption value on the Rochester Properties (See Note 17Discontinued Operations in the Company's Notes to the
Consolidated Financial Statements.)
-
-
FFO
and FFO on a fully diluted basis are useful to investors in comparing operating and financial results between periods. This is especially
true since FFO excludes real estate depreciation and amortization as the Company believes real estate values fluctuate based on market conditions rather than depreciating in value ratably on a
straight-line basis over time. In addition, consistent with the key objective of FFO as a measure of operating performance, the adjustment of FFO for the noncontrolling interest in
redemption value provides a more meaningful measure of the Company's operating performance between periods without reference to the non-cash charge related to the adjustment in
noncontrolling interest due to redemption value. The Company believes that such a presentation also provides investors with a more meaningful measure of its operating results in comparison to the
operating results of other REITS. Further, 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. The Company also cautions that FFO as presented may not be comparable to similarly titled measures reported by other real estate
investment trusts.
-
-
Management
compensates for the limitations of FFO by providing investors with financial statements prepared according to GAAP, along with this
detailed discussion of FFO and a reconciliation of FFO and FFO-diluted to net income available to common stockholders. Management believes that to further understand the Company's
performance, FFO should be compared with the Company's reported net income and considered in addition to cash flows in accordance with GAAP, as presented in the Company's Consolidated Financial
Statements. For disclosure of net income, the most directly comparable GAAP financial measure, for the periods presented and a reconciliation of FFO and FFOdiluted to net income, see
"Item 7. Management's Discussion and Analysis of Financial Condition and Results of OperationsFunds from Operations."
-
-
The
computation of FFOdiluted includes the effect of share and unit-based compensation plans and convertible senior
notes calculated using the treasury stock method. It also assumes the conversion of MACWH, LP common and preferred units and all other securities to the extent that they are dilutive to the FFO
computation (See Note 16Acquisitions in the Company's Notes to the Consolidated Financial Statements). On February 25, 1998, the Company sold $100 million of its
Series A Preferred Stock. The Preferred Stock was convertible on a one-for-one basis for common stock. The Series A Preferred Stock then outstanding was dilutive
to FFO for all periods presented and was dilutive to net income in 2006.
-
(13)
-
Sales
are based on reports by retailers leasing Mall Stores and Freestanding Stores for the trailing 12 months for tenants which have occupied such
stores for a minimum of 12 months. Sales per square foot are based on tenants 10,000 square feet and under for Regional Malls. Year ended 2007 sales per square foot were $467 after giving
effect to the Rochester Redemption and including The Shops at North Bridge.
41
Table of Contents
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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
December 31, 2009, the Operating Partnership owned or had an ownership interest in 72 regional shopping centers and 14 community shopping centers totaling approximately 75 million square
feet of GLA. These 86 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.
The
following discussion is based primarily on the consolidated financial statements of the Company for the years ended December 31, 2009, 2008 and 2007. It compares the results
of operations and cash flows for the year ended December 31, 2009 to the results of operations and cash flows for the year ended December 31, 2008. Also included is a comparison of the
results of operations and cash flows for the year ended December 31, 2008 to the results of operations and cash flows for the year ended December 31, 2007. This information should be
read in conjunction with the accompanying consolidated financial statements and notes thereto.
The financial statements reflect the following acquisitions, dispositions and changes in ownership subsequent to the occurrence of each
transaction.
On
September 5, 2007, the Company purchased the remaining 50% outside ownership interest in Hilton Village, a 96,985 square foot specialty center in Scottsdale, Arizona. The total
purchase price of $13.5 million was funded by cash, borrowings under the Company's line of credit and the assumption of a mortgage note payable. The Center was previously accounted for under
the equity method as an investment in unconsolidated joint ventures.
On
December 17, 2007, the Company purchased a portfolio of ground leasehold interest and/or fee interests in 39 freestanding Mervyn's stores located in the Southwest United
States. The purchase price of $400.2 million was funded by cash and borrowings under the Company's line of credit.
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." Included in the redemption consideration was the
assumption of the remaining 16.32% noncontrolling 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. This exchange is
referred to herein as the "Rochester Redemption."
42
Table of Contents
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.
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. This transaction 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 proceeds were used to pay down the Company's line of credit.
In
June 2009, the Company recorded an impairment charge of $1.0 million, related to the anticipated loss on the sale of Village Center, a 170,801 square foot urban village
property, in July 2009. The Company subsequently sold the property on July 14, 2009 for $11.9 million in total proceeds, resulting in a gain of $0.1 million related to a change in
estimate in transaction costs. The Company used the proceeds from the sale to pay down the term loan and for general corporate purposes.
On
July 30, 2009, the Company sold a 49% ownership interest in Queens Center to a third party for approximately $152.7 million, resulting in a gain on sale of assets of
$154.2 million. The Company used the proceeds from the sale of the ownership interest in the property to pay down the Company's term loan and for general corporate purposes. As of the date of
the sale, the Company has accounted for the operations of Queens Center under the equity method of accounting.
On
September 3, 2009, the Company formed a joint venture with a third party whereby the Company sold a 75% interest in FlatIron Crossing. As part of this transaction, the Company
issued three warrants for an aggregate of 1,250,000 shares of common stock of the Company (See Note 15Stockholders' Equity in the Notes to Company's Consolidated Financial
Statements.) The Company received $123.8 million in cash proceeds for the overall transaction, of which $8.1 million was attributed to the warrants. The proceeds attributable to the
interest sold exceeded the Company's carrying value in the interest sold by $28.7 million. However, due to certain contractual rights afforded to the buyer of the interest in FlatIron Crossing,
the Company has only recognized a gain on sale of $2.5 million. The Company used the proceeds from the sale of the ownership interest to pay down the term loan and for general corporate
purposes. As of the date of the sale, the Company has accounted for the operations of FlatIron Crossing under the equity method of accounting.
Queens
Center and FlatIron Crossing are referred to herein as the "Joint Venture Centers."
43
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On
September 30, 2009, the Company formed a joint venture with a third party, whereby the third party acquired a 49.9% interest in Freehold Raceway Mall and Chandler Fashion
Center. The Company received approximately $174.6 million in cash proceeds for the overall transaction. The Company used the proceeds from this transaction to pay down the Company's line of
credit and for general corporate purposes. As part of this transaction, the Company issued a warrant for an aggregate of 935,358 shares of common stock of the Company. (See
Note 15Stockholders' Equity in the Company's Notes to Consolidated Financial Statements). The transaction has been accounted for as a profit-sharing arrangement, and accordingly
the assets, liabilities and operations of the properties remain on the books of the Company and a co-venture obligation has been established for the amount of $168.2 million
representing the net cash proceeds received from the third party less costs allocated to the warrant.
During
the fourth quarter of 2009, the Company sold five non-core community centers for $71.3 million, resulting in aggregate loss on sales of $16.9 million. The Company
used the proceeds from these sales to pay down the Company's line of credit and for general corporate purposes.
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
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 17Discontinued Operations in the
Company's Notes to the 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.
On
December 19, 2008, the Company sold a fee and/or ground leasehold interest in three former Mervyn's stores to Pacific Premier Retail Trust, one of its 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.
In
June 2009, the Company recorded an impairment charge of $26.0 million, as it relates to the fee and/or ground leasehold interests in five former Mervyn's stores due to the
anticipated loss on the sale of these properties in July 2009. The Company subsequently sold the properties in July 2009 for $52.7 million in total proceeds, resulting in an additional
$0.5 million loss related to transaction costs.
The Company used the proceeds from the sales to pay down the Company's term loan and for general corporate purposes.
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On
September 29, 2009, the Company sold a leasehold interest in a former Mervyn's store for $4.5 million, resulting in a gain on sale of $4.1 million. The Company
used the proceeds from the sale to pay down the Company's line of credit and for general corporate purposes.
The
Mervyn's stores acquired in 2007 and 2008 are referred to herein as the "Mervyn's Properties."
Northgate Mall, the Company's 712,771 square foot regional mall in Marin County, California, opened the first phase of its
redevelopment on November 12, 2009. New anchor Kohl's was joined by retailers H&M, BJ's Restaurant, Children's Place, Chipotle, Gymboree, Hot Topic, PacSun, Panera Bread, See's Candies,
Sunglass Hut, Tilly's and Vans. As of December 31, 2009, the Company incurred approximately $66.5 million of redevelopment costs for this Center and is estimating it will incur
approximately $12.5 million of additional costs in 2010.
Santa
Monica Place in Santa Monica, California, is scheduled to open in August 2010 with anchors Bloomingdale's and Nordstrom. The Company recently announced deals with Tony Burch, Ben
Bridge Jewelers and Charles David. As of December 31, 2009, the Company incurred approximately $163.2 million of redevelopment costs for this Center and is estimating it will incur
approximately $101.8 million of additional costs in 2010.
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.
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
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in
more detail in Note 2Summary of Significant Accounting Policies in the Company's Notes to the Consolidated Financial Statements. However, the following policies are deemed to be
critical.
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, 57% 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.
The Company capitalizes costs incurred in redevelopment and development of 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:
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|
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Buildings and improvements
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5-40 years
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Tenant improvements
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5-7 years
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Equipment and furnishings
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5-7 years
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The Company first determines the value of 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 property 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
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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.
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.
The
Company reviews its investments in unconsolidated joint ventures for a series of operating losses and other factors that may indicate that a decrease in the value of its investments
has occurred which is other-than-temporary. The investment in each unconsolidated joint venture is evaluated periodically, and as deemed necessary, for recoverability and
valuation declines that are other than temporary.
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.
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
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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 a straight-line basis over the individual remaining lease years.
The ranges of the terms of the agreements are as follows:
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Deferred lease costs
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1-15 years
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Deferred financing costs
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1-15 years
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In-place lease values
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Remaining lease term plus an estimate for renewal
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Leasing commissions and legal costs
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5-10 years
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Results of Operations
Many of the variations in the results of operations, discussed below, occurred due to the transactions described above including the
2008 Acquisition Property, the Joint Venture Centers, the Mervyn's Properties and the Redevelopment Centers. For the comparison of the year ended December 31, 2009 to the year ended
December 31, 2008, the "Same Centers" include all Consolidated Centers, excluding the 2008 Acquisition Property, the Mervyn's Properties, the Joint Venture Centers and the Redevelopment Centers
as defined below. For the comparison of the year ended December 31, 2008 to the year ended December 31, 2007, the "Same Centers" include all consolidated Centers, excluding the 2008
Acquisition Property, the Mervyn's Properties and the Redevelopment Centers.
For
the comparison of the year ended December 31, 2009 to the year ended December 31, 2008, the "Redevelopment Centers" include The Oaks, Northgate Mall, Santa Monica Place
and Shoppingtown Mall. For the comparison of the year ended December 31, 2008 to the year ended December 31, 2007, the "Redevelopment Centers" include The Oaks, Northgate Mall, Santa
Monica Place, Shoppingtown Mall, Westside Pavilion, The Marketplace at Flagstaff, SanTan Village Regional Center and Promenade at Casa Grande.
The
U.S. economy, the real estate industry as a whole, and the local markets in which the Centers are located have in recent years experienced adverse economic conditions, resulting in
an economic recession as well as disruptions in the capital and credit markets. These difficult economic conditions have adversely impacted consumer spending levels and the operating results of the
Company's tenants. Regional Mall sales per square foot for 2009 declined by approximately 8% from 2008 to a level of $407 per square foot, continuing the downward trend that began in 2007. Regional
Mall portfolio occupancy also has declined since 2007, with occupancy at December 31, 2009 at 91.3% compared to 92.3% at December 31, 2008. The Company's ability to lease space and
negotiate rents at advantageous rates has been, and may continue to be, adversely affected in this type of economic environment, and more tenants may seek rent relief. The spread between rents on
executed leases and expiring leases remains positive but decreased in 2009 compared to 2008. While the Company cannot predict how long these adverse conditions will continue, a further continuation
could harm the Company's business, results of operations and financial condition.
Comparison of Years Ended December 31, 2009 and 2008
Minimum and percentage rents (collectively referred to as "rental revenue") decreased by $56.7 million, or 10.4%, from 2008 to
2009. The decrease in rental revenue is attributed to a decrease of $32.1 million from the Joint Venture Centers, $26.9 million from the Mervyn's Properties and $7.4 million from
the Same Centers which is offset in part by an increase of $8.9 million from the Redevelopment Centers and $0.8 million from the 2008 Acquisition Property. The decrease in rental
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revenue
from the Mervyn's Properties is due to the rejection of 22 leases by Mervyn's under the bankruptcy laws in 2008, offset in part by the assumption of 23 of the Mervyn's leases by Kohls and
Forever 21 as well as the sale of six of the Mervyn's stores in 2009. The Company is currently seeking replacement tenants for the remainder of the vacant Mervyn's spaces. If these spaces are not
leased, this trend will continue throughout 2010. The decrease in Same Centers rental revenue is primarily attributed to a decrease in occupancy, a decrease in amortization of above and below market
leases and a decrease in percentage rents due to a decrease in retail sales.
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 $22.5 million in 2008 to $9.6 million in 2009. The amortization of straight-lined rents increased from $4.5 million in 2008 to
$6.5 million in 2009. Lease termination income increased from $9.6 million in 2008 to $16.2 million in 2009. The decrease in the amortization of above and below market leases is
primarily due to the early termination of Mervyn's leases in 2008 (See "Management's Overview and SummaryMervyn's.").
Tenant
recoveries decreased $18.1 million, or 6.9%, from 2008 to 2009. The decrease in tenant recoveries is attributed to a decrease of $12.7 million from the Joint Venture
Centers, $4.3 million from the Same Centers and $4.0 million from the Mervyn's Properties offset in part by an increase of $2.7 million from the Redevelopment Centers and
$0.2 million from the 2008 Acquisition Property. The decrease in Same Centers is due to a decrease in recoverable operating expenses, utilities and property taxes.
Shopping center and operating expenses decreased $23.4 million, or 8.3%, from 2008 to 2009. The decrease in shopping center and
operating expenses is attributed to a decrease of $15.1 million from the Joint Venture Centers and $10.1 million from the Same Centers offset in part by an increase of
$1.5 million from the Redevelopment Centers and $0.3 million from the 2008 Acquisition Property. The decrease in Same Centers is due to a decrease in recoverable operating expenses,
utilities and property taxes.
Management Companies' operating expenses increased $2.2 million from 2008 to 2009 due to severance costs paid in connection with
the implementation of the Company's workforce reduction plan in 2009.
REIT general and administrative expenses increased by $9.4 million from 2008 to 2009. The increase is primarily due to
$7.3 million in transaction and other related costs relating to the Chandler Fashion Center and Freehold Raceway Mall transaction (See "Management Overview and SummaryAcquisitions
and Dispositions") and $1.5 million in other compensation costs incurred in 2009.
Depreciation and amortization decreased $7.9 million from 2008 to 2009. The decrease in depreciation and amortization is
primarily attributed to a decrease of $11.4 million from the Mervyn's Properties and $8.5 million from the Joint Venture Centers offset in part by an increase of $4.6 million from
the Same Centers, $2.9 million from the Redevelopment Centers and $0.3 million from the 2008 Acquisition Property. Included in the decrease of depreciation and amortization of Mervyn's
Properties is the write-off of intangible assets as a result of the
early termination of Mervyn's leases in 2008 (See "Management's Overview and SummaryMervyn's.")
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Interest expense decreased $28.0 million from 2008 to 2009. The decrease in interest expense was primarily attributed to a
decrease of $12.1 million from the Senior Notes, $10.9 million from the Joint Venture Centers, $10.8 million from borrowings under the Company's line of credit and
$9.0 million from the term loan offset in part by an increase of $8.5 million from the Redevelopment Centers, $5.7 million from the Same Centers and $0.6 million from the
2008 Acquisition Property.
The
decrease in interest expense on the Senior Notes is due to a reduction of weighted average outstanding principal balance from 2008 to 2009. The decrease in interest expense on the
Company's line of credit was due to a decrease in average outstanding borrowings during 2009, due in part, to the proceeds from sale of the 2009 joint venture transactions (See "Management's Overview
and SummaryAcquisitions and Dispositions") and the equity offering in 2009. (See "Liquidity and Capital Resources".)
The
above interest expense items are net of capitalized interest, which decreased from $33.3 million in 2008 to $21.3 million in 2009 due to a decrease in redevelopment
activity in 2009 and a reduction in the cost of borrowing.
Gain on early extinguishment of debt decreased from $84.1 million in 2008 to $29.2 million in 2009. The reduction in gain
reflects a decrease in the amount of Senior Notes repurchased in 2009 compared to 2008. (See "Liquidity and Capital Resources").
Equity in income of unconsolidated joint ventures decreased $25.7 million from 2008 to 2009. The decrease in equity in income
from joint ventures is primarily attributed to $9.1 million of termination fee income received in 2008 and $7.6 million related to a write-down of assets at certain joint
venture Centers in 2009.
The gain (loss) on sale or write-down of assets increased from a loss of $30.9 million in 2008 to a gain of
$161.9 million in 2009. The gain is primarily attributed to the gain of $156.7 million related to the sale of ownership interests in the Joint Venture Centers (See "Management's Overview
and SummaryAcquisitions and Dispositions"), the impairment charge of $19.2 million in 2008 to reduce the carrying value of land held for development and a $5.3 million
adjustment in 2008 to reduce the carrying value of Mervyn's stores that the Company had previously classified as held for sale (See "Management's Overview and SummaryMervyn's").
The Company recorded a loss from discontinued operations of $35.6 million in 2009 compared to income of $108.4 million in
2008. The reduction in income is primarily attributed to the $99.1 million gain from the Rochester Redemption in 2008 (See "Management's Overview and SummaryAcquisitions and
Dispositions") and the loss on sale or write-down of assets of $40.2 million in 2009.
Net income attributable to noncontrolling interests decreased from $29.0 million in 2008 to $18.5 million in 2009. The
decrease in net income from noncontrolling interests is attributable to $16.3 million from the Rochester Redemption in 2008 and an increase in income from continuing operations.
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Primarily as a result of the factors mentioned above, FFOdiluted decreased 25.4% from $461.5 million in 2008 to
$344.1 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."
Cash provided by operations decreased from $251.9 million in 2008 to $120.9 million in 2009. The decrease was primarily
due to changes in assets and liabilities in 2008 compared to 2009, an increase in accounts payable and other accrued liabilities and the results at the Centers as discussed above.
Cash from investing activities increased from a deficit of $559.0 million in 2008 to a surplus of $302.4 million in 2009.
The increase in cash provided by investing activities was primarily due to an increase in proceeds from the sale of assets of $370.3 million, a decrease in capital expenditures of
$337.8 million, a decrease in contributions to unconsolidated joint ventures of $110.7 million and an increase in distributions from unconsolidated joint ventures of
$27.4 million.
The
increase in proceeds from the sale of assets is due to the sale of the ownership interests in the Joint Venture Centers. The decrease in capital expenditures is primarily due to the
purchase of a ground leasehold and fee simple interest in two Mervyn's stores in 2008 and the decrease in development activity in 2009. 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. See "Management's Overview and SummaryAcquisitions and
Dispositions" for a discussion of the acquisition of The Shops at North Bridge, the Joint Venture Centers and Mervyn's.
Cash flows from financing activities decreased from a surplus of $288.3 million in 2008 to a deficit of $396.5 million in
2009. The decrease in cash from financing activities was primarily attributed to decreases in cash provided by mortgages, bank and other notes payable of $1.3 billion and cash payments on
mortgages, bank and other notes payable of $177.8 million offset in part by the net proceeds from the common stock offering in 2009 of $343.5 million, the decrease in dividends and
distributions (See "Liquidity and Capital Resources") of $179.0 million and the contribution from a co-venture partner of $168.2 million. (See "Management's Overview and
SummaryAcquisitions and Dispositions.")
Comparison of Years Ended December 31, 2008 and 2007
Rental revenue increased by $55.6 million, or 11.3%, from 2007 to 2008. The increase in rental revenue is attributed to an
increase of $37.4 million from the Mervyn's Properties, $13.9 million from the Redevelopment Centers, $3.0 million from the Same Centers and $1.3 million from the 2008
Acquisition Property. The increase in the revenues from the Same Centers is primarily due to rent escalations and lease renewals at higher rents, which was offset by decreases in lease termination
income, amortization of straight-line rents and amortization of above and below market leases. The increase in the revenues from the Same Centers was also offset by a decrease of
$6.3 million in percentage rents due to a decrease in retail sales.
The
amortization of above and below market leases increased from $10.3 million in 2007 to $22.5 million in 2008. The amortization of straight-lined rents decreased from
$6.7 million in 2007 to
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$4.5 million
in 2008. Lease termination income decreased from $9.7 million in 2007 to $9.6 million in 2008. The increase in above and below market leases is primarily due to the
early termination of Mervyn's leases in 2008 (See "Management's Overview and SummaryMervyn's").
Tenant
recoveries increased $20.2 million, or 8.4%, from 2007 to 2008. The increase in tenant recoveries is attributed to an increase of $9.7 million from the Same Centers,
$5.5 million from the Mervyn's Properties, $4.7 from the Redevelopment Centers and $0.3 million from the 2008 Acquisition Property.
Management
Companies' revenues increased by $1.0 million from 2007 to 2008, primarily due to increased management fees received from the joint ventures, additional third party
management contracts and increased development fees from joint ventures.
Shopping center and operating expenses increased $28.4 million, or 11.2%, from 2007 to 2008. The increase in shopping center and
operating expenses is attributed to an increase of $13.1 million from the Same Centers, $10.0 million from the Mervyn's Properties, $5.0 million from the Redevelopment Centers and
$0.3 million from the 2008 Acquisition Property. The increase in Same Centers is primarily due to an increase in recoverable utility expenses and property taxes and a $2.0 million
increase in bad debt expense.
Management Companies' operating expenses increased $3.3 million from 2007 to 2008, in part as a result of the additional costs
of managing the joint ventures and third party managed properties.
REIT general and administrative expenses decreased by $0.1 million from 2007 to 2008. The decrease is primarily due to a
decrease in share and unit-based compensation expense in 2008.
Depreciation and amortization increased $60.8 million from 2007 to 2008. The increase in depreciation and amortization is
primarily attributed to an increase of $37.7 million from the Mervyn's Properties, $12.0 million from the Redevelopment Centers, $6.8 million from the Same Centers and
$0.6 million from the 2008 Acquisition Property. Included in the increase of depreciation and amortization of Mervyn's Properties is the write-off of $32.9 million of
intangible assets as a result of the early termination of Mervyn's leases. (See "Management's Overview and SummaryMervyn's".)
Interest expense increased $34.2 million from 2007 to 2008. The increase in interest expense was primarily attributed to an
increase of $17.9 million from borrowings under the Company's line of credit, $7.8 million from the Senior Notes, $6.3 million from the Redevelopment Centers, and
$5.5 million from the Same Centers. The increase in interest expense was offset in part by a decrease of $3.8 million from term loans.
The
increase in interest expense on the Company's line of credit was due to an increase in average outstanding borrowings during 2008, in part, because of the purchase of The Shops at
North Bridge, the Mervyn's Properties and the 2008 Acquisition Property and the repurchase and retirement of Senior Notes in 2008, which is offset in part by lower LIBOR rates and spreads. The
increase in interest expense on the Senior Notes is due to a full year of interest expense in 2008 compared to
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2007.
The decrease in interest expense on term loans was due to the repayment of the $250 million loan in 2007.
The
above interest expense items are net of capitalized interest, which increased from $32.0 million in 2007 to $33.3 million in 2008 due to an increase in redevelopment
activity in 2008.
The Company recorded a gain of $84.1 million on the early extinguishment of $222.8 million of the Senior Notes in 2008.
In 2007, the Company recorded a $0.9 million loss from the early extinguishment of the $250 million term loan (See "Liquidity and Capital Resources").
The equity in income of unconsolidated joint ventures increased $12.4 million from 2007 to 2008. The increase in equity in
income of unconsolidated joint ventures is due in part to commission income of $6.5 million earned in 2008 from a joint venture, $3.6 million relating to the acquisition of The Shops at
North Bridge in 2008, and $2.0 million relating to a loss on the sale of assets in the SDG Macerich Properties, L.P. joint venture in 2007.
The Company recorded a loss on sale or write down of assets of $30.9 million in 2008 relating to an $8.7 million
write-off of development costs on projects the Company has determined not to pursue, a $19.2 million impairment charge to reduce the carrying value of land held for development and
a $5.3 million adjustment to reduce the carrying value of Mervyn's stores that the Company had previously classified as held for sale (See "Management's Overview and
SummaryMervyn's"). The gain on sale or write-down of assets in 2007 of $12.1 million is primarily related to gains on sales of land.
Income from discontinued operations increased $82.8 million from 2007 to 2008. The increase is primarily due to the
$99.1 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.
Net income attributable to noncontrolling interests decreased from $29.8 million in 2007 to $29.0 million in 2008. The
decrease in income from noncontrolling interests is attributable to $16.3 million from the Rochester Redemption and $0.6 million related to the consolidated joint ventures offset in part
by an increase of $16.0 million from the Operating Partnership. The
increase in net income attributable to noncontrolling interests in the Operating Partnership is due to an increase in net income from $106.1 million in 2007 to $195.0 million in 2008
offset in part by a decrease in the weighted average interest of the Operating Partnership not owned by the Company from 15.0% in 2007 compared to 14.4% in 2008. The decrease in the weighted average
interest in the Operating Partnership not owned by the Company is primarily attributed to the conversion of 3,067,131 preferred shares into common shares in 2008 (See
Note 14Cumulative Convertible Redeemable Preferred Stock in the Company's Notes to the Consolidated Financial Statements) and the repurchase of 807,000 shares in 2007 (See
Note 15Stockholders EquityStock Repurchase Program in the Company's Notes to the Consolidated Financial Statements).
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Primarily as a result of the factors mentioned above, FFOdiluted increased 16.4% from $396.6 million in 2007 to
$461.5 million in 2008. 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."
Cash flow from operations decreased from $326.1 million in 2007 to $251.9 million in 2008. The decrease was primarily due
to changes in assets and liabilities in 2007 compared to 2008, an increase in distributions of income from unconsolidated joint ventures and the results at the Centers as discussed above.
Cash used in investing activities decreased from $865.3 million in 2007 to $559.0 million in 2008. The decrease in cash
used in investing activities was primarily due to a decrease
in capital expenditures of $507.7 million and acquisition deposits of $51.9 million offset by a decrease in distributions from unconsolidated joint ventures of $132.5 million and
an increase in contributions to unconsolidated joint ventures. The decrease in capital expenditures is primarily due to the purchase of the Mervyn's portfolio for $400.2 million in 2007. The
decrease in acquisition deposits and the increase 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 (See "Management's Overview and SummaryAcquisitions and Dispositions".) The decrease in distributions from unconsolidated joint ventures is due to the
receipt of the Company's pro rata share of loan proceeds from the refinance transactions at various unconsolidated joint ventures in 2007.
Cash flow provided by financing activities decreased from $355.1 million in 2007 to $288.3 million in 2008. The decrease
in cash provided by financing activities was primarily attributed to the issuance of $950 million of Senior Notes in 2007, the repurchase of $222.8 million of Senior Notes in 2008 (See
"Liquidity and Capital Resources") and the purchase of the Capped Calls in connection with the issuance of the Senior Notes in 2007.
Liquidity and Capital Resources
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 will be provided if the Company decides to continue to pay a portion of
its dividends in stock throughout 2010. For example, the Company announced that payment of a portion of its next quarterly dividend will be in stock, which is payable on March 22, 2010. The
form, timing and or amount of future dividends will be at the discretion of the Company's Board of Directors. The completion of the Company's stock offering in October 2009, which raised net proceeds
of approximately $383.4 million, as well as the closing of three joint venture transactions during the third quarter of 2009, which raised proceeds of approximately $434.0 million,
provided the Company with additional liquidity in 2009. (See Item 1. BusinessRecent Developments"Acquisitions and Dispositions" and "Financing Activity.") Furthermore,
by reducing the Company's quarterly dividend to $0.60 per share and paying 90% of that dividend in equity in 2009, the Company reduced the cash amount of its dividends and distributions by
$212.5 million and funded these dividends and distributions from cash flow provided by operations.
54
Table of Contents
The
following tables summarize capital expenditures and lease acquisition costs incurred at the Centers for the years ended December 31:
|
|
|
|
|
|
|
|
|
|
|
(Dollars in thousands)
|
|
2009
|
|
2008
|
|
2007
|
|
Consolidated Centers:
|
|
|
|
|
|
|
|
|
|
|
Acquisitions of property and equipment
|
|
$
|
11,001
|
|
$
|
87,516
|
|
$
|
387,899
|
|
Development, redevelopment and expansion of Centers
|
|
|
216,615
|
|
|
446,119
|
|
|
545,926
|
|
Renovations of Centers
|
|
|
9,577
|
|
|
8,541
|
|
|
31,065
|
|
Tenant allowances
|
|
|
10,830
|
|
|
14,651
|
|
|
27,959
|
|
Deferred leasing charges
|
|
|
19,960
|
|
|
22,263
|
|
|
21,611
|
|
|
|
|
|
|
|
|
|
|
|
$
|
267,983
|
|
$
|
579,090
|
|
$
|
1,014,460
|
|
|
|
|
|
|
|
|
|
Unconsolidated Joint Venture Centers (at Company's pro rata share):
|
|
|
|
|
|
|
|
Acquisitions of property and equipment
|
|
$
|
5,443
|
|
$
|
294,416
|
|
$
|
24,828
|
|
Development, redevelopment and expansion of Centers
|
|
|
57,019
|
|
|
60,811
|
|
|
33,492
|
|
Renovations of Centers
|
|
|
4,165
|
|
|
3,080
|
|
|
10,495
|
|
Tenant allowances
|
|
|
5,092
|
|
|
13,759
|
|
|
15,066
|
|
Deferred leasing charges
|
|
|
3,852
|
|
|
4,997
|
|
|
4,181
|
|
|
|
|
|
|
|
|
|
|
|
$
|
75,571
|
|
$
|
377,063
|
|
$
|
88,062
|
|
|
|
|
|
|
|
|
|
Management
expects levels to be incurred in future years for tenant allowances and deferred leasing charges to be comparable or less than 2009 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 $150 million and
$200 million in 2010 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 non-core asset sales in 2009 and the
recent sale of ownership interests in Queens Center, FlatIron Crossing, Freehold Raceway Mall and Chandler Fashion Center, to joint venture partners.
Recent
turmoil in the capital and credit markets, however, has significantly limited access to debt and equity financing for many companies. As demonstrated by the Company's recent
activity, including its October 2009 equity offering, the Company was able to access capital throughout 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 current state
of 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 would cause it to be subject to interest rate fluctuations in the future. (See "Risk FactorsWe
depend on external financings for our growth and ongoing debt service requirements" included in Part I, Item 1A of this Annual Report on Form 10-K).
55
Table of Contents
The
Company's total outstanding loan indebtedness at December 31, 2009 was $6.8 billion (including $1.3 billion of unsecured debt and $2.3 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. Approximately
$247.2 million of the Company's indebtedness matures in 2010 (excluding loans with extensions and refinancing transactions that have recently closed). The Company expects that all 2010 debt
maturities will be refinanced, extended and/or paid off from the Company's line of credit.
On
March 16, 2007, the Company issued $950 million in Senior Notes that mature on March 15, 2012. The Senior Notes bear interest at 3.25%, payable semiannually, are
senior to unsecured debt of the Company and are guaranteed by the Operating Partnership. During the year ended December 31, 2009, the Company repurchased and retired $89.1 million of the
Senior Notes and as a result recorded a gain of $29.8 million on early extinguishment of debt. The repurchases were funded by additional borrowings on the Company's line of credit. The carrying
value of the Senior Notes at December 31, 2009 was $614.2 million. See Note 11Bank and Other Notes Payable in the Company's Notes to the Consolidated Financial
Statements.
The
Company has a $1.5 billion revolving line of credit that matures on April 25, 2010. The Company is in the process of exercising the available one-year extension option
under this facility that will extend the maturity date through April 25, 2011. The interest rate on the line of credit fluctuates between 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 6.08%
until maturity. In addition, the Company has another interest rate swap agreement that effectively fixed the interest rate on $255.0 million of the line of credit at 6.13% until
April 15, 2010. As of December 31, 2009, borrowings outstanding were $655.0 million at an average interest rate, of 6.10%. The Company has access to the remaining balance of its
$1.5 billion line of credit.
On
April 25, 2005, the Company obtained a five year, $450.0 million term loan bearing interest at LIBOR plus 1.50%. The term loan was repaid during the year ended
December 31, 2009 from the proceeds of the sales of interests in Queens Center and FlatIron Crossing (See "Management's Overview and SummaryAcquisitions and Dispositions,") and
through additional borrowings under the Company's line of credit.
On
October 27, 2009, the Company completed an offering of 12,000,000 newly issued shares of its common stock, as well as an additional 1,800,000 newly issued shares of common
stock in connection with the underwriters' exercise of its over-allotment option. The net proceeds of the offering, after giving effect to the issuance and sale of all 13,800,000 shares of
common stock at an initial price to the public of $29.00 per share, were approximately $383.4 million after deducting underwriting discounts, commissions and other transaction costs. The
Company used the net proceeds of the offering to pay down the line of credit.
At
December 31, 2009, the Company was in compliance with all applicable loan covenants.
At
December 31, 2009, the Company had cash and cash equivalents available of $93.3 million.
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 in or is not the primary beneficiary using the equity method
of accounting and those investments are reflected on the Consolidated Balance Sheets of the Company as "Investments in Unconsolidated Joint Ventures." A pro rata share of the mortgage debt on these
properties is shown in "Item 2. PropertiesMortgage Debt."
56
Table of Contents
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 under those joint ventures that could recourse to the Company at December 31, 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
|
|
|
8,795
|
|
|
6/1/2011
|
|
|
|
|
|
|
|
|
|
|
$
|
17,450
|
|
|
|
|
|
|
|
|
|
|
|
Additionally,
as of December 31, 2009, the Company is contingently liable for $26.4 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.
The following is a schedule of contractual obligations as of December 31, 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)
|
|
$
|
4,783,542
|
|
$
|
1,079,367
|
|
$
|
2,649,943
|
|
$
|
266,563
|
|
$
|
787,669
|
|
Operating lease obligations(1)
|
|
|
858,042
|
|
|
11,592
|
|
|
24,343
|
|
|
25,405
|
|
|
796,702
|
|
Purchase obligations(1)
|
|
|
40,159
|
|
|
40,159
|
|
|
|
|
|
|
|
|
|
|
Other long-term liabilities(2)
|
|
|
233,595
|
|
|
176,706
|
|
|
3,818
|
|
|
4,126
|
|
|
48,945
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
5,915,338
|
|
$
|
1,307,824
|
|
$
|
2,678,104
|
|
$
|
296,094
|
|
$
|
1,633,316
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
(1)
-
See
Note 19Commitments and Contingencies in the Company's Notes to the Consolidated Financial Statements.
-
(2)
-
Amount
includes $2,420 of unrecognized tax benefits. See Note 24Income Taxes in the Company's Notes to the Consolidated Financial
Statements.
57
Table of Contents
Funds From Operations
The Company uses FFO in addition to net income to report its operating and financial results and considers FFO and
FFOdiluted as supplemental measures for the real estate industry and a supplement to GAAP measures. NAREIT defines FFO as net income (loss) computed in accordance with GAAP, excluding
gains (or losses) from extraordinary items and sales of depreciated operating properties, plus real estate related depreciation and amortization and after adjustments for unconsolidated partnerships
and joint ventures. Adjustments for unconsolidated partnerships and joint ventures are calculated to reflect FFO on the same basis. The Company also adjusts FFO for the noncontrolling interest due to
redemption value on the Rochester Properties. (See Note 17Discontinued Operations in the Company's Notes to the Consolidated Financial Statements.)
FFO
and FFO on a fully-diluted basis are useful to investors in comparing operating and financial results between periods. This is especially true since FFO excludes real estate
depreciation and amortization as the Company believes real estate values fluctuate based on market conditions rather than depreciating in value ratably on a straight-line basis over time.
In addition, consistent with the key objective of FFO as a measure of operating performance, the adjustment of FFO for the noncontrolling interest in redemption value provides a more meaningful
measure of the Company's operating performance between periods without reference to the non-cash
charge related to the adjustment in noncontrolling interest due to redemption value. The Company believes that such a presentation also provides investors with a more meaningful measure of its
operating results in comparison to the operating results of other REITS. Further, 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. The Company also cautions that FFO, as presented, may not be comparable to similarly titled measures reported by other real estate investment trusts. The reconciliation of
FFO and FFOdiluted to net income available to common stockholders is provided below.
Management
compensates for the limitations of FFO by providing investors with financial statements prepared according to GAAP, along with this detailed discussion of FFO and a
reconciliation of FFO and FFO-diluted to net income available to common stockholders. Management believes that to further understand the Company's performance, FFO should be compared with
the Company's reported net income and considered in addition to cash flows in accordance with GAAP, as presented in the Company's Consolidated Financial Statements.
58
Table of Contents
The
following reconciles net income (loss) available to common stockholders to FFO and FFOdiluted (dollars and shares in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
2008
|
|
2007
|
|
2006
|
|
2005
|
|
Net income (loss)available to common stockholders
|
|
$
|
120,742
|
|
$
|
161,925
|
|
$
|
64,131
|
|
$
|
217,404
|
|
$
|
(93,614
|
)
|
Adjustments to reconcile net income to FFObasic:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noncontrolling interest in the Operating Partnership
|
|
|
17,517
|
|
|
27,230
|
|
|
11,238
|
|
|
40,827
|
|
|
(22,001
|
)
|
|
Gain on sale or write-down of consolidated assets(1)
|
|
|
(121,766
|
)
|
|
(68,714
|
)
|
|
(9,771
|
)
|
|
(241,732
|
)
|
|
(1,530
|
)
|
|
Adjustment for redemption value of redeemable noncontrolling interests
|
|
|
|
|
|
|
|
|
2,046
|
|
|
17,062
|
|
|
183,620
|
|
|
Add: gain on undepreciated assetsconsolidated assets(1)
|
|
|
4,762
|
|
|
798
|
|
|
8,047
|
|
|
8,827
|
|
|
1,068
|
|
|
Add: noncontrolling interest share of gain on sale of consolidated joint ventures(1)
|
|
|
310
|
|
|
185
|
|
|
760
|
|
|
36,831
|
|
|
239
|
|
|
Less: write-down of consolidated assets(1)
|
|
|
(28,434
|
)
|
|
(27,445
|
)
|
|
|
|
|
|
|
|
|
|
|
Loss (gain) on sale of assets from unconsolidated joint ventures (pro rata)(2)
|
|
|
7,642
|
|
|
(3,432
|
)
|
|
(400
|
)
|
|
(725
|
)
|
|
(1,954
|
)
|
|
Add: (loss) gain on sale of undepreciated assetsfrom unconsolidated joint ventures (pro rata)(2)
|
|
|
(152
|
)
|
|
3,039
|
|
|
2,793
|
|
|
725
|
|
|
2,092
|
|
|
Add noncontrolling interest on sale of undepreciated consolidated joint ventures
|
|
|
|
|
|
487
|
|
|
|
|
|
|
|
|
|
|
|
Less write down of unconsolidated joint ventures (pro rata)(2)
|
|
|
(7,501
|
)
|
|
(94
|
)
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization on consolidated assets
|
|
|
266,164
|
|
|
279,339
|
|
|
231,860
|
|
|
232,219
|
|
|
205,971
|
|
|
Less: depreciation and amortization attributable to noncontrolling interest on consolidated joint ventures
|
|
|
(7,871
|
)
|
|
(3,395
|
)
|
|
(4,769
|
)
|
|
(5,422
|
)
|
|
(5,873
|
)
|
|
Depreciation and amortization on unconsolidated joint ventures (pro rata)(2)
|
|
|
106,435
|
|
|
96,441
|
|
|
88,807
|
|
|
82,745
|
|
|
73,247
|
|
|
Less: depreciation on personal property
|
|
|
(13,740
|
)
|
|
(9,952
|
)
|
|
(8,244
|
)
|
|
(15,722
|
)
|
|
(14,724
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
FFObasic(3)
|
|
|
344,108
|
|
|
456,412
|
|
|
386,498
|
|
|
373,039
|
|
|
326,541
|
|
Additional adjustments to arrive at FFOdiluted:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impact of convertible preferred stock
|
|
|
|
|
|
4,124
|
|
|
10,058
|
|
|
10,083
|
|
|
9,649
|
|
|
Impact of non-participating convertible preferred units
|
|
|
|
|
|
979
|
|
|
|
|
|
|
|
|
641
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FFOdiluted
|
|
$
|
344,108
|
|
$
|
461,515
|
|
$
|
396,556
|
|
$
|
383,122
|
|
$
|
336,831
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of FFO shares outstanding for:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FFObasic(3)
|
|
|
93,010
|
|
|
86,794
|
|
|
84,467
|
|
|
84,138
|
|
|
73,250
|
|
Adjustments for the impact of dilutive securities in computing FFOdiluted:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Convertible preferred stock
|
|
|
|
|
|
1,447
|
|
|
3,512
|
|
|
3,627
|
|
|
3,627
|
|
|
Non-participating convertible preferred units
|
|
|
|
|
|
205
|
|
|
|
|
|
|
|
|
197
|
|
|
Share and unit-based compensation plans
|
|
|
|
|
|
|
|
|
293
|
|
|
293
|
|
|
323
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FFOdiluted(4)
|
|
|
93,010
|
|
|
88,446
|
|
|
88,272
|
|
|
88,058
|
|
|
77,397
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
(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 do 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 December 31, 2009, 2008, 2007, 2006 and 2005, 12.0 million,
11.6 million, 12.5 million, 13.2 million and 13.5 million of aggregate 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. On February 25,
1998, the Company sold $100 million of its Series A Preferred Stock. The holder of the Series A Preferred Stock converted 0.6 million, 0.7 million,
1.3 million and 1.0 million shares to common shares on October 18, 2007, May 6, 2008, May 8, 2008 and September 17, 2008, respectively. The preferred stock
was convertible on a one-for-one basis for common stock. The then outstanding preferred shares were assumed converted for purposes of 2008, 2007, 2006 and
2005 FFOdiluted as they were dilutive to that calculation.
59
Table of Contents
ITEM 7A. 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 December 31, 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 December 31,
|
|
|
|
|
|
|
|
|
|
2010
|
|
2011
|
|
2012
|
|
2013
|
|
2014
|
|
Thereafter
|
|
Total
|
|
FV
|
|
CONSOLIDATED CENTERS:
|
|
Long term debt:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed rate(1)
|
|
$
|
855,277
|
|
$
|
976,400
|
|
$
|
868,099
|
|
$
|
242,209
|
|
$
|
10,025
|
|
$
|
739,093
|
|
$
|
3,691,103
|
|
$
|
3,348,649
|
|
|
Average interest rate
|
|
|
6.40
|
%
|
|
6.38
|
%
|
|
5.49
|
%
|
|
5.57
|
%
|
|
8.33
|
%
|
|
6.57
|
%
|
|
6.27
|
%
|
|
|
|
|
Floating rate
|
|
|
166,617
|
|
|
581,070
|
|
|
92,844
|
|
|
|
|
|
|
|
|
|
|
|
840,531
|
|
|
809,558
|
|
|
Average interest rate
|
|
|
1.66
|
%
|
|
2.70
|
%
|
|
6.36
|
%
|
|
|
|
|
|
|
|
|
|
|
2.96
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total debtConsolidated Centers
|
|
$
|
1,021,894
|
|
$
|
1,557,470
|
|
$
|
960,943
|
|
$
|
242,209
|
|
$
|
10,025
|
|
$
|
739,093
|
|
$
|
4,531,634
|
|
$
|
4,158,207
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
UNCONSOLIDATED JOINT VENTURE CENTERS:
|
|
Long term debt (at Company's pro rata share):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed rate
|
|
$
|
131,374
|
|
$
|
69,068
|
|
$
|
181,323
|
|
$
|
524,105
|
|
$
|
211,657
|
|
$
|
870,076
|
|
$
|
1,987,603
|
|
$
|
1,939,839
|
|
|
Average interest rate
|
|
|
6.79
|
%
|
|
5.82
|
%
|
|
6.98
|
%
|
|
6.13
|
%
|
|
5.67
|
%
|
|
6.09
|
%
|
|
6.18
|
%
|
|
|
|
|
Floating rate
|
|
|
107,922
|
|
|
163,213
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
271,135
|
|
|
267,100
|
|
|
Average interest rate
|
|
|
1.18
|
%
|
|
2.71
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2.10
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total debtUnconsolidated Joint Venture Centers
|
|
$
|
239,296
|
|
$
|
232,281
|
|
$
|
181,323
|
|
$
|
524,105
|
|
$
|
211,657
|
|
$
|
870,076
|
|
$
|
2,258,738
|
|
$
|
2,206,939
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
(1)
-
Fixed
rate debt includes the $655.0 million line of credit and $195 million of floating rate mortgages payable. 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 December 31, 2009 and 2008 was $3.7 billion and $4.3 billion,
respectively. The average interest rate on fixed rate debt at December 31, 2009 and 2008 was 6.27% and 6.00%, respectively. The consolidated Centers' total floating rate debt at
December 31, 2009 and 2008 was $840.5 million and $1.6 billion, respectively. The average interest rate on floating rate debt at December 31, 2009 and 2008 was 2.96% and
3.32%, respectively.
The
Company's pro rata share of the Joint Venture Centers' fixed rate debt at December 31, 2009 and 2008 was $2.0 billion and $1.8 billion, respectively. The average
interest rate on fixed rate debt at December 31, 2009 and 2008 was 6.18% and 5.83%, respectively. The Company's pro rata share of the Joint Venture Centers' floating rate debt at
December 31, 2009 and 2008 was $271.1 million and $181.5 million, respectively. The average interest rate on the floating rate debt at December 31, 2009 and 2008 was 2.10%
and 2.36%, respectively.
The
Company uses derivative financial instruments in the normal course of business to manage or hedge interest rate risk and records all derivatives on the balance sheet at fair value
(See Note 5Derivative Instruments and Hedging Activities in the Company's Notes to the Consolidated Financial Statements).
60
Table of Contents
The
following are outstanding derivatives at December 31, 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
|
|
|
30,000
|
|
|
Cap
|
|
|
3.00
|
%
|
|
6/9/2011
|
|
|
100
|
%
|
|
31
|
|
Los Cerritos
|
|
|
200,000
|
|
|
Cap
|
|
|
8.55
|
%
|
|
7/1/2010
|
|
|
51
|
%
|
|
|
|
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
|
%
|
|
|
|
Paradise Valley Mall
|
|
|
85,000
|
|
|
Cap
|
|
|
5.00
|
%
|
|
9/12/2011
|
|
|
100
|
%
|
|
49
|
|
Superstition Springs Center
|
|
|
67,500
|
|
|
Cap
|
|
|
8.63
|
%
|
|
9/9/2010
|
|
|
33.3
|
%
|
|
1
|
|
The Oaks
|
|
|
150,000
|
|
|
Cap
|
|
|
6.25
|
%
|
|
7/1/2010
|
|
|
100
|
%
|
|
|
|
The Oaks
|
|
|
88,297
|
|
|
Swap
|
|
|
4.80
|
%
|
|
4/15/2010
|
|
|
100
|
%
|
|
(1,150
|
)
|
The Operating Partnership
|
|
|
255,000
|
|
|
Swap
|
|
|
4.80
|
%
|
|
4/15/2010
|
|
|
100
|
%
|
|
(3,322
|
)
|
The Operating Partnership
|
|
|
400,000
|
|
|
Swap
|
|
|
5.08
|
%
|
|
4/25/2011
|
|
|
100
|
%
|
|
(22,343
|
)
|
Twenty Ninth Street
|
|
|
106,703
|
|
|
Swap
|
|
|
4.80
|
%
|
|
4/15/2010
|
|
|
100
|
%
|
|
(1,391
|
)
|
Westside Pavilion
|
|
|
175,000
|
|
|
Cap
|
|
|
5.50
|
%
|
|
6/1/2010
|
|
|
100
|
%
|
|
|
|
-
(1)
-
Fair
value at the Company's ownership percentage.
Interest
rate cap agreements ("Cap") offer protection against floating rates on the notional amount from exceeding the rates noted in the above schedule, and interest rate swap
agreements ("Swap") effectively replace a floating rate on the notional amount with a fixed rate as noted above.
In
addition, the Company has assessed the market risk for its floating rate debt and believes that a 1% increase in interest rates would decrease future earnings and cash flows by
approximately $11.1 million per year based on $1.1 billion outstanding of floating rate debt at December 31, 2009.
The
fair value of the Company's long-term debt is estimated based on a present value model utilizing interest rates that reflect the risks associated with
long-term debt of similar risk and duration. In addition, the method of computing fair value for mortgage notes payable included a credit value adjustment based on the estimated value of
the property that serves as collateral for the underlying debt (See Note 10Mortgage Notes Payable in the Company's Notes to the Consolidated Financial Statements).
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Refer to the Index to Financial Statements and Financial Statement Schedules for the required information appearing in Item 15.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
ITEM 9A. CONTROLS AND PROCEDURES
As required by Rule 13a-15(b) under the Securities and Exchange Act of 1934, as amended (the "Exchange Act"),
management carried out an evaluation, under the supervision and 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 Annual Report on
61
Table of Contents
Form 10-K.
Based on their evaluation as of December 31, 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 Exchange Act were effective to ensure that the information required to be disclosed by the
Company in the reports that it files or submits under the Exchange Act is (a) recorded, processed, summarized, and reported within the time periods specified in the SEC's rules and forms and
(b) 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.
The Company's management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined
in Rule 13a-15(f) under the Exchange Act. The Company's management assessed the effectiveness of the Company's internal control over financial reporting as of December 31,
2009. In making this assessment, the Company's management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal ControlIntegrated
Framework. The Company's management concluded that, as of December 31, 2009, its internal control over financial reporting was effective based on this assessment.
Deloitte &
Touche LLP, the independent registered public accounting firm that audited the Company's consolidated financial statements included in this Annual Report on
Form 10-K, has issued an attestation report on the Company's internal control over financial reporting which follows below.
There were no changes in the Company's internal control over financial reporting during the quarter ended December 31, 2009 that
have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.
62
Table of Contents
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To
the Board of Directors and Stockholders of
The Macerich Company
Santa Monica, California
We
have audited the internal control over financial reporting of The Macerich Company and subsidiaries (the "Company") as of December 31, 2009, based on criteria established in
Internal ControlIntegrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. The Company's management is responsible for maintaining effective
internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management's Report on Internal Control
over Financial Reporting. Our responsibility is to express an opinion on the Company's internal control over financial reporting based on our audit.
We
conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control
over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and
performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
A
company's internal control over financial reporting is a process designed by, or under the supervision of, the company's principal executive and principal financial officers, or
persons performing similar functions, and effected by the company's board of directors, management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those
policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;
(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that
receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding
prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.
Because
of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material
misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to
future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
In
our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2009, based on the criteria established in
Internal ControlIntegrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.
We
have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated financial statements and financial statement
schedule as of and for the year ended December 31, 2009, of the Company and our report dated February 26, 2010, expressed an unqualified opinion on those financial statements and
financial statement schedule.
/s/
DELOITTE & TOUCHE LLP
Los
Angeles, California
February 26, 2010
63
Table of Contents
ITEM 9B. OTHER INFORMATION
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
There is hereby incorporated by reference the information which appears under the captions "Information Regarding Nominees and
Directors," "Executive Officers," "Section 16(a) Beneficial Ownership Reporting Compliance," "Audit Committee Matters" and "Codes of Ethics" in the Company's definitive proxy statement for its
2010 Annual Meeting of Stockholders that is responsive to the information required by this Item.
During
2009, there were no material changes to the procedures described in the Company's proxy statement relating to the 2009 Annual Meeting of Stockholders by which stockholders may
recommend nominees to the Company.
ITEM 11. EXECUTIVE COMPENSATION
There is hereby incorporated by reference the information which appears under the caption "Election of Directors" in the Company's
definitive proxy statement for its 2010 Annual Meeting of Stockholders that is responsive to the information required by this Item. Notwithstanding the foregoing, the Compensation Committee Report set
forth therein shall not be incorporated by reference herein, in any of the Company's prior or future filings under the Securities Act of 1933, as amended, or the Exchange Act, except to the extent the
Company specifically incorporates such report by reference therein and shall not be otherwise deemed filed under either of such Acts.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
There is hereby incorporated by reference the information which appears under the captions "Principal Stockholders," "Information
Regarding Nominees and Directors," "Executive Officers" and "Equity Compensation Plan Information" in the Company's definitive proxy statement for its 2010 Annual Meeting of Stockholders that is
responsive to the information required by this Item.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
There is hereby incorporated by reference the information which appears under the captions "Certain Transactions" and "The Board of
Directors and its Committees" in the Company's definitive proxy statement for its 2010 Annual Meeting of Stockholders that is responsive to the information required by this Item.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
There is hereby incorporated by reference the information which appears under the captions "Principal Accountant Fees and Services" and
"Audit Committee Pre-Approval Policy" in the Company's definitive proxy statement for its 2010 Annual Meeting of Stockholders that is responsive to the information required by this Item.
64
Table of Contents
PART IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
|
|
|
|
|
|
|
|
|
|
|
|
|
Page
|
(a) and (c)
|
|
1.
|
|
Financial Statements of the Company
|
|
|
|
|
|
|
Report of Independent Registered Public Accounting Firm
|
|
66
|
|
|
|
|
Consolidated balance sheets of the Company as of December 31, 2009 and 2008
|
|
67
|
|
|
|
|
Consolidated statements of operations of the Company for the years ended December 31, 2009, 2008 and
2007
|
|
68
|
|
|
|
|
Consolidated statements of equity of the Company for the years ended December 31, 2009, 2008 and 2007
|
|
69
|
|
|
|
|
Consolidated statements of cash flows of the Company for the years ended December 31, 2009, 2008 and
2007
|
|
72
|
|
|
|
|
Notes to consolidated financial statements
|
|
74
|
|
|
2.
|
|
Financial Statements of Pacific Premier Retail Trust
|
|
|
|
|
|
|
Report of Independent Registered Public Accounting Firm
|
|
120
|
|
|
|
|
Consolidated balance sheets of Pacific Premier Retail Trust as of December 31, 2009 and 2008
|
|
121
|
|
|
|
|
Consolidated statements of operations of Pacific Premier Retail Trust for the years ended December 31, 2009, 2008
and 2007
|
|
122
|
|
|
|
|
Consolidated statements of equity of Pacific Premier Retail Trust for the years ended December 31, 2009, 2008 and
2007
|
|
123
|
|
|
|
|
Consolidated statements of cash flows of Pacific Premier Retail Trust for the years ended December 31, 2009, 2008 and
2007
|
|
124
|
|
|
|
|
Notes to consolidated financial statements
|
|
125
|
|
|
3.
|
|
Financial Statement Schedules
|
|
|
|
|
|
|
Schedule IIIReal estate and accumulated depreciation of the Company
|
|
136
|
|
|
|
|
Schedule IIIReal estate and accumulated depreciation of Pacific Premier Retail Trust
|
|
139
|
65
Table of Contents
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To
the Board of Directors and Stockholders of
The Macerich Company
Santa Monica, California
We
have audited the accompanying consolidated balance sheets of The Macerich Company and subsidiaries (the "Company") as of December 31, 2009 and 2008, and the related
consolidated statements of operations, equity, and cash flows for each of the three years in the period ended December 31, 2009. Our audits also included the financial statement schedule listed
in the Index at Item 15. These financial statements and financial statement schedule are the responsibility of the
Company's management. Our responsibility is to express an opinion on the financial statements and financial statement schedule based on our audits.
We
conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our opinion.
In
our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of The Macerich Company and subsidiaries as of December 31,
2009 and 2008, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2009, in conformity with accounting principles generally
accepted in the United States of America. Also, in our opinion, such financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents
fairly, in all material respects, the information set forth therein.
We
have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company's internal control over financial reporting as of
December 31, 2009, based on the criteria established in Internal ControlIntegrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our
report dated February 26, 2010 expressed an unqualified opinion on the Company's internal control over financial reporting based on our audit.
/s/ DELOITTE
& TOUCHE LLP
Deloitte &
Touche LLP
Los Angeles, California
February 26,
2010
66
Table of Contents
THE MACERICH COMPANY
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except par value)
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2009
|
|
2008
|
|
ASSETS:
|
|
|
|
|
|
|
|
Property, net
|
|
$
|
5,657,939
|
|
$
|
6,371,319
|
|
Cash and cash equivalents
|
|
|
93,255
|
|
|
66,529
|
|
Restricted cash
|
|
|
41,619
|
|
|
61,707
|
|
Marketable securities
|
|
|
26,970
|
|
|
27,943
|
|
Tenant and other receivables, net
|
|
|
101,220
|
|
|
118,374
|
|
Deferred charges and other assets, net
|
|
|
276,922
|
|
|
339,662
|
|
Loans to unconsolidated joint ventures
|
|
|
2,316
|
|
|
932
|
|
Due from affiliates
|
|
|
6,034
|
|
|
9,124
|
|
Investments in unconsolidated joint ventures
|
|
|
1,046,196
|
|
|
1,094,845
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
7,252,471
|
|
$
|
8,090,435
|
|
|
|
|
|
|
|
LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND EQUITY:
|
|
|
|
|
|
|
|
Mortgage notes payable:
|
|
|
|
|
|
|
|
|
Related parties
|
|
$
|
196,827
|
|
$
|
306,859
|
|
|
Others
|
|
|
3,039,209
|
|
|
3,373,116
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
3,236,036
|
|
|
3,679,975
|
|
Bank and other notes payable
|
|
|
1,295,598
|
|
|
2,260,443
|
|
Accounts payable and accrued expenses
|
|
|
70,275
|
|
|
114,502
|
|
Other accrued liabilities
|
|
|
266,197
|
|
|
289,146
|
|
Investments in unconsolidated joint ventures
|
|
|
67,052
|
|
|
80,915
|
|
Co-venture obligation
|
|
|
168,049
|
|
|
|
|
Preferred dividends payable
|
|
|
207
|
|
|
243
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
5,103,414
|
|
|
6,425,224
|
|
|
|
|
|
|
|
Redeemable noncontrolling interests
|
|
|
20,591
|
|
|
23,327
|
|
|
|
|
|
|
|
Commitments and contingencies
|
|
|
|
|
|
|
|
Equity:
|
|
|
|
|
|
|
|
|
Stockholders' equity:
|
|
|
|
|
|
|
|
|
|
Common stock, $.01 par value, 250,000,000 and 145,000,000 shares authorized, 96,667,689 and 76,883,634 shares issued and outstanding at December 31,
2009 and 2008, respectively
|
|
|
967
|
|
|
769
|
|
|
|
Additional paid-in capital
|
|
|
2,227,931
|
|
|
1,721,256
|
|
|
|
Accumulated deficit
|
|
|
(345,930
|
)
|
|
(274,834
|
)
|
|
|
Accumulated other comprehensive loss
|
|
|
(25,397
|
)
|
|
(53,425
|
)
|
|
|
|
|
|
|
|
|
|
Total stockholders' equity
|
|
|
1,857,571
|
|
|
1,393,766
|
|
|
Noncontrolling interests
|
|
|
270,895
|
|
|
248,118
|
|
|
|
|
|
|
|
|
|
|
Total equity
|
|
|
2,128,466
|
|
|
1,641,884
|
|
|
|
|
|
|
|
|
|
|
Total liabilities, redeemable noncontrolling interests and equity
|
|
$
|
7,252,471
|
|
$
|
8,090,435
|
|
|
|
|
|
|
|
The
accompanying notes are an integral part of these consolidated financial statements.
67
Table of Contents
THE MACERICH COMPANY
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For The Years Ended December 31,
|
|
|
|
2009
|
|
2008
|
|
2007
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
Minimum rents
|
|
$
|
474,261
|
|
$
|
528,571
|
|
$
|
466,071
|
|
|
Percentage rents
|
|
|
16,631
|
|
|
19,048
|
|
|
25,917
|
|
|
Tenant recoveries
|
|
|
244,101
|
|
|
262,238
|
|
|
242,012
|
|
|
Management Companies
|
|
|
40,757
|
|
|
40,716
|
|
|
39,752
|
|
|
Other
|
|
|
29,904
|
|
|
30,298
|
|
|
27,090
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
|
805,654
|
|
|
880,871
|
|
|
800,842
|
|
|
|
|
|
|
|
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
Shopping center and operating expenses
|
|
|
258,174
|
|
|
281,613
|
|
|
253,258
|
|
|
Management Companies' operating expenses
|
|
|
79,305
|
|
|
77,072
|
|
|
73,761
|
|
|
REIT general and administrative expenses
|
|
|
25,933
|
|
|
16,520
|
|
|
16,600
|
|
|
Depreciation and amortization
|
|
|
262,063
|
|
|
269,938
|
|
|
209,101
|
|
|
|
|
|
|
|
|
|
|
|
|
625,475
|
|
|
645,143
|
|
|
552,720
|
|
|
|
|
|
|
|
|
|
|
Interest expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
Related parties
|
|
|
19,413
|
|
|
14,970
|
|
|
13,390
|
|
|
|
Other
|
|
|
247,632
|
|
|
280,102
|
|
|
247,472
|
|
|
|
|
|
|
|
|
|
|
|
|
267,045
|
|
|
295,072
|
|
|
260,862
|
|
|
(Gain) loss on early extinguishment of debt
|
|
|
(29,161
|
)
|
|
(84,143
|
)
|
|
877
|
|
|
|
|
|
|
|
|
|
|
|
Total expenses
|
|
|
863,359
|
|
|
856,072
|
|
|
814,459
|
|
Equity in income of unconsolidated joint ventures
|
|
|
68,160
|
|
|
93,831
|
|
|
81,458
|
|
Co-venture expense
|
|
|
(2,262
|
)
|
|
|
|
|
|
|
Income tax benefit (provision)
|
|
|
4,761
|
|
|
(1,126
|
)
|
|
470
|
|
Gain (loss) on sale or write down of assets
|
|
|
161,937
|
|
|
(30,911
|
)
|
|
12,146
|
|
|
|
|
|
|
|
|
|
Income from continuing operations
|
|
|
174,891
|
|
|
86,593
|
|
|
80,457
|
|
|
|
|
|
|
|
|
|
Discontinued operations:
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) gain on sale or write down of assets
|
|
|
(40,171
|
)
|
|
99,625
|
|
|
(2,376
|
)
|
|
Income from discontinued operations
|
|
|
4,530
|
|
|
8,797
|
|
|
27,981
|
|
|
|
|
|
|
|
|
|
Total (loss) income from discontinued operations
|
|
|
(35,641
|
)
|
|
108,422
|
|
|
25,605
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
139,250
|
|
|
195,015
|
|
|
106,062
|
|
Less net income attributable to noncontrolling interests
|
|
|
18,508
|
|
|
28,966
|
|
|
29,827
|
|
|
|
|
|
|
|
|
|
Net income attributable to the Company
|
|
|
120,742
|
|
|
166,049
|
|
|
76,235
|
|
Less preferred dividends
|
|
|
|
|
|
4,124
|
|
|
10,058
|
|
Less adjustment to redemption value of redeemable noncontrolling interests
|
|
|
|
|
|
|
|
|
2,046
|
|
|
|
|
|
|
|
|
|
Net income available to common stockholders
|
|
$
|
120,742
|
|
$
|
161,925
|
|
$
|
64,131
|
|
|
|
|
|
|
|
|
|
Earnings per common share attributable to Companybasic:
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations
|
|
$
|
1.83
|
|
$
|
0.92
|
|
$
|
0.79
|
|
|
Discontinued operations
|
|
|
(0.38
|
)
|
|
1.25
|
|
|
0.09
|
|
|
|
|
|
|
|
|
|
|
Net income available to common stockholders
|
|
$
|
1.45
|
|
$
|
2.17
|
|
$
|
0.88
|
|
|
|
|
|
|
|
|
|
Earnings per common share attributable to Companydiluted:
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations
|
|
$
|
1.83
|
|
$
|
0.92
|
|
$
|
0.79
|
|
|
Discontinued operations
|
|
|
(0.38
|
)
|
|
1.25
|
|
|
0.09
|
|
|
|
|
|
|
|
|
|
|
Net income available to common stockholders
|
|
$
|
1.45
|
|
$
|
2.17
|
|
$
|
0.88
|
|
|
|
|
|
|
|
|
|
Weighted average number of common shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
81,226,000
|
|
|
74,319,000
|
|
|
71,768,000
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
|
81,226,000
|
|
|
86,794,000
|
|
|
84,760,000
|
|
|
|
|
|
|
|
|
|
The
accompanying notes are an integral part of these consolidated financial statements.
68
Table of Contents
THE MACERICH COMPANY
CONSOLIDATED STATEMENTS OF EQUITY
(Dollars in thousands, except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders' Equity
|
|
|
|
|
|
|
|
|
|
Common Stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
Other
Comprehensive
Income (Loss)
|
|
|
|
|
|
|
|
|
|
|
|
Shares
|
|
Par
Value
|
|
Additional
Paid-in
Capital
|
|
Accumulated
Deficit
|
|
Total
Stockholders'
Equity
|
|
Noncontrolling
Interests
|
|
Total
Equity
|
|
Redeemable
Noncontrolling
Interests
|
|
Balance January 1, 2007
|
|
|
71,567,908
|
|
$
|
716
|
|
$
|
1,443,050
|
|
($
|
66,974
|
)
|
$
|
2,340
|
|
$
|
1,379,132
|
|
$
|
274,446
|
|
$
|
1,653,578
|
|
$
|
322,710
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
76,235
|
|
|
|
|
|
76,235
|
|
|
12,990
|
|
|
89,225
|
|
|
16,837
|
|
|
Reclassification of deferred losses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
967
|
|
|
967
|
|
|
|
|
|
967
|
|
|
|
|
|
Interest rate swap/cap agreements
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(27,815
|
)
|
|
(27,815
|
)
|
|
|
|
|
(27,815
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income (loss)
|
|
|
|
|
|
|
|
|
|
|
|
76,235
|
|
|
(26,848
|
)
|
|
49,387
|
|
|
12,990
|
|
|
62,377
|
|
|
16,837
|
|
Amortization of share and unit-based plans
|
|
|
215,132
|
|
|
2
|
|
|
21,407
|
|
|
|
|
|
|
|
|
21,409
|
|
|
|
|
|
21,409
|
|
|
|
|
Exercise of stock options
|
|
|
23,500
|
|
|
|
|
|
672
|
|
|
|
|
|
|
|
|
672
|
|
|
|
|
|
672
|
|
|
|
|
Employee stock purchases
|
|
|
13,184
|
|
|
|
|
|
881
|
|
|
|
|
|
|
|
|
881
|
|
|
|
|
|
881
|
|
|
|
|
Adjustment for redemption value of redeemable noncontrolling interests
|
|
|
|
|
|
|
|
|
(2,046
|
)
|
|
|
|
|
|
|
|
(2,046
|
)
|
|
|
|
|
(2,046
|
)
|
|
2,046
|
|
Distributions paid ($2.93) per share
|
|
|
|
|
|
|
|
|
|
|
|
(211,192
|
)
|
|
|
|
|
(211,192
|
)
|
|
|
|
|
(211,192
|
)
|
|
|
|
Distributions to noncontrolling interests
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(42,216
|
)
|
|
(42,216
|
)
|
|
(18,974
|
)
|
Preferred dividends
|
|
|
|
|
|
|
|
|
(10,058
|
)
|
|
|
|
|
|
|
|
(10,058
|
)
|
|
|
|
|
(10,058
|
)
|
|
|
|
Contributions from noncontrolling interests
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15,858
|
|
|
15,858
|
|
|
|
|
Conversion of noncontrolling interests to common shares
|
|
|
739,039
|
|
|
7
|
|
|
24,616
|
|
|
|
|
|
|
|
|
24,623
|
|
|
(24,623
|
)
|
|
|
|
|
|
|
Redemption of noncontrolling interests
|
|
|
|
|
|
|
|
|
(3,859
|
)
|
|
|
|
|
|
|
|
(3,859
|
)
|
|
(1,244
|
)
|
|
(5,103
|
)
|
|
|
|
Repurchase of common shares
|
|
|
(807,000
|
)
|
|
(8
|
)
|
|
(74,962
|
)
|
|
|
|
|
|
|
|
(74,970
|
)
|
|
|
|
|
(74,970
|
)
|
|
|
|
Conversion of preferred shares to common shares
|
|
|
560,000
|
|
|
6
|
|
|
15,433
|
|
|
|
|
|
|
|
|
15,439
|
|
|
|
|
|
15,439
|
|
|
|
|
Allocation of equity component of Senior Notes
|
|
|
|
|
|
|
|
|
71,149
|
|
|
|
|
|
|
|
|
71,149
|
|
|
|
|
|
71,149
|
|
|
|
|
Purchase of capped calls on Senior Notes
|
|
|
|
|
|
|
|
|
(59,850
|
)
|
|
|
|
|
|
|
|
(59,850
|
)
|
|
|
|
|
(59,850
|
)
|
|
|
|
Change in accounting principle due to adoption of FIN 48
|
|
|
|
|
|
|
|
|
|
|
|
(1,574
|
)
|
|
|
|
|
(1,574
|
)
|
|
|
|
|
(1,574
|
)
|
|
|
|
Other
|
|
|
|
|
|
|
|
|
347
|
|
|
|
|
|
|
|
|
347
|
|
|
|
|
|
347
|
|
|
|
|
Adjustment of noncontrolling interests in Operating Partnership
|
|
|
|
|
|
|
|
|
1,344
|
|
|
|
|
|
|
|
|
1,344
|
|
|
(1,344
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance December 31, 2007
|
|
|
72,311,763
|
|
$
|
723
|
|
$
|
1,428,124
|
|
($
|
203,505
|
)
|
($
|
24,508
|
)
|
$
|
1,200,834
|
|
$
|
233,867
|
|
$
|
1,434,701
|
|
$
|
322,619
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these consolidated financial statements.
69
Table of Contents
THE MACERICH COMPANY
CONSOLIDATED STATEMENTS OF EQUITY (Continued)
(Dollars in thousands, except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders' Equity
|
|
|
|
|
|
|
|
|
|
Common Stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
Other
Comprehensive
Loss
|
|
Total
Common
Stockholders'
Equity
|
|
|
|
|
|
|
|
|
|
Shares
|
|
Par
Value
|
|
Additional
Paid-in
Capital
|
|
Accumulated
Deficit
|
|
Noncontrolling
Interests
|
|
Total
Equity
|
|
Redeemable
Noncontrolling
Interests
|
|
Balance December 31, 2007
|
|
|
72,311,763
|
|
$
|
723
|
|
$
|
1,428,124
|
|
($
|
203,505
|
)
|
($
|
24,508
|
)
|
$
|
1,200,834
|
|
$
|
233,867
|
|
$
|
1,434,701
|
|
$
|
322,619
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
166,049
|
|
|
|
|
|
166,049
|
|
|
28,383
|
|
|
194,432
|
|
|
583
|
|
|
Reclassification of deferred losses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
285
|
|
|
285
|
|
|
|
|
|
285
|
|
|
|
|
|
Interest rate swap/cap agreements
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(29,202
|
)
|
|
(29,202
|
)
|
|
|
|
|
(29,202
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income (loss)
|
|
|
|
|
|
|
|
|
|
|
|
166,049
|
|
|
(28,917
|
)
|
|
137,132
|
|
|
28,383
|
|
|
165,515
|
|
|
583
|
|
Amortization of share and unit-based plans
|
|
|
193,744
|
|
|
2
|
|
|
21,872
|
|
|
|
|
|
|
|
|
21,874
|
|
|
|
|
|
21,874
|
|
|
|
|
Exercise of stock options
|
|
|
362,888
|
|
|
4
|
|
|
8,568
|
|
|
|
|
|
|
|
|
8,572
|
|
|
|
|
|
8,572
|
|
|
|
|
Employee stock purchases
|
|
|
27,829
|
|
|
|
|
|
712
|
|
|
|
|
|
|
|
|
712
|
|
|
|
|
|
712
|
|
|
|
|
Distributions paid ($3.20) per share
|
|
|
|
|
|
|
|
|
|
|
|
(237,378
|
)
|
|
|
|
|
(237,378
|
)
|
|
|
|
|
(237,378
|
)
|
|
|
|
Distributions to noncontrolling interests
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(48,595
|
)
|
|
(48,595
|
)
|
|
(583
|
)
|
Preferred dividends
|
|
|
|
|
|
|
|
|
(4,124
|
)
|
|
|
|
|
|
|
|
(4,124
|
)
|
|
|
|
|
(4,124
|
)
|
|
|
|
Contributions from noncontrolling interests
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14,083
|
|
|
14,083
|
|
|
|
|
Conversion of noncontrolling interests to common shares
|
|
|
920,279
|
|
|
9
|
|
|
30,391
|
|
|
|
|
|
|
|
|
30,400
|
|
|
(30,400
|
)
|
|
|
|
|
|
|
Conversion of preferred shares to common shares
|
|
|
3,067,131
|
|
|
31
|
|
|
83,464
|
|
|
|
|
|
|
|
|
83,495
|
|
|
|
|
|
83,495
|
|
|
|
|
Redemption of redeemable noncontrolling interests
|
|
|
|
|
|
|
|
|
(864
|
)
|
|
|
|
|
|
|
|
(864
|
)
|
|
(457
|
)
|
|
(1,321
|
)
|
|
(96,564
|
)
|
Reversal of adjustments to redemption value of redeemable noncontrolling interests
|
|
|
|
|
|
|
|
|
202,728
|
|
|
|
|
|
|
|
|
202,728
|
|
|
|
|
|
202,728
|
|
|
(202,728
|
)
|
Other
|
|
|
|
|
|
|
|
|
1,622
|
|
|
|
|
|
|
|
|
1,622
|
|
|
|
|
|
1,622
|
|
|
|
|
Adjustment of noncontrolling interests in Operating Partnership
|
|
|
|
|
|
|
|
|
(51,237
|
)
|
|
|
|
|
|
|
|
(51,237
|
)
|
|
51,237
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance December 31, 2008
|
|
|
76,883,634
|
|
$
|
769
|
|
$
|
1,721,256
|
|
($
|
274,834
|
)
|
($
|
53,425
|
)
|
$
|
1,393,766
|
|
$
|
248,118
|
|
$
|
1,641,884
|
|
$
|
23,327
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these consolidated financial statements.
70
Table of Contents
THE MACERICH COMPANY
CONSOLIDATED STATEMENTS OF EQUITY (Continued)
(Dollars in thousands, except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders' Equity
|
|
|
|
|
|
|
|
|
|
Shares
|
|
Par
Value
|
|
Additional
Paid-in
Capital
|
|
Accumulated
Deficit
|
|
Accumulated
Other
Comprehensive
Loss
|
|
Total
Stockholders'
Equity
|
|
Noncontrolling
Interests
|
|
Total
Equity
|
|
Redeemable
Noncontrolling
Interests
|
|
Balance December 31, 2008
|
|
|
76,883,634
|
|
$
|
769
|
|
$
|
1,721,256
|
|
($
|
274,834
|
)
|
($
|
53,425
|
)
|
$
|
1,393,766
|
|
$
|
248,118
|
|
$
|
1,641,884
|
|
$
|
23,327
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
120,742
|
|
|
|
|
|
120,742
|
|
|
17,924
|
|
|
138,666
|
|
|
584
|
|
|
Interest rate swap/cap agreements
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
28,028
|
|
|
28,028
|
|
|
|
|
|
28,028
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
120,742
|
|
|
28,028
|
|
|
148,770
|
|
|
17,924
|
|
|
166,694
|
|
|
584
|
|
Amortization of share and unit-based plans
|
|
|
213,288
|
|
|
2
|
|
|
17,961
|
|
|
|
|
|
|
|
|
17,963
|
|
|
|
|
|
17,963
|
|
|
|
|
Exercise of stock options
|
|
|
5,325
|
|
|
|
|
|
104
|
|
|
|
|
|
|
|
|
104
|
|
|
|
|
|
104
|
|
|
|
|
Employee stock purchases
|
|
|
38,174
|
|
|
|
|
|
611
|
|
|
|
|
|
|
|
|
611
|
|
|
|
|
|
611
|
|
|
|
|
Distributions paid ($2.60) per share
|
|
|
|
|
|
|
|
|
|
|
|
(191,838
|
)
|
|
|
|
|
(191,838
|
)
|
|
|
|
|
(191,838
|
)
|
|
|
|
Distributions to noncontrolling interests
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(30,291
|
)
|
|
(30,291
|
)
|
|
(584
|
)
|
Issuance of common shares
|
|
|
5,712,928
|
|
|
58
|
|
|
121,215
|
|
|
|
|
|
|
|
|
121,273
|
|
|
|
|
|
121,273
|
|
|
|
|
Issuance of stock warrants
|
|
|
|
|
|
|
|
|
14,503
|
|
|
|
|
|
|
|
|
14,503
|
|
|
|
|
|
14,503
|
|
|
|
|
Stock offering
|
|
|
13,800,000
|
|
|
138
|
|
|
383,312
|
|
|
|
|
|
|
|
|
383,450
|
|
|
|
|
|
383,450
|
|
|
|
|
Contributions from noncontrolling interests
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12,153
|
|
|
12,153
|
|
|
|
|
Conversion of noncontrolling interests to common shares
|
|
|
14,340
|
|
|
|
|
|
455
|
|
|
|
|
|
|
|
|
455
|
|
|
(455
|
)
|
|
|
|
|
|
|
Redemption of noncontrolling interests
|
|
|
|
|
|
|
|
|
47
|
|
|
|
|
|
|
|
|
47
|
|
|
(444
|
)
|
|
(397
|
)
|
|
(2,736
|
)
|
Other
|
|
|
|
|
|
|
|
|
(7,643
|
)
|
|
|
|
|
|
|
|
(7,643
|
)
|
|
|
|
|
(7,643
|
)
|
|
|
|
Adjustment of noncontrolling interest in Operating Partnership
|
|
|
|
|
|
|
|
|
(23,890
|
)
|
|
|
|
|
|
|
|
(23,890
|
)
|
|
23,890
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance December 31, 2009
|
|
|
96,667,689
|
|
$
|
967
|
|
$
|
2,227,931
|
|
($
|
345,930
|
)
|
($
|
25,397
|
)
|
$
|
1,857,571
|
|
$
|
270,895
|
|
$
|
2,128,466
|
|
$
|
20,591
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these consolidated financial statements.
71
Table of Contents
THE MACERICH COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For The Years Ended
December 31,
|
|
|
|
2009
|
|
2008
|
|
2007
|
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
139,250
|
|
$
|
195,015
|
|
$
|
106,062
|
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
(Gain) loss on early extinguishment of debt
|
|
|
(29,161
|
)
|
|
(84,143
|
)
|
|
877
|
|
|
|
(Gain) loss on sale or write-down of assets
|
|
|
(161,937
|
)
|
|
30,911
|
|
|
(12,146
|
)
|
|
|
Loss (gain) on sale of assets of discontinued operations
|
|
|
40,171
|
|
|
(99,625
|
)
|
|
2,376
|
|
|
|
Depreciation and amortization
|
|
|
277,472
|
|
|
287,917
|
|
|
238,645
|
|
|
|
Amortization of net premium on mortgage and bank and other notes payable
|
|
|
670
|
|
|
4,931
|
|
|
1,489
|
|
|
|
Amortization of share and unit-based plans
|
|
|
8,095
|
|
|
11,650
|
|
|
12,344
|
|
|
|
Equity in income of unconsolidated joint ventures
|
|
|
(68,160
|
)
|
|
(93,831
|
)
|
|
(81,458
|
)
|
|
|
Co-venture expense
|
|
|
2,262
|
|
|
|
|
|
|
|
|
|
Distributions of income from unconsolidated joint ventures
|
|
|
12,252
|
|
|
24,096
|
|
|
4,118
|
|
|
|
Changes in assets and liabilities, net of acquisitions and dispositions:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tenant and other receivables, net
|
|
|
1,776
|
|
|
28,786
|
|
|
(20,001
|
)
|
|
|
|
Other assets
|
|
|
5,982
|
|
|
(22,603
|
)
|
|
(33,375
|
)
|
|
|
|
Accounts payable and accrued expenses
|
|
|
(67,150
|
)
|
|
15,766
|
|
|
23,959
|
|
|
|
|
Due from affiliates
|
|
|
3,090
|
|
|
(3,395
|
)
|
|
(1,477
|
)
|
|
|
|
Other accrued liabilities
|
|
|
(43,722
|
)
|
|
(43,528
|
)
|
|
84,657
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
|
120,890
|
|
|
251,947
|
|
|
326,070
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
Acquisitions of property, development, redevelopment and property improvements
|
|
|
(197,483
|
)
|
|
(535,263
|
)
|
|
(1,043,800
|
)
|
|
Redemption of redeemable non-controlling interests
|
|
|
(2,736
|
)
|
|
(18,794
|
)
|
|
|
|
|
Payment of acquisition deposits
|
|
|
|
|
|
|
|
|
(51,943
|
)
|
|
Maturities of marketable securities
|
|
|
1,283
|
|
|
1,436
|
|
|
1,322
|
|
|
Deferred leasing costs
|
|
|
(27,985
|
)
|
|
(38,095
|
)
|
|
(34,753
|
)
|
|
Distributions from unconsolidated joint ventures
|
|
|
169,192
|
|
|
141,773
|
|
|
274,303
|
|
|
Contributions to unconsolidated joint ventures
|
|
|
(50,404
|
)
|
|
(161,070
|
)
|
|
(38,769
|
)
|
|
Loans to unconsolidated joint ventures
|
|
|
(1,384
|
)
|
|
(328
|
)
|
|
104
|
|
|
Proceeds from sale of assets
|
|
|
417,450
|
|
|
47,163
|
|
|
30,261
|
|
|
Restricted cash
|
|
|
(5,577
|
)
|
|
4,222
|
|
|
(2,008
|
)
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) investing activities
|
|
|
302,356
|
|
|
(558,956
|
)
|
|
(865,283
|
)
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these consolidated financial statements.
72
Table of Contents
THE MACERICH COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(Dollars in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For The Years Ended
December 31,
|
|
|
|
2009
|
|
2008
|
|
2007
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from mortgages, bank and other notes payable
|
|
|
425,703
|
|
|
1,732,940
|
|
|
2,296,530
|
|
|
Payments on mortgages, bank and other notes payable
|
|
|
(1,229,081
|
)
|
|
(1,051,292
|
)
|
|
(1,535,017
|
)
|
|
Repurchase of convertible senior notes
|
|
|
(55,029
|
)
|
|
(105,898
|
)
|
|
|
|
|
Deferred financing costs
|
|
|
(6,506
|
)
|
|
(11,898
|
)
|
|
(2,482
|
)
|
|
Proceeds from share and unit-based plans
|
|
|
715
|
|
|
9,284
|
|
|
1,553
|
|
|
Net proceeds from issuance of warrants to purchase common stock
|
|
|
14,503
|
|
|
|
|
|
|
|
|
Net proceeds from common stock offering
|
|
|
383,450
|
|
|
|
|
|
|
|
|
Contributions from co-venture partner
|
|
|
168,154
|
|
|
|
|
|
|
|
|
Redemption of noncontrolling interests
|
|
|
(397
|
)
|
|
|
|
|
|
|
|
Purchase of capped calls
|
|
|
|
|
|
|
|
|
(59,850
|
)
|
|
Repurchase of common stock
|
|
|
|
|
|
|
|
|
(74,970
|
)
|
|
Dividends and distributions
|
|
|
(95,665
|
)
|
|
(274,634
|
)
|
|
(245,991
|
)
|
|
Distributions to co-venture partner
|
|
|
(2,367
|
)
|
|
|
|
|
|
|
|
Dividends to preferred stockholders / preferred unitholders
|
|
|
|
|
|
(10,237
|
)
|
|
(24,722
|
)
|
|
|
|
|
|
|
|
|
|
Net cash (used in) provided by financing activities
|
|
|
(396,520
|
)
|
|
288,265
|
|
|
355,051
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash
|
|
|
26,726
|
|
|
(18,744
|
)
|
|
(184,162
|
)
|
Cash and cash equivalents, beginning of year
|
|
|
66,529
|
|
|
85,273
|
|
|
269,435
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, end of year
|
|
$
|
93,255
|
|
$
|
66,529
|
|
$
|
85,273
|
|
|
|
|
|
|
|
|
|
Supplemental cash flow information:
|
|
|
|
|
|
|
|
|
|
|
|
Cash payments for interest, net of amounts capitalized
|
|
$
|
258,151
|
|
$
|
263,199
|
|
$
|
280,820
|
|
|
|
|
|
|
|
|
|
Non-cash transactions:
|
|
|
|
|
|
|
|
|
|
|
|
Acquisition of noncontrolling interests in properties
|
|
$
|
|
|
$
|
205,520
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
Deposits contributed to unconsolidated joint ventures and the purchase of properties
|
|
$
|
|
|
$
|
50,103
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
Retirement of tax indemnity escrow held for nonparticipating unitholders
|
|
$
|
22,904
|
|
$
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
Accrued development costs included in accounts payable and accrued expenses and other accrued liabilities
|
|
$
|
30,799
|
|
$
|
64,473
|
|
$
|
54,308
|
|
|
|
|
|
|
|
|
|
|
Accrued preferred dividend payable
|
|
$
|
207
|
|
$
|
243
|
|
$
|
6,356
|
|
|
|
|
|
|
|
|
|
|
Acquisition of property by assumption of mortgage note payable
|
|
$
|
|
|
$
|
15,745
|
|
$
|
4,300
|
|
|
|
|
|
|
|
|
|
|
Stock dividend
|
|
$
|
121,116
|
|
$
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
Conversion of Series A cumulative convertible preferred stock to common stock
|
|
$
|
|
|
$
|
83,495
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
Accrued distribution from unconsolidated joint venture
|
|
$
|
|
|
$
|
8,684
|
|
$
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these consolidated financial statements.
73
Table of Contents
THE MACERICH COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)
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 December 31, 2009, the Company was the sole general
partner of and held an 89% ownership interest in The Macerich Partnership, L.P. (the "Operating Partnership"). The interests in the Operating Partnership are known as OP Units. OP Units not
held by the Company are redeemable, at the election of the holder, on a one-for-one basis for the Company's stock or cash at the Company's option. The 11% limited partnership
interest of the Operating Partnership not owned by the Company is reflected in these consolidated financial statements as noncontrolling interests in permanent equity. 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:
These consolidated financial statements have been prepared in accordance with generally accepted accounting principles ("GAAP") in the
United States of America. 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." All intercompany accounts and transactions have been eliminated in the consolidated financial statements.
The
Company allocates net income of the Operating Partnership based on the weighted average ownership interest during the period. The net income of the Operating Partnership that is not
attributable to the Company is reflected in the consolidated statements of operations as noncontrolling interests. The Company adjusts the noncontrolling interests in the Operating Partnership at the
end of each period to reflect its ownership interest in the Company. The Company had an 89% and 87% ownership interest in the Operating Partnership as of December 31, 2009 and 2008,
respectively. The
74
Table of Contents
THE MACERICH COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share amounts)
2. Summary of Significant Accounting Policies: (Continued)
remaining
11% and 13% limited partnership interest as of December 31, 2009 and 2008, respectively, was owned by certain of the Company's executive officers and directors, certain of their
affiliates, and other third party investors in the form of OP Units. The OP Units may be redeemed for shares of 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 December 31, 2009 and 2008, the aggregate redemption value of the then-outstanding OP Units not owned by
the Company was $422,074 and $227,091, respectively.
The Company considers all highly liquid investments with an original maturity of three months or less when purchased to be cash
equivalents, for which cost approximates fair value. Restricted cash includes impounds of property taxes and other capital reserves required under the loan agreements.
Tenant and Other Receivables, net:
Included in tenant and other receivables, net is an allowance for doubtful accounts of $5,943 and $3,754 at December 31, 2009
and 2008, respectively. Also included in tenant and other receivables, net are accrued percentage rents of $4,912 and $6,546 at December 31, 2009 and 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 December 31,
2009 and 2008, the note had a balance of $9,227 and $9,450, respectively.
On
January 1, 2008, as part of the Rochester Redemption (See Note 17Discontinued 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 December 31, 2009 and 2008 was $11,763.
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." Rental revenue was increased by $6,525, $4,545 and $6,671
due to the straight-line rent adjustment during the years ended December 31, 2009, 2008 and 2007, respectively. Percentage rents are recognized and accrued when 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 are recognized into revenue on a straight-line basis over the term of the related leases.
The
Management Companies provide property management, leasing, corporate, development, redevelopment and acquisition services to affiliated and non-affiliated shopping
centers. In
75
Table of Contents
THE MACERICH COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share amounts)
2. Summary of Significant Accounting Policies: (Continued)
consideration
for these services, the Management Companies receive monthly management fees generally ranging from 1.5% to 5% of the gross monthly rental revenue of the properties managed.
Costs related to the development, redevelopment, construction and improvement of properties are capitalized. Interest incurred on
development, redevelopment and construction projects is capitalized until construction is substantially complete.
Maintenance
and repairs 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
|
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 property 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 rental revenue over the remaining terms of the leases.
76
Table of Contents
THE MACERICH COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share amounts)
2. Summary of Significant Accounting Policies: (Continued)
The Company accounts for its investments in marketable securities as held-to-maturity debt 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.
Costs relating to obtaining tenant leases are deferred and amortized over the initial term of the agreement using the
straight-line method. Costs relating to financing of shopping center properties are deferred and amortized over the life of the related loan using the straight-line method,
which approximates the effective interest method. In-place lease values are amortized over the remaining lease term plus an estimate of renewal. Leasing commissions and legal costs are
amortized on a straight-line basis over the individual lease years.
The
range of the terms of the agreements is as follows:
|
|
|
Deferred lease costs
|
|
1-15 years
|
Deferred financing costs
|
|
1-15 years
|
In-place lease values
|
|
Remaining lease term plus an estimate for renewal
|
Leasing commissions and legal costs
|
|
5-10 years
|
The Company assesses whether there has been impairment in the value of its long-lived assets by considering expected future
operating income, trends and prospects, as well as the effects of demand, competition and other economic factors. Such factors include the tenants' ability to perform their duties and pay rent under
the terms of the leases. The determination of recoverability is made based upon the estimated undiscounted future net cash flows, excluding interest expense. The amount of impairment loss, if any, is
determined by comparing the fair value, as determined by a discounted cash flows analysis, with the carrying value of the related assets. Long-lived assets classified as held for sale are
measured at the lower of the carrying amount or fair value less cost to sell.
The
Company reviews its investments in unconsolidated joint ventures for a series of operating losses and other factors that may indicate that a decrease in the value of its investments
has occurred which is other-than-temporary. The investment in each unconsolidated joint venture is evaluated periodically, and as deemed necessary, for recoverability and
valuation declines that are other than temporary.
77
Table of Contents
THE MACERICH COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share amounts)
2. Summary of Significant Accounting Policies: (Continued)
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 is 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.
The Company maintains its cash accounts in a number of commercial banks. Accounts at these banks are guaranteed by the Federal Deposit
Insurance Corporation ("FDIC") up to $250. At various times during the year, the Company had deposits in excess of the FDIC insurance limit.
No
Center or tenant generated more than 10% of total revenues during 2009, 2008 or 2007.
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
In June 2009, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS")
No. 168, "The FASB Accounting Standards Codification ("FASB Codification") and the Hierarchy of Generally Accepted Accounting Principles." This pronouncement establishes the FASB Codification
as the source of authoritative GAAP recognized by the FASB to be
78
Table of Contents
THE MACERICH COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share amounts)
2. Summary of Significant Accounting Policies: (Continued)
applied
by nongovernmental entities. The Company adopted this pronouncement on July 1, 2009 and has updated its references to specific GAAP literature to reflect the codification.
The
following are recent accounting pronouncements adopted on April 1, 2009:
SFAS
No. 165, "Subsequent Events," which was superseded by the FASB Codification and is now included in Accounting Standards Codification ("ASC") 855, 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 this pronouncement did not have a material impact on the Company's consolidated financial statements.
FASB
Staff Position ("FSP") SFAS 141(R)-1, "Accounting for Assets Acquired and Liabilities Assumed in a Business Combination That Arise from Contingencies," which was
superseded by the FASB Codification and is now included in ASC 805-20, addresses application issues on the accounting for contingencies in a business combination. The adoption of this
pronouncement did not have any impact on the Company's consolidated financial statements.
The
following are recent accounting pronouncements adopted on January 1, 2009:
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," which was superseded by the FASB Codification and is now included in ASC 820-10, 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 this pronouncement did not have a material impact on the Company's consolidated financial statements.
SFAS
No. 141(R), "Business Combinations," which was superseded by the FASB Codification and is now included in ASC 805, 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 this pronouncement 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," which was superseded by the FASB Codification and
is now included in ASC 815-10, 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 this pronouncement, the Company has expanded its disclosures concerning its derivative instruments and hedging activities in
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," which was superseded by
the FASB Codification and is now included in ASC 815-40, provides a 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 scope exception for classification as a derivative. The adoption of this pronouncement did not have a material impact on the Company's
consolidated financial statements.
79
Table of Contents
THE MACERICH COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share amounts)
2. Summary of Significant Accounting Policies: (Continued)
FSP
Accounting Principles Board ("APB") 14-1, "Accounting for Convertible Debt Instruments That May Be Settled In Cash Upon Conversion (Including Partial Cash
Settlement)," which was superseded by the FASB Codification and is now included in ASC 470, requires the initial
proceeds from convertible debt that may be settled in cash to be bifurcated between a liability component and an equity component. On January 1, 2009, the Company adopted this guidance and was
required to retrospectively allocate the initial proceeds from the issuance of the Senior Notes (See Note 11Bank and Other Notes Payable) 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.
SFAS
No. 160, "Noncontrolling Interests in Consolidated Financial StatementsAn Amendment of ARB No. 51," which was superseded by the FASB Codification and is
now included in ASC 810-10-45, requires that noncontrolling interests be presented as a component of 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. As a result of the
adoption of this guidance on January 1, 2009, the Company classified 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.
In
addition, the Company reclassified 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, 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.
FSP
EITF No. 03-6-1, "Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities," which was superseded by
the FASB Codification and is now included in ASC 260-10-45, 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. The adoption of this standard did not have a material impact on
the Company's consolidated financial statements.
FSP
SFAS 107-1 and APB 28-1, "Interim Disclosures about Fair Value of Financial Instruments," which was superseded by the FASB Codification and is
now included in ASC 825-10-50, requires
80
Table of Contents
THE MACERICH COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share amounts)
2. Summary of Significant Accounting Policies: (Continued)
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.
FSP
SFAS No. 115-2 and SFAS No. 124-2, "Recognition and Presentation of Other-Than-Temporary Impairments," which was
superseded by the FASB Codification and is now included in ASC 320-10-35, requires increased and more timely disclosures regarding expected cash flows, credit losses, and an
aging of securities with unrealized losses. The adoption of this pronouncement did not have a material impact on the Company's consolidated financial statements.
The
following are recent accounting pronouncements adopted on January 1, 2010:
SFAS
No. 166, "Accounting for Transfers of Financial Assetsan amendment of FASB No. 140," which was superseded by the FASB Codification and is now included in
ASC 860, removes the concept of a qualifying special-purpose entity and 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. The adoption of this pronouncement is not expected to have a material impact on the Company's consolidated financial statements.
SFAS
No. 167, "Amendments to FASB Interpretation No. 46(R)," which was superseded by the FASB Codification and is now included in ASC 810, provides guidance for determining
whether an entity is the primary beneficiary in a variable interest entity. It also requires ongoing reassessments and additional disclosures about an entity's involvement in variable interest
entities. The adoption of this pronouncement is not expected to have a material impact on the Company's consolidated financial statements.
In
January 2010, the FASB issued Accounting Standards Update 2010-01, which provided updated guidance on accounting for distributions to stockholders with components of stock
and cash. The guidance clarifies that in calculating earnings per share, an entity should account for the stock portion of the distribution as a stock issuance and not as a stock dividend. The
adoption of this accounting update did not have an impact on the Company's consolidated financial statements.
81
Table of Contents
THE MACERICH COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share amounts)
3. Earnings per Share ("EPS"):
The following table reconciles the numerator and denominator used in the computation of earnings per share for the years ended December 31 (shares in thousands except per share
amounts):
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2009
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2008
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2007
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Numerator
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Income from continuing operations
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$
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174,891
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$
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86,593
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$
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80,457
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(Loss) income from discontinued operations
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(35,641
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)
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108,422
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25,605
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Income attributable to noncontrolling interests
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(18,508
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)
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(28,966
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)
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(29,827
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)
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Net income attributable to the Company
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120,742
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166,049
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76,235
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Preferred dividends
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(4,124
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)
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(10,058
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)
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Adjustments to redemption value of noncontrolling interests
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(2,046
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)
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Allocation of earnings to participating securities
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(3,270
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)
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(906
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)
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(987
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)
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Numerator for basic earnings per sharenet income
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available to common stockholders
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117,472
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161,019
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63,144
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Effect of assumed conversions:
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Partnership units
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27,230
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11,238
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Numerator for diluted earnings per sharenet income available to common stockholders
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$
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117,472
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$
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188,249
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$
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74,382
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Denominator
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Denominator for basic earnings per shareweighted average number of common shares outstanding
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81,226
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74,319
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71,768
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Effect of dilutive securities:(1)
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Partnership units(2)
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12,475
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12,699
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Convertible non-participating preferred units(3)
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293
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Denominator for diluted earnings per shareweighted average number of common shares outstanding(4)
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81,226
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86,794
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84,760
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Earnings per common sharebasic:
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Income from continuing operations
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$
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1.83
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$
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0.92
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$
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0.79
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Discontinued operations
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(0.38
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)
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1.25
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0.09
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Net income available to common stockholders
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$
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1.45
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$
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2.17
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$
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0.88
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Earnings per common sharediluted:
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Income from continuing operations
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$
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1.83
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$
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0.92
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$
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0.79
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Discontinued operations
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(0.38
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)
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1.25
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0.09
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Net income available to common stockholders
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$
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1.45
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$
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2.17
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$
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0.88
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-
(1)
-
The
Senior Notes (See Note 11Bank and Other Notes Payable) are excluded from diluted EPS for 2009, 2008 and 2007 as their effect would
be antidilutive to net income available to common stockholders.
The
then-outstanding convertible preferred stock (See Note 14Cumulative Convertible Redeemable Preferred Stock) was convertible on a one-for-one
basis for common stock. The
82
Table of Contents
THE MACERICH COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share amounts)
3. Earnings per Share ("EPS"): (Continued)
convertible
preferred stock was excluded from diluted EPS for 2009, 2008 and 2007 as its effect would be antidilutive to net income available to common stockholders.
-
(2)
-
Diluted
EPS excludes 11,990,731 OP Units for 2009 as their effect was antidilutive to net income available to common stockholders.
-
(3)
-
Diluted
EPS excludes 195,164 and 205,757 convertible non-participating preferred units for 2009 and 2008 as their impact was antidilutive to net
income available to common stockholders.
-
(4)
-
Diluted
EPS excludes 1,226,447 and 1,228,384 of unexercised stock appreciation rights for the years ended December 31, 2009 and 2008, respectively,
127,500 and 138,934 of unexercised stock options for the year ended December 31, 2009 and 2008, respectively, and 2,185,358 of unexercised stock warrants for the year ended December 31,
2009 as their effect was antidilutive to net income available to common stockholders.
The
noncontrolling interests of the Operating Partnership as reflected in the Company's consolidated statements of operations has been allocated for EPS calculations as follows for the
years ended December 31:
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2009
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2008
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2007
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Income from continuing operations
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$
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23,024
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$
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13,386
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$
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25,979
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Discontinued operations:
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(Loss) gain on sale of assets
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(5,090
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)
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14,316
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(357
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)
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Income from discontinued operations
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574
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1,264
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4,205
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Total
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$
|
18,508
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$
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28,966
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$
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29,827
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83
Table of Contents
THE MACERICH COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share amounts)