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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark one)
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 1996.
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from to
Commission File Number 1-12504
THE MACERICH COMPANY
(Exact Name of Registrant as Specified in Its Charter)
Maryland 95-4448705
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
233 Wilshire Boulevard, # 700
Santa Monica, California 90401
(Address of principal executive office) (Zip Code)
Registrants telephone number, including area code: (310) 394-6911
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
------------------- -----------------------
Common Stock, New York Stock Exchange
$0.01 Par Value
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter periods that the
registrant was required to file such report(s)) and (2) has been subject to
such filing requirements of the past 90 days. Yes X No .
----- ----
Indicate by a check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein, and will not
be contained, to the best of the registrant's knowledge, in definitive proxy
or information statements incorporated by reference in Part III of this Form
10-K or any amendment to the Form 10-K.
---------------
As of March 4, 1997, the aggregate market value of the 16,463,275 shares
of Common Stock held by non-affiliates of the registrant was $458.9 million
based upon the closing price ($27.785) on the New York Stock Exchange
composite tape on such date. (For this computation, the registrant has
excluded the market value of all shares of its Common Stock reported as
beneficially owned by executive officers and directors of the registrant and
certain other shareholders; such exclusion shall not be deemed to constitute
an admission that any such person is an "affiliate" of the registrant.) As of
March 4, 1997, there were 25,743,497 shares of Common Stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the proxy statement for the annual stockholders meeting to
be held in 1997 are incorporated by reference into Part III.
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<PAGE>
THE MACERICH COMPANY
Annual Report on Form 10-K
For The Year Ended December 31, 1996
TABLE OF CONTENTS
Item No. Page No.
Part I
1. Business................................................ 1-10
2. Properties.............................................. 11-15
3. Legal Proceedings....................................... 15
4. Submission of Matters to a Vote of Security Holders..... 15
Part II
5. Market for the Registrant's Common Equity and
Related Shareholder Matters........................ 16
6. Selected Financial Data................................. 16-18
7. Management's Discussion and Analysis of Financial
Condition and Results of Operations..............18-28
8. Financial Statements and Supplementary Data.............. 28
9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure............... 28
Part III
10. Directors and Executive Officers of the Registrant....... 28
11. Executive Compensation................................... 28
12. Security Ownership of Certain Beneficial Owners
and Management................................... 28
13. Certain Relationships and Related Transactions........... 28
PART IV
14. Exhibits, Financial Statements, Schedules and
Reports on Form 8-K................................. 29
SIGNATURES
<PAGE>
PART I
- -------
Item I. Business
- -----------------
General
- --------
The Macerich Company (the "Company") is involved in the acquisition,
ownership, 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"). The Operating Partnership owns or has an ownership interest in
23 regional shopping centers and three community centers aggregating
approximately 19.1 million square feet of gross leasable area. These 26
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 real estate investment trust ("REIT") and
conducts all of its operations through the Operating Partnership and the
Company's two management companies, Macerich Property Management Company, a
California corporation, and Macerich Management Company, a California
corporation (collectively, the "Management Companies").
The Company was organized as a Maryland corporation in September 1993 to
continue and expand the shopping center operations of Mace Siegel, Arthur M.
Coppola, Dana K. Anderson and Edward C. Coppola (the "Principals") and certain
of their business associates.
All references to the Company in this 10-K include the Company, those
entities owned or controlled by the Company and predecessors of the Company,
unless the context indicates otherwise.
Recent Developments
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Public Offering
---------------
During July, 1995, the Company filed a shelf registration statement for
$250 million worth of securities to be issued at a later date, $112.0 million
of which were issued in 1995. During October and November 1996 the Company
sold 5,750,000 shares of common stock from the shelf (the "Equity Offering").
The net proceeds of $122 million were used by the Company primarily to repay
debt, to acquire Rimrock Mall, Vintage Faire Mall, Buenaventura Mall, Fresno
Fashion Fair and Huntington Center and for general corporate purposes. The
contribution of the proceeds of the equity offering to the Operating
Partnership, raised the Company's ownership interest in the Operating
Partnership to 68%. On February 5, 1997 the Company filed a new shelf
registration statement for $500 million worth of securities (including the
remaining $16 million under the former shelf) to be issued at a later date.
The new shelf has not yet been declared effective.
Acquisition Centers
-------------------
Villa Marina Marketplace was acquired on January 25, 1996. Villa Marina
Marketplace is a 447,684 square foot community center/entertainment complex
located in Marina del Rey, California. The purchase price was $80 million,
consisting of $57.6 million of cash and $22.4 million of assumed mortgage
indebtedness.
Valley View Mall is a super regional mall in Dallas, Texas which the
Company acquired on October 21, 1996. Valley View Mall contains 1,523,815
square feet and the purchase price was $85.5 million in cash plus the
assumption of $2.0 million in other liabilities.
Rimrock Mall, located in Billings, Montana, and Vintage Faire Mall,
located in Modesto, California were both purchased on November 27, 1996. The
combined purchase price was $118.2 million, including the assumption of $88.4
million of existing mortgage indebtedness, the assumption of $3.0 million of
other liabilities and with the balance being paid in cash. Vintage Faire Mall
is a super regional mall with 1,051,458 square feet and Rimrock Mall is a
regional mall consisting of 581,912 square feet.
Buenaventura Mall, Fresno Fashion Fair and Huntington Center were
purchased on December 18, 1996 for a combined price of $128.9 million,
including $38 million of assumed mortgage indebtedness, assumption of $3.8
million of other liabilities and the balance was paid in cash. Buenaventura
Mall, located in Ventura, California, is an 801,152 square foot super regional
mall, Fresno Fashion Fair, located in Fresno, California, is a super regional
mall containing 881,334 square feet and Huntington Center, located in
Huntington Beach, California, consists of 834,578 square feet.
The addition of the 1996 Acquisition Centers brings the Company's
portfolio to 23 Regional Shopping Centers and three Community Shopping
Centers, comprising more than 19.1 million square feet.
1
<PAGE>
Financings
----------
On April 1, 1996 the mortgage debt on Crossroads-OK, Greentree Mall, and
Salisbury was refinanced. The total indebtedness on these centers was
increased to $117 million, from $88 million, and the average interest rate was
fixed at 7.2%. On September 30, 1996 the $65.1 million mortgage loan at
Queens Center was refinanced. The interest rate was reduced from LIBOR plus
1.10% to LIBOR plus 0.45%. On December 23, 1996 the Villa Marina Marketplace
mortgage debt of $22 million was paid off. Additionally, a $60 million
mortgage was placed on Valley View Mall concurrent with its acquisition. The
interest rate is LIBOR plus 1.50% and the loan matures in October, 1997, but
can be converted into a fixed rate loan that matures in October, 2006.
Concurrent with the acquisition of Buenaventura Mall, Fresno Fashion Fair and
Huntington Center, a $57 million unsecured loan was obtained. The loan bears
interest at LIBOR plus 1.625% and matures on December 31, 1997.
The Shopping Center Industry
- ----------------------------
General
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There are several types of retail shopping centers, which are
differentiated primarily based on size and marketing strategy. Retail
shopping centers, generally contain in excess of 400,000 square feet of gross
leasable area ("GLA"), and are typically anchored by two or more department or
large retail stores ("Anchors"), 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," 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"). Anchors, Mall 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.
Regional Shopping Centers
-------------------------
A Regional Shopping Center draws from its trade area by offering a
variety of fashion merchandise, hard goods and services and entertainment,
generally 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.
The Company focuses on the acquisition and redevelopment of Regional
Shopping Centers. Regional Shopping Centers have generally provided owners
with relatively stable growth in 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 are difficult to develop because of the significant
barriers to entry, including the limited availability of capital and suitable
development sites, the presence of existing Regional Shopping Centers in most
markets, a limited number of Anchors, and the associated development costs and
risks. Consequently, the Company believes that few new Regional Shopping
Centers will be built in the next five years. However, many of the market,
financing and economic risks typically associated with the development of new
Regional Shopping Centers can be mitigated by acquiring and redeveloping an
existing Regional Shopping Center. Furthermore, the value of Regional
Shopping Centers can be significantly enhanced through redevelopment,
renovation and expansion.
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 gross leasable area
contiguous to the Anchors for tenants other than Anchors, is leased to a wide
variety of smaller retailers. Mall stores typically account for the bulk of
the revenues of a Regional Shopping Center.
Although a variety of retail formats compete for consumer purchases, the
Company believes that Regional Shopping Centers will continue to be a
preferred shopping destination. The combination of a climate controlled
shopping environment and a diverse tenant mix has resulted in Regional
Shopping Centers generating higher tenant sales than are generally achieved at
smaller retail formats. Further, the Company believes that department stores
located in Regional Shopping Centers will continue to provide a full range of
current fashion merchandise at a limited number of locations in any one
market, allowing them to command the largest geographical trade area of any
retail format.
2
<PAGE>
Community Shopping Centers
--------------------------
Community Shopping Centers are designed to attract local and
neighborhood customers and are typically open air shopping centers, with one
or more supermarkets, drugstores or discount department stores. National
retailers such as Kids-R-Us at Bristol Shopping Center, Toys-R-Us at
Marshall's Boulder Plaza, and The Gap, Victoria's Secret and Limited Express
at Villa Marina, provide the Company's three Community Shopping Centers with
the opportunity to draw from a much larger trade area than a typical
supermarket or drugstore anchored Community Shopping Center.
Business of the Company
- -----------------------
Management and Operating Philosophy
-----------------------------------
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, redevelopment,
property management, leasing, finance, construction, marketing, legal and
accounting 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.
Property Management and Leasing. 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.
The Company believes strongly in decentralized leasing and accordingly,
most of its leasing managers are located on-site to better understand the
market and the community in which a Center is located. Leasing managers are
charged with more than the responsibility of leasing space; they continually
assess and fine tune each Center's tenant mix, identify and replace
underperforming tenants and seek to optimize existing tenant sizes and
configurations.
Acquisitions. Since the IPO, the Company, has acquired interests in
shopping centers nationwide. These acquisitions were identified and
consummated by the Company's staff of acquisition professionals who are
strategically located in Santa Monica, Dallas, Denver, and Atlanta. 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.
Concurrent with its IPO, the Company acquired Crossroads Mall in
Oklahoma City, Oklahoma ("Crossroads-Oklahoma"). In addition, on July 21,
1994, the Company acquired Chesterfield Towne Center in Richmond, Virginia
("Chesterfield"). Together these properties are known as the "1994
Acquisition Centers". The Company made the following acquisitions during
1995: The Centre at Salisbury in Salisbury, Maryland ("Salisbury") on August
15, 1995, Capitola Mall in Capitola, California ("Capitola") on December 21,
1995, and Queens Center in New York, New York ("Queens Center") on December
28, 1995. Together these properties are known as the "1995 Acquisition
Centers". The Company made the following acquisitions in 1996: Villa Marina
Marketplace ("Villa Marina") on January 25, 1996; Valley View Mall on October
21, 1996; Vintage Faire Mall and Rimrock Mall on November 27, 1996; and
Buenaventura Mall, Fresno Fashion Fair and Huntington Center on December 18,
1996. Together these properties are referred to as "1996 Acquisition
Centers".
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 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 and Anchor approvals.
3
<PAGE>
Management and Operating Philosophy, Continued:
-----------------------------------------------
The Centers. The Centers consist of twenty-three Regional Shopping
Centers and three Community Shopping Centers aggregating approximately 19.1
million square feet of GLA. Twelve of the Centers have been acquired
concurrent with or since the IPO including two acquired by the Company in
1994, three acquired in 1995, and seven in 1996. All of the Company's
Regional Shopping Centers are enclosed, with the exception of Broadway Plaza,
an open air Regional Shopping Center located in Walnut Creek, California.
Twenty of the twenty-three Regional Shopping Centers combine three or more
Anchors with numerous diversified Mall Stores, most of which are national or
regional retailers. In addition, there are Freestanding Stores at most of the
Centers. Twenty-three of the 26 Centers contain more than 400,000 square feet
of GLA. The 23 Regional Shopping Centers in the Company's portfolio average
approximately 795,478 square feet of GLA and range in size from 1.8 million
square feet of GLA at Lakewood Mall to 369,670 square feet of GLA at Panorama
Mall. The Company's three Community Shopping Centers, Marshall's Boulder
Plaza, Villa Marina Marketplace and Bristol Shopping Center have an average of
257,435 square feet of GLA. The 26 Centers presently include 86 Anchors
totaling approximately 11.2 million square feet of GLA and approximately 2,452
Mall and Freestanding Stores totaling approximately 7.9 million square feet of
GLA.
Total revenues increased from $86.0 million in 1994 to $102.5 million in
1995 and $155.1 million in 1996 primarily due to acquisitions. See
"Managements Discussion and Analysis of Financial Condition and Results of
Operations." Lakewood Mall generated 16.0% of total shopping center revenues
in 1996, 22.0% in 1995 and 25.6% in 1994. Shopping center revenues at
Crossroads Mall-Colorado accounted for 10.6% of total shopping center revenues
in 1995 and 12.16% in 1994. During 1995 Chesterfield accounted for 12.6% of
total Shopping Center revenues. Queens Center accounted for 13.8% of 1996
shopping center revenue. No other Center generated more than 10% of shopping
center revenues during 1996, 1995 or 1994.
Cost of Occupancy
- -------------------
The Company's management believes that in order to maximize the
Company's operating cash flow, the Centers' Mall Store tenants must be able to
operate profitably. A major factor contributing to tenant profitability is
cost of occupancy. The following table summarizes occupancy costs for Mall
Store tenants in the Centers as a percentage of total Mall Store sales for the
last three years:
<TABLE>
For the Year Ended December 31,
--------------------------------------
1994 1995(2) 1996 (3)
-------- ------- --------
<S> <C> <C> <C>
Mall store sales (in thousands) $761,181 $766,849 $992,614
-------- -------- --------
-------- -------- --------
Minimum rents 8.3% 8.3% 8.3%
Percentage rents 0.4% 0.4% 0.4%
Expense recoveries (1) 2.5% 2.6% 2.9%
-------- -------- --------
Mall tenant occupancy costs 11.2% 11.3% 11.6%
-------- -------- --------
-------- -------- --------
</TABLE>
(1) Represents real estate tax and common area maintenance charges.
(2) Excludes 1995 Acquisition Centers.
(3) Excludes 1996 Acquisition Centers.
Competition
-----------
The 23 Regional Shopping Centers are located in developed areas in
middle to upper income markets where there are relatively few other Regional
Shopping Centers. In addition, 22 of the 23 Regional Shopping Centers contain
more than 400,000 square feet of GLA. The Company intends to consider
additional expansion and renovation projects to maintain and enhance the
quality of the Centers and their competitive position in their trade areas.
4
<PAGE>
Competition, Continued:
-----------------------
There are numerous owners and developers of real estate that compete
with the Company in its trade areas. This results in competition for both
acquisition of centers and for tenants to occupy space. The existence of
competing shopping centers could have a material 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 forms of retail, such as factory
outlet centers, power centers, discount shopping clubs, and home shopping
networks that could adversely affect the Company's revenues.
Major Tenants
- -------------
The Centers derived approximately 88.8% of their total rents for the
year ended December 31, 1996 from Mall and Freestanding Stores. No single
retailer accounted for more than 6.5% of annual base rents of the Company as
of December 31, 1996.
The following retailers (including their subsidiaries) represent the 10
largest retailers in the Company's portfolio based upon minimum rents in place
as of December 31, 1996:
<TABLE>
<C> <S> <S>
Number of Stores % of Total Minimum Rents
Retailer in the Centers as of December 31, 1996
- -------- ---------------- -----------------------
The Limited 71 6.3%
Woolworth 96 4.8%
J.C. Penney 15 2.2%
Barnes & Noble 26 1.8%
The Musicland Group 29 1.7%
The Gap 14 1.5%
Melville 20 1.4%
Sears 13 1.1%
Payless Shoe Source 19 1.0%
Borders Group 16 0.9%
</TABLE>
Mall and Freestanding Stores
----------------------------
Mall and Freestanding Store leases generally provide for tenants to pay
rent comprised of a fixed base (or "minimum") rent and a percentage rent based
on sales. In some cases, tenants pay only a fixed minimum rent, and in a few
cases, tenants pay only percentage rents. Most leases for Mall and
Freestanding Stores contain provisions that allow 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.
The Company uses tenant spaces 10,000 square feet and under for
comparing rental rate activity. Tenant space under 10,000 square feet
comprises 76.0% of all Mall and Freestanding Store space. The Company
believes that to include space over 10,000 square feet would provide a less
meaningful comparison, especially on a quarterly basis.
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 and Freestanding Store leases, 10,000 square feet or under, commencing
during 1996 was $27.02 per square foot, or 13.1% higher than the average base
rent for all Mall and Freestanding Stores (10,000 square feet or under) at
December 31, 1996 of $23.90 per square foot.
5
<PAGE>
Mall and Freestanding Stores, Continued:
----------------------------------------
The following table sets forth for the Centers the average base rent per
square foot of Mall and Freestanding GLA, for tenants 10,000 square feet and
under, as of December 31 for each of the past three years.
<TABLE>
Average Base Average Base
Average Base Rent Per Sq. Ft. on Rent Per Sq. Ft. on
Rent Per Leases Commencing Leases Expiring
Square Foot (1) During the Year (2) During the Year (3)
<S> <C> <C> <C>
December 31,
1994............................ $20.34 $24.12 $20.66
1995............................ $21.19 $23.13 $22.12
1996............................ $23.90 $27.02 $24.54
</TABLE>
(1) Average base rent per square foot is based on Mall and Freestanding Store
GLA for spaces 10,000 square feet or under occupied as of December 31 for
each of the Centers owned by the Company in 1994, 1995 (excluding the 1995
Acquisition Centers), and 1996 (excluding the 1996 Acquisition Centers).
If the 1995 Acquisition Centers were included, the 1995 average would be
$22.86, and if the 1996 Acquisition Centers were included, the 1996 average
would be $23.58.
(2) The base rent on lease signings during the year represents the actual rent
to be paid on a per square foot basis during the first twelve months. The
1995 average excludes the 1995 Acquisition Centers and the 1996 average
excludes the 1996 Acquisition Centers.
(3) The average base rent on leases expiring during the year represents the
final year minimum rent, on a cash basis, for tenant leases 10,000 square
feet or under expiring during the year. The average base rent on leases
expiring in 1995 excludes the 1995 Acquisition Centers and 1996 excludes
the 1996 Acquisition Centers.
Bankruptcy and Closure of Retail Stores
---------------------------------------
The bankruptcy and/or closure of an Anchor, or its sale to a less
desirable retailer, could adversely affect customer traffic in a Center and
thereby reduce the income generated by that Center. Furthermore, the closing
of an Anchor could, under certain circumstances, allow certain other Anchors
or other tenants to terminate their leases or cease operating their stores at
the Center or otherwise adversely affect occupancy at the Center. During the
fourth quarter of 1995 and the first quarter of 1996 there were a significant
number of retailer bankruptcies and closures. As a result, the Company
experienced slightly lower same center occupancies in 1996 compared to 1995.
Retail stores at the Centers other than Anchors may also seek the
protection of the bankruptcy laws, which could result in the termination of
such tenants' leases and thus cause a reduction in the cash flow generated by
the Centers. Although no single retailer accounts for greater than 6.5% of
total rents, the bankruptcy and subsequent closure of stores could create a
decrease in occupancy levels, reduced rental income or otherwise adversely
affect the Centers.
6
<PAGE>
Lease Expirations
-----------------
The following table shows (as of December 31, 1996) scheduled lease
expirations of Mall and Freestanding Stores 10,000 square feet or under for
the next ten years for the Centers, assuming that none of the tenants exercise
renewal options.
<TABLE>
<S> <C> <C> <C> <C>
Approximate % of Total Ending
Number of GLA of Leased GLA Base Rent per
Year Ending Leases Expiring Represented By Square Foot of
December 31, Expiring Leases Expiring Leases(1) Expiring Leases(1)
1997......... 336 647,760 14.1% $20.98
1998......... 260 479,774 10.4% $24.23
1999......... 255 474,550 10.3% $26.40
2000......... 241 486,030 10.6% $27.78
2001......... 211 436,606 9.5% $29.09
2002......... 152 345,859 7.5% $28.96
2003......... 166 411,288 8.9% $26.84
2004......... 127 290,789 6.3% $26.19
2005......... 124 306,673 6.7% $27.74
2006......... 121 346,330 7.5% $27.01
</TABLE>
(1) For leases 10,000 square feet or under
Anchors
- --------
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 and Freestanding Stores, strong Anchors play an
important part in maintaining customer traffic and making the Centers
desirable locations for Mall 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 and Freestanding
Stores.
Anchors accounted for approximately 11.2% of the Company's total rent for
the year ended December 31, 1996. Each Anchor which owns its own store, and
certain Anchors which 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.
7
<PAGE>
Anchors, Continued:
-------------------
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 Centers as of December 31, 1996, except as
otherwise indicated.
<TABLE>
<S> <C> <C> <C> <C>
GLA GLA Total GLA
Number of Owned Leased Occupied
Name Anchor Stores By Anchor By Anchor By Anchor
------------- ------------ ---------- --------------
J.C. Penney (2) 16 531,611 1,439,622 1,971,233
Sears 12 602,943 793,734 1,396,677
Montgomery Ward 10 596,601 718,663 1,315,264
Federated Department
Stores (1)
Macy's 7 500,457 733,009 1,233,466
Macy's Men's
& Juniors 2 - 235,443 235,443
------------- ------------- ------------ ---------------
Total 9 500,457 968,452 1,468,909
Dayton Hudson Corp.
Mervyn's 7 232,537 336,724 569,261
Target 1 - 87,396 87,396
Dayton's 1 115,193 - 115,193
-------------- ------------- ------------- ----------------
Total 9 347,730 424,120 71,850
May Department Stores Co.
Foley's 3 602,485 - 602,485
Hechts 2 140,000 100,000 240,000
Robinsons-May 1 - 362,852 362,852
--------------- ------------- -------------- ----------------
Total 6 742,485 462,852 1,205,337
Gottschalks 5 178,120 438,290 616,410
Dillard's 3 642,802 - 642,802
Herberger's 2 - 122,635 122,635
Burlington Coat Factory 1 - 133,650 133,650
Boscov's 1 - 140,000 140,000
Fashion Bar 1 - 40,000 40,000
Hennessy's 1 - 96,800 96,800
Home Depot 1 - 130,232 130,232
Joslins 1 - 93,270 93,270
Leggetts 1 - 109,933 109,933
Mercantile Stores, Inc.
de Lendrecies 1 188,000 - 188,000
Nordstrom 1 - 185,241 185,241
Profitts 1 - 65,163 65,163
Vacant (1) 4 210,000 326,932 536,932
---------------- ------------- -------------- -----------------
86 4,540,749 6,689,589 11,230,338
---------------- ------------- -------------- -------------------
---------------- ------------- -------------- -------------------
</TABLE>
8
<PAGE>
Anchors, Continued
-------------------
(1) The Broadway Stores merged with Federated Department Stores, Inc.
("Federated") during November 1995. As part of that merger, Federated
closed the Broadway stores at Panorama and Huntington Center and the
Weinstock's store at Parklane. Federated is negotiating to sell the
Panorama location.
(2) On January 25, 1997, J.C. Penney ceased operating at County East Mall.
The Company is currently negotiating with potential replacement tenants.
Environmental Matters
- ---------------------
Under various federal, state and local laws, ordinances and regulations,
an owner of real estate is liable for the costs of removal or remediation of
certain hazardous or toxic substances on or in such property. Such laws often
impose such liability without regard to whether the owner knew of, or was
responsible for, the presence of such hazardous or toxic substances. The
costs of investigation, removal or remediation of such substances may be
substantial, and the presence of such substances, or the failure to properly
remediate such substances, may adversely affect the owner's ability to sell or
rent such property or to borrow using such property as collateral. Persons
who arrange for the disposal or treatment of hazardous or toxic substances may
also be liable for the costs of removal or remediation of a release of such
substances at a disposal treatment facility, whether or not such facility is
owned or operated by such person. Certain environmental laws impose liability
for release of asbestos-containing materials ("ACMs") into the air and third
parties may seek recovery from owners or operators of real properties for
personal injury associated with ACMs. In connection with the ownership (direct
or indirect), operation, management and development of real properties, the
Company may be considered an owner or operator of such properties or as having
arranged for the disposal or treatment of hazardous or toxic substances and
therefore, potentially liable for removal or remediation costs, as well as
certain other related costs, including governmental fines and injuries to
persons and property.
Each of the Centers has been subjected to a Phase I audit (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 audits, and on other information, the Company is aware of
the following environmental issues that are reasonably possible to result in
costs associated with future investigation or remediation, or in environmental
liability:
Asbestos. The Company has conducted ACM surveys at various
locations within the Centers, which have indicated that ACMs are
present or suspected in certain areas, primarily vinyl floor
tiles, mastics, roofing materials, drywall tape, joint compounds
and acoustical ceiling tiles. 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 ACM in place.
Underground Storage Tanks. Underground storage tanks ("USTs") are
or were present at certain of the 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. Certain 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 the responsible current or former tenant, 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 has been detected at certain of the 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 tenants, or other responsible
parties, are unavailable to pay such costs.
9
<PAGE>
Environmental Matters, Continued:
- ---------------------------------
PCE has been detected in soil and groundwater in the vicinity of a dry
cleaning establishment at North Valley Plaza. The California Department of
Toxic Substance Control (DTSC) has advised the Company that very low levels
of Dichlorethylene (1,2,DCE) a degradation byproduct of PCE, have been
detected in a water well located 1/4 mile west from the dry cleaners, and
the dry cleaning facility may have contributed to the introduction of 1,2
DCE into the water well. According to DTSC, the maximum contaminant level
(MCL) for 1,2DCE which is permitted in drinking water is 6 parts per
billion (ppb); and that the 1,2DCE was detected in the water well at 1.2
ppb, which is below the MCL. The Company has retained an environmental
consultant and has initiated extensive testing of the site, although the
extent of the impacted soil and groundwater has not been fully defined.
Redmediation is scheduled to begin in the first half of 1997. The joint
venture that owns that property (of which the Company is a 50% general
partner) has a $685,000 reserve, plus $155,000 has already been incurred,
to cover professional fees, testing and remediation costs. The Company
intends to look to the responsible parties and insurers if remediation is
required.
Toluene, a petroleum constituent, has been detected in a groundwater
dewatering system at the Queens Center. The source of the toluene is
currently unknown, but it is possible that an adjacent service station has
caused or contributed to the problem. It is also possible that the toluene
remains from previous service station operations which occurred on site
prior to the development of the site into its current use in the early
1970s. Toluene was detected at levels of 410 and 160 parts per billion
(ppb) in samples taken from the tank in October, 1995 and February, 1996,
respectively. Additional samples were taken in May and December of 1996,
with results of .63 ppb and "non-detect" for the May sampling event and
16.2 ppb and 25.2 ppb for the December sampling event. The maximum
contaminant level (MCL) for toluene in drinking water is 150 ppb. Although
the Company believes that no remediation will be required, it has set up a
$150,000 reserve to cover professional fees and testing costs. The Company
intends to look to the responsible parties and insurers if remediation is
required.
Dry cleaning chemicals, including PCE have been detected in soil and
groundwater in the vicinity of a dry cleaning establishment at Villa Marina
Marketplace. The previous owner of the property has reported the release
to the local government authorities and has agreed to fully assess and
remediate the site to the extent required by those authorities subject to a
limited indemnity agreement. The previous owner has removed the dominant
source of impacted soil and is continuing its efforts to assess the site
under the direction of the local regulatory oversight agency. Although the
Company believes that it will not be required to participate in assessment
or remediation activities, it has set up a $150,000 reserve ($20,000 of
which has already been incurred) to cover professional and legal fees.
The Company acquired Fresno Fashion Fair in December, 1996. Asbestos
has been detected in structural fireproofing throughout much of the Mall.
Recent testing data conducted by a professional environmental consulting
firms indicates that the fireproofing is largely inaccessible to building
occupants and is well adhered to the structural members. Additionally,
airborne concentrations of asbestos are well within OSHA's permissible
exposure limit (PEL) of .1 fcc. The accounting for this acquisition
included a reserve of $3.3 million to cover future removal of this
asbestos, as necessary.
Dry cleaning chemicals including perchloroethylene (PCE) were detected
in soil and groundwater in the vicinity of a former dry cleaning
establishment at Huntington Center. The release has been reported to the
local government authorities. The Company estimates, based on the data
currently available, that costs for assessment, remediation and legal
services will not exceed $500,000. Consequently, at the time of the
acquisition, the Company established a $500,000 reserve to cover
professional and legal fees. The company intends to look to responsible
parties and insurers for cost recovery.
Employees
- ---------
The Company and the Management Companies employ approximately 910
persons, including six executive officers, personnel in the areas of
acquisitions and business development (8), property management (127), leasing
(32), redevelopment/construction (18), financial services (37) and legal
affairs (8). In addition, in an effort to minimize operating costs, the
Company generally maintains its own security staff (304) and maintenance staff
(370). Approximately 6 of these employees are represented by a union. The
Company believes that relations with its employees are good.
10
<PAGE>
<TABLE>
Item 2. Properties
<S> <C> <C> <C> <C> <C> <C> <C>
Percentage
Year of Year of Mall and of Mall and
Original Most Recent Free Free Sales Per
Name of Center / Construction/ Expansion / Total Standing Standing Square
Location (1) Acquisition Renovation GLA (2) GLA GLA Leased Anchors Foot (8)
- ------------------- ------------ ------------ -------- -------- ----------- ----------------- ---------
Broadway Plaza (9) 1951/1985 1994 679,427 233,930 98.4% Macy's (2 locations), 401
Walnut Creek, California Nordstrom
Capitola Mall (9) 1997/1995 1988 585,618 205,901 95.7% Gottschalks, J.C. Penney, 278
Capitola, California Mervyn's, Sears
Chesterfield
Towne Center 1975/1994 1988 817,697 396,504 90.2% Hecht's, Leggett's, 289
Richmond, Virginia Proffitt's, Sears
County East Mall 1966/1986 1989 488,883 170,323 79.9% J.C. Penney (3), Sears 221
Antioch, California Gottschalks, Mervyn's,
Crossroads Mall (9) 1963/1979 1986 808,969 365,532 91.3% Foley's, J.C. Penney, 242
Boulder, Colorado Mervyn's, Sears
Montgomery Ward
Crossroads Mall 1974/1994 1991 1,112,374 372,686 83.4% Dillard's, Foley's, 213
Oklahoma City, Oklahoma Montgomery Ward
J. C. Penney
Greeley Mall 1973/1986 1987 585,044 241,682 89.0% J.C. Penney, 189
Greeley, Colorado Fashion Bar (4),
Joslins, Sears
Montgomery Ward
Green Tree Mall 1968/1975 1995 786,219 335,437 86.9% Dillard's, 281
Clarksville, Indiana J.C. Penney, Sears,
Target
Holiday
Village Center (9) 1959/1979 1992 597,361 269,842 96.7% Herberger's,
Great Falls, Montana J.C. Penney, 265
Montgomery Ward
Sears
Lakewood Mall 1953/1975 1992 1,758,939 815,290 98.9% Home Depot, Mervyns, 312
Lakewood, California J. C. Penney,
Montgomery Ward,
Robinson-May,
Northgate Mall 1964/1986 1987 744,050 273,719 90.9% Macy's, Mervyns, 245
San Rafael, California Sears
North Valley Plaza 1968/1987 1994 413,843 187,409 67.2% Montgomery Ward (6) 133
Chico, California Mervyn's
Panorama 1955/1979 1980 369,670 159,670 96.4% (7) 330
Panorama, California
Park Lane Mall (9) 1967/1978 1987 459,252 209,932 91.9% Gottschalks, (5) 252
Reno, Nevada
Queens 1973/1995 1991 625,126 156,983 97.5% J.C. Penney , Macy's 657
Queens, New York
Salisbury, Centre at 1990/1995 1990 883,672 278,691 87.8% Boscov's, J.C. Penney, 271
Salisbury, Maryland Montgomery Ward,
Hechts, Sears
West Acres 1972/1986 1992 907,595 355,040 95.8% Daytons, Sears, 320
Fargo, North Dakota O.J. De Lendrecies,
J.C. Penney
Bristol
Shopping Center (9) 1966/1986 1992 165,682 165,682 94.2% 367
Santa Ana, California
Marshalls'
Boulder Plaza 1969/1989 1991 158,939 158,939 100.0% 317
Boulder, Colorado
-------- ------- -------- ---------
Sub-total / Average at December 31, 1996 12,948,360 5,353,192 91.8% $294
</TABLE>
11
<PAGE>
Item 2. Properties, Continued
<TABLE>
THE MACERICH COMPANY: LIST OF PROPERTIES
<S> <C> <C> <C> <C> <C> <C> <C>
Percentage
Year of Year of Mall and of Mall and
Original Most Recent Free Free Sales Per
Name of Center / Construction/ Expansion / Total Standing Standing Square
Location (1) Acquisition Renovation GLA (2) GLA GLA Leased Anchors Foot (8)
- ------------------------ ------------ ------------ -------- -------- ----------- ----------------------- ---------
1996 Acquisition Centers
Fresno Fashion Fair 1970/1996 1983 881,334 320,453 94.8% Gottschalks, J.C. Penney, 289
Fresno, California Macy's (2 locations)
Rimrock 1978/1996 - 581,912 266,472 94.5% Herbergers, Hennessy's 213
Billings, Montana J.C. Penney,
Montgomery Ward
Valley View 1973/1996 1996 1,523,815 465,918 84.7% Dillard's, Foleys, 212
Dallas, Texas J.C. Penney, Sears
Villa Marina
Marketplace 1972/1996 1995 447,684 447,684 96.3% 398
Marina Del Rey, California
Vintage Faire 1977/1996 - 1,051,458 351,539 86.7% Gottschalks, J.C. Penney, 279
Modesto, California Macy's, Sears
Macy's Men's & Home,
Sears
---------- --------- --------- ------
Total / Average 1996 Acquisitions 4,486,203 1,852,066 91.0% 279
(excluding major redevelopment properties)
---------- --------- --------- ------
Sub-Total / Average 17,434,563 7,205,258 91.6% 290
Major Redevelopment Properties
Buenaventura 1965/1996 1993 801,152 345,816 (11) J.C. Penney, Macy's, 267
Ventura, California Montgomery Wards
Huntington Center(9) 1965/1996 1997 832,578 286,881 (11) Edwards Cinema (10), 303
Huntington Beach, California Mervyn's
Burlington Coat Factory,
Montgomery Ward
---------- --------- ------
Total Major Redevelopment Centers 832,578 286,881 283
---------- --------- ------
Grand Total / Average 19,068,293 7,837,955 290
---------- --------- ------
---------- --------- ------
</TABLE>
12
<PAGE>
Item 2. Properties, Continued
- ------------------------------
(1) The land underlying twenty of the Centers is owned entirely by the
Company or, in the case of jointly-owned Centers, the property
partnership in fee. All or part of the land underlying the remaining
Centers is owned by third parties and leased to the Company or property
partnership pursuant to long-term ground leases. Under the terms of a
typical ground lease, the Company or property partnership 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 or property partnership has an option or right of first
refusal to purchase the land. The termination dates of the ground
leases range from 2013 to 2060.
All centers are wholly owned by the Company or its subsidiaries, except
for Broadway Plaza (50%), North Valley Plaza (50%), Panorama Mall (50%),
and West Acres (19%).
(2) Includes GLA attributable to Anchors (whether owned or leased) and Mall
and Freestanding Stores as of December 31, 1996.
(3) J.C. Penney vacated its facility at County East Mall in 1997.
(4) The Company negotiated an early termination of the Fashion Bar lease.
Fashion Bar closed on January 15, 1997. The Company is currently
negotiating with a replacement tenant.
(5) Federated closed the Weinstock's store at Parklane Mall and the Company
acquired Federated's leasehold interest. The Company is planning to
demolish the Weinstocks building and redevelop this area as a location
based entertainment complex.
(6) J.C. Penney vacated its facility at North Valley Plaza in 1993. The
Company has relocated the existing 60,000 square foot Mervyn's at the
Center into the larger J.C. Penney building. The Company is in
negotiations for a replacement tenant for the Mervyn's building.
(7) Federated Department Stores, Inc. merged with Broadway Stores, Inc. in
November, 1995. Federated owns the Broadway Store at Panorama. This
Broadway Store ceased operations in January 1996. Federated is
currently negotiating to sell this building to Wal-Mart.
(8) Sales are based on reports by retailers leasing Mall and Freestanding
Stores for the year ending December 31, 1996 for tenants which have
occupied such stores for a minimum of twelve months. Consistent with
industry practices, sales per square foot are based on gross leased and
occupied area, excluding theaters, and are not based on GLA.
(9) Portions of the land on which the Center is situated are subject to one
or more ground leases.
(10) Edwards Cinema signed a lease in January 1997 to occupy the former
Broadway location. Edwards is expected to open a 21 screen theater
complex on that site in May 1998.
(11) Certain spaces have been intentionally held off the market and remain
vacant due to major redevelopment strategy. As a result, the Company
believes the percentage of mall and free-standing GLA leased at these
major redevelopments is not meaningful data.
<PAGE>
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. All mortgage debt is nonrecourse
to the Company. The information set forth below is as of December 31, 1996.
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
Annual Balance Earliest Date
Annual Principal Debt Due on on which all
Property Pledged Fixed or Interest Balance Service Maturity Maturity Notes Can
As Collateral Floating Rate (000's) (000's) Date (000's) Be Prepaid
----------------- ----------- ----------- ----------- ----------- -------- --------- -----------
Capitola Mall Fixed 9.25% 37,976 3,801 12/15/01 36,152 Any Time
Chesterfield
Towne Center (1) Fixed 8.75% 59,023 5,702 1/1/24 5,381 1/1/24 (2)
Chesterfield Towne Center Fixed 9.38% 5,304 540 1/1/24 515 1/1/24 (2)
Chesterfield Towne Center Fixed 8.88% 1,922 187 1/1/24 177 1/1/24 (2)
Chesterfield Fixed 8.54% 3,444 337 11/1/99 3,484 Any Time
Crossroads Mall (3) Fixed 7.08% 35,968 2,932 12/15/10 28,107 12/15/01
Fresno Fashion Fair Fixed 8.40% 38,000 3,165 10/1/05 38,000 Any Time
Greeley Mall Fixed 8.50% 18,514 2,245 9/15/03 12,519 Any Time
Green Tree Mall/
Crossroads- OK/
Salisbury Fixed 7.22% 117,714 3,597 3/16/04 50,000 Any Time
Holiday Village Mall Fixed 6.75% 17,000 1,147 4/1/01 17,000 1/10/99
Lakewood Mall Fixed 7.20% 127,000 9,144 8/10/05 127,000 Any Time
Northgate Mall Fixed 6.75% 25,000 1,688 4/1/01 25,000 1/10/99
Queens Mall Floating (4) 65,100 (4) 3/31/99 51,000 Any Time
Parklane Mall Fixed 6.75% 20,000 1,350 4/1/01 20,000 Any Time
Rimrock Mall Fixed 7.70% 31,994 2,924 1/1/03 28,496 Any Time
Valley View Mall Floating (5) 60,000 (5) (5) 60,000 Any Time
Vintage Faire Mall Fixed 7.65% 56,280 5,122 1/1/03 50,089 Any Time
-----------
TOTAL - Wholly Owned Centers 720,239
Joint Venture Centers:
Broadway Plaza (50%) (6) Fixed 6.84% 21,750 1,487 5/5/98 21,750 Any Time
West Acres Center(19%)(6) Fixed 8.96% 7,301 648 7/15/99 6,613
-----------
TOTAL - All Centers $ 749,290
-----------
-----------
</TABLE>
Notes:
(1) The annual debt service payment represents the payment of principal and
interest. In addition, contingent interest, as defined in the loan
agreement, may be due to the extent that 35% of the gross receipts
(as defined in the loan agreement) exceeds a base amount specified
therein. Contingent interest recognized was $75,910 for the period
from July 21, 1994 (the date of acquisition of Chesterfield)
to December 31, 1994, $184,321 for the year ended December 31, 1995
and $398,619 for the year ended December 31, 1996.
(2) No prepayment except under certain circumstances in the event of the
sale of the Center.
(3) This debt was issued at a discount. The unamortized discount at
December 31, 1996 was $463,000. The above balance is net of the
discount.
(4) The interest rate is LIBOR plus .45%. LIBOR was 5.55% at December 31,
1996. There is an interest rate cap on $10 million of this debt at a
LIBOR strike rate of 5.88% through maturity. The remaining principal
has an interest rate cap with a LIBOR strike rate of 7.07% from
December 31, 1996 to December 30, 1997, and 7.7% thereafter.
(5) The Valley View loan bears interest at LIBOR plus 1.50%. The Company
can elect to convert the loan to a fixed rate, ten year loan at any
time up to October 21, 1997.
(6) Reflects the Company's pro rata share of debt.
14
<PAGE>
Mortgage Debt, Continued
------------------------
The Company has also obtained a $50 million unsecured working capital line
of credit with a financial institution which bears interest at approximately
LIBOR plus 1.625% or the institution's prime rate. There was $12 million
outstanding on this line as of December 31, 1996. In addition, the Company has
a $57 million unsecured bank loan bearing interest at LIBOR plus 1.625% due
December 31, 1997. This debt was incurred in connection with the Fresno
Fashion Fair, Huntington Center and Buenaventura Mall acquisitions.
Item 3. Legal Proceedings.
- --------------------------
The Company, the Operating Partnership, the Management Companies and the
affiliated partnerships are not currently involved in any material litigation
nor, to the Company's knowledge, is any material litigation currently
threatened against such entities or the Centers, other than routine litigation
arising in the ordinary course of business, most of which is expected to be
covered by liability insurance. For information about certain environmental
matters, see "Business of the Company - Environmental Matters."
Item 4. Submission of Matter to a Vote of Security Holders.
- ------------------------------------------------------------
None.
15
<PAGE>
Part II
Item 5. Market for Registrant's Common Equity and Related Stockholder
Matters.
- -------------------------------------------------------------------------
The common stock of the Company is listed and traded on the New York Stock
Exchange ("NYSE") under the symbol "MAC". The common stock began trading on
March 10, 1994 at a price of $19 per share. In 1996 the Company's shares
traded at a high of $26.125 and a low of $19.
As of February 20, 1997 there were approximately 218 shareholders of
record. The following table shows high and low closing prices per share of
common stock for each quarter in 1995 and 1996 and dividends/distributions per
share of common stock declared and paid by quarter.
<TABLE>
Market Quotation Per Share Dividends/Distributions
High Low Declared and Paid
----- ---- -----------------
<S> <C> <C> <C>
March 31, 1995 $21 1/2 $19 7/8 $0.40
June 30, 1995 20 3/4 19 3/8 0.42
September 30, 1995 21 7/8 19 1/2 0.42
December 31, 1995 21 1/4 19 1/4 0.42
March 31, 1996 $20 1/8 $19 1/4 $0.42
June 30, 1996 21 1/4 19 0.42
September 30, 1996 22 7/8 20 0.42
December 31, 1996 26 1/8 21 3/4 0.44
</TABLE>
Item 6. Selected Financial Data.
The following sets forth selected financial data for the Company on a
historical and pro forma consolidated basis, and for the Centers and the
Management Companies (collectively, the "Predecessor"), on an historical
combined basis. The following data should be read in conjunction with the
financial statements (and the notes thereto) of the Company and the
Predecessor and "Management's Discussion And Analysis of Financial Condition
and Results of Operations" each included elsewhere in this Form 10-K.
The pro forma data for the Company for the year ended December 31, 1994
has been prepared as if the IPO and the transactions related to the
reorganization of the Operating Partnership and formation of the Company (the
"Formation") and the application of the net proceeds of the IPO had occurred
as of January 1, 1994. The pro forma information is not necessarily
indicative of what the Company's financial position or results of operations
would have been assuming the completion of the Formation and IPO at the
beginning of the period indicated, nor does it purport to project the
Company's financial position or what results of operations would have been
assuming the completion of the Formation and the IPO at the beginning of the
period indicated, nor does it purport to project the Company's financial
position or results of operations at any future date or for any future period.
The Selected Financial Data is presented on a combined basis. The
limited partnership interests in the Operating Partnership (not owned by the
REIT) are reflected in the pro forma data as minority interest. Centers in
which the Company does not have a greater than 50% ownership interest
(Panorama Mall, North Valley Plaza, Broadway Plaza and West Acres Shopping
Center) are referred to as the "Joint Venture Centers", and along with the
Management Companies, are reflected in the selected financial data under the
equity method of accounting. Accordingly, the net income from the Joint
Venture Centers and the Management Companies that is allocable to the Company
and the Predecessor is included on the statement of operations as Income of
uncombined joint ventures and management companies.
16
<PAGE>
<TABLE>
Item 6. Selected Financial Data, Continued
The Company Predecessor
-------------------------------------------- --------------------------------------
Pro Forma
as Reported March 16 to January 1 to
1996 1995 for 1994 Dec 31,1994 Mar 15,1994 1993 1992
------ ------ ------------ ------------ ------------ ------------ ------------
(All amounts in thousands except per share data and number of Centers)
<S> <C> <C> <C> <C> <C> <C> <C>
Operating Data:
Revenues:
Minimum rents $99,061 $69,253 $59,640 $48,663 $9,993 $49,219 $46,393
Percentage rents 6,142 4,814 4,906 3,681 851 3,550 3,868
Tenant recoveries 47,648 26,961 22,690 18,515 3,108 16,320 15,991
Management fee
income (2) - - - - 528 2,658 3,130
Other 2,208 1,441 921 582 100 766 1,876
------------ -------- ------- --------- ------------ ---------- ------------
Total revenues $155,059 102,469 88,157 71,441 14,580 72,513 71,258
Shopping center
expenses 50,792 31,580 28,373 22,576 4,891 23,881 22,959
Management, leasing
and development
services (2) - - - - 557 2,084 2,598
REIT general
and administrative
expenses 2,378 2,011 1,954 1,545 - - -
Depreciation and
amortization 32,591 25,749 23,195 18,827 3,642 16,385 14,090
Interest expense 42,353 25,531 19,231 16,091 6,146 27,783 29,818
---------- -------- --------- --------- ---------- ---------- ------------
Income (loss) before
minority interest,
unconsolidated joint
ventures and
extraordinary item $26,945 $17,598 $15,404 $12,402 ($656) $2,380 $1,793
Minority interest (1) (10,975) (8,246) (8,008) (6,792) - - -
Income (loss) of
unconsolidated joint
ventures and management
companies (2) 3,256 3,250 3,054 3,016 (232) (178) 306
Extraordinary loss on
early extinguishment
of debt (315) (1,299) - - - - (1,000)
---------- -------- --------- --------- ------------ ---------- ------------
---------- -------- --------- --------- ------------ ---------- ------------
Net income (loss) $18,911 $11,303 $10,450 $8,626 ($888) $2,202 $1,099
----------- -------- --------- --------- ------------ ---------- ------------
----------- -------- --------- --------- ------------ ---------- ------------
Earnings per share: (3)
Income before
extraordinary
item $0.92 $0.78 $0.72 $0.60
Extraordinary item (0.01) (0.05) - -
------------ -------- --------- ---------
Net income
per share $0.91 $0.73 $0.72 $0.60
------------ -------- --------- ---------
------------ -------- --------- ---------
Other Data:
Funds from
operations(4) $62,424 $44,938 $39,343 $32,710 N/A N/A N/A
The Company's share
of FFO (5) $39,502 $25,982 $22,011 $18,300 N/A N/A N/A
EBITDA (6) $101,889 $68,878 $57,592 $47,320 N/A N/A N/A
Cash flows from
(used in):
Operating
activiti es $80,431 $48,186 $30,011 $6,449 N/A N/A N/A
Investing
activiti es ($296,675) ($88,413) ($137,637) ($1,659) N/A N/A N/A
Financing
activiti es $216,317 $51,973 $99,584 ($2,343) N/A N/A N/A
Number of centers
at year end 26 19 16 16 14 14 14
Weighted average
number of shares
outstanding (7) 32,934 26,930 25,645 25,714 N/A N/A N/A
Cash distributions
declared per
common share $1.70 $1.66 N/A $1.27 N/A N/A N/A
</TABLE>
17
<PAGE>
Item 6. Selected Financial Data, Continued
- -------------------------------------------
<TABLE>
The Company Predecessor
----------------------------------- -----------------------------
December 31,
------------------------------------------------------------------
1996 1995 1994 1993 1992
(All amounts in thousands)
<S> <C> <C> <C> <C>
Balance Sheet Data:
Investment in real estate
(before accumulated
depreciation) $ 1,273,085 $ 833,998 $ 554,788 $ 375,972 $ 311,750
Total assets $ 1,187,753 $ 763,398 $ 485,903 $ 314,591 $ 281,668
Total debt $ 789,702 $ 509,313 $ 326,588 $ 402,885 $ 359,695
Minority interest (1) $ 112,242 $ 95,740 $ 72,376 $ - $ -
Partners' deficit $ - $ - $ - $ (88,294) $ (78,027)
Stockholders' equity $ 237,749 $ 158,345 $ 86,939 $ - $ -
</TABLE>
(1) "Minority Interest" reflects the ownership interest in the Operating
Partnership not owned by the REIT.
(2) Unconsolidated joint ventures include all Centers that the Company does not
wholly own and the Management Companies. The Management Companies on a pro
forma basis and after March 15, 1994 have been reflected on the equity
method.
(3) Net income per share assumes full redemption of OP Units .
(4) Funds from operations ("FFO") represents net income (loss) (computed in
accordance with generally accepted accounting principles ("GAAP")),
excluding gains (or losses) from debt restructuring and sales of property,
plus depreciation and amortization (excluding depreciation on personal
property and amortization of loan and financial instrument costs), and
after adjustments for unconsolidated entities. Adjustments for
unconsolidated entities are calculated on the same basis. Funds from
operations does not represent cash flow from operations as defined by GAAP
and is not necessarily indicative of cash available to fund all cash flow
needs.
(5) The Company's share of FFO represents the Company's weighted average
ownership of the Operating Partnership multiplied by total FFO.
(6) EBITDA represents earnings before interest, income taxes, depreciation,
amortization, minority interest, income in unconsolidated entities and
extraordinary items. This data is relevant to an understanding of the
economics of the shopping center business as it indicates cash flow
available from operations to service debt and satisfy certain fixed
obligations. EBITDA should not be construed by the reader as an
alternative to operating income as an indicator of the Company's operating
performance, or to cash flows from operating activities (as determined in
accordance with GAAP) or as a measure of liquidity.
(7) Assumes that all OP units are converted to common stock.
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
- --------------------------------------------------------------------------
The following discussion should be read in conjunction with the
"Selected Financial Data" and the Company's Consolidated and Predecessor
Combined Financial Statements and Notes thereto appearing elsewhere in this
10-K.
General Background and Performance Measurement
- -----------------------------------------------
The Company receives income primarily from two sources:
(1) Through its ownership of wholly-owned Centers.
(2) Through its ownership interests in Joint Venture Centers which
include Panorama Mall (50%), Broadway Plaza (50%), North Valley
Plaza (50%), and West Acres Shopping Center (19%).
18
<PAGE>
General Background and Performance Measurement, Continued
- ---------------------------------------------------------
The Company believes that the most significant measures of its operating
performance are Funds from Operations and EBITDA. Funds from Operations is
defined as net income (loss) (computed in accordance with GAAP), excluding
gains (or losses) from debt restructuring and sales of property, plus
depreciation and amortization (excluding depreciation on personal property and
amortization of loan and financial instrument costs), and after adjustments
for unconsolidated entities. Adjustments for unconsolidated entities are
calculated on the same basis. Funds from Operations does not represent cash
flow from operations as defined by GAAP and is not necessarily indicative of
cash available to fund all cash flow needs.
EBITDA represents earnings before interest, income taxes, depreciation,
amortization, minority interest, income in unconsolidated entities and
extraordinary items. This data is relevant to an understanding of the
economics of the shopping center business as it indicates cash flow available
from operations to service debt and satisfy certain fixed obligations. EBITDA
should not be construed as an alternative to operating income as an indicator
of the Company's operating performance, or to cash flows from operating
activities (as determined in accordance with GAAP) or as a measure of
liquidity. While the performance of individual Centers and the Management
Companies determines EBITDA, the Company's capital structure also influences
Funds from Operations. The most important component in determining EBITDA and
Funds from Operations is Center revenues. Center revenues consist primarily
of minimum rents, percentage rents and tenant expense recoveries. Minimum
rents will increase to the extent that new leases are signed at market rents
that are higher than prior rents. Minimum rent will also fluctuate up or down
with changes in the occupancy level. Additionally, to the extent that new
leases are signed with more favorable expense recovery terms, expense
recoveries will increase.
Percentage rents generally increase or decrease with changes in tenant
sales. As leases roll over, however, a significant portion of historical
percentage rent is often converted to minimum rent. It is therefore common
for percentage rents to decrease as minimum rents increase. Accordingly, in
discussing financial performance, the Company combines minimum and percentage
rents in order to better measure revenue growth.
The following discussion is based primarily on the consolidated
financial statements of the Company for the years ended December 31, 1996 and
1995, and for the period from March 16, 1994 (commencement of operations)
through December 31, 1994, and the combined financial statements of Macerich
Predecessor Affiliates ("Predecessor") for the period from January 1, 1994
through March 15, 1994. The combined financial statements of the Predecessor
combine the balance sheet data and results of operations of the partnerships
that previously owned 14 of the properties and of the management and leasing
operations of the Predecessor which were contributed to the Company. The
Predecessor is considered the predecessor entity to the Company and the
combined financial statements are presented for comparative purposes. The
following discussion compares the activity for the year ended December 31,
1996 to results of operations for 1995. Also included is a comparison of the
activities for the year ended December 31, 1995 to the results for the year
ended December 31, 1994, which includes a summation of the Company's and the
Predecessor's results of operations for 1994.
This information should be read in conjunction with the accompanying
consolidated and combined financial statements and notes thereto.
On March 16, 1994 the Company acquired Crossroads Mall ("Crossroads-OK")
located in Oklahoma City, Oklahoma and on July 21, 1994 the Company acquired
Chesterfield Towne Center ("Chesterfield") in Richmond, Virginia. Crossroads-
OK and Chesterfield are collectively referred to herein as the "1994
Acquisition Centers". In August, 1995, the Company acquired The Centre at
Salisbury ("Salisbury") in Salisbury, Maryland, and in December, 1995 the
Company acquired two malls, Capitola Mall ("Capitola"), in Capitola,
California, and Queens Center ("Queens"), in Queens, New York. These
properties are known as the "1995 Acquisition Centers." In January 1996, the
Company acquired Villa Marina Marketplace ("Villa Marina"), Valley View Mall
("Valley View") in Dallas, Texas was acquired in October 1996 and Rimrock Mall
("Rimrock") in Billings, Montana and Vintage Faire Mall ("Vintage Faire") in
Modesto, California were acquired in November 1996. In December 1996 the
Company acquired Huntington Center ("Huntington") in Huntington Beach,
California, Buenaventura Mall ("Buenaventura") in Ventura, California, and
Fresno Fashion Fair ("Fresno") in Fresno, California. These properties are
known as the "1996 Acquisition Centers." The financial statements include the
results of the acquired properties from their acquisition dates. As a result,
many of the variations in the results of operations, discussed below, occurred
due to the addition of these properties to the Company's portfolio during
1996, 1995 and 1994. Many factors, such as availability and cost of capital,
overall debt to market capitalization level, interest rates and availability
of potential acquisition targets that meet the Company's criteria, impact the
Company's ability to acquire additional properties. Accordingly, management
is uncertain as to whether during 1997 and future years there will be similar
acquisitions and corresponding increases in revenues, net income and Funds
from Operations that occurred as a result of the 1996, 1995 and 1994
acquisitions.
19
<PAGE>
General Background and Performance Measurement, Continued
- ---------------------------------------------------------
The bankruptcy and/or closure of retail stores, particularly Anchors,
may reduce customer traffic and cash flow generated by a Center. During 1995,
Federated Department Stores, Inc. announced the closure of the Broadway Stores
at Panorama and Huntington Center and Weinstock's at Parklane. The Company
acquired Weinstock's leasehold interest in 1996 and is negotiating with a
replacement. Federated is currently negotiating with another retailer to sell
the former Panorama Broadway building. The Huntington Center Broadway store
is being demolished and replaced with a 21 screen theater complex. All three
stores remained closed through December 31, 1996. The long-term closure of
these or other stores could adversely affect the Company's performance.
In addition, the Company's success in the highly competitive real estate
shopping center business depends upon many other factors, including general
economic conditions, the ability of tenants to make rent payments, increases
or decreases in operating expenses and interest rates, occupancy levels,
changes in demographics, competition from other centers and forms of retailing
and the ability to renew leases or relet space upon the expiration or
termination of leases.
Assets and Liabilities
- ----------------------
Total assets increased to $1,187,753,000 at December 31, 1996 compared
to $763,398,000 at December 31, 1995 and $485,903,000 at December 31, 1994.
During that same period, total liabilities increased from $326,588,000 in 1994
to $509,313,000 in 1995 to $767,266,000 in 1996. These changes were primarily
as a result of the 1996 and 1995 common stock offerings, the purchase of the
1996 Acquisition Centers and 1995 Acquisition Centers and various refinancing
and debt reduction transactions described below.
A. Equity Offering
-------------------
The Company had an equity offering in November, 1996 in which 5,750,000
shares were sold, raising $122.2 million of net equity, after costs of the
offering. The use of those proceeds and timing are summarized below:
<TABLE>
<S> <C>
November 6, 1996 to repay the acquisition debt on Valley View Mall 60,000,000
November 29, 1996 acquisition of Rimrock Mall and Vintage Faire Mall 16,700,000
November 11, 1996 payoff of line of credit 45,500,000
----------------
Total 122,200,000
B. Acquisitions
----------------
On January 25, 1996, Villa Marina, a 447,684 square foot
entertainment/community center was acquired. The purchase price was $80
million and included the assumption of debt of $22.5 million.
On October 21, 1996 Valley View Mall, a 1.5 million square foot super
regional mall in Dallas, Texas was acquired. The purchase price was $87.5
million. Concurrent with the acquisition the Company placed $60 million of
debt on the property at an interest rate of LIBOR plus 1.50%. The Company has
the option of converting this debt to fixed rate debt at any time prior to
October 1, 1997.
On November 27, 1996, the Company purchased Rimrock and Vintage Faire.
The total purchase price was $118.2 million which included assumption of $88.4
million of debt which bears interest at an average fixed rate of 7.7%.
On December 18, 1996, the Company acquired Huntington, Buenaventura and
Fresno. The combined purchase price was $128.9 million and included
assumption of mortgage debt of $38.0 million and $3.8 million of other
liabilities.
C. Refinancings and Debt Reductions
------------------------------------
On April 1, 1996 the mortgage debt on Crossroads-OK, Greentree Mall, and
the Centre at Salisbury was refinanced. The total indebtedness was increased
to $117 million, from $88 million, and the average interest rate was fixed at
7.2%.
20
<PAGE>
C. Refinancings and Debt Reductions, Continued:
------------------------------------------------
On September 30, 1996 the $65.1 million mortgage loan at Queens Center
was refinanced. The interest rate was reduced from LIBOR plus 1.10% to LIBOR
plus 0.45%.
On December 23, 1996 the Villa Marina Marketplace mortgage debt of $22
million was paid off.
There was a $60 million loan placed on Valley View Mall concurrent with
its acquisition. The interest rate is LIBOR plus 1.50% and the loan matures
in October 1997, but the Company can convert the loan into a fixed rate loan
that matures in October 2006.
Concurrent with the acquisition of Buenaventura Mall, Fresno Fashion
Fair and Huntington Center, a $57 million unsecured loan was obtained. The
loan bears interest at LIBOR plus 1.625%.
21
<PAGE>
Results of Operations
- ---------------------
Comparison of Years Ended December 31, 1996 and 1995
----------------------------------------------------
Revenues
--------
Minimum and percentage rents increased by 42% to $105.2 million
from $74.1 million. Approximately $19.0 million of the increase
resulted from the 1995 Acquisition Centers and $13.2 million resulted
from the 1996 Acquisition Centers. These increases were partially
offset by declining rents of $1.1 million at Parklane Mall which was
adversely impacted by an anchor closure in 1996.
Tenant recoveries increased to $47.7 million in 1996 from $27
million in 1995. The 1996 and 1995 Acquisition Centers caused $19.3
million of this increase. Approximately $1.1 million of the increase
was due to higher recoverable expenses in 1996 compared to 1995.
Other income increased to $2.2 million in 1996 from $1.4 million
in 1995. Approximately $1.2 million of the increase related to the 1996
and 1995 Acquisition Centers. This increase was partially offset by
lower interest income of $0.3 million in 1996 compared to 1995.
Expenses
--------
Shopping center expenses increased to $50.8 million in 1996
compared to $31.6 million in 1995. Approximately $18.7 million of the
increase resulted from the 1996 and 1995 Acquisition Centers. The other
centers had a net increase of $0.5 million in shopping center expenses
of which approximately $1.1 million was for increased property taxes,
$0.5 million of increased bad debt expense, offset by a reduction in
ground rent expense of $1.3 million which resulted from the October,
1995 acquisition of land at Crossroads Mall-Boulder which had previously
been leased.
General and administrative expenses increased to $2.4 million in
1996 from $2.0 million in 1995 primarily due to increased professional
fee expense.
Interest Expense
----------------
Interest expense increased to $42.4 million in 1996 from $25.5
million in 1995. Interest expense attributable to County East Mall
decreased $1.2 million in 1996 due to the payoff of that debt on
December 31, 1995, also, there was a decrease of $1.3 million at
Crossroads Mall-Boulder due to a December 1995 refinancing at a
substantially lower interest rate. These reductions partially offset
the increase of $19.1 million from the 1995 and 1996 Acquisition
Centers.
Depreciation and Amortization
-----------------------------
Depreciation increased to $32.6 million from $25.7 million in
1995. An increase of approximately $7.6 million related to the 1995 and
1996 Acquisition Centers. This increase was offset by a decrease of
approximately $1.4 million in amortization of financial instruments in
1996 which resulted from several financial instruments becoming fully
amortized in 1995.
Minority Interest
-----------------
The minority interest represents the 36.7% weighted average
interest of the Operating Partnership that is not owned by the Company
during 1996.
22
<PAGE>
Gain (Loss) From Unconsolidated Joint Ventures and Management Companies
-----------------------------------------------------------------------
The gain from unconsolidated joint ventures and the management
companies was $3.3 million for 1996, essentially the same as 1995.
Extraordinary Loss on Early Retirement of Debt
----------------------------------------------
In connection with the sale of an interest rate cap, the Company
wrote off unamortized financing costs of $0.3 million in 1996. In 1995
the Company wrote off $1.3 million of loan costs concurrent with the
1995 refinancing of Lakewood Mall.
Net Income
----------
As a result of the foregoing, net income increased to $18.9
million in 1996 from $11.3 million in 1995.
Operating Activities
-------------------
Cash flow from operations increased to $80.4 million compared to
$48.2 million in 1995. The increase resulted from the factors discussed
above, primarily the impact of the 1995 and 1996 Acquisition Centers.
Investing Activities
--------------------
Cash flow used in investing activities was $296.6 million in
1996 compared to a reduction of $88.4 million in 1995. The change
resulted primarily from the seven acquisitions completed in 1996
compared to three acquisitions in 1995.
Financing Activities
--------------------
Cash flow from financing activities increased to $216.3 million
in 1996 compared to $52.0 million in 1995. The increase resulted from
more mortgage financing done in 1996, primarily to fund the 1996
acquisitions.
EBITDA and Funds From Operations
--------------------------------
Due primarily to the factors mentioned above, EBITDA increased
48%, to $101.9 million in 1996 from $68.9 million in 1995 and Funds From
Operations increased 39%, to $62.4 million, from $44.9 million in 1995.
23
<PAGE>
Comparison of Years Ended December 31, 1995 and 1994
----------------------------------------------------
Revenues
--------
Minimum and percentage rents increased by 17.2% from $63,188,000
in 1994 to $74,067,000 in 1995. The 1995 Acquisition Centers accounted
for approximately $3,407,000 of this increase and 1994 Acquisition
Centers accounted for $6,128,000 of the increase. The primary reason
for the balance of the increase was contractual rent increases in
existing leases, and replacement of expiring leases with renewal leases
at higher minimum rents.
Tenant recoveries increased by $5,338,000 to $26,961,000 for the
year ended December 31, 1995, compared to the same period of 1994. The
1995 Acquisition Centers accounted for $1,293,000 of this increase in
recoveries and the 1994 Acquisition Centers accounted for $3,494,000.
The balance of the increase resulted primarily from increased
recoverable expenses at the other properties.
Management fee income was $528,000 for the period from January
1, 1994 through March 15, 1994. Prior to the IPO the Management
Companies were consolidated with the Predecessor. Subsequent to the
IPO, the Management Companies are accounted for on the equity method and
included in income from unconsolidated joint ventures and management
companies.
Other income increased from $682,000 in 1994 to $1,441,000 in
1995. This increase was due almost entirely to the temporary investment
of the proceeds of a common stock offering into interest bearing
investments until their ultimate use for debt repayment, acquisitions or
other corporate purposes.
Expenses
--------
Shopping center expenses increased by $4,113,000 to $31,580,000
for 1995. An increase of $2,989,000 was due to the 1994 Acquisition
Centers and $1,211,000 was due to the 1995 Acquisition Centers. The
increase due to the Acquisition Centers was partially offset by reduced
expense of $327,000 due to the purchase in October 1995 of a parcel of
land at Crossroads Mall-Boulder which had previously been ground leased.
In addition, real estate taxes, excluding the 1994 and 1995 Acquisition
Centers, increased by $277,000 due to reassessments. There were no
management and leasing expenses in 1995 compared to $557,000 for 1994.
This decrease is a result of the Management Companies being accounted
for on the equity method after March 16, 1994. General and
administrative expenses of the Company were $2,011,000 compared to
$1,545,000 during 1994. This difference was primarily due to the
Company being operational for only nine and one-half months in 1994.
Interest Expense
----------------
Interest expense increased by 14.8% from $22,237,000 for the
twelve months ended December 31, 1994 to $25,531,000 for 1995. This was
partially due to interest expense of $3,591,000 for the 1994 Acquisition
Centers and $710,000 for the 1995 Acquisition Centers. There was a
reduction in same center interest expense in 1995 primarily due to the
net reduction of approximately $117,100,000 of debt in March, 1994
subsequent to the IPO. During 1995, there was a full year of benefit
from those reductions.
Depreciation and Amortization
-----------------------------
Depreciation increased by $3,280,000 to $25,749,000 for the
twelve months ended December 31, 1996. The 1995 Acquisition Centers
accounted for $717,000 of the difference and the Acquisition Centers
that were purchased in 1994, but depreciated for a full year in 1995,
accounted for $1,745,000. Also contributing to this increase was
$515,000 related to additional depreciation of the 1994 acquisition cost
of partnership interests.
Minority Interest In Operating Partnership
------------------------------------------
The minority interest in the Operating Partnership represents
the 42% weighted average interest in the Operating Partnership that is
not owned by the Company at December 31, 1995.
24
<PAGE>
Gain (Loss) From Unconsolidated Joint Ventures and Management Companies
-----------------------------------------------------------------------
The gain from unconsolidated joint ventures and the management
companies increased to $3,250,000 for 1995 compared to $2,784,000 for
1994. This increase was primarily due to net income at Broadway Plaza
increasing by $1,341,000 largely resulting from the addition of 15,000
square feet of space which was completed during 1994 and reduction of
the interest expense due to a debt reduction in March, 1994. The
Company owns a 50% joint venture interest in Broadway Plaza.
Extraordinary Loss on Early Retirement of Debt
----------------------------------------------
In connection with the 1995 refinancing of mortgage debt at
Lakewood Mall, the Company wrote off unamortized financing costs of
$1,299,000 associated with the retired debt of.
Net Income
----------
As a result of the foregoing, net income increased by $3,565,000
in 1995 compared to 1994.
Operating Activities
--------------------
Cash flow from operations was $44,936,000 in 1995, a 32.5%
increase over 1994, primarily due to the factors mentioned above.
Investing Activities
--------------------
Cash was utilized in investing activities totaling ($88,413,000)
in 1995 compared to ($137,637,000) in 1994. In 1994, cash flow was
reduced by investing activities, primarily the acquisition of property
and partnership interests concurrent with the IPO and the acquisition of
Chesterfield. Also contributing to the decrease was $27,799,000 of
contributions to joint ventures which was primarily used to pay down
debt at the joint ventures. During 1995, the decrease in cash flow due
to investing activities related primarily to cash expended for the 1995
Acquisition Centers.
Financing Activities
--------------------
Financing activities reflected net cash flow of $51,973,000 in
1995, compared to $99,584,000 in 1994. This was primarily the result of
the IPO in 1994 compared to the equity offering and refinancings in
1995.
EBITDA and Funds From Operations
--------------------------------
Due to factors described above, EBITDA increased 22% to
$68,878,000 from $56,452,000 in 1994. Funds from Operations increased
by 25.3% to $48,612,000 in 1995 from $38,790,000 in 1994.
Liquidity and Capital Resources
-------------------------------
The Company intends to meet its short term liquidity
requirements through cash generated from operations and working capital
reserves. The Company anticipates that revenues will continue to
provide necessary funds for its operating expenses and debt service
requirements, and to pay dividends to stockholders in accordance with
REIT requirements. The Company anticipates that cash generated from
operations, together with cash on hand, will be adequate to fund capital
expenditures which will not be reimbursed by tenants, other than non-
recurring capital expenditures. Capital for major expenditures or
redevelopments has been, and is expected to continue to be, obtained
from equity or debt financings.
The Company believes that it will have access to the capital
necessary to expand its business in accordance with its strategies for
growth and maximizing Funds from Operations. The Company presently
intends to obtain additional capital necessary to expand its business
through a combination of additional equity offerings and debt
financings.
25
<PAGE>
Liquidity and Capital Resources, Continued
------------------------------------------
The Company's total outstanding loan indebtedness at December
31, 1996 was $818.0 million (including its pro rata share of joint
venture debt). This equated to a debt to Total Market Capitalization
(defined as total debt of the Operating Partnership, including its pro
rata share of joint venture debt, plus aggregate market value of
outstanding shares of common stock, assuming full conversion of OP Units
into stock) rate of approximately 45.0% at year end. Such debt consists
primarily of conventional mortgages payable secured by individual
properties. See "Properties-Mortgage Debt" for a description of the
Company's outstanding indebtedness. In connection with $65.1 million of
the Company's floating rate indebtedness, the Company has entered into
interest rate protection agreements that limit the Company's exposure to
increases in interest rates. See "Properties-Mortgage Debt."
The Company has filed a shelf registration statement, which is
not yet effective, to sell securities. The shelf registration is for a
total of $500 million of common stock or common stock warrants.
The Company has a line of credit up to $50 million. There was
$12 million outstanding at December 31, 1996 and $0 outstanding at
December 31, 1995.
At December 31, 1996 the Company had cash and cash equivalents
available of $15.6 million.
26
<PAGE>
Funds From Operations
---------------------
The Company believes that the most significant measure of its
performance is Funds from Operations ("FFO"). FFO is defined by The
National Association of Real Estate Investment Trusts ("NAREIT") to be:
Net income, excluding gains (or losses) from debt restructuring and
sales of property, plus depreciation and amortization and after
adjustments for unconsolidated joint ventures. Adjustments for
unconsolidated partnerships and joint ventures will be calculated to
reflect FFO on the same basis. This is herein referred to as "FFO -
Original Definition". In May 1995, NAREIT issued a revised
interpretation of FFO. This revised definition of FFO ("FFO - New
Definition") excludes the add back of non real estate depreciation and
amortization. Extraordinary items and significant non-recurring events
are also excluded from FFO-New Definition. FFO does not represent cash
flow from operations, as defined by generally accepted accounting
principles, and is not necessarily indicative of cash available to fund
all cash flow needs. The following reconciles net income to the FFO -
Original Definition to the FFO - New Definition.
</TABLE>
<TABLE>
1996 1995 1994
------ ----- -----
(Pro forma)
(amounts in thousands)
<S> <C> <C> <C>
Net income $18,911 $11,303 $10,450
Adjustments to reconcile
net income to FFO -
Original Definition:
Minority interest 10,975 8,246 8,008
Depreciation and amortization
on wholly owned properties 32,591 25,749 23,195
Pro rata share of unconsolidated
entity depreciation
and amortization 2,096 2,255 1,797
Extraordinary loss on early
extinguishment of debt 315 1,299 -
Pro rata share of (gain) loss
on sale of joint venture assets (110) (240) (366)
--------- --------- -----------
Sub Total FFO - Original Definition 64,778 48,612 43,084
Adjustments to reconcile to
FFO - New Definition:
Amortization of loan costs,
including interest rate caps
and swaps (2,090) (3,250) (3,489)
Depreciation of
personal property (260) (424) (252)
--------- ---------- ----------
FFO - New Definition $62,428 $44,938 $39,343
---------- ---------- ----------
---------- ---------- ----------
Company's share of FFO -
new definition $39,502 $25,982 $22,011
---------- ---------- ----------
--------- ---------- ----------
Weighted average number of
shares outstanding,
assuming full conversion
of OP Units 32,934 26,930 25,645
--------- ---------- ---------
--------- ---------- ---------
</TABLE>
Included in minimum rents were rents attributable to the
accounting practice of "straight lining of rents." The amount of
straight lining of rents that impacted minimum rents was $1,832 for
1996, $944 for 1995 and $1,306 for 1994 (pro forma).
27
<PAGE>
Inflation
- ---------
In the last three years, inflation has not had a significant impact
on the Company or the Predecessor because of a relatively low inflation
rate. Substantially all the leases at the Centers have rent adjustments
periodically through the lease term. These rent increases are either in
fixed increments or based on increases in the Consumer Price Index. In
addition, many of the leases are for terms of less than ten years, 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, most of the leases require the tenants to pay
their pro rata share of operating expenses. This reduces the Company's
exposure to increases in costs and operating expenses resulting from
inflation.
New Pronouncements Issued:
- -------------------------
None.
Item 8. Financial Statements and Supplementary Data
- ----------------------------------------------------
Refer to the Index to Financial Statements and Financial Statement
Schedules for the required information.
Item 9. Changes in and Disagreements with Accountants or Accounting and
Financial Disclosure.
- --------------------------------------------------------------------------
None.
Part III
Item 10. Directors and Executive Officers of the Company.
- ----------------------------------------------------------
There is hereby incorporated by reference the information which appears
under the captions "Election of Director," "Executive Officers" and "Section
16 Reporting" in the Company's definitive proxy statement for its 1996 Annual
Meeting of Stockholders.
Item 11. Executive Compensation.
- ---------------------------------
There is hereby incorporated by reference the information which appears
under the caption "Executive Compensation" in the Company's definitive proxy
statement for its 1996 Annual Meeting of Stockholders; provided, however, that
neither the Report of the Compensation Committee on executive compensation nor
the Stock Performance Graph set forth therein shall 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 Securities Exchange Act of 1934, as
amended, except to the extent the Company specifically incorporates such
report or stock performance graph 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
- ------------------------------------------------------------------------
There is hereby incorporated by reference the information which appears
under the captions "Principal Stockholders," "Information Regarding Nominees
and Directors" and "Executive Officers" in the Company's definitive proxy
statement for its 1996 Annual Meeting of Stockholders.
Item 13. Certain Relationships and Related Transactions
- --------------------------------------------------------
There is hereby incorporated by reference the information which appears
under the captions "Certain Transactions" in the Company's definitive proxy
statement for its 1996 Annual Meeting of Stockholders.
28
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedule and Reports on Form 8-K
- -------------------------------------------------------------------------
Page
(a) 1. Financial Statements
Report of Independent Accountants 30
Consolidated balance sheets of the Company as of
December 31, 1996 and 1995 31
Consolidated statements of operations of the
Company for the years ended December 31, 1996 and
1995 and for the period from March 16, 1994 through
December 31, 1994 and combined statement of operations
of the Predecessor for the period from January 1, 1994
through March 15, 1994 32
Consolidated statements of stockholders' equity of the
Company for the years ended December 31, 1996 and 1995
and for the period from March 16, 1994 to December 31,
1994 and combined statement of partners' deficit for the
Predecessor for the period from January 1 through
March 15, 1994. 33
Consolidated statements of cash flows of the Company
for the years ended December 31, 1996 and 1995 and
for the period from March 16, 1994 through December 31,
1994 and combined statement of cash flows of the
Predecessor for the period from January 1, 1994 through
March 15, 1994. 34
Notes to consolidated and combined financial statements. 35
2. Financial Statement Schedules
Schedule III - Real estate and accumulated depreciation 51
(b) 1. Reports on Form 8-K filed during the last
quarter of 1996 are incorporated by reference
to this item.
A. Form 8-K dated October 30, 1996 for the
acquisition of Valley View Mall, including
the financial statements of the business to
be acquired and pro forma financial information.
B. Form 8-K dated December 11, 1996 for the
acquisition of Vintage Faire Mall and Rimrock Mall.
(c) 1. Exhibits
The Exhibit Index attached hereto is incorporated by
reference to this item.
29
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
----------------------------------
To the Board of Directors and Stockholders of The Macerich Company
We have audited the consolidated and combined financial statements and
financial statement schedule of The Macerich Company and Macerich Predecessor
Affiliates as listed in Item 14(a) of this Form 10-K. These financial
statements and financial statement schedule are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
statements and financial statement schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of The Macerich
Company as of December 31, 1996 and 1995, and the consolidated and combined
results of the Macerich Company's and Macerich Predecessor Affiliates'
operations and their cash flows for the years ended December 31, 1996 and 1995
and for the period March 16, 1994 through December 31, 1994 and the period
January 1, 1994 through March 15, 1994, respectively, in conformity with
generally accepted accounting principles. In addition, in our opinion, the
financial statement schedule referred to above, when considered in relation to
the basic financial statements taken as a whole, presents fairly, in all
material respects, the information required to be included therein.
COOPERS & LYBRAND L.L.P.
Los Angeles, California
March 14, 1997
30
<PAGE>
<TABLE>
THE MACERICH COMPANY (THE "COMPANY")
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except share data)
December 31,
1996 1995
---- ----
ASSETS:
-------
<S> <C> <C>
Property, net $1,108,668 $694,900
Cash and cash equivalents 15,643 15,570
Tenant receivables, including accrued
overage rents of $3,805 in 1996
and $2,455 in 1995 23,192 15,214
Due from affiliates 3,105 -
Deferred charges and other assets, net 20,716 20,434
Investment in joint ventures and
the Management Companies 16,429 17,280
---------- -------
Total assets $1,187,753 $763,398
----------- --------
------------ --------
LIABILITIES AND STOCKHOLDERS' EQUITY:
-------------------------------------
Mortgage notes payable:
Related parties $135,944 $136,186
Others 584,295 349,007
---------- --------
Total 720,239 485,193
Bank notes payable 69,000 -
Accounts payable 4,197 2,265
Accrued interest expense 3,584 2,015
Accrued real estate taxes and ground rent expense 7,616 4,522
Due to affiliates 430 811
Deferred acquisition liability 5,000 5,000
Other accrued liabilities 27,696 9,507
---------- --------
Total liabilities 837,762 509,313
---------- --------
Minority interest in Operating Partnership 112,242 95,740
---------- --------
Commitments and contingencies (Note 10)
Stockholders' equity:
Preferred stock, $.01 par value, 10,000,000
shares authorized - none issued - -
Common stock, $.01 par value, 100,000,000 shares
authorized, 25,743,000 and 19,977,000 shares
issued and outstanding at December 31, 1996
and 1995, respectively 257 200
Additional paid in capital 238,346 158,145
Accumulated earnings - -
Unamortized restricted stock (854) -
----------- -------
Total stockholders' equity 237,749 158,345
----------- -------
Total liabilities and
stockholders' equity 1,187,753 763,398
----------- --------
----------- --------
</TABLE>
The accompanying notes are an integral part of these financial statements.
31
<PAGE >
THE MACERICH COMPANY (THE "COMPANY") and
MACERICH PREDECESSOR AFFILIATES ("PREDECESSOR")
CONSOLIDATED STATEMENTS OF OPERATIONS OF THE COMPANY AND
COMBINED STATEMENT OF OPERATIONS OF THE PREDECESSOR
(Dollars in thousands, except per share amounts)
<TABLE>
The Company Predecessor
---------------------------------------- -------------
For the year ended March 16 January 1
December 31, December 31, to December 31, to March 15,
1996 1995 1994 1994
------------ ------------ -------------- -----------
<S> <C> <C> <C> <C>
REVENUES:
Minimum rents $99,061 $69,253 $48,663 $9,993
Percentage rents 6,142 4,814 3,681 851
Tenant recoveries 47,648 26,961 18,515 3,108
--------- ------------ ---------- -----------
152,851 101,028 70,859 13,952
--------- ------------ ---------- -----------
Management fees:
Affiliates - - - 401
Other - - - 127
--------- ------------ ---------- -----------
- - - 528
--------- ------------ ---------- -----------
Other 2,208 1,441 582 100
--------- ------------ ---------- -----------
Total revenues 155,059 102,469 71,441 14,580
--------- ------------ ---------- -----------
EXPENSES:
Shopping center expenses 50,792 31,580 22,576 4,891
Management and leasing
services - - - 557
General and administrative
expense 2,378 2,011 1,545 -
--------- ------------ ---------- -----------
53,170 33,591 24,121 5,448
--------- ------------ ---------- -----------
Interest expense:
Related parties 10,172 8,226 6,417 2,235
Others 32,181 17,305 9,674 3,911
Depreciation and amortization 32,591 25,749 18,827 3,642
--------- ------------ ---------- -----------
74,944 51,280 34,918 9,788
--------- ------------ ---------- -----------
Equity in income (loss) of
unconsolidated joint
ventures and the
management companies 3,256 3,250 3,016 (232)
--------- ------------ ---------- -----------
Income before minority interest
and extraordinary item 30,201 20,848 15,418 (888)
Extraordinary loss from early
extinguishment of debt (315) (1,299) - -
--------- ------------ ---------- -----------
Income (loss) of the Operating
Partnership 29,886 19,549 15,418 (888)
Less minority interest in net
income of
Operating Partnership 10,975 8,246 6,792 -
--------- ------------ ---------- -----------
Net income (loss) $18,911 $11,303 $8,626 ($888)
--------- ------------ ---------- -----------
--------- ------------ ---------- -----------
Earnings per common share:
Income before
extraordinary item $0.92 $0.78 $0.60
Extraordinary item (0.01) (0.05) -
--------- ------------ ----------
Net income $0.91 $0.73 $0.60
--------- ------------ ----------
--------- ------------ ----------
Weighted average number of
shares of common stock
outstanding 20,781,000 15,482,000 14,375,000
---------- ------------ -----------
---------- ------------ -----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
32
<PAGE >
<TABLE>
THE MACERICH COMPANY (THE COMPANY) and
MACERICH PREDECESSOR AFFILIATES (PREDECESSOR)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY AND
COMBINED STATEMENT OF PARTNERS' DEFICIT OF THE PREDECESSOR
(In thousands, except share data)
The Company Predecessor
Common
Common Stock Additional Unamortized Total
Stock Par Paid In Accumulated Restricted Stockholders' Partners'
(# shares) Value Capital Earnings Stock Equity Deficit
--------- ------- ------------- ------------- ---------- ----------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance December 31, 1993 (88,294)
Contributions 1,675
Distributions (6,847)
Net income (888)
----------
Balance March 16, 1994 (inception) ($94,354)
----------
----------
Common stock issued
to the public 14,375,000 $144 $272,981 $273,125
Issuance costs (23,656) (23,656)
Distributions paid
($.87 per share) (3,880) ($8,626) (12,506)
Net income from inception
to 12/31/94 - - - 8,626 8,626
Accounting adjustment
necessary to reflect
assets at
Predecessor cost (158,650) (158,650)
------------- ------ ---------- ---------- ----------- ----------
Balance
December 31, 1994 14,375,000 144 86,795 - 245,589
Common stock issued to
public 5,600,000 56 107,408 107,464
Issuance costs (582) (582)
Distributions paid
($1.66 per share) (14,913) (11,303) (26,216)
Net income 11,303 11,303
Adjustment to reflect
minority interest on a
pro rata basis according
to year end ownership
percentage of
Operating Partnership (20,615) (20,615)
Other, net 2,000 52 52
------------- ------ ---------- ---------- ------------ -------------
Balance
December 31, 1995 19,977,000 200 158,145 - 316,995
Common stock issued to
public 5,750,000 57 122,129 - 122,186
Issuance costs - - (152) - (152)
Issuance of restricted
stock 41,238 - 854 - $0 854
Unvested
restricted stock (41,238) - - - (854) (854)
Exercise of
stock options 16,000 - 291 - 291
Distributions paid
($1.70 per share (17,565) (18,911) (36,476)
Net income - - - 18,911 18,911
Adjustment to reflect
minority interest on a
pro rata basis according
to year end ownership
percentage of
Operating Partnership - - (25,356) - (25,356)
------------- ------ ---------- ---------- ------------- -------------
Balance
December 31, 1996 25,743,000 $257 $238,346 $0 ($854) $237,749
------------- ------ --------- ----------- ------------ -------------
------------- ------ --------- ----------- ------------ -------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
33
<PAGE >
<TABLE>
THE MACERICH COMPANY (THE "COMPANY") and
MACERICH PREDECESSOR AFFILIATES (PREDECESSOR)
CONSOLIDATED STATEMENTS OF CASH FLOWS OF THE COMPANY AND
COMBINED STATEMENT OF CASH FLOWS OF THE PREDECESSOR
(Dollars in thousands)
The Company Predecessor
January 1 to January 1 to March 16 to January 1,
December 31, December 31, December 31, to March 15,
1996 1995 1994 1994
--------- ------------ ------------ ---------
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $18,911 $11,303 $8,626 ($888)
--------- ------------ ------------ ---------
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities:
Extraordinary loss on early
extinguishment of debt 315 1,299 - -
Depreciation and amortization 32,591 25,749 18,827 3,642
Interest payments deferred,
(deferred interest paid) - - 2,369 (2,591)
Amortization of discount on
trust deed note payable 33 547 394 104
Minority interest in the income
of the Operating Partnership 10,975 8,246 6,792 -
Changes in assets and liabilities:
Tenant receivables, net (7,977) (2,973) (4,262) (758)
Other assets 1,181 (2,149) (911) 217
Accounts payable and
accrued expenses 6,596 1,378 (422) 1,163
Due to affiliates (382) 345 (1,309) 2,324
Other liabilities 18,188 4,441 (93) 3,236
--------- ------------ ------------ ---------
Total adjustments 61,520 36,883 21,385 7,337
--------- ------------ ------------ ---------
Net cash provided by
operating activities 80,431 48,186 30,011 6,449
--------- ------------ ------------ ---------
Cash flows from investing activities:
Acquisitions of property and
improvements (277,319) (75,738) (106,780) (170)
Renovations and expansions
of centers (8,019) (4,571) (3,904) (253)
Additions to tenant improvements (920) (1,554) (1,704) (215)
Equity in (income) loss of
unconsolidated joint ventures
and the management companies (3,256) (3,250) (2,778) 232
Deferred charges (9,111) (6,698) 3,092 (1,113)
(Contributions to) and
distributions from joint ventures 4,107 3,398 (27,799) 225
(Loans to) repayment from affiliates (3,105) - 2,236 (365)
Proceeds from sale of assets 948 - - -
--------- ------------ ------------ ---------
Net cash used in
investing activities (296,675) (88,413) (137,637) (1,659)
--------- ------------ ------------ ---------
Cash flows from financing activities:
Proceeds from notes and
mortgages payable 235,673 148,000 111,773 227
Interest rate agreements - - (6,225) -
Payments on mortgage and
notes payable (84,775) (157,800) (235,501) 2,552
Net proceeds from equity offerings 122,034 106,879 249,325 -
Actual and deemed net
distributions to partners (56,615) (45,106) (20,171) (5,172)
Investment of cash restricted
for use - - 383 50
--------- ------------ ------------ ---------
Net cash provided by
(used in) financing
activities 216,317 51,973 99,584 (2,343)
--------- ------------ ------------ ---------
Net increase (decrease)
in cash 73 11,746 (8,042) 2,447
Cash and cash equivalents,
beginning of period 15,570 3,824 11,866 9,419
--------- ------------ ------------ ---------
Cash and cash equivalents,
end of period $15,643 $15,570 $3,824 $11,866
--------- ------------ ----------- ---------
--------- ------------ ------------ ---------
Supplemental cash flow information:
Cash payment for interest,
net of amounts capitalized $40,572 $24,429 $15,975 $ 8,403
--------- ------------ ------------ ---------
--------- ------------ ------------ ---------
Non cash transactions:
Acquisition of property by
assumption of debt $152,228 $178,900 $67,547 -
--------- ------------ ------------ ---------
--------- ------------ ------------ ---------
Acquisition of property by
issuance of OP units $600 $18,448 $3,915 -
--------- ------------ ------------ ---------
--------- ------------ ------------ ---------
</TABLE>
The accompanying notes are an integral part of these financial statements.
34
<PAGE >
THE MACERICH COMPANY (THE "COMPANY") and
MACERICH PREDECESSOR AFFILIATES (PREDECESSOR)
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)
1. Organization And Basis Of Presentation:
- --------------------------------------------
Macerich Predecessor Affiliates ("Predecessor"), represent
entities owned by or affiliated with Macerich principals and their
affiliates ("The Macerich Group") that were reorganized to combine The
Macerich Group's interests in certain retail investment properties and
property management, leasing and redevelopment businesses. The
reorganization entailed a public offering of common stock in a newly
formed Maryland corporation, The Macerich Company ("Company"), the
proceeds of which were invested in the Macerich Partnership L.P. ("The
Operating Partnership"). The Company commenced operations effective
with the completion of the initial public offering (the "IPO") on March
16, 1994. The Operating Partnership holds ownership interests in the
entities reflected herein as Predecessor for periods prior to March 16,
1994. These interests in the Predecessor were obtained in exchange for
cash, an ownership interest in The Operating Partnership ("OP Units")
and common stock of the Company. OP Units not held by the Company can
be exchanged, subject to certain restrictions, on a one-for-one basis,
into the Company's common stock.
The Company, which was organized to qualify as a real estate
investment trust ("REIT") under the Internal Revenue Service Code of
1986, as amended, as of December 31, 1996, owns approximately 68% of The
Operating Partnership and is the sole general partner. The 32% limited
partnership interest of the Operating Partnership, not owned by the
Company, is reflected in these financial statements as minority
interest. The average total number of OP Units outstanding in The
Operating Partnership (including the units owned by the Company) was
32,934,000 for the year ended December 31, 1996, 26,930,000 for the year
ended December 31, 1995, and 25,645,000 for the period from March 16,
1994 to December 31, 1994.
The property management, leasing and redevelopment of the
Company's portfolio is provided by the Macerich Management Company and
Macerich Property Management Company, California corporations (together
referred to hereafter as "the Management Companies"). The non-voting
preferred stock of the Management Companies is owned by The Operating
Partnership, which provides The Operating Partnership the right to
receive 95% of the distributable cash flow from the Management
Companies.
Basis Of Presentation:
- ----------------------
The consolidated financial statements of the Company include the
accounts of the Company and the Operating Partnership. The accompanying
Predecessor financial statements are presented on a combined basis as
the entities are predecessor businesses to the Company. The properties
which The Operating Partnership does not own a greater than 50% interest
in, and the Management Companies, have been accounted for under the
equity method of accounting. These entities are reflected on the
Company's consolidated financial statements as investment in joint
ventures and the Management Companies. The Management Companies are
combined with the financial statements of the Predecessor in the
combined financial statements of the Predecessor.
The formation of the Company has been reflected as a
reorganization of the predecessor business with the assets and
liabilities reflected at the historical cost basis of the Predecessor,
except for those properties for which monetary consideration was given
to acquire interests previously held by outside joint venture partners,
in which case the portion of the property so acquired has been adjusted
to reflect the value of the consideration given.
All significant intercompany accounts and transactions have been
eliminated in the consolidated and combined financial statements.
35
<PAGE>
THE MACERICH COMPANY (THE "COMPANY") and
MACERICH PREDECESSOR AFFILIATES (PREDECESSOR)
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)
2. Summary of Significant Accounting Policies:
- -------------------------------------------------
Cash And Cash Equivalents:
- -------------------------
The Company considers all highly liquid investments with an
original maturity of 90 days or less when purchased to be cash
equivalents, for which cost approximates market. Included in cash is
restricted cash of $3,775 at December 31, 1996 and $750 at December 31,
1995 which reflects cash restricted under terms of a loan agreement to
be used for certain capital expenditures.
Revenues:
- --------
Minimum rental revenues are recognized on a straight-line basis
over the terms 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 lining of rent adjustment." Rental income
was increased by $1,832 in 1996, $944 in 1995, $1,212 for the period
from March 16, 1994 to December 31, 1994, and $94 for the period from
January 1, 1994 to March 15, 1994 due to the straight lining of rent
adjustment. Percentage rents are recognized on an accrual basis.
Recoveries from tenants for real estate taxes, insurance and other
shopping center operating expenses are recognized as revenues in the
period the applicable costs are incurred.
The Management Companies provide property management, leasing,
corporate, development and acquisitions services to affiliated and non-
affiliated shopping centers. In 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.
Management fees are recognized as revenue as they are earned in
the combined financial statements of the Predecessor.
Property:
- --------
Costs related to the acquisition, development, construction and
improvement of properties are capitalized. Interest costs are
capitalized until construction is substantially complete.
Expenditures for maintenance and repairs are charged to operations
as incurred. Realized 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:
Tenant improvements initial term of related lease
Buildings and improvements 5-40 years
Equipment and furnishings 5- 7 years
Deferred Charges:
----------------
Costs relating to financing of shopping center properties and
obtaining tenant leases are deferred and amortized over the initial term
of the agreement. The straight-line method is used to amortize all
costs except financing, for which the effective interest method is used.
The range of the terms of the agreements are as follows:
Deferred lease costs 2 - 15 years
Deferred financing costs 1 - 15 years
36
<PAGE>
THE MACERICH COMPANY (THE "COMPANY") and
MACERICH PREDECESSOR AFFILIATES (PREDECESSOR)
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)
2. Summary of Significant Accounting Policies, Continued:
- -----------------------------------------------------
Deferred Acquisition Liability:
- ------------------------------
As part of the Company's total consideration to the seller of
Capitola Mall, the Company will issue $5,000 of OP Units five years
after the acquisition date. The number of OP Units will be determined
based on the Company's common stock price at that time.
Income Taxes:
- ------------
The Company has elected to be taxed as a REIT under the Internal
Revenue Code of 1986, as amended. A REIT is generally not subject to
income taxation on that portion of its income that qualifies as REIT
taxable income as long as it distributes at least 95 percent of its
taxable income to its stockholders and complies with other requirements.
Accordingly, no provision has been made for income taxes in the
consolidated financial statements.
On a tax basis, the distributions of $1.70 paid during 1996
represented $1.14 of ordinary income and $0.56 of return of capital and
the distributions of $1.66 per share during 1995 represented $1.00 of
ordinary income and $0.66 return of capital. During 1994 the
distributions were $0.87 per share of which $0.70 was ordinary income
and $0.17 was return of capital.
Each partner is taxed individually on their share of partnership
income or loss, and accordingly, no provision for federal and state
income tax is provided for the Operating Partnership or Predecessor in
the combined financial statements.
Reclassifications:
- -----------------
Certain reclassifications have been made to the 1994 and 1995
financial statements to conform to the 1996 financial statement
presentation.
Accounting Pronouncements:
- -------------------------
During 1995 the Financial Accounting Standard Board ("FAS") issued
Statement of Accounting Standards No. 121 "Accounting for the Impairment
of Long-Lived Assets" and FAS No. 123 "Accounting for Stock-Based
Compensation." The Company adopted these pronouncement in 1996 but the
requirements of these statements did not have a significant impact on
the Company's consolidated financial statements. The effect of FAS 123
is discussed in Footnote 12 and the effect of FAS 121 is discussed
below.
Impairment of Long-Lived Assets:
- -------------------------------
In March 1995, the Financial Accounting Standards Board ("FASB")
issued Statement of Financial Accounting Standards ("SFAS") No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of." SFAS No 121 requires that long-lived assets
and certain identifiable intangibles to be held and used by an entity be
reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable.
Certain long-lived assets and certain identifiable intangibles to be
disposed must be reported at the lower of carrying amount or fair value
less cost to sell. The Company adopted SFAS No.121 beginning in the
first quarter of 1996 with no material impact to the Company's financial
condition or results of operations.
37
<PAGE>
THE MACERICH COMPANY (THE "COMPANY") and
MACERICH PREDECESSOR AFFILIATES (PREDECESSOR)
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)
2. Summary of Significant Accounting Policies, Continued:
- ------------------------------------------------------
Fair Value of Financial Instruments:
- -----------------------------------
To meet the reporting requirement of FAS No. 107 "Disclosures
about Fair Value of Financial Instruments", the Company calculates the
fair value of financial instruments and includes this additional
information in the notes to 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 estimated fair value amounts have been
determined by the Company using available market information and
appropriate valuation methodologies. However, considerable judgment is
necessarily required in interpreting market data to develop the
estimates of fair value. Accordingly, the estimates presented herein
are not necessarily indicative of the amounts that the Company could
realize in a current market exchange. The use of different market
assumptions and/or estimation methodologies may have a material effect
on the estimated fair value amounts.
Interest rate cap agreements are purchased by the Company from
third parties to hedge the risk of interest rate increases on some of
the Company's variable rate debt. The cost of these cap agreements is
amortized over the life of the cap agreement on a straight line basis.
Payments received as a result of the cap agreements are recorded as a
reduction of interest expense. The unamortized costs of the cap
agreements are included in deferred charges. The fair market value of
these caps will vary with fluctuations in interest rates. The Company
is exposed to credit loss in the event of nonperformance by these
counter parties to the financial instruments, however, management does
not anticipate nonperformance by the counter party.
Earnings Per Share:
- ------------------
The computation of primary earnings per share is based on net
income and the weighted average number of common shares outstanding for
the years ended December 31, 1996 and 1995. The outstanding common
stock options have less than a 3% dilutive effect on earnings per share
and thus have not been included in the computation. The effect of the
Company stock option plan was calculated using the Treasury stock
method. The computation of fully diluted earnings per share is less
than 3% dilutive and has not been presented.
Concentration of Risk:
- ----------------------
Lakewood Mall generated 16.0% of total shopping center revenues in
1996, 22.0% in 1995 and 25.6% in 1994. Shopping center revenues at
Crossroads Mall-Colorado accounted for 10.6% of total shopping center
revenues in 1995 and 12.16% in 1994. During 1995 Chesterfield accounted
for 12.6% of total Shopping Center revenues. Queens Center accounted
for 13.8% of 1996 shopping center revenue. No other Center generated
more than 10% of shopping center revenues during 1996, 1995 or 1994.
The Centers derived approximately 88.8% of their total rents for
the year ended December 31, 1996 from Mall and Freestanding Stores. No
single retailer accounted for more than 6.5% of annual base rents of the
Company as of December 31, 1996. The Limited represented 6.3% of total
minimum rents in place as of December 31, 1996 and Woolworth represented
4.8% as of that date. No other retailer represented more than 2.5% of
total minimum rents as of December 31, 1996.
Management Estimates:
- ---------------------
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities 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.
38
<PAGE>
THE MACERICH COMPANY (THE "COMPANY") and
MACERICH PREDECESSOR AFFILIATES (PREDECESSOR)
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)
3. Investments In Joint Ventures and the Management Companies:
- -----------------------------------------------------------
The following are the Company's investments in various real estate
joint ventures which own regional retail shopping centers. The
Operating Partnership is a general partner in these joint ventures. The
Operating Partnership's interest in each joint venture as of December
31, 1996 is as follows:
The Operating
Partnership's
Joint Venture Ownership %
----------------------- -------------
Macerich Northwestern Associates 50%
North Valley Plaza Associates 50%
Panorama City Associates 50%
West Acres Development 19%
The Operating Partnership also owns the non-voting preferred stock
of the Management Companies and is entitled to receive 95% of the
distributable cash flow.
Combined and condensed balance sheets and statement of operations
are presented below for all unconsolidated joint ventures and the
Management Companies, followed by information regarding The Operating
Partnership's/ Predecessor's beneficial interest in operations.
Beneficial interest is calculated based on the terms of the joint
venture agreements and reflects 95% of the Management Companies.
<TABLE>
COMBINED AND CONDENSED BALANCE SHEETS OF JOINT VENTURES
AND THE MANAGEMENT COMPANIES
December 31, December 31,
1996 1995
<S> <C> <C>
Assets:
Properties, net $106,751 $104,879
Other assets 13,257 10,923
------------ ----------
Total assets $120,008 $115,802
------------ ----------
------------ ----------
Liabilities and partners' capital:
Mortgage notes payable $ 81,925 $ 82,515
Other liabilities 11,116 5,306
The Company's capital 16,429 17,280
Outside partners' capital 10,538 10,701
------------ ----------
Total liabilities and
partners' capital $120,008 $115,802
------------ ----------
------------ ----------
</TABLE>
39
<PAGE>
<TABLE>
THE MACERICH COMPANY (THE "COMPANY") and
MACERICH PREDECESSOR AFFILIATES (PREDECESSOR)
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)
3. Investments In Joint Ventures and the Management Companies, Continued:
- ----------------------------------------------------------------------
COMBINED AND CONDENSED STATEMENTS OF OPERATIONS OF JOINT VENTURES
AND THE MANAGEMENT COMPANIES
From March 16 From January 1
to to
1996 1995 Dec 31, 1994 March 15, 1994
----------- ----------- ------------------ ------------------
<S> <C> <C> <C> <C>
Revenues $31,533 $32,270 $24,944 $5,099
----------- ----------- ------------------ ------------------
Expenses:
Management Company expense 4,293 3,987 3,958 -
Shopping center expenses 9,598 9,293 6,724 2,063
Interest 6,409 6,414 4,740 2,317
Depreciation and amortization 4,406 4,485 3,283 796
----------- ----------- ------------------ ------------------
Total operating costs 24,706 24,179 18,705 5,176
----------- ----------- ------------------ ------------------
Gain on sale of land 581 1,265 1,875 28
----------- ----------- ------------------ ------------------
Net income (loss) $7,408 $9,356 $8,114 ($49)
----------- ----------- ------------------ ------------------
----------- ----------- ------------------ ------------------
</TABLE>
Significant accounting policies used by the unconsolidated joint
ventures and the Management Companies are similar to those used by the
Company.
The Management Companies are reflected above for the years ended
December 31, 1996 and 1995 and for the period from March 16, 1994 to
December 31, 1994. Prior to March 16, 1994 (the date of the IPO) the
Management Companies were combined and included in the results of the
Predecessor.
Included in mortgage notes payable are amounts due to related parties
of $43,500 for the years ended December 31, 1996, 1995 and 1994.
Interest expense incurred on these borrowings amounted to $2,976 for the
years ended December 31, 1996 and 1995, $1,631 for the period from
January 1 to March 15, 1994 and $2,081 for the period March 16 through
December 31, 1994.
40
<PAGE>
THE MACERICH COMPANY (THE "COMPANY") and
MACERICH PREDECESSOR AFFILIATES (PREDECESSOR)
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)
3. Investments In Joint Ventures and the Management Companies:
- -----------------------------------------------------------
The following table sets forth the Operating Partnership's and the
Predecessor's beneficial interest in the joint ventures and the
Management Companies:
<TABLE>
PRO RATA SHARE OF COMBINED AND CONDENSED STATEMENT OF OPERATIONS
OF JOINT VENTURES AND THE MANAGEMENT COMPANIES
For the For the From March 16 From January 1
year ended year ended to to
1996 1995 Dec 31, 1994 March 15, 1994
--------- ---------- --------------- ------------------
<S> <C> <C> <C> <C>
Revenues $14,980 $15,393 $12,315 $1,974
--------- ---------- ------------------ ------------------
Expenses:
Management
Company
expense 3,747 3,988 3,769 -
Shopping center
expenses 3,856 4,042 2,917 901
Interest 2,135 2,098 1,541 946
Depreciation
and
amortization 2,096 2,255 1,433 364
--------- ---------- ------------------ ------------------
Total operating
costs 11,834 12,383 9,660 2,211
--------- ---------- ------------------ ------------------
Gain on sale
of land 110 240 361 5
--------- ---------- ------------------ ------------------
Net income
(loss) $3,256 $3,250 $3,016 ($232)
--------- ---------- ------------------ ------------------
--------- ---------- ------------------ ------------------
</TABLE>
4. Property:
Property, at December 31, is summarized as follows:
<TABLE>
1996 1995
----------- ------------
<S> <C> <C>
Land $239,847 $155,490
Building Improvements 990,125 636,183
Tenant Improvements 34,149 34,730
Equipment & Furnishings 4,769 3,668
Construction in Progress 4,195 3,927
----------- ------------
1,273,085 833,998
Less, accumulated
depreciation (164,417) (139,098)
----------- ------------
$1,108,668 $694,900
----------- ------------
----------- ------------
</TABLE>
41
<PAGE>
THE MACERICH COMPANY (THE "COMPANY") and
MACERICH PREDECESSOR AFFILIATES (PREDECESSOR)
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)
5. Deferred Charges And Other Assets:
- -------------------------------------
Deferred charges and other assets are summarized as follows:
<TABLE>
December 31, December 31,
1996 1995
--------- ----------
<S> <C> <C>
Leasing $25,629 $24,926
Financing 7,891 8,173
----------- ---------
33,520 33,099
Less, accumulated amortization (15,434) (16,476)
----------- ---------
18,086 16,623
Other assets 2,630 3,811
----------- ---------
$20,716 $20,434
----------- ---------
----------- ---------
</TABLE>
42
<PAGE>
THE MACERICH COMPANY (THE "COMPANY") and
MACERICH PREDECESSOR AFFILIATES (PREDECESSOR)
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)
6. Mortgage Notes Payable:
Mortgage notes payable at December 31, 1996 and December 31, 1995 consists
of the following:
<TABLE>
Carrying Amount of Notes
-----------------------
1996 1995
---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Property Pledged Related Related Interest Payment Maturity
As Collateral Other Party Other Party Rate Terms Date
Capitola Mall ---- $37,976 ---- $38,250 9.25% 316 (f) 2001
Chesterfield
Towne Center $59,023 ---- $59,536 ---- 8.75% 475(i) 2024
Chesterfield
Towne Center 5,304 ---- 5,346 ---- 9.38% 43(i) 2024
Chesterfield
Towne Center 1,922 ---- 1,938 ---- 8.88% 16(i) 2024
Chesterfield
Towne Center 3,444 ---- ---- ---- 8.54% 28(f) 1999
Crossroads Mall (b) (c) ---- $35,968 ---- 35,936 7.08% 244(f) 2010
Fresno Fashion Fair 38,000 ---- ---- ---- 8.40% interest only 2005
Greeley Mall 18,514 ---- 19,000 ---- 8.50% interest only 2003
Green Tree Mall/
Crossroads - OK/
Salisbury (g) 117,714 ---- 50,000 ---- 7.23% interest only 2004
Holiday Village Mall ---- ---- 73 ---- 5.50% 7(f) 1996
Holiday Village Mall ---- 17,000 ---- 17,000 6.75% interest only 2001
Lakewood Mall (a) 127,000 ---- 127,000 ---- 7.20% interest only 2005
Northgate Mall ---- 25,000 ---- 25,000 6.75% interest only 2001
Parklane Mall ---- 20,000 ---- 20,000 6.75% interest only 2001
Queens Center 65,100 ---- ---- ---- (d) interest only 1999
Queens Center ---- ---- 55,800 ---- (e) (e) 1999
Queens Center ---- ---- 10,200 ---- (e) (e) 1999
Rimrock Mall 31,994 ---- ---- ---- 7.70% 244(f) 2003
The Centre at
Salisbury (k) ---- ---- 21,000 ---- 7.13% interest only 2004
Valley View Mall 60,000 ---- ---- ---- (l) interest only (l)
Vintage Faire Mall 56,280 ---- ---- ---- 7.65% 427(f) 2003
-------- ------ ------- -------
Sub-Total 584,295 135,944 349,893 136,186
Less interest rate
arrangements (h) ---- ---- 886 ----
-------- ------- -------- -------
Total $584,295 $135,944 $349,007 $136,186
-------- ------- -------- -------
-------- ------- -------- -------
Weighted average interest rate at December 31, 1995 7.52%
---------
---------
Weighted average interest rate at December 31, 1996 7.45%
---------
---------
</TABLE>
43
<PAGE>
THE MACERICH COMPANY (THE "COMPANY") and
MACERICH PREDECESSOR AFFILIATES (PREDECESSOR)
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)
6. Mortgage Notes Payable, Continued:
- -------------------------------------
(a) On August 15, 1995 the Company issued $127,000 of collateralized
floating rate notes (the "Notes"). The Notes bear interest at an
average fixed rate of 7.20% and mature in July 2005.
The Note requires the Company to deposit all cash flow from the
property operations with a trustee to meet its obligations under the
Notes. Cash in excess of the required amount, as defined, is
released. Included in cash and cash equivalents is $750 of
restricted cash deposited with the trustee at December 31, 1995 and
$750 at December 31, 1996.
(b) This loan was refinanced on December 21, 1995. The loan amount
remained the same. The interest rate was reduced to 7.08%.
(c) This note was issued at a discount. The discount is being
amortized over the life of the loan using the effective
interest method. At December 31, 1996 and 1995 the unamortized
discount was $463 and $496, respectively.
(d) This loan bears interest at LIBOR plus 0.45%. There is an
interest rate protection agreement in place on the first $10.2
million of this debt with a LIBOR ceiling of 5.88% through maturity
with the remaining principal having an interest rate cap with a LIBOR
ceiling at 7.07% through 1997 and 7.7% thereafter.
(e) The $55,800 loan bears interest at LIBOR plus .90%. This loan was
paid off on September 30, 1996.
The $10,200 loan bears interest at LIBOR plus 2.22%. This loan was
paid off on September 30, 1996.
(f) This represents the monthly payment of principal and interest.
(g) This loan is cross collateralized by Green Tree Mall and
Crossroads Mall Oklahoma and as of April 14, 1996 also included
Salisbury.
(h) Represents the unamortized cost of interest rate arrangements
at County East Mall and Crossroads Mall. The estimated market value
of these arrangements is $886 at December 31, 1995 and $0 at December
31, 1996.
(i) This amount represents the monthly payment of principal and
interest. In addition, 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 (as defined in the loan agreement)
exceeds a base amount specified therein. Contingent interest expense
recognized by the Company was $76 for the period from July 21, 1994
(the date of acquisition of Chesterfield Towne Center) to December
31, 1994, $184 for the year ended December 31, 1995 and $399 for
1996. As of January 1, 1997 all these loans were consolidated into a
new loan of $66.2 million at an interest rate of 9.1%.
This amount bears interest at LIBOR plus 1.50% and matures on October
21, 1997, however, at any time prior to maturity, the Company can
convert this into a fixed rate loan maturing in October 2006.
(j) Interest only is payable through March 1996. Thereafter
monthly payments total $187 until maturity, at which time the balance
is due in full.
(k) This loan was combined with the Greentree/Crossroads-OK loan on April
14, 1996.
(l) This loan bears interest at LIBOR plus 1.50% (7.00% at December 31,
1996). At any time prior to October 21, 1997 this loan can be
converted to a fixed rate loan at a rate of 1.25% over the rate on a
Treasury Note of a duration equal to the maturity of the loan.
44
<PAGE>
THE MACERICH COMPANY (THE "COMPANY") and
MACERICH PREDECESSOR AFFILIATES (PREDECESSOR)
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)
6. Mortgage Notes Payable, Continued:
- ----------------------------------------
Certain mortgage loan agreements contain a prepayment penalty provision
for the early extinguishment of the debt.
Total interest expense capitalized during 1996 was $461 and during 1995
was $546 and during 1994 was $116 .
The above debt matures as follows:
<TABLE>
<S> <C>
Years Ending
December 31,
1997 $3,317
1998 3,651
1999 72,227
2000 4,188
2001 102,697
2002 and beyond 534,159
---------
$720,239
</TABLE>
The market value of notes payable at December 31, 1996 and 1995 is
estimated to be approximately $733,000 and $466,000, respectively, based on
current interest rates for comparable loans.
7. Notes Payable:
- --------------------
The Company has a $50,000 unsecured line of credit with a bank. The
line of credit bears interest at LIBOR plus 1.625% and matures in June
1997. There was a $12,000 balance outstanding on the line of credit at
December 31, 1996 and $0 at December 31, 1995. Also, at December 31, 1996
there is a $57,000 unsecured note bearing interest at LIBOR plus 1.625%
which matures December 31, 1997.
8. Related-Party Transactions:
- ---------------------------------
The Predecessor and the Company engaged the Management Companies to
manage the operations of certain uncombined joint ventures and other
uncombined affiliated shopping centers. Management fees earned from
uncombined joint ventures and affiliates were $401 for the period from
January 1, 1994 to March 15, 1994. Subsequent to March 15, 1994, the
Management Companies are reflected under the equity method of accounting
for investments. During the period from March 16, 1994 to December 31,
1994 management fees of $1,180 were paid by the Company to the Management
Companies. During 1995 and 1996, management fees of $1,456 and $1,788 were
paid to the Management Companies by the Company.
Certain mortgage notes are held by outside partners of the individual
Macerich Group partnerships. Interest expense, in connection with these
notes was $10,168, $8,226 and $8,652 for the years ended December 31, 1996,
1995 and 1994, respectively. Included in accounts payables and accrued
expense is interest payable to these partners of $516, $537 and $398 at
December 31, 1996, 1995, and 1994 respectively.
Certain Company officers and affiliates have guaranteed mortgages of
$21,750 at one of the Company's joint venture properties and $2,000 at
Greeley Mall.
45
<PAGE>
THE MACERICH COMPANY (THE "COMPANY") and
MACERICH PREDECESSOR AFFILIATES (PREDECESSOR)
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)
9. Future Rental Revenues:
- ----------------------------
Under existing noncancellable operating lease agreements, tenants are
committed to pay the following minimum rentals to the Company:
<TABLE>
<S> <C>
Years Ending
December 31,
------------
1997 $118,239
1998 109,506
1999 99,036
2000 86,477
2001 73,135
2002 and beyond 319,166
$805,559
------------
------------
</TABLE>
10. Commitments and Contingencies:
- ----------------------------------
The Company has certain properties subject to noncancellable operating
ground leases. The leases expire at various times through 2060, subject in
some cases to options to extend the terms of the lease. Certain leases
provide for contingent rent payments based on a percent of base rent
income, as defined. Ground rent expenses were $704, (including contingent
rent of $0) in 1996, $1,944 (including contingent rents of $1,168) in 1995
and $2,267 (including contingent rents of $733) in 1994.
Certain leases also require the lessee to pay real estate taxes,
insurance and certain other operating costs applicable to the leased
property.
Minimum future rental payments required under the leases are as follows:
<TABLE>
<S> <C>
Years Ending
December 31,
-------------
1997 $ 553
1998 553
1999 557
2000 557
2001 549
2002 and beyond 25,948
-------
$28,717
-------
-------
</TABLE>
Perchloroethylene (PCE) has been detected in soil and groundwater in the
vicinity of a dry cleaning establishment at North Valley Plaza. The
California Department of Toxic Substance Control (DTSC) has advised the
Company that very low levels of Dichlorethylene (1,2,DCE) a degradation
byproduct of PCE, have been detected in a water well located 1/4 mile west
from the dry cleaners, and that the dry cleaning facility may have
contributed to the introduction of 1,2 DCE into the water well. According
to DTSC, the maximum contaminant level (MCL) for 1,2DCE which is permitted
in drinking water is 6 parts per billion (ppb); and the 1,2DCE was detected
in the water well at 1.2 ppb, which is below the MCL. The Company has
retained an environmental consultant and has initiated extensive testing of
the site, although the extent of the impacted soil and groundwater has not
been fully defined. Remediation is scheduled to begin in the first half of
1997. The joint venture that owns that property had a $685 reserve at
December 31, 1996. In addition, $155 has already been incurred, to cover
professional fees and testing costs. The Company intends to look to the
responsible parties and insurers for cost recovery.
46
<PAGE>
THE MACERICH COMPANY (THE "COMPANY") and
MACERICH PREDECESSOR AFFILIATES (PREDECESSOR)
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)
10. Commitments and Contingencies, Continued:
-----------------------------------------
Toluene, a petroleum constituent, was detected in a groundwater
dewatering system at the Queens Center. The source of the toluene is
currently unknown, but it is possible that an adjacent Sunoco service
station has caused or contributed to the problem. It is also possible that
the toluene remains from previous service station operations which occurred
on site prior to the development of the site into its current use in the
early 1970s. Toluene was detected at levels of 410 and 160 parts per
billion (ppb) in samples taken from the tank in October, 1995 and February,
1996, respectively. Additional samples were taken in May and December of
1996, with results of .63 ppb and "non-detect" for the May sampling event
and 16.2 ppb and 25.2 ppb for the December sampling event. The maximum
containment level (MCL) for toluene in drinking water is 150 ppb. Although
the Company believes that no remediation will be required, it has set up a
$150 reserve to cover professional fees and testing costs. The Company
intends to look to the responsible parties and insurers if remediation is
required.
Dry cleaning chemicals, including PCE were detected in soil and
groundwater in the vicinity of a dry cleaning establishment at Villa Marina
Marketplace. The previous owner of the property has reported the release
to the local government authorities and has agreed to fully assess and
remediate the site to the extent required by those authorities. Although
the Company believes that it will not be required to participate in
assessment or remediation activities, it has set up a $150 reserve ($20 of
which has already been incurred) to cover professional and legal fees.
Dry cleaning chemicals including PCE were detected in soil and
groundwater in the vicinity of a former dry cleaning establishment at
Huntington Center. The release has been reported to the local government
authorities. The Company estimates, based on the data currently available,
that costs for assessment, remediation and legal services will not exceed
$500. Consequently, a $500 reserve was established at the time of the
acquisition to cover professional and legal fees. The Company intends to
look to responsible parties and insurers for cost recovery.
The Company acquired Fresno Fashion Fair in December, 1996. Asbestos
has been detected in structural fireproofing throughout much of the Mall.
Recent testing data conducted by a professional environmental consulting
firms indicates that the fireproofing is largely inaccessible to building
occupants and is well adhered to the structural members. Additionally,
airborne concentrations of asbestos are well within OSHA's permissible
exposure limit (PEL) of .1 fcc. The Company intends to abate asbestos
fireproofing as tenant spaces become vacant. The accounting for this
acquisition includes a reserve of $3.3 million to cover future removal of
this asbestos, as necessary.
11. Profit Sharing Plan:
-------------------
The Management Companies and the Company have a retirement profit
sharing plan that was established in 1984 covering substantially all of
their eligible employees. The plan is qualified in accordance with section
401(a) of the Internal Revenue Code. Effective January 1, 1995 this plan
was modified to include a 401(k) plan whereby employees can elect to defer
compensation subject to Internal Revenue Service withholding rules.
Contributions by the Management Companies are made at the discretion of the
Board of Directors and are based upon a specified percentage of employee
compensation. The Management Companies and the Company contributed $350,
$348 and $325 to the plan in 1996, 1995 and 1994, respectively.
12. Stock Option Plan:
------------------
The Company has established stock option plans for the purpose of
attracting and retaining executive officers, directors and key employees.
The Company has issued options to employees to purchase 1,512,334 shares of
the Company under the stock incentive plan. The term of these options is
ten years from the grant date. These options generally vest 33 1/3% per
year over three years and were issued and are exercisable at the market
value of the common stock at the grant date.
47
<PAGE>
THE MACERICH COMPANY (THE "COMPANY") and
MACERICH PREDECESSOR AFFILIATES (PREDECESSOR)
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)
12. Stock Option Plan, Continued
In addition, the Company has established a plan for non employee
directors. A total of 27,500 options were outstanding at December 31, 1996,
22,500 were exercisable. The non employee directors options have a term of
ten years from the grant date and vest six months after grant.
Also, under the employees stock incentive plan 41,238 shares of
restricted stock have been issued to executives. These awards are granted
based on certain performance criteria for the Company. The restricted
stock vests over 5 years and the compensation expense related to these
grants is reflected over the vesting period on a straight line basis. As
of December 31, 1996 none of the restricted stock grants had vested. A
total of 41,238 shares were issued during 1996 at a weighted average price
of $20.70 per share and 0 shares were issued during 1995.
An additional 412,762 shares have been reserved for issuance under the
stock incentive plan. The plan allow for granting options or restricted
stock at market value.
<TABLE>
Weighted
Average
Exercise Price
Employee Plan Director Plan # of Options On Exercisable
Option Price Option Price Exercisable Options
Shares Per Share Shares Per Share At Year End At Year End
<S> <C> <C> <C> <C> <C> <C>
Shares outstanding
at January 1, 1994 - - - -
Granted 1,148,000 $19.00-$19.63 17,500 $19.00-$21.38
Exercised - - - -
Forfeited - - - - 0 0
---------- ------------- ------ -------------- ---------- ----------
---------- ----------
Shares outstanding
at December 31, 1994 1,148,000 $19.00-$19.63 17,500 $19.00
Granted 115,000 $20.25 5,000 $20.00
Exercised (2,000) $19.00 - -
Forfeited (6,500) - - - 399,784 19.02
---------- ------------- ------ -------------- ---------- ----------
---------- ----------
Shares outstanding
at December 31, 1995 1,254,500 $19.00-$20.25 22,500 $19.00-$21.38
Granted 281,000 $21.62 5,000 $26.12
Exercised (16,000) $19.00 - -
Forfeited (7,166) - - -
---------- ------------- ------ --------------
Shares outstanding
at December 31, 1996 1,512,334 $19.00 - $21.62 27,500 $19.00 - $26.12 793,697 $19.09
---------- --------------- ------ --------------- ----------- ---------
---------- --------------- ------ --------------- ----------- ---------
</TABLE>
The weighted average exercise price for options granted in 1994 is
$19.02, for 1995 is $20.25 and for 1996 is $21.65.
The weighted average remaining contractual life for options outstanding
at December 31, 1996 is 7.9 years and the weighed average remaining
contractual life for options exercisable at December 31, 1996 is 7.6 years.
The Company records options granted using Accounting Principles Board
(APB) opinion Number 25, Accounting for Stock Issued to Employees and
Related Interpretations. Accordingly, no compensation expense is
recognized on the date the options are granted. If the Company had
recorded compensation expense using the methodology prescribed in Financial
Accounting Standards Number 123, the Company's net income would have been
reduced by approximately $56 or $0.00 per share for the year ended December
31, 1996 and $160 or $0.01 per share for the year ended December 31, 1995.
48
<PAGE>
THE MACERICH COMPANY (THE "COMPANY") and
MACERICH PREDECESSOR AFFILIATES (PREDECESSOR)
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)
13. Deferred Compensation Plans:
---------------------------
The Company has established deferred compensation plans under which key
executives of the Company may elect to defer receiving a portion of their
cash compensation otherwise payable in one calendar year until a later
year. The Company may, as determined by the Board of Directors in its sole
discretion, credit a participant's account with an amount equal to a
percentage of the participant's deferral. The Company contributed $125
during 1996 and $104 during 1995 to two of these plans.
In addition, certain executives have split dollar life insurance
agreements with the Company whereby the Company generally pays annual
premiums on a life insurance policy in an amount equal to the executives
deferral under one of the Company's deferred compensation plans.
14. Acquisitions:
-------------
On March 16, 1994, concurrent with the IPO, the Company acquired
Crossroads Mall-Oklahoma ("Crossroads-OK"). Crossroads-OK is a 1.1 million
square foot super regional mall in Oklahoma City, Oklahoma. The purchase
price was $51,500 and was paid in cash.
On July 21, 1994, the Company acquired Chesterfield Towne Center
("Chesterfield") in Richmond, Virginia. Chesterfield is a 608,500 square
foot regional mall. The purchase price of $84,500 was paid with
approximately $13,100 in cash, $3,900 in OP Units of the Operating
Partnership and assumption of the existing mortgage of approximate $67,500.
On August 15, 1995 the Company acquired The Centre at Salisbury
("Salisbury"), an 884,000 square foot super regional mall. The total
purchase price was $78 million, and was comprised of $55.6 million of cash,
$21 million of debt and approximately $1.4 million in OP Units.
Capitola Mall ("Capitola") was acquired on December 21, 1995. Capitola
is a 577,000 square foot regional mall. The purchase price was $57.5
million and was comprised of the issuance of OP Units valued at $12.1
million, the assumption of $38.3 million of mortgage indebtedness, and cash
of $2.1 million. The remaining $5 million of consideration will be paid in
OP Units in five years.
Queens Center ("Queens") was acquired on December 28, 1995. The total
purchase price was $108 million which consisted of assumption of debt of
$66 million and $42 million of cash.
Villa Marina was acquired on January 25, 1996. Villa Marina is a
447,684 square foot community center/entertainment complex located in
Marina del Rey, California. The purchase price was $80 million, consisting
of $57.6 million of cash and $22.4 million of assumption of mortgage
indebtedness.
Valley View Mall is a super regional mall in Dallas, Texas which the
Company acquired on October 21, 1996. Valley View Mall contains 1,523,000
square feet and the purchase price was $87.5 million.
Rimrock Mall, located in Billings, Montana, and Vintage Faire Mall,
located in Modesto, California were purchased simultaneous on November 27,
1996. The combined purchase price was $118.2 million. Vintage Faire Mall
is a super regional mall with 1,051,458 square feet and Rimrock Mall is a
regional mall consisting of 581,912 square feet.
Buenaventura Mall, Fresno Fashion Fair and Huntington Center were
purchased on December 18, 1996 for a combined price of $128.9 million.
Buenaventura Mall, located in Ventura, California, is an 801,152 square
foot regional mall, Fresno Fashion Fair, located in Fresno, California, is
a super regional mall containing 881,334 square feet and Huntington
Center, located in Huntington Beach, California, consists of 832,578 square
feet.
49
<PAGE>
THE MACERICH COMPANY (THE "COMPANY") and
MACERICH PREDECESSOR AFFILIATES (PREDECESSOR)
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)
15. Unaudited Pro Forma Financial Information:
-----------------------------------------
The following unaudited pro forma financial information combines the
consolidated results of operations of the Company for 1996 and 1995 as if
the 1996 Acquisitions had occurred on January 1, 1995, after giving effect
to certain adjustments, including depreciation, interest expense relating
to debt incurred to finance the acquisitions and general and administrative
expense to manage the properties. The pro forma information is based on
assumptions management believes to be appropriate. The pro forma
information is not necessarily indicative of what the actual results would
have been had the initial public offering and acquisitions occurred at the
beginning of the period indicated, nor does it purport to project the
Company's financial position or results of operations at any future date or
for any future period.
<TABLE>
Year ended December 31,
1996 1995
<S> <C> <C>
Revenues $203,512 $168,785
Income of the Operating
Partnership before
extraordinary items 37,851 31,416
Income before extraordinary items 23,875 18,166
Net income 23,675 17,413
Per share income before
extraordinary items $1.15 $1.17
Net income per share $1.14 $1.12
Weighted average number of common
shares outstanding 20,781,000 15,482,000
</TABLE>
16. Quarterly Financial Data (Unaudited):
------------------------------------
The following is a summary of periodic results of operations for 1996 and
1995:
<TABLE>
Company
1996 Quarter Ended 1995 Quarter Ended
Dec 31 Sept 30 June 30 Mar 31 Dec 31 Sept 30 June 30 Mar 31
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues $43,924 $37,749 $37,777 $35,293 $29,016 $26,291 $24,067 $23,095
Income before minority
interest and
extraordinary items 8,417 7,479 6,925 7,065 6,586 5,066 5,064 4,132
Income before
extraordinary items 5,539 4,659 4,502 4,401 4,077 2,821 2,824 2,304
Net income 5,539 4,659 4,312 4,401 4,077 2,821 2,101 2,304
Income before
extraordinary
items per share $0.24 $0.23 $0.22 $0.22 $0.22 $0.20 $0.20 $0.16
Net income per share $0.24 $0.23 $0.21 $0.22 $0.22 $0.20 $0.15 $0.16
</TABLE>
17. Subsequent Events
On February 7, 1997 a $0.44 per share dividend was declared, payable to
stockholders of record as of February 20, 1997 and paid on March 6, 1997.
50
<PAGE>
<TABLE>
REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 1996
(in thousands)
Initial Cost to Company
<S> <C> <C> <C> <C>
Equipment Cost Capitalized
Building and and Subsequent to
Land Improvements Furnishings Acquisition
Shopping Centers
Bristol Shopping Center $ 0 $11,051 $0 $1,111
Buenaventura Mall 3,414 13,979 0 0
Capitola Mall 11,312 46,689 0 592
Chesterfield Towne Center 16,992 68,660 2 4,667
County East Mall 2,633 15,131 716 5,767
Crossroads Mall - Boulder 0 37,528 64 27,167
Crossroads Mall - Oklahoma 10,279 43,458 291 2,103
Fresno Fashion Fair 17,966 72,194 0 0
Greeley Mall 5,600 12,617 13 6,761
Green Tree Mall 4,947 14,893 332 22,067
Holiday Village
Shopping Center 2,311 13,488 138 15,936
Huntington Center 4,679 19,056 0 0
Lakewood Mall 12,502 31,158 117 30,264
Marshalls' Boulder Plaza 2,650 7,950 0 782
Northgate Mall 7,144 29,805 841 17,595
Parklane Mall 1,377 11,775 173 12,432
Queens Center 21,460 86,631 8 758
Rimrock Mall 8,737 35,652 0 31
The Centre at Salisbury 15,290 63,474 31 368
Towne Center Plaza 1,525 4,276 0 31
Valley View Center 17,100 68,687 0 23
Villa Marina Marketplace 15,852 65,441 0 352
Vintage Faire Mall 14,902 60,532 0 0
The Macerich
Partnership, L.P. 11,962 47,848 0 28,945
-------- -------- -------- --------
Total $210,634 $881,973 $2,726 $177,752
-------- -------- -------- --------
-------- -------- -------- --------
</TABLE>
<TABLE>
REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 1996
(in thousands)
Gross Amount at Which Carried at Close of Period
<S> <C> <C> <C> <C> <C> <C> <C>
Furniture, Net of
Building and Fixtures & Construction Accumulated Accumulated
Land Improvements Equipment in Progress Total Depreciation Depreciation
Shopping Centers
Bristol Shopping Center $ 0 $12,162 $ 0 $ 0 $12,162 $4,552 $7,610
Buenaventura Mall 3,414 13,979 0 0 17,393 14 17,379
Capitola Mall 11,309 47,239 45 0 58,593 1,265 57,328
Chesterfield Towne
Center 16,992 72,486 811 32 90,321 5,650 84,671
County East Mall 2,633 20,823 791 0 24,247 7,565 16,682
Crossroads Mall
- Boulder 23,302 41,249 101 107 64,759 21,036 43,723
Crossroads Mall
- Oklahoma 10,279 45,517 316 19 56,131 4,133 51,998
Fresno Fashion Fair 17,966 72,194 0 0 90,160 74 90,086
Greeley Mall 5,600 19,325 66 0 24,991 8,119 16,872
Green Tree Mall 4,947 36,860 432 0 42,239 17,730 24,509
Holiday Village
Shopping Center 2,311 29,387 175 0 31,873 17,122 14,751
Huntington Center 4,679 19,056 0 0 23,735 20 23,715
Lakewood Mall 12,503 59,353 612 1,573 74,041 27,671 46,370
Marshalls'
Boulder Plaza 2,650 8,732 0 0 11,382 2,091 9,291
Northgate Mall 7,144 47,318 923 0 55,385 15,639 39,746
Parklane Mall 1,565 21,369 384 2,439 25,757 13,809 11,948
Queens Center 21,454 87,349 37 17 108,857 2,273 106,584
Rimrock Mall 8,737 35,676 7 0 44,420 88 44,332
The Centre
at Salisbury 15,284 63,845 34 0 79,163 2,282 76,881
Towne Center Plaza 1,525 4,307 0 0 5,832 59 5,773
Valley View Center 17,100 68,687 15 8 85,810 347 85,463
Villa Marina
Marketplace 15,852 65,773 20 0 81,645 1,572 80,073
Vintage Faire Mall 14,901 60,533 0 0 75,434 148 75,286
The Macerich
Partnership, L.P. 17,700 71,055 0 0 88,755 11,158 77,597
-------- -------- -------- -------- -------- -------- --------
Total $239,847 $1,024,274 $4,769 $4,195 $1,273,085 $164,417 $1,108,668
-------- -------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- -------- --------
The changes in total real estate assets for the three years ended December 31, 1996 are as follows:
1994 1995 1996
Balance, beginning
of year 375,972 554,788 833,998
Additions 178,816 279,210 439,087
Disposals and
retirements 0 0 0
Balance,
end of year 554,788 833,998 1,273,085
The changes in accumulated depreciation and amortization for the three years ended December 31, 1996 are as
follows:
1994 1995 1996
Balance, beginning
of year 102,963 119,466 139,098
Additions 16,503 19,632 25,319
Disposals and
retirement 0 0 0
Balance,
end of year 119,466 139,098 164,417
Depreciation and amortization of the Macerich Company's investment in buildings and improvements reflected
in the statements of income are calculated over the estimated useful lives of the assets as follows:
Buildings and Improvements 5 - 40 years
Tenant Improvements life of related lease
Equipment and Furnishings 5 - 7 years
</TABLE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
THE MACERICH COMPANY
By /s/ Arthur M. Coppola
----------------------
Arthur M. Coppola
President and Chief
Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
<TABLE>
<S> <C> <C>
Signature Capacity Date
/s/ Arthur M. Coppola President and Chief March 25, 1997
Arthur M. Coppola Executive Officer
and Director
/s/ Mace Siegel Chairman of the Board March 25, 1997
Mace Siegel
/s/ Dana K. Anderson Vice Chairman of the March 25, 1997
Dana K. Anderson Board and
Chief Operating Officer
/s/ Edward C. Coppola Executive Vice President March 25, 1997
Edward C. Coppola Director of Acquisitions
and Director
/s/ James Cownie Director March 25, 1997
James Cownie
/s/ Theodore Hochstim Director March 25, 1997
Theodore Hochstim
/s/ Frederick Hubbell Director March 25, 1997
Frederick Hubbell
/s/ Stanley Moore Director March 25, 1997
Stanley Moore
/s/ William Sexton Director March 25, 1997
William Sexton
/s/ Thomas E. O'Hern Senior Vice President and March 25, 1997
Thomas E. O'Hern Chief Financial and
Accounting Officer
</TABLE>
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description Sequentially
Numbered Page
3.1* Articles of Amendment and Restatement of the Company
3.2** Articles Supplementary of the Company
3.3* Bylaws of the Company
4.1** Form of Common Stock Certificate
10.1*** Amended and Restated Limited Partnership Agreement
for the Operating Partnership, dated as of March 16, 1994
10.2*** Employment Agreement between the Company and Mace Siegel,
dated as of March 16, 1994
10.2.1*** List of omitted Employment Agreements
10.3**** The Macerich Company 1994 Stock Incentive Plan
10.4**** The Macerich Company 1994 Eligible Directors' Stock Option Plan
10.5**** The Macerich Company Deferred Compensation Plan
10.6**** The Macerich Company Annual Incentive Compensation Plan
10.7**** The Macerich Company Deferred Compensation Plan for Mall
Executives
10.8*** The Macerich Company Eligible Directors' Deferred Compensation
Plan/Phantom Stock Plan
10.9*** The Macerich Company Executive Officer Salary Deferral Plan
10.10* NML Master Agreement, dated as of October 22, 1993, among the
Operating Partnership, The Northwestern Mutual Life Insurance
Company (as general partner), The Northwestern Mutual Life
Insurance Company (as lender), each of the property partnerships
and each of the Macerich Partnerships
10.11* Partnership Interest Agreement of Purchase and Sale, dated as of
October 18, 1993, between Hexalon Real Estate, Inc. and the
Operating Partnership
10.12* Third Amendment to Partnership Interest Agreement of Purchase
and Sale, dated as of February 9, 1994, between Hexalon Real
Estate, Inc. and the Operating Partnership
10.13* Purchase and Sale Agreement, dated as of June 30, 1993, between
the Operating Partnership and Provident Life and Accident
Insurance Company
10.14* Indenture of Lease, dated as of January 26, 1983, between PCA
Crossroads, Ltd., as landlord, and Crossroads Shopping Center
Company and Macerich Crossroads Associates, collectively, as
tenant, as amended
<PAGE>
10.15*** Macerich Master Agreement, dated as of March 16, 1994, regarding
the transfer of property partnership interests of The Macerich
Group to the Operating Partnership
10.16*** Registration Rights Agreement, dated as of March 16, 1994,
between the Company and The Northwestern Mutual Life Insurance
Company
10.17*** Registration Rights Agreement, dated as of March 16, 1994, among
the Company and Mace Siegel, Dana K. Anderson, Arthur M. Coppola
and Edward C. Coppola
10.18*** Registration Rights Agreement, dated as of March 16, 1994, among
the Company, Richard M. Cohen and MRII Associates
10.19*** Incidental Registration Rights Agreement, dated as of March 16,
1994
10.20*** Indemnification Agreement, dated as of March 16, 1994, between
the Company and Mace Siegel
10.20.1*** List of omitted Indemnification Agreements
10.21*** Property Management Agreement, dated as of March 16, 1994, with
respect to Macerich Bristol Associates
10.21.1*** List of omitted Property Management Agreements
10.22* Management and Operating Agreement, dated July 1, 1991, between
Macerich Management Company and North Valley Plaza Associates
10.23* Management and Operating Agreement, dated January 17, 1985,
between Macerich Management Company and Macerich Northwestern
Associates, as amended
10.24* Management Agreement, dated September 1, 1985, between Macerich
Management Company and Panorama City Associates
10.25*** Amended and Restated Partnership Agreement for Macerich Bristol
Associates
10.25.1*** List of omitted Amended and Restated Partnership Agreements for
certain Property Partnerships
10.26* Partnership Agreement for Macerich Northwestern Associates, dated
as of January 17, 1985, between Macerich Walnut Creek Associates
and The Northwestern Mutual Life Insurance Company
10.27*** First Amendment to Macerich Northwestern Associates Partnership
Agreement between Operating Partnership and The Northwestern
Mutual Life Insurance Company
10.28* North Valley Plaza Associates Joint Venture Agreement, dated as
of April 14, 1988, between Chico Associates and The Northwestern
Mutual Life Insurance Company
10.29*** First Amendment to North Valley Plaza Associates Joint Venture
Agreement between Operating Partnership and The Northwestern
Mutual Life Insurance Company
<PAGE>
10.30* Panorama City Associates Partnership Agreement, dated as of
February 2, 1979, between Macerich Panorama Associates and
Connecticut General Mortgage and Realty Investments, as amended
10.31*** Second Amendment to Panorama City Associates Partnership
Agreement between Operating Partnership and 745 Property
Investments (formerly Connecticut General Mortgage and Realty
Investments)
10.32* Amended and Restated Partnership Agreement, dated as of
February 28, 1986, among William A. Schlossman, Donald L. Johnson,
Charles R. Nolan, John L. McCormick, M.O. Foss, Jr., Mark B. Foss,
and Macerich Fargo Associates
10.33* Parcel #1 Ground Lease (Bristol), dated as of November 1, 1971,
between First Western Bank and Trust Company, as landlord, and
Rinker Development Corp., as tenant
10.33.1*** List of omitted Ground Leases
10.34* Amendment to Lease Parcel #2 Ground Lease (Bristol), dated
November 1, 1973, between First Western Bank and Trust Company, as
landlord, and Century Properties Equity Partnership 72, as tenant
10.35* Amendment No. 1 to Ground Leases (Bristol), dated as of June 6,
1973, between First Western Bank and Trust Company, as landlord,
and Montgomery Ross Fisher and Joanne M. Fisher, collectively, as
lessee
10.36* Ground Lease (Broadway), dated June 30, 1993, between City of
Walnut Creek, as lessor, and Macerich Northwestern Associates, as
lessee
10.37* Agreement of Lease (Crossroads-Boulder), dated December 31, 1960,
between H.R. Hindry, as lessor, and Gerri Von Frellick, as lessee,
with amendments and supplements thereto
10.38* Lease (Menke #1) (Parklane), dated December 22, 1959, between
Bessie L. Menke, as lessor, and A.J. Flagg, as lessee, as
supplemented
10.39* Agreement Supplementing Lease (Menke #1), dated November 1, 1960,
between Bessie L. Menke, as lessor, and A.J. Flagg, as lessee
10.40* Second Agreement Supplementing Lease (Menke #1), dated
September 1, 1964, between Mark W. Menke, as executor of the
estate of Bessie L. Menke, and Edith Menke Gamos and Mark W.
Menke, individually (collectively as lessor), and Parklane Mall,
as lessee
10.41* Lease (Menke #2), dated July 30, 1960, between Edith Menke Gamos
and Mark W. Menke, collectively, as lessor, and Flaghill, Inc., as
lessee
10.42* Amendment to Ground Lease (Menke #2), dated May 1, 1979, between
Parklane Shopping Center Company, as ground lessee, and Mark W.
Menke, Diana J. Jones, Edith Menke Gamos and Gary Gamos,
collectively, as ground lessor
10.43* Lease (Menke #3), dated October 5, 1960, between Bessie L. Menke,
as lessor, and Flaghill, Inc., as lessee
10.44* First Agreement Supplementing Lease (Menke #3), dated
September 1, 1964, between Mark W. Menke, executor of the estate
of Bessie L. Menke, deceased, Edith Menke Gamos and Mark W. Menke,
as lessor, and Parklane Mall, as lessee
10.45* Lease (Menke #4), dated October 5, 1960, between Bessie L. Menke,
as lessor, and Flaghill, Inc., as lessee, as supplemented
10.46* Amendment of Leases (Menke #1 through Menke #4) dated June 9,
1981, among Diana J. Jones, Curtis D. Jones, Gary Gamos, Steward
R. Wilson (as Trustee for Menke Trust), Edith Gamos and Mark W.
S. Menke, collectively, as lessor, and Parklane Shopping Center
Company, as lessee
10.47* Agreement (amending Menke #1 through Menke #4), dated May 31,
1967, among Parklane Mall (as ground lessee), Mark W. Menke, Edith
Menke Gamos and Mark W. Menke (as the Administrator of the Estate
of Bessie L. Menke, deceased) (collectively, the ground lessors)
and The Equitable Life Assurance Society of the United States
10.48* Agreement (amending Menke #1 through Menke #4), dated May 1,
1979, among Parklane Mall (as ground lessee), Mark W. Menke, Edith
Menke Gamos and Gary Gamos, Diana J. Jones, Stewart R. Wilson, and
Diana J. Jones as trustee under a Trust Agreement dated September
3, 1971 (collectively, the ground lessors), and The Equitable Life
Assurance Society of the United States
10.49*** Amended and Restated Partnership Agreement of Macerich Fargo
Associates, dated as of March 16, 1994
10.50* Purchase and Sale Agreement, dated as of January 24, 1994, by and
between Crossroads Associates Limited Partnership, as seller, and
the Operating Partnership, as purchaser
10.51***** Contribution Agreement, dated May 13, 1994, between Chesterfield
Mall Associates, a Virginia general partnership, and the Operating
Partnership, as amended and supplemented
10.52****** Contribution Agreement, dated May 13, 1995, between Salisbury-
Springhill Limited Partnership, a Maryland limited partnership,
and the Operating Partnership
10.53******* Contribution Agreement, dated as of July 28, 1995, between
Capitola Mall Associates, a California limited partnership, and
the Operating Partnership, as amended
10.54******** Purchase and Sale Agreement, dated as of November 28, 1995,
between Queens Center Associates, L.P., a Delaware limited
partnership, and Macerich Queens Limited Partnership, a California
limited partnership, as amended
10.55********* Purchase and Sale Agreement, dated as of November 11, 1995,
between Copley Investors Limited Partnership, a Delaware limited
partnership, and Macerich Marina Limited Partnership, a California
limited partnership
<PAGE>
10.56# Purchase and Sale Agreement, dated as of September 26, 1996,
between LaSalle Street Fund Incorporated of Delaware, a Delaware
corporation, and Macerich Valley View Limited Partnership, a
California limited partnership
10.57## Purchase and Sale Agreement, dated as of September 30, 1996,
between Vintage Faire Associates, a California general
partnership, and Macerich Vintage Faire Limited Partnership, a
California limited partnership.
10.58### Purchase and Sale Agreement, dated as of September 30, 1996,
between Billings Associates, a Montana limited partnership, and
Macerich Rimrock Mall Limited Partnership, a California limited
partnership.
10.59#### Purchase and Sale Agreement, dated as of November 22, 1996,
between MCA Buenaventura Associates, L.P., a Delaware limited
partnership, and MR Buenaventura Limited Partnership, a California
limited partnership
10.60##### Purchase and Sale Agreement, dated as of November 22, 1996,
between MCA Fresno Associates, L.P., a Delaware limited
partnership, and MR Fresno Limited Partnership, a California
limited partnership
10.61###### Purchase and Sale Agreement, dated as of November 22, 1996,
between MCA Huntington Associates, L.P., a Delaware limited
partnership, and MR Huntington Limited Partnership, a California
limited partnership
11.1 Computation of per Share Earnings
21.1 List of Subsidiaries
23.1 Consent of Independent Accountants (Coopers & Lybrand L.L.P.)
<PAGE>
* Previously filed as an exhibit to the Company's Registration Statement on
Form S-11, as amended (No. 33-68964), and incorporated herein by reference.
** Previously filed as an exhibit to the Company's Current Report on
Form 8-K, event date May 30, 1995, and incorporated herein by reference.
*** Previously filed as an exhibit to the Company's Annual Report on
Form 10-K for the year ended December 31, 1996, and incorporated herein
by reference.
**** Previously filed as an exhibit to the Company's Quarterly Statement on
Form 10-Q for the quarter ended June 30, 1994, and incorporated herein by
reference.
***** Previously filed as an exhibit to the Company's Current Report on
Form 8-K, event date July 21, 1994, and incorporated herein by reference.
****** Previously filed as an exhibit to the Company's Current Report on
Form 8-K, event date May 13, 1995, and incorporated herein by reference.
******* Previously filed as an exhibit to the Company's Current Report on
Form 8-K, event date July 28, 1995, and incorporated herein by
reference.
******** Previously filed as an exhibit to the Company's Current Report on
Form 8-K, event date December 28, 1995, and incorporated herein by
reference.
********* Previously filed as an exhibit to the Company's Current Report on
Form 8-K, event date January 29, 1996, and incorporated herein by
reference.
# Previously filed as an exhibit to the Company's Current Report on Form 8-K,
event date October 21, 1996, and incorporated herein by reference.
## Previously filed as an exhibit to the Company's Current Report on Form 8-K,
event date February 3, 1997, and incorporated herein by reference.
### Previously filed as an exhibit to the Company's Current Report on Form 8-K,
event date February 3, 1997, and incorporated herein by reference.
#### Previously filed as an exhibit to the Company's Current Report on
Form 8-K, event date February 27, 1997, and incorporated herein by
reference.
##### Previously filed as an exhibit to the Company's Current Report on
Form 8-K, event date February 27, 1997, and incorporated herein by
reference.
###### Previously filed as an exhibit to the Company's Current Report on
Form 8-K, event date February 27, 1997, and incorporated herein by
reference.
<TABLE>
Exhibit 11.1
THE MACERICH COMPANY
Computation of Earnings Per Share
(Dollars in thousands, except per share data)
For the year ended
December 31, 1996 December 31, 1995
--------------------- ----------------------
<S> <C> <C>
Primary
Net income as reported $18,911 $11,303
---------------------- ----------------------
---------------------- ----------------------
Weighted average number
of shares outstanding 20,781,000 15,481,000
Incremental shares
resulting from stock
options and
restricted stock 150,000 20,000
---------------------- ----------------------
Weighted average number
of shares of common
stock and
equivalents 20,931,000 15,501,000
---------------------- ----------------------
Primary earnings
per share $0.90 $0.73
---------------------- ----------------------
---------------------- ----------------------
Fully Diluted
Net income as reported $18,911 $11,303
---------------------- ----------------------
---------------------- ----------------------
Weighted average number
of shares outstanding 20,781,000 15,481,000
Incremental shares
resulting from
stock options and
restricted stock 244,000 58,000
---------------------- ----------------------
Weighted average
number of shares
of common stock
and equivalents 21,025,000 15,539,000
---------------------- ----------------------
---------------------- ----------------------
Fully diluted
earnings per share $0.90 $0.73
---------------------- ----------------------
---------------------- ----------------------
</TABLE>
Exhibit 21.1
LIST OF SUBSIDIARIES
THE MACERICH PARTNERSHIP, L.P., a Delaware limited partnership
MACERICH FARGO ASSOCIATES, a California general partnership
MACERICH BRISTOL ASSOCIATES, a California general partnership
MACERICH BUENAVENTURA LIMITED PARTNERSHIP, a California limited
partnership
MACERICH BUENAVENTURA GP CORP., a Delaware corporation
MACERICH NORTHWESTERN ASSOCIATES, a California general partnership
MACERICH FRESNO LIMITED PARTNERSHIP, a California limited partnership
MACERICH FRESNO GP CORP., a Delaware corporation
MACERICH GREELEY ASSOCIATES, a California general partnership
MACERICH HUNTINGTON LIMITED PARTNERSHIP, a California limited
partnership
MACERICH HUNTINGTON GP CORP., a Delaware corporation
NORTHGATE MALL ASSOCIATES, a California general partnership
NORTH VALLEY PLAZA ASSOCIATES, a California general partnership
PANORAMA CITY ASSOCIATES, a California general partnership
LAKEWOOD MALL BUSINESS COMPANY, a Delaware business trust
LAKEWOOD MALL FINANCE COMPANY, a Delaware corporation
MACERICH PROPERTY MANAGEMENT COMPANY, a California corporation
MACERICH MANAGEMENT COMPANY, a California corporation
MACERICH MARINA LIMITED PARTNERSHIP, a California limited partnership
MACERICH MARINA GP CORP., a Delaware corporation
MACERICH OKLAHOMA LIMITED PARTNERSHIP, a California limited partnership
MACERICH OKLAHOMA GP CORP., a Delaware corporation
MACERICH QUEENS LIMITED PARTNERSHIP, a California limited partnership
MACERICH QUEENS GP CORP., a Delaware corporation
MACERICH QUEENS FUNDING CORP., a Delaware corporation
MACERICH RIMROCK LIMITED PARTNERSHIP, a California limited partnership
MACERICH RIMROCK GP CORP., a Delaware corporation
<PAGE>
MACERICH SCG LIMITED PARTNERSHIP, a California limited partnership
MACERICH SCG GP CORP., a Delaware corporation
MACERICH SCG FUNDING LIMITED PARTNERSHIP, a California limited
partnership
MACERICH SCG HOLDING LIMITED PARTNERSHIP, a California limited
partnership
MACERICH SCG FUNDING GP CORP., a Delaware corporation
MACERICH SASSAFRAS GP CORP., a Delaware corporation
MACERICH SASSAFRAS LIMITED PARTNERSHIP, a California limited partnership
MACERICH SOUTH TOWNE LIMITED PARTNERSHIP, a California limited
partnership
MACERICH SOUTH TOWNE GP CORP., a Delaware corporation
MACERICH ST MARKETPLACE LIMITED PARTNERSHIP, a California limited
partnership
MACERICH ST MARKETPLACE GP CORP., a Delaware corporation
MACERICH VALLEY VIEW LIMITED PARTNERSHIP, a California limited
partnership
MACERICH VALLEY VIEW GP CORP., a Delaware corporation
MACERICH VINTAGE FAIRE LIMITED PARTNERSHIP, a California limited
partnership
MACERICH VINTAGE FAIRE GP CORP., a Delaware corporation
WEST ACRES DEVELOPMENT, a North Dakota general partnership
Exhibit 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statements of
The Macerich Company in Form S-3 and Form S-8, of our report dated March 14,
1997, on our audits of the consolidated financial statements and financial
statement schedule of The Macerich Company as of December 31, 1996 and 1995,
and for the years ended December 31, 1996, 1995 and the period March 16,1994
through December 31, 1994 and the combined financial statements of Macerich
Predecessor Affiliates for the period January 1, 1994 through March 15, 1994,
and the year ended December 31, 1993, which report is included in the Annual
Report on Form 10-K. We also consent to the reference to our Firm under the
caption "Experts" in the registration statement on Form S-3.
COOPERS & LYBRAND L.L.P.
Los Angeles, California
March 25, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED CONSOLIDATED BALANCE SHEETS AND CONDENSED CONSOLIDATED STATEMENTS
OF OPERATIONS FOUND ON PAGES 31 AND 32 OF THE COMPANY'S FORM 10-K FOR THE
YEAR, AND IS QUALIFIED IN ITS ENTIRETY BY REFERNCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 15,643
<SECURITIES> 0
<RECEIVABLES> 26,297
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 37,145
<PP&E> 1,273,085
<DEPRECIATION> 164,417
<TOTAL-ASSETS> 1,187,753
<CURRENT-LIABILITIES> 117,523
<BONDS> 0
0
257
<COMMON> 0
<OTHER-SE> 237,492
<TOTAL-LIABILITY-AND-EQUITY> 1,187,753
<SALES> 0
<TOTAL-REVENUES> 155,059
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 85,761
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 42,353
<INCOME-PRETAX> 19,226
<INCOME-TAX> 0
<INCOME-CONTINUING> 19,226
<DISCONTINUED> 0
<EXTRAORDINARY> (315)
<CHANGES> 0
<NET-INCOME> 18,911
<EPS-PRIMARY> .91
<EPS-DILUTED> .91
</TABLE>
