<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR QUARTER ENDED SEPTEMBER 30, 1998 COMMISSION FILE NO. 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 IDENTIFICATION
INCORPORATION OR ORGANIZATION) NUMBER)
401 WILSHIRE BOULEVARD, SUITE 700, SANTA MONICA, CA 90401
------------------------------------------------------------------------------
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICE)(ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (310) 394-6911
-------------------
N/A
- --------------------------------------------------------------------------------
(FORMER NAME, FORMER ADDRESS AND FORMER FISCAL YEAR,
IF CHANGED SINCE LAST REPORT)
NUMBER OF SHARES OUTSTANDING OF EACH OF THE REGISTRANT'S CLASSES OF COMMON
STOCK, AS OF NOVEMBER 6, 1998.
COMMON STOCK, PAR VALUE $.01 PER SHARE: 32,501,963 SHARES
- --------------------------------------------------------------------------------
INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS REQUIRED
TO BE FILED BY SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 DURING
THE PRECEDING TWELVE (12) MONTHS (OR SUCH SHORTER PERIOD THAT THE REGISTRANT WAS
REQUIRED TO FILE SUCH REPORT) AND (2) HAS BEEN SUBJECT TO SUCH FILING
REQUIREMENTS FOR THE PAST NINETY (90) DAYS.
YES X NO
----------- ----------
<PAGE>
FORM 10-Q
INDEX
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PART I: FINANCIAL INFORMATION
- ------------------------------
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS OF THE COMPANY AS
OF SEPTEMBER 30, 1998 AND DECEMBER 31, 1997 1
CONSOLIDATED STATEMENTS OF OPERATIONS OF THE
COMPANY FOR THE PERIODS FROM JANUARY 1 THROUGH
SEPTEMBER 30, 1998 AND 1997 2
CONSOLIDATED STATEMENTS OF OPERATIONS OF THE
COMPANY FOR THE PERIODS FROM JULY 1 THROUGH
SEPTEMBER 30, 1998 AND 1997 3
CONSOLIDATED STATEMENTS OF CASH FLOWS OF THE
COMPANY FOR THE PERIODS FROM JANUARY 1 THROUGH
SEPTEMBER 30, 1998 AND 1997 4
NOTES TO CONDENSED AND CONSOLIDATED FINANCIAL
STATEMENTS 5 TO 19
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS 20 TO 29
PART II: OTHER INFORMATION 30 TO 31
- --------------------------
</TABLE>
<PAGE>
THE MACERICH COMPANY (THE COMPANY)
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
------------- ------------
<S> <C> <C>
ASSETS:
Property, net $1,862,142 $1,407,179
Cash and cash equivalents 16,902 25,154
Tenant receivables, net, including accrued overage rents of
$2,280 in 1998 and $4,330 in 1997 27,951 23,696
Due from affiliates - 3,105
Deferred charges and other assets, net 67,832 37,899
Investment in joint ventures and the Management Companies 229,474 7,969
---------- ----------
Total assets $2,204,301 $1,505,002
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY:
Mortgage notes payable:
Related parties $134,807 $135,313
Others 967,778 771,246
---------- ----------
Total 1,102,585 906,559
Bank notes payable 140,000 55,000
Convertible debentures 161,400 161,400
Accounts payable and accrued expenses 23,950 17,335
Due to affiliates 36 15,109
Other accrued liabilities 60,536 32,841
Preferred stock dividend payable 4,193 -
---------- ----------
Total liabilities 1,492,700 1,188,244
---------- ----------
Minority interest in Operating Partnership 163,099 100,463
---------- ----------
Commitments and contingencies (Note 9)
Stockholders' equity:
Series A cumulative convertible redeemable preferred stock, $.01 par value,
3,627,131 and 0 shares issued and outstanding
at September 30, 1998 and December 31, 1997, respectively 100,000 -
Series B cumulative convertible redeemable preferred stock, $.01 par value,
5,487,471and 0 shares issued and outstanding at September 30, 1998 and
December 31,1997, respectively 150,000 -
Common stock, $.01 par value, 100,000,000 shares
authorized, 32,468,300 and 26,004,800 shares issued and
outstanding at September 30, 1998 and December 31, 1997, respectively 325 260
Additional paid in capital 303,162 219,121
Accumulated earnings - -
Unamortized restricted stock (4,985) (3,086)
---------- ----------
Total stockholders' equity 548,502 216,295
---------- ----------
Total liabilities and stockholders' equity $2,204,301 $1,505,002
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
-1-
<PAGE>
THE MACERICH COMPANY (THE COMPANY)
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
January 1 to September 30,
------------------------------------
1998 1997
------------ ------------
<S> <C> <C>
REVENUES:
Minimum rents $127,052 $101,228
Percentage rents 6,709 6,434
Tenant recoveries 60,775 49,558
Other 3,125 2,465
----------- ----------
Total Revenues 197,661 159,685
----------- ----------
OPERATING COSTS:
Shopping center expenses 62,135 51,830
General and administrative expense 3,119 2,099
Interest expense:
Related parties 7,555 7,531
Others 58,545 39,871
Depreciation and amortization 38,919 29,815
----------- ----------
Total Expenses 170,273 131,146
----------- ----------
Equity in income (loss) of unconsolidated
joint ventures and the management companies 8,432 (7,608)
Gain on sale of assets 9 1,620
----------- ----------
Income before extraordinary item and minority interest 35,829 22,551
Less extraordinary loss on early extinguishment of debt 2,414 563
Less minority interest in net income
of the Operating Partnership 7,748 7,195
----------- ----------
Net income 25,667 14,793
Less preferred dividends 6,898 -
----------- ----------
Net income - available to common stockholders $18,769 $14,793
=========== ==========
Earnings per common share - basic:
Income before extraordinary item $0.68 $0.58
Extraordinary item (0.06) (0.01)
----------- ----------
Net income - available to common stockholders $0.62 $0.57
=========== ==========
Weighted average number of common shares
outstanding - basic 30,154,000 25,886,000
=========== ==========
Weighted average number of common shares
outstanding - basic, assuming full conversion of
operating units outstanding 42,310,000 37,981,000
=========== ==========
Earnings per common share - diluted:
Income before extraordinary item $0.68 $0.58
Extraordinary item (0.06) ($0.01)
----------- ----------
Net income - available to common stockholders $0.62 $0.57
=========== ==========
Weighted average number of common shares
outstanding - diluted for EPS 42,920,000 38,402,000
=========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
-2-
<PAGE>
THE MACERICH COMPANY (THE COMPANY)
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
July 1 to September 30,
------------------------------------
1998 1997
------------ ------------
<S> <C> <C>
REVENUES:
Minimum rents $47,424 $35,674
Percentage rents 2,458 2,278
Tenant recoveries 23,953 18,645
Other 1,244 435
---------- ----------
Total Revenues 75,079 57,032
---------- ----------
OPERATING COSTS:
Shopping center expenses 24,135 19,896
General and administrative expense 942 910
Interest expense:
Related parties 2,472 2,538
Others 22,416 13,701
Depreciation and amortization 15,312 10,134
---------- ----------
Total Expenses 65,277 47,179
---------- ----------
Equity in income (loss) of unconsolidated
joint ventures and the management companies 2,852 (8,681)
Gain on sale of assets - 1,620
---------- ----------
Income before extraordinary item and minority interest 12,654 2,792
Less extraordinary loss on early extinguishment of debt 2,324 51
Less minority interest in net income
of the Operating Partnership 1,558 871
---------- ----------
Net income 8,772 1,870
Less preferred dividends 4,193 -
---------- ----------
Net income - available to common stockholders $4,579 $1,870
========== ==========
Earnings per common share - basic:
Income before extraordinary item $0.19 $0.07
Extraordinary item (0.05) 0.00
Net income - available to common stockholders $0.14 $0.07
========== ==========
Weighted average number of common shares
outstanding - basic 32,468,000 25,956,000
========== ==========
Weighted average number of common shares
outstanding - basic, assuming full conversion of
operating units outstanding 44,761,000 38,023,000
========== ==========
Earnings per common share - diluted:
Income before extraordinary item $0.19 $0.07
Extraordinary item (0.05) 0.00
---------- ----------
Net income - available to common stockholders $0.14 $0.07
========== ==========
Weighted average number of common shares
outstanding - diluted for EPS 45,353,000 38,444,000
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
-3-
<PAGE>
THE MACERICH COMPANY (THE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
January 1 to September 30,
----------------------------------
1998 1997
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net income - available to common stockholders $18,769 $14,793
Preferred dividends 6,898 -
--------- ---------
Net income 25,667 14,793
--------- ---------
Adjustments to reconcile net income to
net cash provided by operating activities:
Extraordinary loss on early extinguishment of debt 2,414 563
Gain on sale of assets (9) (1,620)
Depreciation and amortization 38,919 29,815
Amortization of net discount (premium) on trust deed note payable (330) 25
Minority interest in the net income of the Operating Partnership 7,748 7,195
Changes in assets and liabilities:
Tenant receivables, net (4,255) 663
Other assets (25,831) (2,226)
Accounts payable and accrued expenses 6,615 2,305
Preferred stock dividend payable 4,193 -
Other liabilities 27,695 3,846
--------- ---------
Total adjustments 57,159 40,566
--------- ---------
Net cash provided by operating activities 82,826 55,359
--------- ---------
Cash flows from investing activities:
Acquisitions of property and improvements (381,726) (147,585)
Renovations and expansions of centers (25,153) (10,072)
Additions to tenant improvements (3,696) (2,093)
Deferred charges (11,780) (9,879)
Equity in (income) loss of unconsolidated joint ventures
and the management companies (8,432) 7,608
Distributions from (contributions to) joint ventures (213,073) (4,384)
Loan repayments to affiliates, net (11,968) (704)
Proceeds from sale of assets - 4,332
--------- ---------
Net cash used in investing activities (655,828) (162,777)
--------- ---------
Cash flows from financing activities:
Proceeds from mortgages and notes payable 397,679 316,115
Payments on mortgages and notes payable (186,440) (162,645)
Net proceeds from equity offerings 416,833 -
Dividends and distributions to partners (56,424) (48,875)
Dividends to preferred stockholders (6,898) -
--------- ---------
Net cash provided by financing activities 564,750 104,595
--------- ---------
Net decrease in cash (8,252) (2,823)
Cash and cash equivalents, beginning of period 25,154 15,643
--------- ---------
Cash and cash equivalents, end of period $16,902 $12,820
========= =========
Supplemental cash flow information:
Cash payment for interest, net of amounts capitalized $62,020 $41,069
========= =========
Non cash transactions:
Acquisition of property by assumption of debt $70,116 $46,202
========= =========
Acquisition of property by issuance of OP units $7,917 -
========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
-4-
<PAGE>
THE MACERICH COMPANY (THE COMPANY)
NOTES TO CONDENSED AND CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
1. INTERIM FINANCIAL STATEMENTS AND BASIS OF PRESENTATION:
The accompanying consolidated financial statements of The Macerich Company
(the "Company") have been prepared in accordance with generally accepted
accounting principles ("GAAP") for interim financial information and with
the instructions to Form 10-Q and Article 10 of Regulation S-X.
Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial
statements and have not been audited by independent public accountants.
The unaudited interim financial statements should be read in conjunction
with the audited financial statements and related notes included in the
Company's Annual Report on Form 10-K for the year ended December 31, 1997.
In the opinion of management, all adjustments (consisting of normal
recurring adjustments) necessary for a fair presentation of the financial
statements for the interim periods have been made. The results for interim
periods are not necessarily indicative of the results to be expected for a
full year. The accompanying consolidated balance sheet as of December 31,
1997 has been derived from the audited financial statements, but does not
include all disclosure required by GAAP.
Certain reclassifications have been made in the 1997 financial statements
to conform to the 1998 financial statement presentation.
In March, 1998, the FASB, through its Emerging Issues Task Force ("EITF"),
concluded based on EITF 97-11, "Accounting for Internal Costs Relating to
Real Estate Property Acquisitions," that all internal costs to source,
analyze and close acquisitions should be expensed as incurred. The Company
has historically capitalized these costs, in accordance with GAAP. The
Company has adopted the FASB's interpretation effective March 19, 1998, and
expects the impact to be an approximate $0.05 per share reduction of net
income per share in 1998.
In May, 1998, the FASB, through the EITF, modified the timing of
recognition of revenue for percentage rent received from tenants in EITF
98-9, "Accounting for Contingent Rent in Interim Financial Periods." The
Company applied this accounting change as of April 1, 1998. Although the
Company believes this accounting change will have no material impact on the
annual percentage rent recognized, the accounting change had the effect of
deferring $1,792 and $1,572 of percentage rent that would have been
recognized for the three months ended June 30, 1998 and September 30, 1998,
respectively, using the previous GAAP accounting method for percentage rent
recognition. As a result of this accounting change, the Company expects a
portion of percentage rent that previously would have been recognized in
the second and third quarters to be recognized in the fourth quarter.
In June 1998, the FASB issued FAS 133, "Accounting for Derivative
Instruments and Hedging Activities," which will be effective for the
Company's financial statements for periods beginning January 1, 2000. The
new standard requires companies to record derivatives on the balance sheet,
measured at fair value. Changes in the fair values of those derivatives
would be accounted for depending on the use of the derivative and whether
it qualifies for hedge accounting. The key criterion for hedge accounting
is that the hedging relationship must be highly effective in achieving
offsetting changes in fair value or cash flows. The Company has not yet
determined when it will implement FAS 133 nor has it completed the complex
analysis required to determine the impact on its financial statements.
-5-
<PAGE>
THE MACERICH COMPANY (THE COMPANY)
NOTES TO CONDENSED AND CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
EARNINGS PER SHARE ("EPS")
The computation of basic earnings per share is based on net income and the
weighted average number of common shares outstanding for the three and nine
months ending September 30, 1998 and 1997. The diluted earnings per share
gives effect to the outstanding restricted stock and common stock options
calculated using the treasury stock method. The convertible debentures and
convertible preferred stock would be anti-dilutive to the calculation of
diluted EPS and therefore are not included. The OP units not held by the
Company have been included in the diluted EPS calculation since they are
convertible on a one-for-one basis. The following table reconciles the
basic and diluted earnings per share calculations:
<TABLE>
<CAPTION>
For the Three Months Ended September 30,
-----------------------------------------------------------------------------
1998 1997
----------------------------------- -------------------------------------
Net Net
Income Shares Per Share Income Shares Per Share
----------------------------------- -------------------------------------
<S> <C> <C> <C> <C> <C> <C>
(In thousands, except per share data)
Net income $8,772 $1,870
Less: Preferred stock dividends 4,193 -
---------- ---------
Basic EPS:
Net income - available to common stockholders 4,579 32,468 $0.14 1,870 25,956 $0.07
Diluted EPS:
Effect of dilutive securities:
Conversion of OP units 1,558 12,293 871 12,067
Employee stock options and restricted stock 155 592 60 421
Convertible preferred stock n/a -antidilutive for EPS - - -
Convertible debentures n/a -antidilutive n/a - antidilutive
----------------------------------- -------------------------------------
Net income - available to common stockholders $6,292 45,353 $0.14 $2,801 38,444 $0.07
=================================== =====================================
</TABLE>
<TABLE>
<CAPTION>
For the Nine Months Ended September 30,
-----------------------------------------------------------------------------
1998 1997
----------------------------------- -------------------------------------
Net Net
Income Shares Per Share Income Shares Per Share
----------------------------------- -------------------------------------
<S> <C> <C> <C> <C> <C> <C>
(In thousands, except per share data)
Net income $25,667 $14,793
Less: Preferred stock dividends 6,898 -
---------- ---------
Basic EPS:
Net income - available to common stockholders 18,769 30,154 $0.62 14,793 25,886 $0.57
Diluted EPS:
Effect of dilutive securities:
Conversion of OP units 7,748 12,156 7,195 12,095
Employee stock options and restricted stock 411 610 179 421
Convertible preferred stock n/a -antidilutive for EPS - - -
Convertible debentures n/a -antidilutive n/a - antidilutive
----------------------------------- -------------------------------------
Net income - available to common stockholders $26,928 42,920 $0.62 $22,167 38,402 $0.57
=================================== =====================================
</TABLE>
-6-
<PAGE>
THE MACERICH COMPANY (THE COMPANY)
NOTES TO CONDENSED AND CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
2. ORGANIZATION:
The Company was incorporated under the General Corporation Law of Maryland
on September 9, 1993 and commenced operations effective with the completion
of its initial public offering ("IPO") on March 16, 1994. The Company was
formed to continue the business of the Macerich Group, which since 1972 has
focused on the acquisition, ownership, redevelopment, management and
leasing of regional shopping centers located throughout the United States.
In 1994, the Company became the sole general partner of The Macerich
Partnership L.P., (the "Operating Partnership"). The Operating Partnership
owns or has an ownership interest in forty-one regional shopping centers
and five community shopping centers. Collectively these properties and
interests are referred to as the "Centers". The Company conducts all of
its operations through the Operating Partnership and other wholly owned
subsidiaries, and the Company's three Management Companies, Macerich
Property Management Company, Macerich Management Company, and Macerich
Manhattan Management Company, collectively referred to as "the Management
Companies".
The Company is a real estate investment trust under the Internal Revenue
Code of 1986, as amended and owned approximately 77% of The Operating
Partnership as of September 30, 1998. The limited partnership interest not
owned by the Company is reflected in these financial statements as Minority
Interest.
3. INVESTMENTS IN UNCONSOLIDATED JOINT VENTURES AND THE MANAGEMENT COMPANIES:
The following are the Company's investments in various real estate joint
ventures, which own retail shopping centers. The Operating Partnership's
interest in each joint venture as of September 30, 1998 is as follows:
<TABLE>
<CAPTION>
The Operating Partnership's
Joint Venture Ownership %
------------- ------------------
<S> <C>
Macerich Northwestern Associates 50%
Panorama City Associates 50%
SDG Macerich Properties, L.P. 50%
West Acres Development 19%
Manhattan Village, LLC 10%
</TABLE>
The Operating Partnership also owns the non-voting preferred stock of the
Macerich Management Company and Macerich Property Management Company and
is entitled to receive 95% of the distributable cash flow of these two
entities. Macerich Manhattan Management Company is a 100% subsidiary of
Macerich Management Company. The Company accounts for the Management
Companies and joint ventures using the equity method of accounting.
-7-
<PAGE>
THE MACERICH COMPANY (THE COMPANY)
NOTES TO CONDENSED AND CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
3. INVESTMENTS IN UNCONSOLIDATED JOINT VENTURES AND THE MANAGEMENT COMPANIES,
CONTINUED:
On February 27, 1998, the Company, through a 50/50 joint venture, SDG
Macerich Properties, L.P., acquired a portfolio of twelve regional malls.
The total purchase price was $974,500 including the assumption of $485,000
in debt. The Company funded its 50% of the remaining purchase price by
issuing 3,627,131 shares of Series A cumulative convertible preferred stock
for gross proceeds totaling $100,000 in a private placement. The Company
also issued 2,879,134 shares of common stock ($79,600 of total proceeds)
under the Company's shelf registration statement. The balance of the
purchase price was funded from the Company's line of credit. Each of the
joint venture partners have assumed leasing and management responsibilities
for six of the regional malls.
The results of these joint ventures are included for the period subsequent
to their respective dates of acquisition.
In December 1997, North Valley Plaza, which was 50% owned by the Company,
was sold.
Combined and condensed balance sheets and statements of operations are
presented below for all unconsolidated joint ventures, and the Management
Companies, followed by information regarding the Operating Partnership's
beneficial interest in the combined operations. Beneficial interest is
calculated based on the Operating Partnership's ownership interests in the
joint ventures and the Management Companies.
COMBINED AND CONDENSED BALANCE SHEETS OF JOINT VENTURES
AND THE MANAGEMENT COMPANIES
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
-------- --------
<S> <C> <C>
Assets:
Properties, net $1,145,295 $153,856
Other assets 36,129 10,013
---------- ---------
Total assets $1,181,424 $163,869
========== =========
Liabilities and partners' capital:
Mortgage notes payable $619,063 $84,342
Other liabilities 44,898 6,563
The Company's capital 229,474 7,969
Outside partners' capital 287,989 64,995
---------- ---------
Total liabilities and partners' capital $1,181,424 $163,869
========== =========
</TABLE>
-8-
<PAGE>
THE MACERICH COMPANY (THE COMPANY)
NOTES TO CONDENSED AND CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
3. INVESTMENTS IN UNCONSOLIDATED JOINT VENTURES AND THE MANAGEMENT COMPANIES
-- CONTINUED:
COMBINED STATEMENTS OF OPERATIONS OF JOINT VENTURES
AND THE MANAGEMENT COMPANIES
<TABLE>
<CAPTION>
Nine Months Ended September 30, 1998
----------------------------------------------------------------------
SDG
Macerich Other Mgmt
Properties, L.P. Joint Ventures Companies Total
---------------- -------------- ----------- --------
<S> <C> <C> <C> <C>
Revenues $73,245 $27,999 $4,808 $106,052
-------- -------- -------- --------
Expenses:
Shopping center expenses 26,134 9,394 - 35,528
Interest expense 18,120 5,061 (294) 22,887
Management company expense - - 6,663 6,663
Depreciation and amortization 12,977 3,196 444 16,617
-------- -------- -------- --------
Total operating expenses 57,231 17,651 6,813 81,695
-------- -------- -------- --------
Gain (loss) on sale or write-down of assets - 126 (197) (71)
-------- -------- -------- --------
Net income (loss) $16,014 $10,474 ($2,202) $24,286
======== ======== ========= =======
</TABLE>
<TABLE>
<CAPTION>
Nine Months Ended September 30, 1997
----------------------------------------------------------------------
SDG
Macerich Other Mgmt
Properties, L.P. Joint Ventures Companies Total
---------------- -------------- ----------- --------
<S> <C> <C> <C> <C>
Revenues - $22,372 $3,062 $25,434
-------- -------- -------- --------
Expenses:
Shopping center expenses - 8,169 - 8,169
Interest expense - 4,777 (93) 4,684
Management company expense - - 3,397 3,397
Depreciation and amortization - 3,218 283 3,501
-------- -------- -------- --------
Total operating expenses - 16,164 3,587 19,751
-------- -------- -------- --------
Loss on sale or write-down of assets - (20,576) - (20,576)
-------- -------- -------- --------
Net loss - ($14,368) ($525) ($14,893)
======== ======== ========= =======
</TABLE>
-9-
<PAGE>
THE MACERICH COMPANY (THE COMPANY)
NOTES TO CONDENSED AND CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
3. INVESTMENTS IN UNCONSOLIDATED JOINT VENTURES AND THE MANAGEMENT COMPANIES
-- CONTINUED:
COMBINED STATEMENTS OF OPERATIONS OF JOINT VENTURES
AND THE MANAGEMENT COMPANIES
<TABLE>
<CAPTION>
Three Months Ended September 30, 1998
-----------------------------------------------------------------------
SDG
Macerich Other Mgmt
Properties, L.P. Joint Ventures Companies Total
---------------- -------------- ----------- --------
<S> <C> <C> <C> <C>
Revenues $31,492 $9,094 $1,690 $42,276
--------- -------- -------- -------
Expenses:
Shopping center expenses 11,571 2,968 - 14,539
Interest expense 7,797 1,898 (103) 9,592
Management company expense - - 2,549 2,549
Depreciation and amortization 6,111 1,139 134 7,384
--------- -------- -------- -------
Total operating expenses 25,479 6,005 2,580 34,064
--------- -------- -------- -------
Gain (loss) on sale or write-down of assets - - - -
--------- -------- -------- -------
Net income (loss) $6,013 $3,089 ($890) $8,212
========= ======== ======== =======
</TABLE>
<TABLE>
<CAPTION>
Three Months Ended September 30, 1997
-----------------------------------------------------------------------
SDG
Macerich Other Mgmt
Properties, L.P. Joint Ventures Companies Total
---------------- -------------- ----------- --------
<S> <C> <C> <C> <C>
Revenues - $ 8,550 $1,214 $9,764
--------- --------- -------- --------
Expenses:
Shopping center expenses - 3,116 - 3,116
Interest expense - 1,595 (46) 1,549
Management company expense - - 1,493 1,493
Depreciation and amortization - 1,153 103 1,256
--------- --------- -------- --------
Total operating expenses - 5,864 1,550 7,414
--------- --------- -------- --------
Loss on sale or write-down of assets - (20,923) - (20,923)
--------- --------- -------- --------
Net loss - $(18,237) ($336) ($18,573)
========= ========= ======== ========
</TABLE>
Significant accounting policies used by the unconsolidated joint
ventures and the Management Companies are similar to those used
by the Company.
-10-
<PAGE>
THE MACERICH COMPANY (THE COMPANY)
NOTES TO CONDENSED AND CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
3. INVESTMENTS IN UNCONSOLIDATED JOINT VENTURES AND THE MANAGEMENT COMPANIES
-- CONTINUED:
Included in mortgage notes payable are amounts due to related
parties of $74,911 and $43,500 at September 30, 1998 and December
31, 1997, respectively. Interest expense incurred on these
borrowings amounted to $1,057 and $750 for the three months ended
September 30, 1998 and 1997, respectively, and $2,540 and $2,233
for the nine months ended September 30, 1998 and 1997,
respectively.
PRO RATA SHARE OF COMBINED AND CONDENSED STATEMENTS OF
OPERATIONS OF JOINT VENTURES AND THE MANAGEMENT COMPANIES
The following tables set forth the Operating Partnership's beneficial interest
in the joint ventures:
<TABLE>
<CAPTION>
Nine Months Ended September 30, 1998
------------------------------------------------------------------------
SDG
Macerich Other Mgmt
Properties, L.P. Joint Ventures Companies Total
----------------- -------------- ----------- --------
<S> <C> <C> <C> <C>
Revenues $36,622 $8,242 $4,568 $49,432
----------- --------- -------- -------
Expenses:
Shopping center expenses 13,067 2,927 - 15,994
Interest expense 9,060 1,749 (279) 10,530
Management company expense - - 6,330 6,330
Depreciation and amortization 6,488 1,072 422 7,982
----------- --------- -------- -------
Total operating expenses 28,615 5,748 6,473 40,836
----------- --------- -------- -------
Gain (loss) on sale or write-down of assets - 23 (187) (164)
----------- --------- -------- -------
Net income (loss) $8,007 $2,517 ($2,092) $8,432
=========== ========= ======== =======
</TABLE>
<TABLE>
<CAPTION>
Nine Months Ended September 30, 1997
------------------------------------------------------------------------
SDG
Macerich Other Mgmt
Properties, L.P. Joint Ventures Companies Total
----------------- -------------- ----------- --------
<S> <C> <C> <C> <C>
Revenues - $8,024 $2,909 $10,933
----------- --------- -------- -------
Expenses:
Shopping center expenses - 3,039 - 3,039
Interest expense - 1,600 (88) 1,512
Management company expense - - 3,227 3,227
Depreciation and amortization - 1,423 268 1,691
----------- --------- -------- -------
Total operating expenses - 6,062 3,407 9,469
----------- --------- -------- -------
Loss on sale or write-down of assets - (9,072) - (9,072)
----------- --------- -------- -------
Net loss - ($7,110) ($498) ($7,608)
=========== ========= ======== =======
</TABLE>
-11-
<PAGE>
THE MACERICH COMPANY (THE COMPANY)
NOTES TO CONDENSED AND CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
3. INVESTMENTS IN UNCONSOLIDATED JOINT VENTURES AND THE MANAGEMENT COMPANIES
-- CONTINUED:
PRO RATA SHARE OF COMBINED AND CONDENSED STATEMENTS OF
OPERATIONS OF JOINT VENTURES AND THE MANAGEMENT COMPANIES
<TABLE>
<CAPTION>
Three Months Ended September 30, 1998
------------------------------------------------------------------------
SDG
Macerich Other Mgmt
Properties, L.P. Joint Ventures Companies Total
----------------- -------------- ----------- --------
<S> <C> <C> <C> <C>
Revenues $15,746 $2,703 $1,605 $20,054
-------- ------- ------- --------
Expenses:
Shopping center expenses 5,785 950 - 6,735
Interest expense 3,898 689 (98) 4,489
Management company expense - - 2,421 2,421
Depreciation and amortization 3,055 375 127 3,557
-------- ------- ------- --------
Total operating expenses 12,738 2,014 2,450 17,202
-------- ------- ------- --------
Gain (loss) on sale or write-down of assets - - - -
-------- ------- ------- --------
Net income (loss) $3,008 $689 ($845) $2,852
======== ======= ======= ========
</TABLE>
<TABLE>
<CAPTION>
Three Months Ended September 30, 1997
------------------------------------------------------------------------
SDG
Macerich Other Mgmt
Properties, L.P. Joint Ventures Companies Total
----------------- -------------- ----------- --------
<S> <C> <C> <C> <C>
Revenues - $2,896 $1,153 $4,049
-------- ------- ------- --------
Expenses:
Shopping center expenses - 1,102 - 1,102
Interest expense - 536 (44) 492
Management company expense - - 1,418 1,418
Depreciation and amortization - 480 98 578
-------- ------- ------- --------
Total operating expenses - 2,118 1,472 3,590
-------- ------- ------- --------
Loss on sale or write-down of assets - (9,140) - (9,140)
-------- ------- ------- --------
Net loss - ($8,362) ($319) ($8,681)
======== ======= ======= ========
</TABLE>
-12-
<PAGE>
THE MACERICH COMPANY (THE COMPANY)
NOTES TO CONDENSED AND CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
4. PROPERTY:
Property is comprised of the following at:
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
------ ------
<S> <C> <C>
Land $403,738 $313,050
Building Improvements 1,602,276 1,235,459
Tenant Improvements 44,710 38,097
Equipment & Furnishings 8,707 7,576
Construction in Progress 36,607 13,247
---------- ----------
2,096,038 1,607,429
Less, accumulated depreciation (233,896) (200,250)
---------- ----------
$1,862,142 $1,407,179
========== ==========
</TABLE>
-13-
<PAGE>
THE MACERICH COMPANY (THE COMPANY)
NOTES TO CONDENSED AND CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
5. MORTGAGE NOTES PAYABLE:
Mortgage notes payable at September 30, 1998 and December 31, 1997 consist
of the following:
<TABLE>
<CAPTION>
Carrying Amount of Notes
--------------------------
1998 1997
-------- --------
Property Pledged Related Related Interest Payment Maturity
As Collateral Other Party Other Party Rate Terms Date
- ---------------- -------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Capitola Mall ---- $37,433 ---- $37,675 9.25% 316 (d) 2001
Chesterfield Towne Center $65,230 ---- $65,708 ---- 9.10% 548(e) 2024
Chesterfield Towne Center 3,290 ---- 3,359 ---- 8.54% 28(d) 1999
Citadel 74,861 ---- 75,600 ---- 7.20% 544(d) 2008
Corte Madera, Village at (k) 40,000 ---- ---- ---- 9.63% interest only 1998
Crossroads Mall (a) ---- 35,374 ---- 35,638 7.08% 244(d) 2010
Fresno Fashion Fair (j) 69,000 ---- 38,000 ---- 6.52% interest only 2008
Greeley Mall 17,251 ---- 17,815 ---- 8.50% 187(d) 2003
Green Tree Mall/Crossroads - OK
Centre at Salisbury (b) 117,714 ---- 117,714 ---- 7.23% interest only 2004
Holiday Village Mall ---- 17,000 ---- 17,000 6.75% interest only 2001
Lakewood Mall (c) 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 ---- 65,100 ---- (f) interest only 1999
Rimrock Mall 31,134 ---- 31,517 ---- 7.70% 244(d) 2003
South Plains Mall 29,441 ---- ---- ---- 6.3% (i) 348 (d) 2008
South Towne Center 64,000 ---- 65,000 ---- 6.61% (g) interest only 2008
Valley View Center 51,000 ---- 51,000 ---- 7.89% interest only 2006
Villa Marina Marketplace 58,000 ---- 58,000 ---- 7.23% interest only 2006
Vintage Faire Mall (h) 54,757 ---- 55,433 ---- 7.65% 427(d) 2003
Westside Pavilion 100,000 ---- ---- ---- 6.67% interest only 2008
--------- --------- --------- ---------
Total $967,778 $134,807 $771,246 $135,313
========= ========= ========= =========
Weighted average interest rate at September 30, 1998 7.01%
=====
Weighted average interest rate at December 31, 1997 7.42%
=====
</TABLE>
Notes:
(a) This note was issued at a discount. The discount is being amortized
over the life of the loan using the effective interest method. At
September 30, 1998 and December 31, 1997, the unamortized discount was
$405 and $430, respectively.
(b) This loan is cross collateralized by Green Tree Mall, Crossroads Mall,
Oklahoma and The Centre at Salisbury.
(c) 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.
-14-
<PAGE>
THE MACERICH COMPANY (THE COMPANY)
NOTES TO CONDENSED AND CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
5. MORTGAGE NOTES PAYABLE, CONTINUED:
The Notes require 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 September 30, 1998 and at December
31, 1997.
(d) This represents the monthly payment of principal and interest.
(e) 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 of 35% of the amount by which the property's
gross receipts (as defined in the loan agreement) exceed a base amount
specified therein. Contingent interest expense recognized by the
Company was $234 and $0 for the nine months ended September 30, 1998
and 1997, respectively.
(f) This loan bears interest at LIBOR plus 0.45%. There is an interest
rate protection agreement in place on the first $10,200 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 7.7%.
(g) In July 1998, this loan was reduced by $1,000 and converted into a
fixed rate loan bearing interest at 6.61% maturing in 2008.
(h) Included in cash and cash equivalents is $3,031 and $3,030 at
September 30, 1998 and December 31, 1997, respectively, of cash
restricted under the terms of this loan agreement.
(i) This note was assumed at acquisition. At the time of acquisition in
June 1998, this debt was recorded at fair market value and the premium
is being amortized over the life of the loan using the effective
interest method. The monthly debt service payment is $348 per month
and is calculated based on a 12.5% interest rate. At September 30,
1998, the unamortized premium was $6,479.
(j) The Company incurred a loss on early extinguishment of the old debt of
$2,324.
(k) This loan was refinanced on October 25, 1998. The new loan is for
$60,000, bears interest at LIBOR plus 2% and matures on November 1,
1999.
The Company periodically enters into treasury lock agreements in order to
hedge its exposure to interest rate fluctuations on anticipated financings.
Under these agreements, the Company pays or receives an amount equal to the
difference between the treasury lock rate and the market rate on the date
of settlement, based on the notional amount of the hedge. The realized
gain or loss on the contracts is recorded on the balance sheet and
amortized to interest expense over the period of the hedged loans. The
Company has one unsettled treasury lock for a notional amount of
-15-
<PAGE>
THE MACERICH COMPANY (THE COMPANY)
NOTES TO CONDENSED AND CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
5. MORTGAGE NOTES PAYABLE, CONTINUED:
$140,000. As of September 30, 1998, the treasury rate lock was higher than
the market rate resulting in an unrealized hedge liability of approximately
$6,900, which has been accrued at September 30, 1998.
Certain mortgage loan agreements contain a prepayment penalty provision for
the early extinguishment of the debt.
Total interest expense capitalized for the three months ending September
30, 1998 and 1997 was $730 and $1,617, respectively; and $2,201 and $1,916
for the nine months ended September 30, 1998 and 1997, respectively.
The market value of notes payable at September 30, 1998 and December 31,
1997 is estimated to be approximately $1,240,700 and $1,013,000,
respectively, based on current interest rates for comparable loans.
6. BANK NOTES PAYABLE:
At December 31, 1997, the Company had $55,000 outstanding under its $60,000
unsecured credit facility, which bore interest at LIBOR plus 1.325%. On
February 26, 1998, the Company increased this credit facility to $150,000
with a maturity of February 2000, currently bearing interest at LIBOR plus
1.10%. As of September 30, 1998, $140,000 was outstanding on this line of
credit.
7. CONVERTIBLE DEBENTURES:
During 1997, the Company issued and sold $161,400 of convertible
subordinated debentures (the "Debentures") due 2002. The Debentures, which
were sold at par, bear interest at 7.25% annually (payable semi-annually)
and are convertible at any time, on or after 60 days, from the date of
issue at a conversion price of $31.125 per share. The Debentures mature on
December 15, 2002 and are callable by the Company after June 15, 2002 at
par plus accrued interest.
8. RELATED-PARTY TRANSACTIONS:
The Company has engaged The Management Companies to manage the operations
of its properties and certain unconsolidated joint ventures. For the three
months ending September 30, 1998 and 1997, management fees of $718 and
$552, respectively; and for the nine months ending September 30, 1998 and
1997 of $1,968 and $1,572, respectively, were paid to the Management
Companies by the Company.
-16-
<PAGE>
THE MACERICH COMPANY (THE COMPANY)
NOTES TO CONDENSED AND CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
8. RELATED-PARTY TRANSACTIONS, CONTINUED:
Certain mortgage notes were held by outside partners of the individual
Macerich Group partnerships. Interest expense in connection with these
notes was $2,784 and $2,538 for the three months ended September 30, 1998
and 1997, respectively; and $7,659 and $7,531 for the nine months ended
September 30, 1998 and 1997, respectively. Included in accrued interest
expense is interest payable to these partners of $492 and $517 at September
30, 1998 and December 31, 1997, respectively.
9. COMMITMENTS AND CONTINGENCIES:
Certain partnerships have entered into noncancellable operating ground
leases. The leases expire at various times through 2070, 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 $115 and $230 for
the three months ended September 30, 1998 and 1997, respectively; and $760
and $573 for the nine months ended September 30, 1998 and 1997,
respectively. There were no contingent rents in either period.
Perchloroethylene (PCE) has been detected in soil and groundwater in the
vicinity of a dry cleaning establishment at North Valley Plaza, formerly
owned by a joint venture of which the Company was a member. The property
was sold on December 18, 1997. The California Department of Toxic
Substances Control (DTSC) advised the Company in 1995 that very low levels
of Dichloroethylene (1,2 DCE), a degradation byproduct of PCE, had been
detected in a municipal water well located 1/4 mile west of 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 1,2 DCE which is permitted in drinking
water is 6 parts per billion (ppb). The 1,2 DCE was detected in the water
well at a concentration of 1.2 ppb, which is below the MCL. The Company
has retained an environmental consultant and has initiated extensive
testing of the site. Remediation began in October 1997. The joint venture
agreed (between itself and the buyer) that it would be responsible for
continuing to pursue the investigation and remediation of impacted soil and
groundwater resulting from releases of PCE from the former dry cleaner.
$100 and $65 have already been incurred by the Company for remediation, and
professional and legal fees for the periods ending September 30, 1998 and
1997, respectively. An additional $461 and $621 was accrued as a liability
by the Company as of September 30, 1998 and September 30, 1997,
respectively. The Company has been sharing costs on a 50/50 basis with a
former owner of the property and intends to look to additional responsible
parties for recovery.
Low levels of toluene, a petroleum constituent, was detected in one of
three groundwater dewatering system holding tanks at Queens Center. No
government agency has requested any action to address this matter.
Although the Company believes that no remediation will be required, the
Company established a $150 reserve in 1996 to cover professional fees and
testing costs, which was reduced by costs incurred of $1 and $5 for the
nine months ending September 30, 1998 and 1997, respectively. The Company
intends to look to the responsible parties and insurers if remediation is
required.
-17-
<PAGE>
THE MACERICH COMPANY (THE COMPANY)
NOTES TO CONDENSED AND CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
9. COMMITMENTS AND CONTINGENCIES, CONTINUED:
The Company acquired Fresno Fashion Fair in December 1996. Asbestos has
been detected in structural fireproofing throughout much of the Center.
Testing data conducted by 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 were well within OSHA's permissible
exposure limit (PEL) of .1 fcc. The accounting for this acquisition
includes a reserve of $3.3 million to cover future removal of this
asbestos, as necessary. The Company incurred $206 and $94 in remediation
costs for the nine months ending September 30, 1998 and 1997, respectively.
10. PRO FORMA INFORMATION:
On February 27, 1998, the Company, through a 50/50 joint venture, SDG
Macerich Properties, L.P., acquired a portfolio of twelve regional malls.
Additionally, on June 19, 1998, the Company acquired South Plains Mall in
Lubbock, Texas for approximately $115,700. The purchase price consisted of
$29,400 of debt, at market value, and $86,300 of cash.
On July 1, 1998, the Company acquired the Westside Pavilion in Los Angeles,
California for $170,500. The purchase price was funded from the Company's
line of credit and a new ten year $100,000 mortgage placed on the property
at closing at an effective fixed interest rate of 6.67% .
The Company acquired 40% of the Village at Corte Madera in Corte Madera,
California, on June 16 and the remaining 60% on July 24, 1998 and also
acquired Carmel Plaza in Carmel, California on August 10, 1998. The
combined purchase price was $165,500 consisting of the assumption of
$40,000 of debt and the issuance of $7,900 of OP units and $117,600 in
cash.
On a pro forma basis, reflecting these acquisitions and the 1998 equity
offerings as if they had occurred on January 1, 1998 and 1997, the Company
would have reflected net income of $30,200 and $21,400 for the nine
months ended September 30, 1998 and 1997, respectively. Net
income -- available to common stockholders on a basic and diluted per share
basis would be $0.42 and $0.41, for the nine months ended September 30,
1998 respectively; and $0.29 and $0.29, for the nine months ended
September 30, 1997, respectively.
11. PREFERRED STOCK:
In February, 1998, the Company issued 3,627,131 shares of Series A
cumulative convertible preferred stock for proceeds totaling $100,000 in a
private placement. The preferred stock can be converted on a one for one
basis into common stock and will pay a dividend equal to the greater of
$0.46 per share per quarter or the dividend then payable on a share of
common stock.
On June 17, 1998, the Company issued 5,487,471 shares of Series B
cumulative convertible preferred stock for proceeds totaling $150,000 in a
direct private placement. The preferred stock can be converted on a one
for one basis into common stock and will pay a dividend equal to the
greater of $0.46 per share per quarter or the quarterly dividend then
payable on a share of common stock.
-18-
<PAGE>
THE MACERICH COMPANY (THE COMPANY)
NOTES TO CONDENSED AND CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
12. SUBSEQUENT EVENTS:
On November 10, 1998, a dividend\distribution of $0.485 per share was
declared for common stockholders and OP unit holders of record on November
24, 1998. In addition, the Company declared a dividend of $0.485 on the
Company's Series A cumulative convertible preferred stock
and a dividend of $0.485 on the Company's Series B cumulative convertible
preferred stock. All dividends/distributions will be payable on December 7,
1998.
-19-
<PAGE>
THE MACERICH COMPANY (THE COMPANY)
ITEM II
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The following discussion is based primarily on the consolidated balance sheet of
The Macerich Company (the "Company") as of September 30, 1998, and also compares
the activities for the three and nine months ended September 30, 1998 to the
activities for the three and nine months ended September 30, 1997.
This information should be read in conjunction with the accompanying
consolidated financial statements and notes thereto. These financial statements
include all adjustments, which are, in the opinion of management, necessary to
reflect the fair statement of the results for the interim periods presented, and
all such adjustments are of a normal recurring nature.
This Quarterly Report on Form 10-Q contains or incorporates statements that
constitute forward looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995. Those statements appear in a number
of places in this Quarterly Report on Form 10-Q and include statements
regarding, among other matters, the Company's growth opportunities, the
Company's acquisition strategy, regulatory matters pertaining to compliance with
governmental regulations and other factors affecting the Company's financial
condition or results of operations. Stockholders are cautioned that any such
forward looking statements are not guarantees of future performance and involve
risks, uncertainties and other factors which may cause actual results,
performance or achievements to differ materially from the future results,
performance or achievements, expressed or implied in such forward looking
statements. Such factors include, among others, general economic and business
conditions, which will, among other things, affect demand for retail space or
retail goods, availability and creditworthiness of prospective tenants, lease
rents and the terms and availability of financing and operating expenses;
adverse changes in the real estate markets including, among other things,
competition with other companies, risks of real estate development and
acquisition; governmental actions and initiatives; environmental and safety
requirements; and Year 2000 compliance issues of the Company and third parties
and related service interruptions or payment delays.
The following reflects the Company's acquisitions in 1997 and 1998:
<TABLE>
<CAPTION>
DATE ACQUIRED LOCATION
------------- --------
<S> <C> <C>
"1997 ACQUISITION CENTERS":
South Towne Center March 27, 1997 Sandy, Utah
Stonewood Mall August 6, 1997 Downey, California
Manhattan Village Shopping Center August 19, 1997 Manhattan Beach, California
The Citadel December 19, 1997 Colorado Springs, Colorado
Great Falls Marketplace December 31, 1997 Great Falls, Montana
"1998 ACQUISITION CENTERS":
ERE/Yarmouth Portfolio February 27, 1998 Eight States
South Plains Mall June 19, 1998 Lubbock, Texas
Westside Pavilion July 1, 1998 Los Angeles, California
Village at Corte Madera June-July 1998 Corte Madera, California
Carmel Plaza August 10, 1998 Carmel, California
</TABLE>
The financial statements include the results of these centers for periods
subsequent to their acquisition.
-20-
<PAGE>
THE MACERICH COMPANY (THE COMPANY)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS, CONTINUED:
Manhattan Village Shopping Center and the ERE/Yarmouth portfolio ("Joint
Venture Acquisitions") were acquired by unconsolidated joint ventures of the
Company which are reflected using the equity method of accounting. The
results of these acquisitions are reflected in the consolidated results of
operations of the Company in equity in income of unconsolidated joint
ventures and the Management Companies.
Many of the variations in the results of operations, discussed below, occurred
due to the addition of these properties to the portfolio during 1998 and 1997.
Many factors, such as the 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 the balance of 1998, and in future years, there will be
similar acquisitions and corresponding increases in revenues, equity in income
of unconsolidated joint ventures and the Management Companies, net income and
funds from operations that occurred as a result of the addition of the 1998 and
1997 Acquisition Centers. All other centers are referred to herein as the "Same
Centers".
The bankruptcy and/or closure of retail stores, particularly anchors, may reduce
customer traffic and cash flow generated by a center. During 1997, Montgomery
Ward filed bankruptcy. The Company has 11 Montgomery Ward stores in its
portfolio. Montgomery Ward has not yet disclosed whether they will cease
operating any of their stores in the Company's centers. The long-term closure
of these or other stores could adversely affect the Company's performance.
RESULTS OF OPERATIONS - NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
REVENUES
Minimum and percentage rents together increased by $26.1 million to $133.8
million for the nine months ended September 30, 1998 compared to $107.7 million
in the nine months ended September 30, 1997. The 1997 and 1998 Acquisition
Centers contributed $24.8 million of the increase with approximately $1.3
million generated from the Same Centers. The impact of EITF 98-9, "Accounting
for Contingent Rents in Interim Financial Periods," which was implemented on
April 1, 1998, reduced percentage rents by $2.8 million for the nine months
ending September 30, 1998.
REVENUES
Tenant recoveries for the nine months ended September 30, 1998 increased by
$11.2 million compared to the same period in 1997. This was primarily due to
the addition of the 1997 and 1998 Acquisition Centers. In addition, Same
Centers recoveries increased by $0.5 million due to increased recoverable
expenses during the year.
-21-
<PAGE>
THE MACERICH COMPANY (THE COMPANY)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS, CONTINUED:
EXPENSES
Shopping center expenses increased by $10.3 million for the nine months ended
September 30, 1998 compared to the same period in 1997. Approximately $10.6
million of the increase was due to the addition of the 1997 and 1998
Acquisition Centers. The Same Centers had a net decrease of $0.4 million,
primarily from a decrease in maintenance, repair, security and utility
expenses.
General and administrative expenses increased to $3.1 million for the nine
months ended September 30, 1998 compared to $2.1 million in the same period in
1997, primarily due to the accounting change required by EITF 97-11, "Accounting
for Internal Costs Relating to Real Estate Property Acquisitions", which
requires the expensing of internal acquisition costs. Previously, in accordance
with GAAP, certain internal acquisition costs were capitalized. The increase is
also attributable to increased executive and director compensation expense.
Interest expense increased to $66.1 million at September 30, 1998 compared to
$47.4 million at September 30, 1997. This increase of $18.7 million is
primarily attributable to the acquisition activity in 1997 and 1998, which was
partially funded with secured debt and borrowings under the Company's line of
credit. In addition, in June and July of 1997, the Company issued $161.4
million of convertible debentures, which resulted in $5.7 million of the
increase.
Depreciation and amortization increased to $38.9 million at September 30, 1998
compared to $29.8 million at September 30, 1997. This increase of $9.1 million
relates primarily to the 1997 and 1998 Acquisition Centers.
INCOME FROM UNCONSOLIDATED JOINT VENTURES AND THE MANAGEMENT COMPANIES
The income from unconsolidated joint ventures and the Management Companies
increased to $8.4 million compared to a $7.6 million loss for the period
ended September 30, 1997. $10.5 million of the difference is attributable to
the write down, and the loss on the sale, of North Valley Plaza in 1997 and
the remaining due to the Joint Venture Acquisitions.
NET INCOME -- AVAILABLE TO COMMON STOCKHOLDERS
Net income for the nine months ended September 30, 1998 increased to $18.8
million compared to $14.8 million for the nine months ended September 30, 1997.
This increase was due to the factors discussed above.
CASH FLOWS FROM OPERATING ACTIVITIES
As a result of the factors discussed above, cash flow from operations increased
to $82.8 million for the nine months ended September 30, 1998 from $55.4 million
during the same period in 1997. This increase is primarily due to increased net
operating income from the 1997 and 1998 Acquisition Centers.
-22-
<PAGE>
THE MACERICH COMPANY (THE COMPANY)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS, CONTINUED:
CASH FLOWS FROM INVESTING ACTIVITIES
Net cash flow used in investing activities increased to $655.8 million for the
nine months ended September 30, 1998 from $162.8 million for the same period in
1997. This increase is primarily due to the increase in cash used for
acquisitions in the nine months ended September 30, 1998 compared to the same
period in 1997.
CASH FLOWS FROM FINANCING ACTIVITIES
Cash flow from financing activities increased to $564.7 million for the nine
months ended September 30, 1998 from $104.6 million for the same period in 1997
as a result of net proceeds received from issuing stock and debt in 1998.
RESULTS OF OPERATIONS -- THREE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
REVENUES
Minimum and percentage rents together increased by $11.9 million to $49.9
million for the three months ended September 30, 1998 compared to $38.0 million
in the three months ended September 30, 1997. The 1997 and 1998 Acquisition
Centers contributed the majority of this increase. The impact of EITF 98-9,
which was implemented April 1, 1998, reduced percentage rents by $1.0 million
for the three months ended September 30, 1998.
Tenant recoveries for the third quarter of 1998 increased by $5.3 million
compared to the third quarter of 1997. The addition of the 1997 and 1998
Acquisition Centers represented $6.0 million of this increase with the
offsetting decrease of $1.3 million attributable to the Same Centers.
EXPENSES
Shopping center expenses increased by $4.2 million for the three months ended
September 30, 1998 compared to the same period in 1997. Approximately $5.7
million of the increase was due to the addition of the 1997 and 1998 Acquisition
Centers. The Same Centers had a net decrease of $1.5 million, primarily from a
decrease in maintenance, repair, security and utility expenses.
Interest expense increased to $24.9 million for the three months ended September
30, 1998 compared to the $16.2 million for the three months ended September 30,
1997. This increase of $8.7 million is primarily attributable to the
acquisition activity in 1997 and 1998, which was partially funded with secured
debt and borrowings under the Company's line of credit.
Depreciation and amortization increased to $15.3 million for the three months
ended September 30, 1998 compared to $10.1 million for the same period in 1997.
This increase of $5.2 million relates primarily to the 1997 and 1998 Acquisition
Centers.
-23-
<PAGE>
THE MACERICH COMPANY (THE COMPANY)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS, CONTINUED:
INCOME FROM UNCONSOLIDATED JOINT VENTURES AND THE MANAGEMENT COMPANIES
The income from unconsolidated joint ventures and the Management Companies
increased to $2.8 million for the three months ended September 30, 1998 compared
to an $8.7 million loss for the same period in 1997. $10.5 million of the
change is attributable to the write down, and the loss on sale, of North Valley
Plaza in 1997 and the remaining due to the Joint Venture Acquisitions.
NET INCOME -- AVAILABLE TO COMMON STOCKHOLDERS
Net income for the three months ended September 30, 1998 increased to $4.6
million compared to $1.9 million for the three months ended September 30,
1997. This increase was due to the factors discussed above.
LIQUIDITY AND CAPITAL RESOURCES
The Company intends to meet its short term liquidity needs 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 the additional capital
necessary to expand its business through a combination of additional equity
offerings and debt financings.
The Company's total outstanding loan indebtedness at September 30, 1998 was
$1.7 billion (including its pro rata share of joint venture debt). This
equated to a debt to Total Market Capitalization (defined as total debt of
the Company, including its pro rata share of joint venture debt, plus
aggregate market value of outstanding shares of common stock, assuming full
conversion of all outstanding OP Units and preferred stock into common stock)
ratio of 54% at September 30, 1998. The Company's debt consists primarily of
fixed rate, conventional mortgages payable secured by individual properties.
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.
The Company has filed a shelf registration statement, effective December 8,
1997, to sell securities. The shelf registration was for a total of $500
million of common stock, common stock warrants or common stock rights. On
February 18, 1998, the Company issued 1,052,650 shares and on February 23, 1998,
an additional 1,826,484 shares were issued. On April 24, 1998, the Company
issued 808,989 shares and an additional 967,256 and 1,864,802 shares were issued
on April 29, 1998 and May 29, 1998, respectively. The total gross proceeds of
these transactions were approximately $178.8 million, leaving approximately
$321.2 million available under the shelf registration statement.
-24-
<PAGE>
THE MACERICH COMPANY (THE COMPANY)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS, CONTINUED:
The Company has an unsecured line of credit for up to $150 million. There was
$55 million of borrowings outstanding at December 31, 1997 and $140 million
outstanding on September 30, 1998.
At September 30, 1998 and December 31, 1997, the Company had cash and cash
equivalents of $16.9 million and $25.2 million, respectively.
YEAR 2000 READINESS DISCLOSURE
The information provided below contains Year 2000 statements and is a Year 2000
Readiness Disclosure pursuant to Pub. L. No. 105-271.
Year 2000 Issues
The Year 2000 issue results from computer programs and embedded technology using
two digits rather than four to define the applicable year. The Company's
computer equipment and software and devices with embedded technology that are
time-sensitive may recognize a date using "00" as the year 1900 rather than the
year 2000. This could result in system failure or erroneous data which would
cause disruptions of operations.
The Company has initiated a Year 2000 compliance program consisting of the
following phases: (1) identification of Year 2000 issues; (2) assessment of
Year 2000 compliance of systems; (3) remediation or replacement of non-compliant
systems; (4) testing to verify compliance; and (5) contingency planning, as
appropriate. This program includes a review of both information technology
("IT") and non-IT systems and is being supervised by the Company's Year 2000
task force which consists of management as well as operational and IT staff
members.
IT Systems
The Company is conducting a review of its core computer hardware systems and
software programs to determine if such systems and programs will properly
process dates in the Year 2000 and thereafter. Based on manufacturer or
vendor information, the Company presently believes most of its critical
computer hardware systems and software programs are substantially Year 2000
compliant. The Company is currently in the process of conducting its own
evaluation and testing to verify compliance of its critical hardware systems
and software and expects to conclude such testing by April 1, 1999. The most
important software program to the Company's operations is its property
management and accounting software. The Company has been advised by its
independent software vendor that it has completed its evaluation, testing and
modification of this program and the necessary changes have been completed to
achieve Year 2000 compliance. The Company is conducting its own evaluation
and testing to confirm this conclusion. The Company is also in the process of
assessing the Year 2000 compliance of other non-critical hardware systems and
software programs and expects to complete such phases by December 31, 1998.
-25-
<PAGE>
THE MACERICH COMPANY (THE COMPANY)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS, CONTINUED:
Non-IT Systems
Part of the Company's Year 2000 program also includes a review of the various
operating systems of each of its portfolio properties and main offices. These
systems typically include embedded technology which complicates the Company's
Year 2000 efforts. Examples of these types of systems include energy management
systems, telecommunications systems, elevators, security systems and copiers.
The various operating systems are initially assigned priorities based on the
importance of the system to each property's operations and the potential impact
of non-compliance. A majority of the Company's properties have substantially
completed their initial assessment of each system and are verifying Year 2000
compliance through the manufacturers and/or vendors of the systems. Based on
the information received, each property will prepare recommendations regarding
the remediation and testing phases. Remediation and testing recommendations and
time lines will be prepared based on the importance of each system to the
property's operations. The Company currently anticipates completing the
remediation and testing phases for the critical operating systems at each
property prior to June 1, 1999 and expects the Year 2000 program to continue
beyond January 1, 2000 with respect to non-critical systems and issues.
Material Third Parties
The Company is in the process of communicating with material vendors, utilities,
and tenants about their plans and progress in addressing the Year 2000 issues.
The Company will monitor the Year 2000 progress of these entities and evaluate
the impact of their progress on the Company's operations.
Costs
Because the Company's assessment and remediation efforts are ongoing, the
Company is unable to estimate the actual costs of achieving Year 2000 compliance
for its internal systems and equipment. To date, the Company has not expended
significant amounts since its evaluation of Year 2000 issues has been primarily
conducted by its own personnel.
Risks
As is true of most businesses, the Company is vulnerable to external forces that
might generally effect industry and commerce, such as utility company Year 2000
compliance failures and related service interruptions. In addition, failure of
information and operating systems of tenants may delay the payment of rent to
the Company. A contingency plan has not been developed for dealing with the
most reasonably likely worst case scenario since the Company is unable at this
time to clearly identify such a scenario. The Company will continue to evaluate
these and other potential areas of risk and develop contingency plans, as
appropriate.
Based on currently available information, the Company believes that the Year
2000 issue will not pose significant operational problems for the Company.
However, if all Year 2000 issues are not properly identified, or assessment,
remediation and testing are not effected in a timely manner, there can be no
assurance that the Year 2000 issue will not adversely affect the Company's
results of operations or adversely affect the Company's relationships with
tenants or other third parties. Additionally, there can be no assurance that
the Year 2000 issues of third parties will not have an adverse impact on the
Company's results of operations.
-26-
<PAGE>
THE MACERICH COMPANY (THE COMPANY)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS, CONTINUED:
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 (computed in
accordance with GAAP), excluding gains or losses from debt restructuring and
sales or write down of assets, 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 will be calculated on the same basis.
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 --
available to common stockholders to FFO:
<TABLE>
<CAPTION>
Nine months ended September 30,
1998 1997
-------------------------- ---------------------------
Shares Amount Shares Amount
------------ ---------- ----------- ----------
(amounts in thousands)
<S> <C> <C> <C> <C>
Net income - available to common stockholders $ 18,769 $ 14,793
Adjustments to reconcile net income to FFO:
Minority interest 7,748 7,195
Depreciation and amortization on wholly owned properties 38,919 29,815
Pro rata share of unconsolidated entities' depreciation and
amortization 7,982 1,691
Gain on sale of assets (9) (1,620)
Extraordinary loss on early extinguishment of debt 2,414 563
Pro rata share of (gain) loss on sale or write-down
from unconsolidated entities 164 9,072
Amortization of loan costs, including interest rate caps (2,109) (1,376)
Depreciation of personal property (534) (389)
--------- ---------
FFO - basic (1) 42,310 73,344 37,981 59,744
To arrive at FFO - diluted:
Impact of convertible preferred stock 5,027 6,898 - -
Impact of stock options and restricted stock using
the treasury method 610 411 421 179
Impact of convertible debentures (n/a anti-dilutive)
-------- -------- ------- --------
FFO - diluted (2) 47,947 $80,653 38,402 $59,923
======== ======== ======= ========
</TABLE>
-27-
<PAGE>
THE MACERICH COMPANY (THE COMPANY)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS, CONTINUED:
<TABLE>
<CAPTION>
Three months ended September 30,
1998 1997
-------------------------- ---------------------------
Shares Amount Shares Amount
------------ ---------- ----------- ----------
(amounts in thousands)
<S> <C> <C> <C> <C>
Net income - available to common stockholders $ 4,579 $ 1,870
Adjustments to reconcile net income to FFO:
Minority interest 1,558 871
Depreciation and amortization on wholly owned properties 15,312 10,134
Pro rata share of unconsolidated entities' depreciation and
amortization 3,557 578
Gain on sale of assets - (1,620)
Extraordinary loss on early extinguishment of debt 2,324 51
Pro rata share of (gain) loss on sale or write-down
from unconsolidated entities - 9,140
Amortization of loan costs, including interest rate caps (608) (542)
Depreciation of personal property (168) (166)
--------- ---------
FFO - basic (1) 44,761 26,554 38,023 20,316
To arrive at FFO - diluted:
Impact of convertible preferred stock 9,114 4,193 - -
Impact of stock options and restricted stock using
the treasury method 592 155 421 60
Impact of convertible debentures (n/a anti-dilutive)
-------- -------- ------- --------
FFO - diluted (2) 54,467 $30,902 38,444 $20,376
======== ======== ======= ========
</TABLE>
1) Calculated based upon basic net income as adjusted to reach basic FFO.
Weighted average number of shares includes the weighted average shares of
common stock outstanding for 1998 and 1997 assuming the conversion of all
outstanding OP units.
2) The computation of FFO -- diluted and diluted average number of shares
outstanding includes the effect of outstanding common stock options and
restricted stock using the treasury method. Convertible debentures are
anti-dilutive and are not included. On February 25, 1998, the Company sold
$100 million of cumulative convertible preferred stock. On June 17, 1998,
the Company sold an additional $150 million of cumulative convertible
preferred stock. The preferred stock can be converted on a 1 for 1 basis
for common stock. These preferred shares are not assumed converted for
purposes of net income per share as they would be anti-dilutive to that
calculation. The preferred shares are assumed converted for purposes of
FFO diluted per share as they are dilutive to that calculation.
-28-
<PAGE>
THE MACERICH COMPANY (THE COMPANY)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS, CONTINUED:
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 $2.7 million and $2.6 million for the nine months ended
September 30, 1998 and 1997, respectively; and $0.9 million and $0.8 million for
the three months ended September 30, 1998 and 1997, respectively.
INFLATION
In the last three years, inflation has not had a significant impact on the
Company because of a relatively low inflation rate. Most of the leases at the
Centers have rent adjustments periodically through the lease term. These rent
increases are either in fixed increments or based on 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 ACCOUNTING PRONOUNCEMENTS
In March, 1998, the FASB, through its Emerging Issues Task Force ("EITF"),
concluded based on EITF 97-11, "Accounting for Internal Costs Relating to Real
Estate Property Acquisitions," that all internal costs to source, analyze and
close acquisitions should be expensed as incurred. The Company has historically
capitalized these costs, in accordance with GAAP. The Company has adopted the
FASB's interpretation effective March 19, 1998, and expects the impact to be an
approximate $.05 per share reduction of net income and FFO - diluted per share
in 1998.
In May, 1998, the FASB, through the EITF, modified the timing of recognition of
revenue for percentage rent received from tenants in EITF 98-9, "Accounting for
Contingent Rents in Interim Financial Periods." The Company applied this
accounting change as of April 1, 1998. Although the Company believes this
accounting change will have no material impact on the annual percentage rent
recognized, the accounting change had the effect of deferring $1.8 and $1.6
million of percentage rent that would have been recognized for the three months
ended June 30, 1998 and the three months ended September 30, 1998, respectively,
using the previous GAAP accounting method for percentage rent recognition. As a
result of this accounting change, the Company expects a portion of percentage
rent that previously would be recognized in the second and third quarters to be
recognized in the fourth quarter.
In June 1998, the FASB issued FAS 133, "Accounting for Derivative Instruments
and Hedging Activities," which will be effective for the Company's financial
statements for periods beginning January 1, 2000. The new standard requires
companies to record derivatives on the balance sheet, measured at fair value.
Changes in the fair values of those derivatives would be accounted for depending
on the use of the derivative and whether it qualifies for hedge accounting. The
key criterion for hedge accounting is that the hedging relationship must be
highly effective in achieving offsetting changes in fair value or cash flows.
The Company has not yet determined when it will implement FAS 133 nor has it
completed the complex analysis required to determine the impact on its financial
statements.
-29-
<PAGE>
THE MACERICH COMPANY (THE COMPANY)
PART II
OTHER INFORMATION
- -----------------
Item 1 Legal Proceedings
During the ordinary course of business, the Company, from time to time, is
threatened with, or becomes a party to, legal actions and other
proceedings. Management is of the opinion that the outcome of currently
known actions and proceedings to which it is a party will not, singly or in
the aggregate, have a material adverse effect on the Company.
Item 2 Changes in Securities and Use of Proceeds
On July 24, 1998, as partial consideration for the acquisition of The
Village at Corte Madera ("Corte Madera"), The Macerich Partnership, L.P.
(the "Operating Partnership") issued $8 million of OP Units in a private
placement pursuant to Section 4(2) of the Securities Act to Harry S. Newman
and LeRoy H. Brettin (the "Investors") as sellers of Corte Madera. The OP
Units are redeemable by the Operating Partnership for cash, or at the
option of the Company, for Common Stock. The Company and the Operating
Partnership entered into a Redemption, Registration and Rights and Lock-Up
Agreement (the "Registration Rights Agreement") with the Investors with
respect to such OP Units and Common Stock. The Registration Rights
Agreement, among other things, provides certain piggyback registration
rights to the Investors. A copy of the Registration Rights Agreement is
attached hereto as Exhibit 4.1. Additional information regarding the
purchase of Corte Madera was filed with the Commission on Form 8-K dated
August 7, 1998, event date July 24, 1998.
Item 3 Defaults Upon Senior Securities
None
Item 4 Submission of Matters to a Vote of Security Holders
None
Item 5 Other Information
None
-30-
<PAGE>
THE MACERICH COMPANY (THE COMPANY)
Item 6 Exhibits and Reports on Form 8-K
(a) Exhibits
NUMBER DESCRIPTION
None
(b) Reports on Form 8-K
A report on Form 8-K dated July 2, 1998, event date June 19, 1998, was
filed with the Securities and Exchange Commission for the purpose of
disclosing the acquisition of South Plains Mall.
A report on Form 8-K dated July 10, 1998, event date July 1, 1998, was
filed with the Securities and Exchange Commission for the purpose of
disclosing the acquisition of Westside Pavilion.
A report on Form 8-K dated July 14, 1998, event date June 17, 1998,
was filed with the Securities and Exchange Commission for the purpose
of disclosing the issuance of 5,487,471 shares of the Company's Series
B Cumulative Convertible Redeemable Preferred Stock.
A report on Form 8-K dated August 7, 1998, event date July 24, 1998,
was filed with the Securities and Exchange Commission for the purpose
of disclosing the acquisition of The Village at Corte Madera.
A report on Form 8-K dated August 20, 1998, event date August 10,
1998, was filed with the Securities and Exchange Commission for the
purpose of disclosing the acquisition of Carmel Plaza.
A report on Form 8-K/A, Amendment No. 1, dated August 21, 1998, event
date July 1, 1998, was filed with the Securities and Exchange
Commission for the purpose of disclosing certain financial statements
and pro forma financial information regarding the acquisition of
Westside Pavilion.
A report on Form 8-K/A, Amendment No. 2, dated September 11, 1998,
event date July 1, 1998, was filed with the Securities and Exchange
Commission for the purpose of disclosing certain financial statements
and pro forma financial information regarding the acquisition of
Westside Pavilion.
A report on Form 8-K/A, Amendment No. 1, dated November 10, 1998,
event date July 24, 1998 and August 10, 1998, was filed with the
Securities and Exchange Commission for the purpose of disclosing
certain financial statements and pro forma financial information
regarding the acquisitions of The Village at Corte Madera and Carmel
Plaza.
-31-
<PAGE>
THE MACERICH COMPANY (THE COMPANY)
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
The Macerich Company
By: /s/ THOMAS E. O'HERN
---------------------------------
Thomas E. O'Hern
Senior Vice President and
Chief Financial Officer
Date: November 13, 1998
-32-
<PAGE>
THE MACERICH COMPANY (THE COMPANY)
Exhibit Index
Exhibit No.
Page
- -----------
(a) Exhibits
Number Description
------ -----------
None
-33-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEETS AND CONSOLIDATED STATEMENTS OF OPERATIONS FOUND ON
PAGES 1 AND 2 OF THE COMPANY'S 10Q FOR THE YEAR TO DATE AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 16,902
<SECURITIES> 0
<RECEIVABLES> 27,951
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 2,096,038
<DEPRECIATION> (233,896)
<TOTAL-ASSETS> 2,204,301
<CURRENT-LIABILITIES> 84,522
<BONDS> 1,403,985
0
250,000
<COMMON> 325
<OTHER-SE> 298,177
<TOTAL-LIABILITY-AND-EQUITY> 2,204,301
<SALES> 0
<TOTAL-REVENUES> 197,661
<CGS> 0
<TOTAL-COSTS> 65,254
<OTHER-EXPENSES> 38,919
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 66,100
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 21,183
<DISCONTINUED> 0
<EXTRAORDINARY> (2,414)
<CHANGES> 0
<NET-INCOME> 18,769
<EPS-PRIMARY> 0.62
<EPS-DILUTED> 0.62
</TABLE>
