<PAGE>
THE MACERICH COMPANY (THE COMPANY)
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, 1999 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 NUMBER)
INCORPORATION OR ORGANIZATION)
401 WILSHIRE BOULEVARD, SUITE 700, SANTA MONICA, CA 90401
- --------------------------------------------------------------------------------
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICE)(ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (310) 394-6000
--------------
N/A
- --------------------------------------------------------------------------------
(FORMER NAME, FORMER ADDRESS AND FORMER FISCAL YEAR,
IF CHANGED SINCE LAST REPORT)
NUMBER OF SHARES OUTSTANDING OF THE REGISTRANT'S COMMON STOCK, AS OF NOVEMBER 8,
1999.
COMMON STOCK, PAR VALUE $.01 PER SHARE: 34,070,480 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, 1999 AND
DECEMBER 31, 1998 1
CONSOLIDATED STATEMENTS OF OPERATIONS OF THE COMPANY FOR THE PERIODS FROM
JANUARY 1 THROUGH SEPTEMBER 30, 1999 AND 1998 2
CONSOLIDATED STATEMENTS OF OPERATIONS OF THE COMPANY FOR THE PERIODS FROM
JULY 1 THROUGH SEPTEMBER 30, 1999 AND 1998. 3
CONSOLIDATED STATEMENTS OF CASH FLOWS OF THE COMPANY FOR THE PERIODS FROM
JANUARY 1 THROUGH SEPTEMBER 30, 1999 AND 1998 4
NOTES TO CONDENSED AND CONSOLIDATED FINANCIAL STATEMENTS 5 TO 24
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS 25 TO 38
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK 39 TO 40
PART II: OTHER INFORMATION 41 TO 43
</TABLE>
<PAGE>
THE MACERICH COMPANY (THE COMPANY)
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
September 30, December 31,
1999 1998
----------- -----------
<S> <C> <C>
ASSETS:
Property, net $ 1,975,841 $ 1,966,845
Cash and cash equivalents 23,325 25,143
Tenant receivables, net, including accrued overage rents of
$5,794 in 1999 and $5,917 in 1998 34,294 37,373
Due from affiliates 79,440 -
Deferred charges and other assets, net 55,751 62,673
Investments in joint ventures and the Management Companies 317,586 230,022
----------- -----------
Total assets $ 2,486,237 $ 2,322,056
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY:
Mortgage notes payable:
Related parties $ 134,073 $ 134,625
Others 1,144,978 1,074,093
----------- -----------
Total 1,279,051 1,208,718
Bank and other notes payable 277,251 137,000
Convertible debentures 161,400 161,400
Accounts payable and accrued expenses 26,473 27,701
Due to affiliates - 2,953
Other accrued liabilities 24,289 36,927
Preferred stock dividend payable 4,740 4,420
----------- -----------
Total liabilities 1,773,204 1,579,119
----------- -----------
Minority interest in Operating Partnership 157,509 165,524
----------- -----------
Commitments and contingencies (Note 9)
Stockholders' equity:
Series A cumulative convertible redeemable preferred stock, $.01 par
value, 3,627,131 shares authorized, issued and outstanding
at September 30, 1999 and December 31, 1998 36 36
Series B cumulative convertible redeemable preferred stock, $.01 par value,
5,487,471 shares authorized, issued and outstanding
at September 30, 1999 and December 31, 1998 55 55
Common stock, $.01 par value, 100,000,000 shares
authorized, 34,055,517 and 33,901,963 shares issued and
outstanding at September 30, 1999 and December 31, 1998, respectively 340 338
Additional paid in capital 562,911 581,508
Accumulated earnings - -
Unamortized restricted stock (7,818) (4,524)
----------- -----------
Total stockholders' equity 555,524 577,413
----------- -----------
Total liabilities and stockholders' equity $ 2,486,237 $ 2,322,056
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
THE MACERICH COMPANY (THE COMPANY)
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended September 30,
------------------------------
1999 1998
------------ ------------
<S> <C> <C>
REVENUES:
Minimum rents $ 153,474 $ 127,052
Percentage rents 10,594 6,709
Tenant recoveries 72,785 60,775
Other 5,915 3,125
------------ ------------
Total revenues 242,768 197,661
------------ ------------
EXPENSES:
Shopping center expenses 72,537 62,135
General and administrative expense 4,083 3,119
Interest expense:
Related parties 7,559 7,555
Others 77,609 58,545
Depreciation and amortization 46,434 38,919
------------ ------------
Total expenses 208,222 170,273
------------ ------------
Equity in income of unconsolidated
joint ventures and the Management Companies 16,692 8,432
Gain on sale of assets 162 9
------------ ------------
Income before extraordinary item and minority interest 51,400 35,829
Extraordinary loss on early extinguishment of debt (1,016) (2,414)
------------ ------------
Income of the Operating Partnership 50,384 33,415
Less minority interest in net income
of the Operating Partnership 9,795 7,748
------------ ------------
Net income 40,589 25,667
Less preferred dividends 13,581 6,898
------------ ------------
Net income - available to common stockholders $ 27,008 $ 18,769
============ ============
Earnings per common share - basic:
Income before extraordinary item $ 0.82 $ 0.68
Extraordinary item (0.03) (0.06)
------------ ------------
Net income per share - available to common stockholders $ 0.79 $ 0.62
============ ============
Weighted average number of common shares
outstanding - basic 33,987,000 30,154,000
============ ============
Weighted average number of common shares
outstanding - basic, assuming full conversion of
Operating Partnership units outstanding 46,286,000 42,310,000
============ ============
Earnings per common share - diluted:
Income before extraordinary item $ 0.81 $ 0.68
Extraordinary item (0.02) (0.06)
------------ ------------
Net income per share - available to common stockholders $ 0.79 $ 0.62
============ ============
Weighted average number of common shares
outstanding - diluted for EPS 46,754,000 42,920,000
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
THE MACERICH COMPANY (THE COMPANY)
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended September 30,
-------------------------------
1999 1998
------------ ------------
<S> <C> <C>
REVENUES:
Minimum rents $ 51,569 $ 47,424
Percentage rents 3,446 2,458
Tenant recoveries 25,509 23,953
Other 2,720 1,244
------------ ------------
Total revenues 83,244 75,079
------------ ------------
EXPENSES:
Shopping center expenses 25,316 24,135
General and administrative expense 1,240 942
Interest expense:
Related parties 2,506 2,472
Others 27,307 22,416
Depreciation and amortization 15,895 15,312
------------ ------------
Total expenses 72,264 65,277
------------ ------------
Equity in income of unconsolidated
joint ventures and the Management Companies 6,058 2,852
Gain on sale of assets 162 -
------------ ------------
Income before extraordinary item and minority interest 17,200 12,654
Extraordinary loss on early extinguishment of debt (28) (2,324)
------------ ------------
Income of the Operating Partnership 17,172 10,330
Less minority interest in net income
of the Operating Partnership 3,307 1,558
------------ ------------
Net income 13,865 8,772
Less preferred dividends 4,740 4,193
------------ ------------
Net income - available to common stockholders $ 9,125 $ 4,579
============ ============
Earnings per common share - basic:
Income before extraordinary item $ 0.27 $ 0.19
Extraordinary item 0.00 (0.05)
------------ ------------
Net income per share - available to common stockholders $ 0.27 $ 0.14
============ ============
Weighted average number of common shares
outstanding - basic 34,044,000 32,468,000
============ ============
Weighted average number of common shares
outstanding - basic, assuming full conversion of
Operating Partnership units outstanding 46,318,000 44,761,000
============ ============
Earnings per common share - diluted:
Income before extraordinary item $ 0.27 $ 0.19
Extraordinary item 0.00 (0.05)
------------ ------------
Net income per share - available to common stockholders $ 0.27 $ 0.14
============ ============
Weighted average number of common shares
outstanding - diluted for EPS 46,853,000 45,353,000
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
THE MACERICH COMPANY (THE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
January 1 to September 30,
-------------------------------
1999 1998
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net income - available to common stockholders $ 27,008 $ 18,769
Preferred dividends 13,581 6,898
------------ ------------
Net income 40,589 25,667
------------ ------------
Adjustments to reconcile net income to net cash provided by operating
activities:
Extraordinary loss on early extinguishment of debt 1,016 2,414
Gain on sale of assets (162) (9)
Depreciation and amortization 46,434 38,919
Amortization of net discount (premium) on trust deed note payable 182 (330)
Minority interest in net income of the Operating Partnership 9,795 7,748
Changes in assets and liabilities:
Tenant receivables, net 3,079 (4,255)
Other assets 9,583 (25,831)
Accounts payable and accrued expenses (1,228) 6,615
Preferred stock dividend payable 320 4,193
Other liabilities (12,638) 27,695
------------ ------------
Total adjustments 56,381 57,159
------------ ------------
Net cash provided by operating activities 96,970 82,826
------------ ------------
Cash flows from investing activities:
Acquisitions of property and improvements (4,918) (381,726)
Renovations and expansions of centers (40,231) (25,153)
Tenant allowances (3,604) (3,696)
Deferred charges (10,194) (11,780)
Equity in income of unconsolidated joint ventures
and the Management Companies (16,692) (8,432)
Distributions from joint ventures 17,271 27,123
Contributions to joint ventures (88,142) (240,196)
Loans to affiliates, net (82,393) (11,968)
------------ ------------
Net cash used in investing activities (228,903) (655,828)
------------ ------------
Cash flows from financing activities:
Proceeds from mortgages and notes payable 335,931 397,679
Payments on mortgages and notes payable (125,529) (186,440)
Net proceeds from equity offerings - 416,833
Dividends and distributions to partners (66,706) (56,424)
Dividends to preferred stockholders (13,581) (6,898)
------------ ------------
Net cash provided by financing activities 130,115 564,750
------------ ------------
Net decrease in cash (1,818) (8,252)
Cash and cash equivalents, beginning of period 25,143 25,154
------------ ------------
Cash and cash equivalents, end of period $ 23,325 $ 16,902
============ ============
Supplemental cash flow information:
Cash payment for interest, net of amounts capitalized $ 81,132 $ 62,020
============ ============
Non-cash transactions:
Acquisition of property by assumption of debt - $ 70,116
============ ============
Acquisition of property by issuance of OP units - $ 7,917
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
THE MACERICH COMPANY (THE COMPANY)
NOTES TO CONDENSED AND CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
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. They do not include all of the information and
footnotes required by GAAP for complete financial statements and have
not been audited by independent public accountants.
The unaudited interim consolidated financial statements should be read
in conjunction with the audited consolidated financial statements and
related notes included in the Company's Annual Report on Form 10-K for
the year ended December 31, 1998. 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, 1998 has
been derived from the audited financial statements, but does not
include all disclosure required by GAAP.
Certain reclassifications have been made in the 1998 consolidated
financial statements to conform to the 1999 financial statement
presentation.
In March 1998, the Financial Accounting Standards Board ("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 had
historically capitalized these costs in accordance with GAAP. The
Company adopted the FASB's interpretation effective March 19, 1998.
In June 1998, the FASB issued SFAS 133, "Accounting for Derivative
Instruments and Hedging Activities," which was initially to become
effective for the Company's consolidated 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 value of those derivatives will be accounted for
based on the use of the derivative and whether it qualifies for hedge
accounting. The key criteria for use of hedge accounting is whether the
hedging relationship is highly effective in achieving offsetting
changes in fair value or cash flows. The Company has not yet determined
when it will implement SFAS 133 nor has it completed the complex
analysis required to determine the impact of SFAS 133 on its
consolidated financial statements.
In June 1999, the FASB issued SFAS 137, "Accounting for Derivative
Instruments and Hedging Activities - Deferral of the Effective Date of
FASB Statement No. 133," which delays the implementation of SFAS 133
for the Company's consolidated financial statements to January 1, 2001.
5
<PAGE>
THE MACERICH COMPANY (THE COMPANY)
NOTES TO CONDENSED AND CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
Earnings Per Share ("EPS")
During 1998, the Company implemented SFAS No. 128, "Earnings per
Share." The computation of basic earnings per share is based on net
income and the weighted average number of common shares outstanding for
the nine and three months ending September 30, 1999 and 1998. The
computation of diluted earnings per share includes the effect of
outstanding restricted stock and common stock options calculated using
the treasury stock method. The convertible debentures and convertible
preferred stock were not included in the calculation since the effect
of their inclusion would be anti-dilutive. The Operating Partnership
units ("OP units") not held by the Company have been included in the
diluted EPS calculation since they are redeemable on a one-for-one
basis for common stock. The following table reconciles the basic and
diluted earnings per share calculation:
<TABLE>
<CAPTION>
For the Nine Months Ended September 30,
---------------------------------------------------------
1999 1998
---------------------------- ----------------------------
Net Net
Income Shares Per Share Income Shares Per Share
---------------------------- ----------------------------
(In thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C>
Net income $40,589 $25,667
Less: Preferred stock dividends 13,581 6,898
-------- --------
Basic EPS:
Net income - available to common stockholders 27,008 33,987 $0.79 18,769 30,154 $0.62
Diluted EPS:
Effect of dilutive securities:
Conversion of OP units 9,795 12,299 7,748 12,156
Employee stock options and restricted stock 1,141 468 411 610
Convertible preferred stock n/a - antidilutive for EPS n/a - antidilutive for EPS
Convertible debentures n/a - antidilutive for EPS n/a - antidilutive for EPS
---------------------------- ----------------------------
Net income - available to common stockholders $37,944 46,754 $0.79 $26,928 42,920 $0.62
============================ ============================
</TABLE>
<TABLE>
<CAPTION>
For the Three Months Ended September 30,
---------------------------------------------------------
1999 1998
---------------------------- ----------------------------
Net Net
Income Shares Per Share Income Shares Per Share
---------------------------- ----------------------------
(In thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C>
Net income $13,865 $8,772
Less: Preferred stock dividends 4,740 4,193
-------- --------
Basic EPS:
Net income - available to common stockholders 9,125 34,044 $0.27 4,579 32,468 $0.14
Diluted EPS:
Effect of dilutive securities:
Conversion of OP units 3,307 12,274 1,558 12,293
Employee stock options and restricted stock 530 535 155 592
Convertible preferred stock n/a - antidilutive for EPS n/a - antidilutive for EPS
Convertible debentures n/a - antidilutive for EPS n/a - antidilutive for EPS
---------------------------- ----------------------------
Net income - available to common stockholders $12,962 46,853 $0.27 $6,292 45,353 $0.14
============================ ============================
</TABLE>
6
<PAGE>
THE MACERICH COMPANY (THE COMPANY)
NOTES TO CONDENSED AND CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
2. ORGANIZATION:
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 48 regional shopping centers and five community
shopping centers aggregating approximately 41 million square feet of
gross leasable area. These 53 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 three
management companies, Macerich Property Management Company, a
California corporation, Macerich Manhattan Management Company, a
California corporation, and Macerich Management Company, a California
corporation (collectively, the "Management Companies").
The Company was organized to qualify as a REIT under the Internal
Revenue Code of 1986, as amended. The 22% limited partnership interest
of the Operating Partnership 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 regional retail and community shopping
centers. The Operating Partnership's interest in each joint venture as
of September 30, 1999 is as follows:
<TABLE>
<CAPTION>
The Operating Partnership's
Joint Venture Ownership %
------------- -----------
<S> <C>
Macerich Northwestern Associates 50%
Manhattan Village, LLC 10%
Pacific Premier Retail Trust 51%
Panorama City Associates 50%
SDG Macerich Properties, L.P. 50%
West Acres Development 19%
</TABLE>
The Operating Partnership also owns the non-voting preferred stock of
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 following are the Management Companies' ownership interests in
entities which own regional retail and community shopping centers as of
September 30, 1999:
<TABLE>
<CAPTION>
Management Companies'
Entity Ownership %
------ -----------
<S> <C>
Macerich Cerritos, LLC 100%
PPR Albany Plaza, LLC 51%
PPR Eastland Plaza, LLC 51%
</TABLE>
7
<PAGE>
THE MACERICH COMPANY (THE COMPANY)
NOTES TO CONDENSED AND CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
3. INVESTMENTS IN UNCONSOLIDATED JOINT VENTURES AND THE MANAGEMENT
COMPANIES, CONTINUED:
The Company accounts for the Management Companies and joint ventures
using the equity method of accounting.
On February 27, 1998, the Company, through SDG Macerich Properties,
L.P., a 50/50 joint venture with an affiliate of Simon Property Group,
Inc., acquired a portfolio of twelve regional malls. The properties in
the portfolio comprise 10.7 million square feet and are located in
eight states. The total purchase price was $974,500, which included
$485,000 of assumed debt, at market value. The Company's share of the
cash component of the purchase price was funded by issuing $100,000 of
Series A cumulative convertible preferred stock ("Series A Preferred
Stock"), $80,000 of common stock and borrowing the balance 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.
On February 18, 1999, the Company, through a 51/49 joint venture with
Ontario Teachers' Pension Plan Board ("Ontario Teachers") closed on the
first phase of a two phase acquisition of a portfolio of properties.
The phase one closing included the acquisition of three regional malls,
the retail component of a mixed-use development, five contiguous
properties and two non-contiguous community shopping centers comprising
approximately 3.6 million square feet for a total purchase price of
approximately $427,000. The purchase price was funded with a $120,000
loan placed concurrently with the closing, $140,400 of debt from an
affiliate of the seller, and $39,400 of assumed debt. The balance of
the purchase price was paid in cash. The Company's share of the cash
component was funded with the proceeds from two refinancings of Centers
and borrowings under the Company's line of credit. On July 12, 1999,
the Company closed on the second phase of the acquisition. The second
phase consisted of the acquisition of the office component of the
mixed-use development for a purchase price of approximately $111,000.
The purchase price was funded with a $76,700 loan placed concurrently
with the closing and the balance was paid in cash. The Company's share
of the cash component was funded from borrowings under the Company's
line of credit.
On June 2, 1999, Macerich Cerritos, LLC, a wholly-owned subsidiary of
Macerich Management Company, acquired Los Cerritos Center in Cerritos,
California. The total purchase price was $188,000, which was funded
with $120,000 of debt placed concurrently with the closing and a
$70,800 loan from the Company. The Company funded this loan from
borrowings under a $60,000 bank loan agreement and the balance from the
Company's line of credit.
The results of these joint ventures and the Management Companies are
included for the period subsequent to their respective dates of
acquisition.
On October 27, 1999, Albany Plaza, a 145,462 square foot community
center, which was owned 51% by the Management Companies, was sold.
On November 12, 1999, Eastland Plaza, a 65,313 square foot community
center, which was owned 51% by the Management Companies, was sold.
8
<PAGE>
THE MACERICH COMPANY (THE COMPANY)
NOTES TO CONDENSED AND CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
3. INVESTMENTS IN UNCONSOLIDATED JOINT VENTURES AND THE MANAGEMENT
COMPANIES, CONTINUED:
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,
1999 1998
------------ ------------
<S> <C> <C>
Assets:
Properties, net $1,848,255 $1,141,984
Other assets 56,480 38,103
------------ ------------
Total assets $1,904,735 $1,180,087
============ ============
Liabilities and partners' capital:
Mortgage notes payable $1,084,519 $618,384
Notes to affiliates 76,937 -
Other liabilities 49,141 42,048
The Company's capital 317,586 230,022
Outside partners' capital 376,552 289,633
------------ ------------
Total liabilities and partners' capital $1,904,735 $1,180,087
============ ============
</TABLE>
9
<PAGE>
THE MACERICH COMPANY (THE COMPANY)
NOTES TO CONDENSED AND CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
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, 1999
-----------------------------------------------------------------------------------------
SDG Pacific
Macerich Premier Other Mgmt
Properties, L.P. Retail Trust Joint Ventures Companies Total
---------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
Revenues:
Minimum rents $63,903 $25,208 $18,954 $4,928 $112,993
Percentage rents 5,384 1,450 1,393 205 8,432
Tenant recoveries 31,079 8,574 8,326 2,169 50,148
Management fee - - - 6,466 6,466
Other 1,702 144 987 339 3,172
-------------- -------------- -------------- -------------- --------------
Total revenues 102,068 35,376 29,660 14,107 181,211
Expenses:
Shopping center expenses 37,948 10,236 9,809 2,017 60,010
Interest expense 22,843 11,802 5,689 4,426 44,760
Management company expense - - - 8,334 8,334
Depreciation and amortization 16,225 5,828 3,253 2,002 27,308
-------------- -------------- -------------- -------------- --------------
Total operating expenses 77,016 27,866 18,751 16,779 140,412
-------------- -------------- -------------- -------------- --------------
Gain on sale of assets 5 - 983 220 1,208
-------------- -------------- -------------- -------------- --------------
Net income (loss) $25,057 $7,510 $11,892 ($2,452) $42,007
============== ============== ============== ============== ==============
</TABLE>
COMBINED STATEMENTS OF OPERATIONS OF JOINT VENTURES
AND THE MANAGEMENT COMPANIES
<TABLE>
<CAPTION>
Nine Months Ended September 30, 1998
-----------------------------------------------------------------------------------------
SDG Pacific
Macerich Premier Other Mgmt
Properties, L.P. Retail Trust Joint Ventures Companies Total
---------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
Revenues:
Minimum rents $48,716 - $18,765 - $67,481
Percentage rents 2,171 - 806 - 2,977
Tenant recoveries 21,089 - 7,759 - 28,848
Management fee - - - $4,516 4,516
Other 1,269 - 669 292 2,230
-------------- -------------- -------------- -------------- --------------
Total 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 of assets - - 126 (197) (71)
-------------- -------------- -------------- -------------- --------------
Net income (loss) $16,014 - $10,474 ($2,202) $24,286
============== ============== ============== ============== ==============
</TABLE>
10
<PAGE>
THE MACERICH COMPANY (THE COMPANY)
NOTES TO CONDENSED AND CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
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, 1999
-----------------------------------------------------------------------------------------
SDG Pacific
Macerich Premier Other Mgmt
Properties, L.P. Retail Trust Joint Ventures Companies Total
---------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
Revenues:
Minimum rents $21,355 $11,627 $6,391 $3,529 $42,902
Percentage rents 1,830 519 442 193 2,984
Tenant recoveries 11,467 4,295 2,661 1,828 20,251
Management fee - - - 2,368 2,368
Other 771 (23) 411 124 1,283
-------------- -------------- -------------- -------------- --------------
Total revenues 35,423 16,418 9,905 8,042 69,788
Expenses:
Shopping center expenses 13,660 4,729 3,419 1,644 23,452
Interest expense 7,654 5,403 1,895 3,407 18,359
Management company expense - - - 2,615 2,615
Depreciation and amortization 5,659 2,303 1,112 1,305 10,379
-------------- -------------- -------------- -------------- --------------
Total operating expenses 26,973 12,435 6,426 8,971 54,805
-------------- -------------- -------------- -------------- --------------
Loss on sale of assets - - - (80) (80)
-------------- -------------- -------------- -------------- --------------
Net income (loss) $8,450 $3,983 $3,479 ($1,009) $14,903
============== ============== ============== ============== ==============
</TABLE>
11
<PAGE>
THE MACERICH COMPANY (THE COMPANY)
NOTES TO CONDENSED AND CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
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 Pacific
Macerich Premier Other Mgmt
Properties, L.P. Retail Trust Joint Ventures Companies Total
---------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
Revenues:
Minimum rents $20,829 - $6,294 - $27,123
Percentage rents 664 - 247 - 911
Tenant recoveries 9,551 - 2,320 - 11,871
Management fee - - - $1,572 1,572
Other 448 - 233 118 799
-------------- -------------- -------------- -------------- --------------
Total 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 - 1,139 132 7,382
-------------- -------------- -------------- -------------- --------------
Total operating expenses 25,479 - 6,005 2,578 34,062
-------------- -------------- -------------- -------------- --------------
Gain on sale of assets - - - - -
-------------- -------------- -------------- -------------- --------------
Net income (loss) $6,013 - $3,089 ($888) $8,214
============== ============== ============== ============== ==============
</TABLE>
Significant accounting policies used by the unconsolidated joint
ventures and the Management Companies are similar to those used by the
Company.
Included in mortgage notes payable are amounts due to affiliates of
Northwestern Mutual Life ("NML") of $152,558 and $74,612 for the
periods ended September 30, 1999 and December 31, 1998, respectively.
NML is considered a related party because it is a joint venture partner
with the Company in Macerich Northwestern Associates. Interest expense
incurred on these borrowings amounted to $4,710 and $2,540 for the nine
months ended September 30, 1999 and 1998, respectively; and $2,245 and
$1,057 for the three months ended September 30, 1999 and 1998,
respectively.
12
<PAGE>
THE MACERICH COMPANY (THE COMPANY)
NOTES TO CONDENSED AND CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
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
The following tables set forth the Operating Partnership's beneficial interest
in the joint ventures and the Management Companies:
<TABLE>
<CAPTION>
Nine Months Ended September 30, 1999
-----------------------------------------------------------------------------------------
SDG Pacific
Macerich Premier Other Mgmt
Properties, L.P. Retail Trust Joint Ventures Companies Total
---------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
Revenues:
Minimun rents $31,951 $12,856 $5,826 $4,682 $55,315
Percentage rents 2,692 739 422 195 4,048
Tenant recoveries 15,539 4,373 2,369 2,060 24,341
Management fee - - - 6,143 6,143
Other 851 73 199 322 1,445
-------------- -------------- -------------- -------------- --------------
Total revenues 51,033 18,041 8,816 13,402 91,292
-------------- -------------- -------------- -------------- --------------
Expenses:
Shopping center expenses 18,974 5,220 3,005 1,916 29,115
Interest expense 11,421 6,019 2,231 4,205 23,876
Management company expense - - - 7,917 7,917
Depreciation and amortization 8,112 2,972 1,105 1,902 14,091
-------------- -------------- -------------- -------------- --------------
Total operating expenses 38,507 14,211 6,341 15,940 74,999
-------------- -------------- -------------- -------------- --------------
Gain on sale of assets 2 - 188 209 399
-------------- -------------- -------------- -------------- --------------
Net income (loss) $12,528 $3,830 $2,663 ($2,329) $16,692
============== ============== ============== ============== ==============
</TABLE>
13
<PAGE>
THE MACERICH COMPANY (THE COMPANY)
NOTES TO CONDENSED AND CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
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 CONTINUED:
The following tables set forth the Operating Partnership's beneficial interest
in the joint ventures and the Management Companies:
<TABLE>
<CAPTION>
Nine Months Ended September 30, 1998
-----------------------------------------------------------------------------------------
SDG Pacific
Macerich Premier Other Mgmt
Properties, L.P. Retail Trust Joint Ventures Companies Total
---------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
Revenues:
Minimun rents $24,358 - $5,746 - $30,104
Percentage rents 1,085 - 256 - 1,341
Tenant recoveries 10,544 - 2,099 - 12,643
Management fee - - - $4,290 4,290
Other 635 - 141 278 1,054
-------------- -------------- -------------- -------------- --------------
Total 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 of assets - - 23 (187) (164)
-------------- -------------- -------------- -------------- --------------
Net income (loss) $8,007 - $2,517 ($2,092) $8,432
============== ============== ============== ============== ==============
</TABLE>
14
<PAGE>
THE MACERICH COMPANY (THE COMPANY)
NOTES TO CONDENSED AND CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
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 CONTINUED:
The following tables set forth the Operating Partnership's beneficial interest
in the joint ventures and the Management Companies:
<TABLE>
<CAPTION>
Three Months Ended September 30, 1999
-----------------------------------------------------------------------------------------
SDG Pacific
Macerich Premier Other Mgmt
Properties, L.P. Retail Trust Joint Ventures Companies Total
---------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
Revenues:
Minimum rents $10,677 $5,930 $1,966 $3,353 $21,926
Percentage rents 915 264 122 184 1,485
Tenant recoveries 5,733 2,191 778 1,736 10,438
Management fee - - - 2,250 2,250
Other 385 (12) 82 118 573
-------------- -------------- -------------- -------------- --------------
Total revenues 17,710 8,373 2,948 7,641 36,672
-------------- -------------- -------------- -------------- --------------
Expenses:
Shopping center expenses 6,830 2,412 1,057 1,562 11,861
Interest expense 3,827 2,756 746 3,237 10,566
Management company expense - - - 2,486 2,486
Depreciation and amortization 2,829 1,174 383 1,240 5,626
-------------- -------------- -------------- -------------- --------------
Total operating expenses 13,486 6,342 2,186 8,525 30,539
-------------- -------------- -------------- -------------- --------------
Loss on sale of assets - - - (75) (75)
-------------- -------------- -------------- -------------- --------------
Net income (loss) $4,224 $2,031 $762 ($959) $6,058
============== ============== ============== ============== ==============
</TABLE>
<TABLE>
<CAPTION>
Three Months Ended September 30, 1998
-----------------------------------------------------------------------------------------
SDG Pacific
Macerich Premier Other Mgmt
Properties, L.P. Retail Trust Joint Ventures Companies Total
---------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
Revenues:
Minimun rents $10,415 - $1,940 - $12,355
Percentage rents 332 - 78 - 410
Tenant recoveries 4,775 - 636 - 5,411
Management fee - - - $1,494 1,494
Other 224 - 44 112 380
-------------- -------------- -------------- -------------- --------------
Total revenues 15,746 - 2,698 1,606 20,050
-------------- -------------- -------------- -------------- --------------
Expenses:
Shopping center expenses 5,786 - 950 - 6,736
Interest expense 3,898 - 689 (98) 4,489
Management company expense - - - 2,416 2,416
Depreciation and amortization 3,055 - 373 129 3,557
-------------- -------------- -------------- -------------- --------------
Total operating expenses 12,739 - 2,012 2,447 17,198
-------------- -------------- -------------- -------------- --------------
Gain (loss) on sale of assets - - (1) 1 -
-------------- -------------- -------------- -------------- --------------
Net income (loss) $3,007 - $685 ($840) $2,852
============== ============== ============== ============== ==============
</TABLE>
15
<PAGE>
THE MACERICH COMPANY (THE COMPANY)
NOTES TO CONDENSED AND CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
4. PROPERTY:
Property is comprised of the following at:
<TABLE>
<CAPTION>
September 30, December 31,
1999 1998
------------ ------------
<S> <C> <C>
Land $427,609 $422,592
Building improvements 1,685,936 1,684,188
Tenant improvements 51,864 47,808
Equipment & furnishings 12,093 9,097
Construction in progress 84,541 49,440
------------ ------------
2,262,043 2,213,125
Less, accumulated depreciation (286,202) (246,280)
------------ ------------
$1,975,841 $1,966,845
============ ============
</TABLE>
16
<PAGE>
THE MACERICH COMPANY (THE COMPANY)
NOTES TO CONDENSED AND CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
5. MORTGAGE NOTES PAYABLE:
Mortgage notes payable at September 30, 1999 and December 31, 1998
consist of the following:
<TABLE>
<CAPTION>
Carrying Amount of Notes
-------------------------------------------------
1999 1998
--------------------- -------------------------
Property Pledged Related Related Interest Payment Maturity
As Collateral Other Party Other Party Rate Terms Date
- -------------------------------- -------- ---------- ----------- ----------- ------------ -------------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Wholly Owned Centers:
Capitola Mall ---- $37,079 ---- $37,345 9.25% 316(d) 2001
Carmel Plaza (i) $28,930 ---- $25,000 ---- 8.18% 202(d) 2009
Chesterfield Towne Center 64,541 ---- 65,064 ---- 9.07% 548(e) 2024
Chesterfield Towne Center 3,192 ---- 3,266 ---- 8.54% 31(d) 1999
Citadel 73,685 ---- 74,575 ---- 7.20% 554(d) 2008
Corte Madera, Village at (j) 60,000 ---- 60,000 ---- 7.28% interest only 1999
Crossroads Mall-Boulder (a) ---- 34,994 ---- 35,280 7.08% 244(d) 2010
Fresno Fashion Fair 69,000 ---- 69,000 ---- 6.52% interest only 2008
Greeley Mall 16,441 ---- 17,055 ---- 8.50% 187(d) 2003
Green Tree Mall/Crossroads - OK/
Salisbury (b) 117,714 ---- 117,714 ---- 7.23% interest only 2004
Holiday Village ---- 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
Northwest Arkansas Mall 62,337 ---- 63,000 ---- 7.33% 434(d) 2009
Parklane Mall ---- 20,000 ---- 20,000 6.75% interest only 2001
Queens Center (f) 100,000 ---- 65,100 ---- 6.88% 633(d) 2009
Rimrock Mall 30,588 ---- 31,002 ---- 7.70% 244(d) 2003
South Plains Mall (h) 64,760 ---- 28,795 ---- 8.22% 454(d) 2009
South Towne Center 64,000 ---- 64,000 ---- 6.61% 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 (g) 53,790 ---- 54,522 ---- 7.65% 427(d) 2003
Westside Pavilion 100,000 ---- 100,000 ---- 6.67% interest only 2008
---------- ---------- ---------- ----------
Total - Wholly Owned Centers $1,144,978 $134,073 $1,074,093 $134,625
---------- ---------- ---------- ----------
</TABLE>
17
<PAGE>
THE MACERICH COMPANY (THE COMPANY)
NOTES TO CONDENSED AND CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
5. MORTGAGE NOTES PAYABLE, CONTINUED:
Mortgage notes payable at September 30, 1999 and December 31, 1998
consist of the following:
<TABLE>
<CAPTION>
Carrying Amount of Notes
-------------------------------------------
1999 1998
-------------------- ---------------------
Property Pledged Related Related Interest Payment Maturity
As Collateral Other Party Other Party Rate Terms Date
- ---------------------------------------------- -------- --------- ---------- -------- -------- ------------- ------
<S> <C> <C> <C> <C> <C> <C> <C>
Joint Venture/Management Companies (at pro rata share):
Broadway Plaza (50%) (k) - $36,849 - $37,306 6.68% 257 (d) 2008
Macerich Cerritos LLC (95%) (k) $113,785 - - - 7.13% 785 (d) 2006
Pacific Premier Retail Trust (51%) (k):
Cascade Mall 13,976 - - - 6.50% 122 (d) 2014
Kitsap Mall 20,629 - - - 6.50% (l) 178 (d) 2000
North Point 1,906 - - - 6.50% 16 (d) 2015
Redmond Town Center - Retail 32,881 - - - 6.50% 224 (d) 2011
Redmond Town Center - Office (o) - 40,218 - - 6.77% 584 (d) 2010
Washington Square 60,718 - - - 6.70% 421 (d) 2009
Washington Square Too 6,585 - - - 6.50% 53 (d) 2016
SDG Macerich Properties L.P. (50%) (k) 159,579 - $160,434 - 6.23% (m) 926 (d) 2006
SDG Macerich Properties L.P. (50%) (k) 92,500 - 92,500 - 6.15% (m) interest only 2003
West Acres Center (19%) (k) (n) 7,600 - 7,202 - 6.52% interest only 2019
---------- --------- ---------- --------
Total - Joint Venture/Management Companies 510,159 77,067 260,136 37,306
---------- --------- ---------- --------
Total - All Centers $1,655,137 $211,140 $1,334,229 $171,931
========== ========= ========== =========
Weighted average interest rate at September 30, 1999 - Wholly Owned Centers 7.36%
======
Weighted average interest rate at December 31, 1998 - Wholly Owned Centers 7.24%
======
</TABLE>
(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, 1999 and December 31, 1998
the unamortized discount was $372 and $397, 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 fixed rate notes (the "Notes"). The Notes bear
interest at an average fixed rate of 7.20% and mature in July
2005. 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, 1999 and at December 31, 1998.
18
<PAGE>
THE MACERICH COMPANY (THE COMPANY)
NOTES TO CONDENSED AND CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
5. MORTGAGE NOTES PAYABLE, CONTINUED:
(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 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 $192
and $52 for the nine and three months ended September 30,
1999, respectively; and $234 and $234 for the nine and three
months ended September 30, 1998.
(f) At December 31, 1998, a $65,100 loan was outstanding which
bore interest at LIBOR plus 0.45%. There was 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 of 7.07% through 1997 and 7.7% thereafter. The $65,100
loan was paid in full on February 4, 1999 and refinanced with
a new loan of $100,000, with interest at 6.88%, maturing in
2009. The Company incurred a loss on early extinguishment of
the old debt in 1999 of $163.
(g) Included in cash and cash equivalents is $1,258 and $3,048 at
September 30, 1999 and December 31, 1998, respectively, of
cash restricted under the terms of this loan agreement.
(h) The old note of $28,795 was assumed at acquisition. At the
time of acquisition in June 1998, this debt was recorded at
fair market value and the premium was amortized as interest
expense over the life of the loan using the effective interest
method. The monthly debt service payment was $348 per month
and was calculated based on a 12.5% interest rate. At December
31, 1998, the unamortized premium was $6,165. On February 17,
1999, the loan was paid in full and was refinanced with a new
loan of $65,000, with interest at 8.22%, maturing in 2009. The
Company incurred a loss on early extinguishment of the old
debt in 1999 of $810.
(i) On April 30, 1999, the old loan of $25,000 was paid in full
and was refinanced with a new loan of $29,000, with a fixed
interest rate of 8.18%, maturing May 1, 2009.
(j) The loan bears interest at LIBOR plus 2.0%. On October 8,
1999, the loan was paid in full and was refinanced with a new
loan of $72,000 at a fixed rate of 7.75%, maturing November 1,
2009.
(k) Reflects the Company's pro rata share of debt.
(l) In connection with the acquisition of this Center, the joint
venture assumed $39,425 of debt. At acquisition, this debt was
recorded at fair market value of $41,475, which included an
unamortized premium of $2,050. This premium is being amortized
as interest expense over the life of the loan using the
effective interest method. The joint venture's monthly debt
service is $349 and is calculated based on an 8.60% interest
rate. At September 30, 1999, the joint venture's unamortized
premium was $1,501.
19
<PAGE>
THE MACERICH COMPANY (THE COMPANY)
NOTES TO CONDENSED AND CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
5. MORTGAGE NOTES PAYABLE, CONTINUED:
(m) In connection with the acquisition of these Centers, the joint
venture assumed $485,000 of mortgage notes payable which are
secured by the properties. At acquisition, this debt reflected
a fair market value of $322,700, which included an unamortized
premium of $22,700. This premium is being amortized as
interest expense over the life of the loan using the effective
interest method. At September 30, 1999 and December 31, 1998,
the unamortized balance of the debt premium was $19,159 and
$20,900, respectively. This debt is due in May 2006 and
requires monthly payments of $926. $185,000 of this debt is
due in May 2003 and requires monthly interest payments at a
variable weighted average rate (based on LIBOR) of 5.77% and
6.03% at September 30, 1999 and December 31, 1998,
respectively. This variable rate debt is covered by an
interest rate cap agreement which effectively prevents the
interest rate from exceeding 11.53%.
(n) On January 4, 1999, the joint venture replaced the old debt
with a new loan of $40,000. The loan has an interest rate of
6.52% and matures February 2019. The debt is interest only
until January 2001 at which time monthly payments of principal
and interest will be due of $299.
(o) Concurrent with the acquisition, the joint venture placed
$76,700 of debt and obtained a construction loan for an
additional $16,000. Principal is drawn on the construction
loan as costs are incurred. As of September 30, 1999, $2,302
of principal has been drawn under the construction loan.
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 in other assets and amortized as interest expense
over the period of the hedged loans.
Certain mortgage loan agreements contain a prepayment penalty provision
for the early extinguishment of the debt.
Total interest capitalized during the nine and three months ended
September 30, 1999 was $4,533 and $1,793, respectively; and total
interest capitalized during the nine and three months ended September
30, 1998 was $2,201 and $730, respectively.
The market value of mortgage notes payable for the wholly-owned Centers
at September 30, 1999 and December 31, 1998 is estimated to be
approximately $1,227,815 and $1,271,853, respectively, based on current
interest rates for comparable loans.
20
<PAGE>
THE MACERICH COMPANY (THE COMPANY)
NOTES TO CONDENSED AND CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
6. BANK AND OTHER NOTES PAYABLE, CONTINUED:
The Company has a credit facility of $150,000 with a maturity of
February 2000, which can be extended to February 2001, currently
bearing interest at LIBOR plus 1.15%. The interest rate on such credit
facility fluctuates between 0.95% and 1.15% over LIBOR. As of September
30, 1999 and December 31, 1998, $134,500 and $137,000 of borrowings
were outstanding under this line of credit at interest rates of 6.59%
and 6.79%, respectively. As of November 12, 1999, $52,400 was
outstanding under this line of credit.
On May 28, 1999, the Company entered into an agreement with a bank for
a term loan of $60,000. The interest rate on such loan is at LIBOR plus
3.0% and matures with extension on February 26, 2000. As of September
30, 1999, $60,000 was outstanding at a total interest rate of 8.0%. On
October 28, 1999, the entire $60,000 loan was paid off.
Additionally, the Company issued $776 in letters of credit guaranteeing
performance by the Company of certain obligations. The Company does not
believe that these letters of credit will result in a liability to the
Company.
During January 1999, the Company entered into a bank construction loan
agreement to fund $89,200 of costs related to the redevelopment of
Pacific View. The loan bears interest at LIBOR plus 2.25% and matures
in February 2001. Principal is drawn as construction costs are
incurred. As of September 30, 1999, $52,151 of principal has been drawn
under the loan.
In addition, the Company has a note payable of $30,600 due in February
2000 payable to the seller of the acquired portfolio. The note bears
interest at 6.5%.
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 engaged the Management Companies to manage the operations
of its properties and certain unconsolidated joint ventures. For the
nine and three months ending September 30, 1999, management fees of
$2,439 and $818 respectively, and for the nine and three months ended
September 30, 1998, management fees of $1,968 and $718, respectively,
were paid to the Management Companies by the Company.
Certain mortgage notes are held by one of the Company's joint venture
partners. Interest expense in connection with these notes was $7,559
and $7,659 for the nine months ended September 30, 1999 and 1998,
respectively; and $2,506 and $2,784 for the three months ending
September 30, 1999 and 1998, respectively. Included in accounts payable
and accrued expenses is interest payable to these partners of $486 and
$512 at September 30, 1999 and December 31, 1998, respectively.
21
<PAGE>
THE MACERICH COMPANY (THE COMPANY)
NOTES TO CONDENSED AND CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
8. RELATED-PARTY TRANSACTIONS, CONTINUED:
Additionally, the Company has notes receivable due from the Management
Companies of $76,937 related to acquisitions made by the Management
Companies in 1999. These notes are interest only at a rate of 7.0% and
mature in 2009. These notes receivable are included in due from
affiliates at September 30, 1999.
In 1997, certain executive officers received loans from the Company
totaling $5,500. These loans are full recourse to the executives.
$5,000 of the loans were issued under the terms of the employee stock
incentive plan, bear interest at 7%, are due in 2007 and are secured by
the Company common stock owned by the executives. The remaining loan is
non interest bearing and is forgiven ratably over a five year term.
These loans receivable are included in other assets at September 30,
1999 and December 31, 1998.
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.
9. COMMITMENTS AND CONTINGENCIES:
The Company has certain properties subject to 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 percentage of
base rental income, as defined. Ground rent expenses were $684 and $760
for the nine months ended September 30, 1999 and 1998, respectively;
and $228 and $115 for the three months ended September 30, 1999 and
1998, 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 50%
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. $104 and
$100 have already been incurred by the joint venture for remediation,
and professional and legal fees for the periods ending September 30,
1999 and 1998, respectively. An additional $304 remains reserved by the
joint venture as of September 30, 1999. The joint venture 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.
22
<PAGE>
THE MACERICH COMPANY (THE COMPANY)
NOTES TO CONDENSED AND CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
9. COMMITMENTS AND CONTINGENCIES, CONTINUED:
Low levels of toluene, a petroleum constituent, were detected in one of
three groundwater dewatering system holding tanks at Queens Center.
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. The Company incurred costs of $0 and $1 during the
nine months ending September 30, 1999 and 1998, respectively. The
Company intends to look to the responsible parties if remediation is
required.
The Company acquired Fresno Fashion Fair in December 1996. Asbestos was
detected in structural fireproofing throughout much of the Center.
Testing data conducted by professional environmental consulting firms
indicate 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
includes a reserve of $3,300 to cover future removal of this asbestos,
as necessary. The Company incurred $80 and $206 in remediation costs
for the nine months ending September 30, 1999 and 1998, respectively.
An additional $2,794 remains reserved at September 30, 1999.
10. PRO FORMA INFORMATION:
On February 18, 1999, through a 51/49 joint venture with Ontario
Teachers, the Company closed on the first phase of a two phase
acquisition of a portfolio of properties. The phase one closing
included the acquisition of three regional malls, the retail component
of a mixed-use development, five contiguous properties and two
non-contiguous community shopping centers comprising approximately 3.6
million square feet for a total purchase price of approximately
$427,000. The purchase price was funded with a $120,000 loan placed
concurrently with the closing, $140,400 of debt from an affiliate of
the seller, and $39,400 of assumed debt. The balance of the purchase
price was paid in cash. The Company's share of the cash component was
funded with the proceeds from two refinancings of Centers and
borrowings under the Company's line of credit. On July 12, 1999, the
Company closed on the second phase of the acquisition. The second phase
consisted of the acquisition of the office component of the mixed-use
development for a purchase price of approximately $111,000. The
purchase price was funded with a $76,700 loan placed concurrently with
the closing and the balance was paid in cash. The Company's share of
the cash component was funded from borrowings under the Company's line
of credit.
On June 2, 1999, Macerich Cerritos, LLC, a wholly-owned subsidiary of
Macerich Management Company, acquired Los Cerritos Center in Cerritos,
California. The total purchase price was $188,000, which was funded
with $120,000 of debt placed concurrently with the closing and a
$70,800 loan from the Company. The Company funded this loan from
borrowings under a $60,000 bank loan agreement and the balance from the
Company's line of credit.
23
<PAGE>
THE MACERICH COMPANY (THE COMPANY)
NOTES TO CONDENSED AND CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
10. PRO FORMA INFORMATION - CONTINUED:
On a pro forma basis, reflecting these acquisitions as if they had
occurred on January 1, 1999 and 1998, the Company would have reflected
net income - available to common stockholders of $26,002 and $17,376
for the nine months ended September 30, 1999 and 1998, respectively.
Net income available to common stockholders on a diluted per share
basis would be $0.77 and $0.57 for the nine months ended September 30,
1999 and 1998, respectively.
11. PREFERRED STOCK:
On February 25, 1998, the Company issued 3,627,131 shares of Series A
Preferred Stock for proceeds totaling $100,000 in a private placement.
The preferred stock can be converted on a one for one basis into common
stock and will pay a quarterly dividend equal to the greater of $0.46
per share, or the dividend then payable on a share of common stock.
On June 17, 1998, the Company issued 5,487,471 shares of Series B
cumulative convertible preferred stock ("Series B Preferred Stock") for
proceeds totaling $150,000 in a private placement. The preferred stock
can be converted on a one for one basis into common stock and will pay
a quarterly dividend equal to the greater of $0.46 per share, or the
dividend then payable on a share of common stock.
No dividends will be declared or paid on any class of common or other
junior stock to the extent that dividends on Series A Preferred Stock
and Series B Preferred Stock have not been declared and/or paid.
12. SUBSEQUENT EVENTS:
On November 10, 1999, a dividend\distribution of $0.51 per share was
declared for common stockholders and OP unit holders of record on
November 19, 1999. In addition, the Company declared a dividend of
$0.51 on the Company's Series A Preferred Stock and a dividend of $0.51
on the Company's Series B Preferred Stock. All dividends/distributions
will be payable on December 7, 1999.
On October 26, 1999, 99% of the membership interests of Macerich
Stonewood, LLC and Macerich Cerritos, LLC and 100% of the membership
interests of Lakewood Mall, LLC were contributed to Pacific Premier
Retail Trust ("PPR"), a real estate investment trust, owned
approximately 51% by the Company and 49% by Ontario Teachers. Macerich
Lakewood, LLC, Macerich Stonewood, LLC and Macerich Cerritos, LLC own
Lakewood Mall, Stonewood Mall and Los Cerritos Center, respectively.
The total value of the transaction was approximately $535,000. The
properties were contributed to PPR subject to existing debt of
$322,000. The net proceeds to the Company were approximately $104,000
which were used for reduction of debt and for general corporate
purposes.
On October 29, 1999, Macerich Santa Monica, LLC, a wholly-owned
indirect subsidiary of the Company, acquired Santa Monica Place, a
560,000 square foot regional mall located in Santa Monica, California.
The total purchase price was $130,800, which was funded with $80,000 of
debt placed concurrently with the closing with the balance funded from
proceeds from the PPR transaction described above.
24
<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 as of September 30, 1999, and also
compares the activities for the nine and three months ended September
30, 1999 to the activities for the nine and three months ended
September 30, 1998.
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.
FORWARD-LOOKING STATEMENTS
This quarterly report on Form 10-Q contains or incorporates statements
that constitute forward-looking statements. Those statements appear in
a number of places in this Form 10-Q and include statements regarding,
among other matters, the Company's growth and acquisition
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. Words such as "expects," "anticipates," "intends,"
"projects," "predicts," "plans," "believes," "seeks," "estimates," and
"should" and variations of these words and similar expressions, are
used in many cases to identify these forward-looking statements.
Stockholders are cautioned that any such forward-looking statements are
not guarantees of future performance and involve risks, uncertainties
and other factors that may cause actual results, performance or
achievements of the Company or the industry to vary materially from the
Company's future results, performance or achievements, or those of the
industry, expressed or implied in such forward-looking statements. Such
factors include, among others, general industry economic and business
conditions, which will, among other things, affect demand for retail
space or retail goods, availability and creditworthiness of current and
prospective tenants, lease rents, availability and cost of financing
and operating expenses; adverse changes in the real estate markets
including, among other things, competition with other companies, retail
formats and technology, risks of real estate development and
acquisitions; 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
Company will not update any forward-looking information to reflect
actual results or changes in the factors affecting the forward-looking
information.
25
<PAGE>
THE MACERICH COMPANY (THE COMPANY)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS, CONTINUED:
The following table reflects the Company's acquisitions in 1998 and 1999 as of
September 30, 1999:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
Date
Acquired Location
-------- --------
<S> <C> <C>
"1998 ACQUISITION CENTERS"
SDG Macerich Properties, L.P. (*) February 27, 1998 Twelve properties in 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
Northwest Arkansas Mall December 15, 1998 Fayetteville, Arkansas
"1999 ACQUISITION CENTERS"
Pacific Premier Retail Trust (*) February 18, 1999 Three regional malls, retail component of a
mixed-use development and five contiguous
properties in Washington and Oregon. The office
component of the mixed-used development was
acquired July 12, 1999.
PPR Albany Plaza LLC (**) February 18, 1999 Two non-contiguous community shopping
PPR Eastland Plaza LLC (**) Centers in Oregon and Ohio.
Los Cerritos Center (**) June 2, 1999 Cerritos, California
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
(*) denotes the Company owns its interests in these Centers
through a joint venture entity.
(**) denotes the Company owns its interests in these Centers
through one of the Management Companies.
The financial statements include the results of these Centers for
periods subsequent to their acquisition.
The properties acquired by SDG Macerich Properties, L.P., Pacific
Premier Retail Trust and the Management Companies ("Joint Venture
Acquisitions") 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 1999 and 1998. Many factors impact the Company's ability to
acquire additional properties; including the availability and cost of
capital, the overall debt to market capitalization level, interest
rates and availability of potential acquisition targets that meet the
Company's criteria. Accordingly, management is uncertain whether during
the balance of 1999, and in 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 1999 and 1998
Acquisition Centers. Pacific View (formerly known as Buenaventura
Mall), Crossroads Mall-Boulder, Huntington Center and Parklane Mall are
currently under redevelopment and are referred to herein as the
"Redevelopment Centers." All other Centers are referred to herein as
the "Same Centers."
26
<PAGE>
THE MACERICH COMPANY (THE COMPANY)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS, CONTINUED:
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.
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, 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.
RESULTS OF OPERATIONS
COMPARISON OF NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
REVENUES
Minimum and percentage rents increased by 22.6% to $164.1 million in
1999 from $133.8 million in 1998. Approximately $24.6 million of the
increase resulted from the 1998 Acquisition Centers and $7.5 million of
the increase was attributable to the Same Centers. 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. The accounting change had the
effect of deferring $2.3 million of percentage rent in the second and
third quarters of 1998 attributable to the Same Centers into the fourth
quarter of 1998. During the fourth quarter of 1998, the FASB reversed
EITF 98-9. Accordingly, the Company has resumed accounting for
percentage rent on the accrual basis effective January 1, 1999. These
increases were partially offset by revenue decreases at the
Redevelopment Centers of $1.8 million in 1999.
Tenant recoveries increased to $72.8 million in 1999 from $60.8 million
in 1998. The 1998 Acquisition Centers generated $12.4 million of this
increase and $0.9 million of the increase was from the Same Centers.
These increases were partially offset by revenue decreases at the
Redevelopment Centers of $1.3 million in 1999.
Other income increased to $5.9 million in 1999 from $3.1 million in
1998. Approximately $0.4 million of the increase related to the 1998
Acquisition Centers and $2.3 million of the increase was attributable
to the Same Centers. Included in the Same Centers increase was $1.6
million attributable to interest income on a $70.8 million note from
the Company to the Management Companies relating to the acquisition
of Los Cerritos Center on June 2, 1999.
27
<PAGE>
THE MACERICH COMPANY (THE COMPANY)
RESULTS OF OPERATIONS - CONTINUED:
COMPARISON OF NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998, CONTINUED:
EXPENSES
Shopping center expenses increased to $72.5 million in 1999 compared to
$62.1 million in 1998. Approximately $10.9 million of the increase
resulted from the 1998 Acquisition Centers. The other Centers had a net
decrease of $0.5 million in shopping center expenses resulting
primarily from decreased property taxes and recoverable expenses.
General and administrative expenses increased to $4.1 million in 1999
from $3.1 million in 1998 primarily because of 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 partially
attributable to higher executive and director compensation expense.
INTEREST EXPENSE
Interest expense increased to $85.2 million in 1999 from $66.1 million
in 1998. This increase of $19.1 million is primarily attributable to
the acquisition activity in 1998 and 1999, which was partially funded
with secured debt and borrowings under the Company's line of credit.
DEPRECIATION AND AMORTIZATION
Depreciation increased to $46.4 million from $38.9 million in 1998.
This increase relates primarily to the 1998 Acquisition Centers.
INCOME FROM UNCONSOLIDATED JOINT VENTURES AND MANAGEMENT COMPANIES
The income from unconsolidated joint ventures and the Management
Companies was $16.7 million for 1999, compared to income of $8.4
million in 1998. A total of $4.7 million of the change is attributable
to the 1998 acquisitions by SDG Macerich Properties, L.P. and $3.8
million of the change is attributable to the 1999 acquisition by
Pacific Premier Retail Trust. These increases are partially offset by a
decrease of $0.2 million at the Management Companies.
EXTRAORDINARY LOSS FROM EARLY EXTINGUISHMENT OF DEBT
In 1999, the Company wrote off $1.0 million of unamortized financing
costs, compared to $2.4 million written off in 1998.
NET INCOME AVAILABLE TO COMMON STOCKHOLDERS
As a result of the foregoing, net income available to common
stockholders increased to $27.0 million in 1999 from $18.8 million in
1998.
28
<PAGE>
THE MACERICH COMPANY (THE COMPANY)
RESULTS OF OPERATIONS - CONTINUED:
COMPARISON OF NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998, CONTINUED:
OPERATING ACTIVITIES
Cash flow from operations was $97.0 million in 1999 compared to $82.8
million in 1998. The increase is primarily because of increased net
operating income from the 1998 and 1999 Acquisition Centers.
INVESTING ACTIVITIES
Cash flow used in investing activities was $228.9 million in 1999
compared to $655.8 million in 1998. The change resulted primarily from
the cash contributions required by the Company for the joint venture
acquisitions of $240.2 million in 1998 compared to $88.1 million in
1999.
FINANCING ACTIVITIES
Cash flow from financing activities was $130.1 million in 1999 compared
to $564.8 million in 1998. The decrease resulted from no equity
offerings in the nine months ended September 30, 1999 compared to
6,520,181 shares of common stock sold in the nine months ended
September 30, 1998. Additionally, 9,114,602 shares of preferred stock
were sold in the first and second quarters of 1998.
FUNDS FROM OPERATIONS
Primarily because of the factors mentioned above, Funds from Operations
- Diluted increased 46.9% to $118.4 million from $80.6 million in 1998.
RESULTS OF OPERATIONS
COMPARISON OF THREE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
REVENUES
Minimum and percentage rents increased by 10% to $55.0 million in 1999
from $49.9 million in 1998. Approximately $2.4 million of the increase
resulted from the 1998 Acquisition Centers and $3.1 million of the
increase was attributable to the Same Centers. 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. The accounting change had the
effect of deferring $1.0 million of percentage rent in the third
quarter of 1998 attributable to the Same Centers into the fourth
quarter of 1998. During the fourth quarter of 1998, the FASB reversed
EITF 98-9. Accordingly, the Company has resumed accounting for
percentage rent on the accrual basis effective January 1, 1999. These
increases were partially offset by revenue decreases at the
Redevelopment Centers of $0.4 million in 1999.
29
<PAGE>
THE MACERICH COMPANY (THE COMPANY)
RESULTS OF OPERATIONS - CONTINUED:
COMPARISON OF THREE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998,
CONTINUED:
Tenant recoveries increased to $25.5 million in 1999 from $23.9 million
in 1998. The 1998 Acquisition Centers generated $0.2 million of this
increase, $0.8 million of the increase was attributable to the Same
Centers and $0.6 million related to the Redevelopment Centers.
Other income increased to $2.7 million in 1999 from $1.2 million in
1998. Approximately $1.4 million of the increase was attributable to
the Same Centers and $0.1 million to the Redevelopment Centers.
Included in the Same Centers increase was $1.2 million attributable
to interest income on a $70.8 million note from the Company to the
Management Companies relating to the acquisition of Los Cerritos
Center on June 2, 1999.
EXPENSES
Shopping center expenses increased to $25.3 million in 1999 compared to
$24.1 million in 1998. Approximately $0.9 million of the increase
resulted from the 1998 Redevelopment Centers and $0.4 million of the
increase was from the Acquisition Centers. The Same Centers had a net
decrease of $0.1 million in shopping center expenses resulting
primarily from decreased property taxes and recoverable expenses.
General and administrative expenses increased to $1.2 million in 1999
from $0.9 million in 1998 primarily due to higher executive and
director compensation expense.
INTEREST EXPENSE
Interest expense increased to $29.8 million in 1999 from $24.9 million
in 1998. This increase of $4.9 million is primarily attributable to the
acquisition activity in 1998 and 1999, which was partially funded with
secured debt and borrowings under the Company's line of credit.
DEPRECIATION AND AMORTIZATION
Depreciation increased to $15.9 million from $15.3 million in 1998.
This increase relates primarily to the 1998 Acquisition Centers.
INCOME FROM UNCONSOLIDATED JOINT VENTURES AND MANAGEMENT COMPANIES
The income from unconsolidated joint ventures and the Management
Companies was $6.1 million for 1999, compared to income of $2.9 million
in 1998. A total of $1.2 million of the change is attributable to the
1998 acquisitions by SDG Macerich Properties, L.P. and $2.0 million of
the change is attributable to the 1999 acquisition by Pacific Premier
Retail Trust.
NET INCOME AVAILABLE TO COMMON STOCKHOLDERS
As a result of the foregoing, net income available to common
stockholders increased to $9.1 million in 1999 from $4.6 million in
1998.
30
<PAGE>
THE MACERICH COMPANY (THE COMPANY)
RESULTS OF OPERATIONS - CONTINUED:
COMPARISON OF THREE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998,
CONTINUED:
FUNDS FROM OPERATIONS
Primarily because of the factors mentioned above, Funds from Operations
- Diluted increased 32.4% to $40.9 million from $30.9 million in 1998.
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 major redevelopments has been, and is expected to continue to be,
obtained from equity or debt financings which include borrowings under
the Company's line of credit and construction loans. However, many
factors impact the Company's ability to access capital, such as its
overall debt to market capitalization level, interest rates, interest
coverage ratios and prevailing market conditions. The Company currently
is undertaking a $90 million redevelopment of Pacific View. The Company
has a bank construction loan agreement to fund $89.2 million of these
construction costs.
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 public and private equity offerings, debt
financings and/or joint ventures. During 1998 and 1999, the Company
acquired two portfolios through joint ventures with another party. The
Company believes such joint venture arrangements provide an attractive
alternative to other forms of financing.
The Company's total outstanding loan indebtedness at September 30, 1999
was $2.3 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 OP Units and preferred stock into
common stock) ratio of approximately 64% at September 30, 1999. The
Company's debt consists primarily of fixed-rate conventional mortgages
payable secured by individual properties.
The Company has filed a shelf registration statement, effective
December 8, 1997, to sell securities. The shelf registration is for a
total of $500 million of common stock, common stock warrants or common
stock rights. During 1998, the Company sold a total of 7,920,181 shares
of common stock under this shelf registration. The aggregate offering
price of these transactions was approximately $212.9 million, leaving
approximately $287.1 million available under the shelf registration
statement.
31
<PAGE>
THE MACERICH COMPANY (THE COMPANY)
LIQUIDITY AND CAPITAL RESOURCES, CONTINUED:
The Company has an unsecured line of credit for up to $150.0 million.
There was $134.5 million of borrowings outstanding at September 30,
1999.
At September 30, 1999, the Company had cash and cash equivalents
available of $23.3 million.
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 is the result of many existing 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 of critical systems
to verify compliance; and (5) contingency planning, as appropriate.
This program includes a review of both information technology ("IT")
and non-IT systems of the centers in which the Company has an ownership
interest and manages, excluding Santa Monica Place which was acquired
on October 29, 1999. The Company's Year 2000 team which consists of
management as well as operational and IT staff members is supervising
this program.
IT SYSTEMS
The Company has reviewed 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 that
all of its critical computer hardware systems and software programs are
substantially Year 2000 compliant. One critical hardware system needed
a Year 2000 upgrade which the Company installed at a cost of
approximately $13,100. The Company recently concluded its own
evaluation and testing and based upon such results the Company believes
its critical hardware systems and software are substantially Year 2000
compliant.
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 completed its own evaluation and testing and based upon such
testing, the Company believes that this software is substantially Year
2000 compliant.
32
<PAGE>
THE MACERICH COMPANY (THE COMPANY)
YEAR 2000 READINESS DISCLOSURE - CONTINUED:
IT SYSTEMS, CONTINUED:
The Company completed its assessment of the Year 2000 compliance of its
non-critical computer hardware systems and software programs by its
target date of December 31, 1998. Based on manufacturer or vendor
information, the Company presently believes that substantially all of
its non-critical hardware systems and software programs are Year 2000
compliant.
NON-IT SYSTEMS
Part of the Company's Year 2000 program also includes a review of the
various operating systems of each of its centers in which the Company
has an ownership interest and manages. The main offices of the Company
are also being reviewed for Year 2000 compliance issues. These
operating systems typically include embedded technology which
complicates the Company's Year 2000 efforts. Examples of these types of
systems include energy management systems, telecommunication systems,
elevators, security systems and copiers. The various operating systems
have been assigned priorities based on the importance of the system to
each property's operations and the potential impact of non-compliance.
All of the Company's properties have completed their initial assessment
of each system and have substantially completed the process of
verifying Year 2000 compliance through the manufacturers and/or vendors
of the systems. Approximately 94% of the critical operating systems at
the centers for which the Company has received information from
manufacturers or vendors are substantially Year 2000 compliant as
reported by such entities. Certain critical systems, 11 energy
management systems, five telephone systems, two fire alarm systems, one
security alarm system, one CCTV system, one HVAC system and one
elevator intercom system, required Year 2000 upgrades at an aggregate
cost of approximately $60,000. Most of the Y2K upgrades have been
successfully installed or are in process. Other non-compliant critical
systems are being upgraded by the manufacturer at no cost to the
Company or were previously scheduled for replacement or upgrades prior
to January 1, 2000. With respect to approximately 8% of its critical
operating systems at the centers, the Company has not received the
necessary information to assess the Year 2000 compliance of such
systems or the necessary remediation steps. The Company continues to
contact these manufacturers/vendors to obtain the information necessary
to complete its Year 2000 compliance assessment. The Company is also
beginning the process of assessing the risk to the center assuming the
system is not compliant and developing contingency plans, as
appropriate.
Each property prepared remediation and testing recommendations and time
lines based on the importance of each system to the property's
operations and information received from the manufacturer/vendor. The
Company has been coordinating the testing phase with the
manufacturers/vendors of the systems, as appropriate. Approximately 75%
of the critical systems at the centers have tested successfully for
Year 2000 compliance or are not date-sensitive. The Company continues
to contact the vendors and manufacturers of the remaining critical
systems for testing information and assistance and anticipates
completion of the testing of substantially all critical operating
systems by December 1, 1999. If such testing information and assistance
is not provided, completion of this phase may be delayed. The Company
expects the Year 2000 program to continue beyond January 1, 2000 with
respect to non-critical operating systems and issues.
33
<PAGE>
THE MACERICH COMPANY (THE COMPANY)
YEAR 2000 READINESS DISCLOSURE - CONTINUED:
MATERIAL THIRD PARTIES
The Company mailed surveys to its material vendors, utilities and
tenants about their plans and progress in addressing the Year 2000
issue. Those entities surveyed include the utilities for each center
(i.e., electric, gas, water, telephone and waste management companies),
the largest tenants of the Company based on the amount of their 1998
rent payments and certain Anchor tenants. As of this date, the Company
has received responses from approximately 95% of those entities
surveyed. Generally, the responses received state that the entity is in
the process of addressing the Year 2000 compliance issues and expects
to achieve compliance prior to January 1, 2000. Approximately 45% of
those entities have indicated their mission critical systems are Year
2000 compliant.
COSTS
Because the Company's assessment, remediation and testing efforts are
ongoing, the Company is unable to estimate the total costs of achieving
Year 2000 compliance for its IT and non-IT systems. Based on
information received from manufacturers/vendors, the Company presently
anticipates that the assessment and remediation costs will not be
material. As of September 30, 1999, the Company has not expended
significant amounts since its evaluation of Year 2000 issues has been
primarily conducted by its own personnel. The Company does not
separately record the internal costs incurred for its Year 2000
compliance program. Such costs are primarily the related payroll costs
for its personnel who are part of the Year 2000 program. Independent
electricians conducted Year 2000 compliance reviews of the electrical
infrastructure at each center for an aggregate cost of approximately
$13,000.
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 and/or failure of their respective material vendors
to provide products and services may delay or otherwise adversely
impact the payment of rent to the Company or impair the ability of a
tenant to operate. Although a formal contingency plan has not yet been
developed for dealing with the most reasonably likely worst case
scenario, the Company has focused on the power companies serving each
center and each center has prepared security contingency plans to deal
with potential power failures or interruptions. The Company will
continue to evaluate 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 its
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.
34
<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 (loss) (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 are calculated on the same basis. FFO 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. The following reconciles net income available to common
stockholders to FFO:
<TABLE>
<CAPTION>
Nine months ended September 30,
1999 1998
------------------------ ------------------------
Shares Amount Shares Amount
---------- ---------- ---------- ----------
(amounts in thousands)
<S> <C> <C> <C> <C>
Net income - available to common stockholders $27,008 $18,769
Adjustments to reconcile net income to FFO - basic:
Minority interest 9,795 7,748
Depreciation and amortization on wholly owned centers 46,434 38,919
Pro rata share of unconsolidated entities' depreciation and
amortization 14,091 7,982
Gain on sale of assets (162) (9)
Extraordinary loss on early extinguishment of debt 1,016 2,414
Pro rata share of (gain) loss on sale of assets
from unconsolidated entities (399) 164
Amortization of financing costs (2,717) (2,109)
Depreciation of personal property (807) (534)
---------- ----------
FFO - basic (1) 46,286 94,259 42,310 73,344
Additional adjustments to arrive at FFO - diluted:
Impact of convertible preferred stock 9,115 13,581 5,027 6,898
Impact of stock options and restricted stock using
the treasury method 468 1,141 610 411
Impact of convertible debentures 5,186 9,453 (n/a anti-dilutive)
---------- ---------- ---------- ----------
FFO - diluted (2) 61,055 $118,434 47,947 $80,653
========== ========== ========== ==========
</TABLE>
35
<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,
1999 1998
------------------------ --------------------------
Shares Amount Shares Amount
---------- ---------- ---------- ----------
(amounts in thousands)
<S> <C> <C> <C> <C>
Net income - available to common stockholders $9,125 $4,579
Adjustments to reconcile net income to FFO - basic:
Minority interest 3,307 1,558
Depreciation and amortization on wholly owned centers 15,895 15,312
Pro rata share of unconsolidated entities' depreciation and
amortization 5,626 3,557
Gain on sale of assets (162) -
Extraordinary loss on early extinguishment of debt 28 2,324
Pro rata share of (gain) loss on sale of assets
from unconsolidated entities 75 -
Amortization of financing costs (1,035) (608)
Depreciation of personal property (385) (168)
---------- ----------
FFO - basic (1) 46,318 32,474 44,761 26,554
Additional adjustments to arrive at FFO - diluted:
Impact of convertible preferred stock 9,115 4,740 9,114 4,193
Impact of stock options and restricted stock using
the treasury method 535 530 592 155
Impact of convertible debentures 5,186 3,177 (n/a anti-dilutive)
---------- ---------- ---------- ----------
FFO - diluted (2) 61,154 $40,921 54,467 $30,902
========== ========== ========== ==========
</TABLE>
1) Calculated based upon basic net income as adjusted to reach
basic FFO. Weighted average number of shares includes the
weighted average number of shares of common stock outstanding
for 1999 and 1998 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 dilutive for the nine and three
months ending September 30, 1999 and therefore assumed
converted to equity to calculate FFO - diluted in 1999. The
debentures are anti-dilutive for the nine and three months
ending September 30, 1998 and therefore are not assumed
converted to equity for the period ended September 30, 1998.
On February 25, 1998, the Company sold $100 million of its
Series A Preferred Stock. On June 17, 1998, the Company sold
$150 million of its Series B Preferred Stock Each series of
preferred stock can be converted on a one for one 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.
36
<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 $1.9 million and $2.7 million for
the nine months ended September 30, 1999 and 1998, respectively; and
$0.7 million and $0.9 million for the three months ended September 30,
1999 and 1998, 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.
SEASONALITY
The shopping center industry is seasonal in nature, particularly in the
fourth quarter during the holiday season when retailer occupancy and
retail sales are typically at their highest levels. In addition,
shopping malls achieve a substantial portion of their specialty
(temporary retailer) rents during the holiday season. As a result of
the above, earnings are generally highest in the fourth quarter of each
year.
NEW ACCOUNTING PRONOUNCEMENTS ISSUED
In March 1998, the FASB, through its 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 had
historically capitalized these costs in accordance with GAAP. The
Company adopted the FASB's interpretation effective March 19, 1998.
In June 1998, the FASB issued SFAS 133, "Accounting for Derivative
Instruments and Hedging Activities," which was initially to become
effective for the Company's consolidated 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 value of those derivatives will be accounted for
based on the use of the derivative and whether it qualifies for hedge
accounting. The key criteria for hedge accounting is whether the
hedging relationship is highly effective in achieving offsetting
changes in fair value or cash flows. The Company has not yet determined
when it will implement SFAS 133 nor has it completed the complex
analysis required to determine the impact of SFAS 133 on its
consolidated financial statements.
37
<PAGE>
THE MACERICH COMPANY (THE COMPANY)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS, CONTINUED:
NEW ACCOUNTING PRONOUNCEMENTS ISSUED - CONTINUED:
In June 1999, the FASB issued SFAS 137, "Accounting for Derivative
Instruments and Hedging Activities - Deferral of the Effective Date of
FASB Statement No. 133," which delays the implementation of SFAS 133
for the Company's consolidated financial statements to January 1, 2001.
38
<PAGE>
THE MACERICH COMPANY (THE COMPANY)
ITEM III
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company's primary market risk exposure is interest rate risk. The
Company has managed and will continue to manage interest rate risk by
(1) maintaining a conservative ratio of fixed rate, long-term debt to
total debt such that variable rate exposure is kept at an acceptable
level, (2) reducing interest rate exposure on certain long-term
variable rate debt through the use of interest rate caps with
appropriately matching maturities, (3) using treasury rate locks where
appropriate to fix rates on anticipated debt transactions, and (4)
taking advantage of favorable market conditions for long-term debt
and/or equity.
The following table sets forth information as of September 30, 1999
concerning the Company's long term debt obligations, including
principal cash flows by scheduled maturity, weighted average interest
rates and estimated fair value ("FV").
<TABLE>
<CAPTION>
For the Years Ended December 31,
(dollars in thousands)
1999 2000 2001 2002 2003 Thereafter Total FV
-------- -------- -------- -------- -------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Wholly Owned Centers:
Long term debt:
Fixed rate $ 9,671 $ 38,628 $107,253 $ 10,255 $ 97,900 $ 985,944 $1,249,651 $1,198,251
Average interest rate 7.35% 7.34% 7.36% 7.33% 7.33% 7.28% 7.33% --
Fixed rate - Debentures -- -- -- 161,400 -- -- 161,400 156,861
Average interest rate -- -- -- 7.25% -- -- 7.25% --
Variable rate 60,000 60,000 186,651 -- -- -- 306,651 306,651
Average interest rate 7.28% 8.0% 6.58% -- -- -- 6.97% --
-------- -------- -------- -------- -------- ----------- ---------- ----------
Total debt - Wholly owned Centers $69,671 $ 98,628 $293,904 $171,655 $ 97,900 $ 985,914 $1,717,702 $1,661,763
-------- -------- -------- -------- -------- ----------- ---------- ----------
Joint Venture Centers:
(at Company's pro rata share)
Fixed rate $ 4,672 $ 26,976 $ 7,160 $ 7,651 $ 8,179 $ 440,088 $ 494,726 $ 450,750
Average interest rate 6.60% 6.60% 6.61% 6.61% 6.61% 6.61% 6.61% --
Variable rate -- -- -- -- 92,500 -- 92,500 92,500
Average interest rate -- -- -- -- 6.15% -- 6.15% --
-------- -------- -------- -------- -------- ----------- ---------- ----------
Total debt - All Centers $74,343 $125,604 $301,064 $179,306 $198,579 $1,426,032 $2,304,928 $2,205,013
-------- -------- -------- -------- -------- ----------- ---------- ----------
-------- -------- -------- -------- -------- ----------- ---------- ----------
</TABLE>
The total variable rate debt of $60,000 maturing in 1999, was paid off
in full by the Company on October 8, 1999 and replaced with a new loan
of $72.0 million at a fixed rate of 7.75%, maturing in 2009. The $60.0
million of floating rate debt maturing in 2000 was paid off in full on
October 28, 1999. Of the $186.7 million of variable rate debt maturing
in 2001, $134.5 million represents the outstanding borrowings under the
Company's credit facility. The credit facility matures in February
2000, with a one year option to extend the maturity date to February
2001. The table reflects the Company extending the maturity date to
February 2001. The balance of $52.2 million represents outstanding
borrowings under the Pacific View construction loan.
39
<PAGE>
THE MACERICH COMPANY (THE COMPANY)
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK, CONTINUED:
In addition, the Company has assessed the market risk for its variable
rate debt and believes that a 1% increase in interest rates would
decrease future earnings and cash flows by approximately $3.9 million
per year based on $399.2 million outstanding at September 30, 1999.
The fair value of the Company's long term debt is estimated based on
discounted cash flows at interest rates that management believes
reflect the risks associated with long term debt of similar risk and
duration.
40
<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 August 27, 1999, the Company issued 10,000 shares of common stock
upon the redemption of 10,000 OP Units in a private placement to a
limited partner of the Operating Partnership, an accredited investor,
pursuant to Section 4 (2) of the Securities Act of 1933.
Item 3 Defaults Upon Senior Securities
None
Item 4 Submission of Matters to a Vote of Security Holders
None
Item 5 Other Information
None
Item 6 Exhibits and Reports on Form 8-K
(a) Exhibits
Number Description
------ -----------
10.1 1999 Cash Bonus/Restricted Stock and Stock Unit Program under
the Amended and Restated 1994 Incentive Plan (including the
forms of Award Agreements).
(b) Reports on Form 8-K
A report on Form 8-K/A, Amendment No. 2, dated July 30, 1999, event
date July 12, 1999, was filed with the Securities and Exchange
Commission for the purpose of disclosing the acquisition of the office
component of Redmond Town Center, a mixed-use development, by Pacific
Premier Retail Trust.
41
<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
Executive Vice President and
Chief Financial Officer
Date: November 12, 1999
42
<PAGE>
THE MACERICH COMPANY (THE COMPANY)
Exhibit Index
<TABLE>
<CAPTION>
Exhibit No. Page
- ----------- ----
<S> <C> <C>
(a) Exhibits
Number Description
------ -----------
10.1 1999 Cash Bonus/Restricted Stock and Stock
Unit Program under the Amended and Restated
1994 Incentive Plan (including the forms
of Award Agreements).
</TABLE>
43
<PAGE>
EXHIBIT 10.1
THE MACERICH COMPANY
1999 CASH BONUS/RESTRICTED STOCK AND STOCK UNIT
PROGRAM
UNDER THE AMENDED AND RESTATED 1994 INCENTIVE PLAN
(AS AMENDED AUGUST 10, 1999)
<PAGE>
THE MACERICH COMPANY
1999 CASH BONUS/RESTRICTED STOCK AND STOCK UNIT AWARD PROGRAM
UNDER THE AMENDED AND RESTATED 1994 INCENTIVE PLAN,
AS AMENDED AUGUST 10, 1999
TABLE OF CONTENTS
Page
ARTICLE I TITLE, PURPOSE AND AUTHORIZED SHARES .................... 1
ARTICLE II DEFINITIONS ............................................ 1
ARTICLE III PARTICIPATION ......................................... 3
ARTICLE IV RESTRICTED STOCK, STOCK UNIT OR CASH ELECTIONS ......... 3
ARTICLE V RESTRICTED STOCK AWARDS ................................. 5
ARTICLE VI STOCK UNIT AWARDS ...................................... 5
ARTICLE VII ADMINISTRATION ........................................ 6
ARTICLE VIII MISCELLANEOUS ........................................ 7
EXHIBIT A-1 THE MACERICH COMPANY IRREVOCABLE ELECTION AGREEMENT (1998)
EXHIBIT A-2 THE MACERICH COMPANY IRREVOCABLE ELECTION AGREEMENT (1999)
EXHIBIT B RESTRICTED STOCK AWARD AGREEMENT
EXHIBIT C STOCK UNIT AWARD AGREEMENT
i
<PAGE>
THE MACERICH COMPANY
1999 CASH BONUS/RESTRICTED STOCK AND STOCK UNIT AWARD PROGRAM
UNDER THE AMENDED AND RESTATED 1994 INCENTIVE PLAN
ARTICLE I
TITLE, PURPOSE AND AUTHORIZED SHARES
1.1 TITLE
This Program shall be known as The Macerich Company 1999 Cash
Bonus/Restricted Stock and Stock Unit Award Program under the Amended and
Restated 1994 Incentive Plan.
1.2 PURPOSE
The purpose of this Program is to promote the success of the Company
and the interest of its stockholders by providing an additional means to
attract, motivate, retain and reward key employees, including officers, by
providing an opportunity to convert cash bonus opportunities into Restricted
Stock and/or Stock Unit Awards, enhancing compensation deferral opportunities
and offering additional incentives to increase stock ownership in the Company.
1.3 SHARES
The aggregate number of shares of Common Stock issuable under this
Program shall be charged against and subject to the limits on the available
shares under the Plan.
ARTICLE II
DEFINITIONS
Whenever the following terms are used in this Program they shall have
the meaning specified below unless the context clearly indicates to the
contrary. Capitalized terms not otherwise defined shall have the meaning
assigned to such terms in the Plan.
2.1 BONUS PAYMENT DATE means the date designated by the Committee (upon
or after its decisions as to awards) on which the Cash Bonus is or would
otherwise be received by the Participant.
2.2 CASH BONUS means an incentive award granted by the Committee,
whether or not under the terms of the Plan, that but for elections under this
Program would be paid solely in cash.
2.3 CONVERSION AMOUNT means the dollar equivalent of the Cash Bonus
elected by the Participant to be converted to a Restricted Stock and/or Stock
Unit Award under this Program.
1
<PAGE>
2.4 DIVIDEND EQUIVALENT RIGHT means the amount of cash dividends or
other cash distributions paid by the Company on that number of shares of Common
Stock equal to the number of Stock Units credited to a Participant's Stock Unit
Account as of the applicable record date for the dividend or other distribution,
which amount shall, at the discretion of the Committee, either be paid on the
applicable dividend payment date directly to the Participant in cash or credited
in the form of additional Stock Units to the Stock Unit Account of the
Participant, as provided in the applicable Stock Unit Award Agreement.
2.5 EFFECTIVE DATE means November 30, 1998.
2.6 ELIGIBLE EMPLOYEE means any officer or key employee of the Company
or a Subsidiary who earns an annual base salary of at least $100,000 and who
otherwise qualifies as a member of a select group of management or highly
compensated employees, as described in Sections 201, 301 and 401 of the Employee
Retirement Income Security Act of 1974, as amended, who has been designated by
the Committee as potentially eligible to receive a Restricted Stock and/or Stock
Unit Award under this Program.
2.7 PARTICIPANT means any Eligible Employee who has delivered to the
Company an election agreement electing to participate in the Program.
2.8 PLAN means The Macerich Company Amended and Restated 1994 Incentive
Plan.
2.9 PROGRAM means this The Macerich Company 1999 Cash Bonus/Restricted
Stock and Stock Unit Award Program under the Amended and Restated 1994 Incentive
Plan, as from time to time amended.
2.10 RESTRICTED STOCK means shares of Common Stock awarded to a
Participant pursuant to Article IV of the Plan.
2.11 RESTRICTED STOCK AWARD means an award of Restricted Stock granted
by the Committee under the Plan based on the Conversion Amount.
2.12 RESTRICTED STOCK AWARD AGREEMENT means an agreement substantially
in the form of Exhibit B (as from time to time revised by the Committee).
2.13 STOCK UNIT means a non-voting unit of measurement which is deemed
solely for bookkeeping purposes to be equivalent to one outstanding share of
Common Stock (subject to adjustment) awarded to a Participant pursuant to
Article IV of the Plan.
2.14 STOCK UNIT AWARD means an award of Stock Units granted by the
Committee under the Plan based on the Conversion Amount.
2.15 STOCK UNIT AWARD AGREEMENT means an agreement substantially in the
form of Exhibit C (as from time to time revised by the Committee).
2
<PAGE>
2.16 STOCK UNIT ACCOUNT means the bookkeeping account maintained by the
Company on behalf of each Participant which is credited with Stock Units
calculated in accordance with Section 4.4.
2.17 YEAR means the applicable calendar year.
ARTICLE III
PARTICIPATION
Each Eligible Employee designated by the Committee for any Year may
elect in advance to receive all or part (in increments and on forms authorized
by the Committee) of any Cash Bonus that may be granted in the future in the
form of Restricted Stock and/or Stock Units to the extent provided in Article
IV.
ARTICLE IV
RESTRICTED STOCK, STOCK UNIT OR CASH ELECTIONS
4.1 TIME AND TYPES OF ELECTIONS
On or before December 31, 1998 and September 30 of each subsequent
Year, each Eligible Employee may make an irrevocable election to receive a
percentage of Cash Bonus that may be granted to the Eligible Employee during the
following Year in shares of Restricted Stock and/or Stock Units. This election
shall become effective only if the Committee, in authorizing the Cash Bonus,
expressly recognizes such alternative payment opportunity in Restricted Stock
and/or Stock Units and grants the Restricted Stock and/or Stock Units at that
time. The Committee will have the sole discretion to determine whether
Restricted Stock or Stock Units will be issuable. A person who first becomes an
Eligible Employee after the applicable deadline may, within 30 days of becoming
and being designated as an Eligible Employee, make an irrevocable election to
receive any Cash Bonuses granted for the applicable Year (or remaining portion
thereof, as the case may be) in Restricted Stock and/or Stock Units.
4.2 ELECTION PROCEDURES
The elections shall be made in writing on forms provided by the Company
and authorized by the Committee. These forms shall take the form of the Election
Agreement attached hereto as Exhibit A-1 for elections made in December 1998 and
Exhibit A-2 for elections made in September 1999, as from time to time amended
by the Committee. Neither the distribution nor completion of election agreements
shall convey any right to receive a bonus, in cash, Restricted Stock or Stock
Units. Failure to timely elect Restricted Stock and/or Stock Units, however,
will result in the payment in cash if any cash bonus is awarded.
3
<PAGE>
4.3 DISTRIBUTION OF BENEFITS
(a) TIME AND MANNER OF DISTRIBUTION. A Participant shall be entitled to
receive a number of unrestricted shares of Restricted Stock, or to receive a
number of shares of Common Stock equal to the number of Stock Units allocated to
his or her Stock Unit Account, in accordance with the vesting schedule set forth
in the applicable Restricted Stock Award Agreement or Stock Unit Award
Agreement. Alternatively, the Committee may permit a Participant to elect to
receive a distribution of shares of Common Stock in an amount equal to the
number of Stock Units, if any, allocated to his or her Stock Unit Account at
such time and in such manner as set forth in the form of agreement approved by
the Committee. If the Committee so provides, a Participant may elect any of the
distribution commencement dates and methods of distribution (lump sum or annual
installments) set forth in the form of agreement approved by the Committee.
(b) CHANGE IN TIME OR MANNER OF DISTRIBUTION OF STOCK UNITS.
(1) To the extent permitted by the Committee and set forth in any
applicable Distribution Election Agreement, a Participant may change the
manner of any distribution election from a lump sum to annual installments
(or vice versa) made with respect to Stock Units credited under any Stock
Unit Account by filing a written election with the Committee on a form
provided by the Committee; PROVIDED, HOWEVER, that no such election shall
be effective until 12 months after such election is filed with the
Committee, and no such election shall be effective if it is made with
respect to any Stock Unit Account after benefits with respect to such
Stock Unit Account have commenced. An election made pursuant to this
Section 4.3(b) shall not affect the date of the commencement of benefits.
(2) To the extent permitted by the Committee and set forth in any
applicable Distribution Election Agreement, a Participant may elect to
further defer the commencement of any distribution to be made with respect
to Stock Units credited under any Stock Unit Account by filing a new
written election with the Committee on a form approved by the Committee;
PROVIDED, HOWEVER, that (A) no such election shall be effective until 12
months after such election is filed with the Committee, (B) no such new
election shall be effective with respect to any Stock Unit Account after
benefits with respect to such Stock Unit Account shall have commenced, and
(C) no more than three new elections shall be valid as to any Stock Unit
Account. An election made pursuant to this Section 4.3(b)(2) shall not
affect the manner of distribution (I.E., lump sum versus installments),
the terms of which shall be subject to Section 4.3(b)(1) above.
4.4 NUMBER OF SHARES/STOCK UNITS
The number of shares of Restricted Stock to be granted and/or the
number of Stock Units to be credited under this Program shall equal a multiple
of the Conversion Amount divided by the Fair Market Value of a share of Common
Stock (without regard to any restriction) on the applicable Bonus Payment Date.
The multiple shall not be changed as to any election after it is duly made under
the terms of this Program without the consent of the Participant.
4
<PAGE>
The multiple for bonuses paid in 1999 and until changed by the
Committee shall be 1.5. For example, assume that prior to December 31, 1998 a
Participant elects to receive 40% of any cash bonus in Restricted Stock or Stock
Units and, on March 1, 1999, the Company grants him a $40,000 cash bonus. The
market value of a share of Common Stock on the Bonus Payment Date is $20. The
Participant will receive $24,000 in cash and, at the election of the Committee,
1,200 shares of Restricted Stock or 1,200 Stock Units.
4.5 NO FRACTIONAL SHARE INTERESTS
If an election would result in the issuance of a fractional share, the
amount of Restricted Stock and/or Stock Units granted shall be rounded down to
the next whole share and the cash alternative amount in lieu of the fractional
interest shall be paid in cash.
ARTICLE V
RESTRICTED STOCK AWARDS
The grant of Restricted Stock Awards, including, but not limited to,
the terms of grant, conditions and restrictions, the consideration (other than
services) to be paid, dividend rights, vesting terms, provisions for redelivery
to the Company, and adjustments in case of changes in the Common Stock, shall be
governed by the terms of the Plan, the Program and of the Restricted Stock Award
Agreement, substantially in the form of Exhibit B (as from time to time revised
by the Committee), to be executed and delivered by the Company and the
Participant. After an election is made, the form of the Restricted Stock Award
Agreement (if applicable) may not be changed in any manner materially adverse to
the Participant without his or her consent. All Restricted Stock Awards are
subject to express prior authorization by the Committee of the terms of the
Restricted Stock Award and the specific number of shares of Restricted Stock
thereunder.
ARTICLE VI
STOCK UNIT AWARDS
The grant of Stock Unit Awards, including, but not limited to, the
terms of grant, conditions and restrictions, the consideration (other than
services) to be paid, the form and content of Dividend Equivalent rights,
vesting terms, and adjustments in case of changes in the Common Stock, shall be
governed by the terms of the Plan, the Program and of the Stock Unit Award
Agreement, substantially in the form of Exhibit C (as from time to time revised
by the Committee), to be executed and delivered by the Company and the
Participant. After an election is made, the form of the Stock Unit Award
Agreement (if applicable) may not be changed in any manner materially adverse to
the Participant without his or her consent. All Stock Unit Awards are subject to
express prior authorization by the Committee of the terms of the Stock Unit
Award and the specific number of shares of Common Stock referenced in the
Participant's Stock Unit Account thereunder.
5
<PAGE>
ARTICLE VII
ADMINISTRATION
7.1 RIGHTS AND DUTIES.
This Program shall be administered by and all Restricted Stock and
Stock Unit Awards to Eligible Employees shall be authorized by the Committee.
The Committee shall have all powers necessary to accomplish those purposes,
including, but not by way of limitation, the following:
(a) to determine the particular Eligible Employees who will receive
Cash Bonuses, the extent to which and price at which a Cash Bonus may be settled
in shares of Common Stock, Restricted Stock or Stock Units, and the other
specific terms and conditions of Restricted Stock and Stock Unit Awards
consistent with the express limits of this Program and the Plan;
(b) to approve from time to time the election agreement and other forms
of Restricted Stock and Stock Unit Award Agreements (which need not be identical
either as to type of award or among Participants or from year to year); and
(c) to resolve any questions concerning benefits payable to a
Participant and make all other determinations and take such other action as
contemplated by this Program or the Plan or as may be necessary or advisable for
the administration or interpretation of this Program.
7.2 CLAIMS PROCEDURES.
To the extent the Committee permits deferral elections extending to the
termination of employment or beyond, the following claims procedures shall
apply:
(a) The Committee shall notify Participants and, where appropriate, the
Beneficiary(ies) of their right to claim benefits under these claims procedures,
shall make forms available for filing of such claims, and shall provide the name
of the person or persons with whom such claims should be filed.
(b) The Committee shall act upon claims as required and communicate a
decision to the claimant promptly and, in any event, not later than 90 days
after the claim is received by the Committee, unless special circumstances
require an extension of time for processing the claim. If an extension is
required, notice of the extension shall be furnished to the claimant prior to
the end of the initial 90-day period, which notice shall indicate the reasons
for the extension and the expected decision date. The extension shall not exceed
90 days. The claim may be deemed by the claimant to have been denied for
purposes of further review described below in the event a decision is not
furnished to the claimant within the period described in the preceding three
sentences. Every claim for benefits which is denied shall be denied by written
notice setting forth in a manner calculated to be understood by the claimant (i)
the specific reason or reasons for the denial, (ii) specific reference to any
provisions of this Program on which denial is based, (iii) description of any
additional material or information necessary for the claimant to perfect his
claim with an explanation of why such material or information is
6
<PAGE>
necessary, and (iv) an explanation of the procedure for further review of the
denial of the claim under this Program.
(c) The claimant or his or her duly authorized representative shall
have 60 days after receipt of denial of his or her claim to request a review of
such denial, the right to review all pertinent documents and the right to submit
issues and comments in writing. Upon receipt of a request for a review of the
denial of a benefit claim, the Committee shall undertake a full and fair review
of the denial.
(d) The Committee shall issue a decision not later than 60 days after
receipt of a request for review from a claimant unless special circumstances,
such as the need to hold a hearing, require a longer period of time, in which
case a decision shall be rendered as soon as possible but not later than 120
days after receipt of the claimant's request for review. The decision on review
shall be in writing and shall include specific reasons for the decision written
in a manner calculated to be understood by the claimant with specific reference
to any provisions of this Program on which the decision is based.
ARTICLE VIII
MISCELLANEOUS
8.1 INCORPORATION BY REFERENCE
Except where in conflict with the express terms of this Program, the
terms of the Plan govern the Program and are incorporated by reference,
including, without limitation, the following: the administrative powers and
authority of the Committee and the effect of its decisions; the unfunded status
of benefits; provisions for non-transferability of rights; rights (or absence of
rights) of eligible persons, participants, and beneficiaries; compliance with
laws; tax withholding obligation of Participants; privileges of stock ownership;
and governing law/construction/severability.
8.2 AMENDMENT, TERMINATION AND SUSPENSION
The Committee or the Board may, at any time, terminate or, from time to
time, amend, modify or suspend this Program, in whole or in part. No Restricted
Stock or Stock Unit Awards may be granted under this Program during any
suspension of this Program or after termination of this Program. Termination or
amendment of this Program shall have no effect on any then outstanding
Restricted Stock or Stock Unit Awards.
8.3 TERM OF THIS PROGRAM
The term of this Program is indefinite, subject to the term of the
Plan and Section 8.2. All authority of the Committee with respect to
Restricted Stock and Stock Unit Awards hereunder, including its authority to
amend a Restricted Stock or Stock Unit Award, shall continue during any
suspension of this Program or the Plan, in respect of outstanding Restricted
Stock and Stock Unit Awards on such Termination Date.
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8.4 NON-EXCLUSIVITY OF PROGRAM
Nothing in this Program shall limit or be deemed to limit the authority
of the Board or the Committee to grant awards or authorize any other
compensation, with or without reference to the Common Stock, under the Plan or
any other plan or authority.
8.5 RELATIONSHIP TO EMPLOYMENT AGREEMENTS
In the case of any Participant who has an employment agreement with the
Company, the Conversion Amount reflected by a Restricted Stock or Stock Unit
Award shall not be, but any remaining amount paid as a Cash Bonus shall be,
considered a bonus paid in the applicable Year in which it is paid. The
consequences of a termination of service, whether before or after a Change in
Control, in respect of any rights or benefits related to the Conversion Amount
shall be governed solely by the terms of the Restricted Stock or Stock Unit
Award.
8
<PAGE>
EXHIBIT A-1
DECEMBER 1998 ELECTION
THE MACERICH COMPANY
IRREVOCABLE ELECTION AGREEMENT
UNDER THE
1999 CASH BONUS/RESTRICTED STOCK PROGRAM
================================================================================
IF DURING 1999, THE COMPENSATION COMMITTEE GRANTS A CASH BONUS TO ME AND IF THE
COMPENSATION COMMITTEE THEN EXPRESSLY AUTHORIZES ME TO RECEIVE ALL OR PART OF
THE CASH BONUS IN THE FORM OF A RESTRICTED STOCK AWARD:
I IRREVOCABLY ELECT TO RECEIVE ____% OF MY CASH BONUS IN THE FORM OF A
RESTRICTED STOCK AWARD UNDER THE MACERICH COMPANY AMENDED AND RESTATED
1994 INCENTIVE PLAN FOR THE NUMBER OF SHARES CALCULATED ACCORDING TO
SECTION 4.3 OF THE PROGRAM.
THIS ELECTION MUST BE FILED WITH THE COMMITTEE, C/O RICHARD A. BAYER, GENERAL
COUNSEL, 401 WILSHIRE BOULEVARD, SUITE 700, SANTA MONICA, CALIFORNIA 90401, BY
DECEMBER 31, 1998. IF IT IS NOT TIMELY FILED, YOU WILL HAVE NO OPPORTUNITY TO
RECEIVE RESTRICTED STOCK IN LIEU OF ANY CASH BONUS AWARDS IN 1999.
================================================================================
ACKNOWLEDGMENT AND AGREEMENT
I ACKNOWLEDGE AND AGREE TO THE TERMS OF THIS ELECTION AGREEMENT, THE PROGRAM AND
THE PLAN.
I UNDERSTAND THAT THIS ELECTION IS IRREVOCABLE ON MY PART AND IS SUBJECT TO THE
TERMS OF THE PROGRAM, THE PLAN (INCLUDING THE INDIVIDUAL SHARE AWARD LIMITS
UNDER THE PLAN), ANY LIMITS IMPOSED BY THE COMMITTEE ON THE CONVERSION AMOUNT
AND THE RESTRICTED STOCK AWARD AGREEMENT.
- --------------------------------------------------
(Participant's Signature) (Date)
- --------------------------------------------------
(Print Name)
1
<PAGE>
EXHIBIT A-2
SEPTEMBER 1999 ELECTION
THE MACERICH COMPANY
IRREVOCABLE ELECTION AGREEMENT
1999 CASH BONUS/RESTRICTED STOCK AND STOCK UNIT AWARD PROGRAM UNDER
THE MACERICH COMPANY AMENDED AND RESTATED 1994 INCENTIVE PLAN
================================================================================
IF DURING THE YEAR 2000, THE COMPENSATION COMMITTEE GRANTS A CASH BONUS TO ME
UNDER THE PROGRAM AND IF THE COMPENSATION COMMITTEE THEN EXPRESSLY AUTHORIZES ME
TO RECEIVE ALL OR PART OF THE CASH BONUS IN THE FORM OF A RESTRICTED STOCK OR
STOCK UNIT AWARD (A "STOCK-BASED AWARD"):
I IRREVOCABLY ELECT TO TAKE ____% OF MY CASH BONUS IN THE FORM OF A STOCK-BASED
AWARD. I UNDERSTAND THE COMMITTEE HAS THE SOLE DISCRETION TO DETERMINE IF THE
STOCK-BASED AWARD IS IN THE FORM OF RESTRICTED STOCK OR STOCK UNITS.
I UNDERSTAND THAT:
- THE CONVERSION RATE, OR "MULTIPLE", FOR PURPOSES OF OR IN RESPECT OF
DETERMINING THE NUMBER OF SHARES UNDERLYING THE AWARD WILL BE 1.5
- THE VESTING SCHEDULE FOR THE STOCK-BASED AWARD WILL BE NOT LESS THAN
AT A RATE OF 20% PER YEAR.
- THIS ELECTION IS IRREVOCABLE AND MUST BE FILED BY SEPTEMBER 30, 1999
WITH:
RICHARD A. BAYER, GENERAL COUNSEL
401 WILSHIRE BOULEVARD, SUITE 700
SANTA MONICA, CALIFORNIA 90401
- IF THIS ELECTION IS NOT TIMELY FILED, I WILL NOT HAVE AN OPPORTUNITY
TO PARTICIPATE IN THE PROGRAM FOR THE YEAR 2000.
- THIS ELECTION IS SUBJECT TO THE TERMS OF THE PROGRAM, THE PLAN
(INCLUDING THE INDIVIDUAL SHARE AWARD LIMITS) AND THE APPLICABLE
STOCK-BASED AWARD AGREEMENT.
- THIS ELECTION DOES NOT CONSTITUTE A GUARANTEE THAT I WILL RECEIVE
ANY BONUS FROM THE COMPANY.
================================================================================
ACKNOWLEDGMENT AND AGREEMENT
I ACKNOWLEDGE AND AGREE TO THE FOREGOING TERMS OF THIS ELECTION AGREEMENT.
- ----------------------------------
(PARTICIPANT'S SIGNATURE)
- ---------------------------------- --------------------------------
(PRINT NAME) (DATE)
1
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EXHIBIT B
RESTRICTED STOCK AWARD AGREEMENT
<PAGE>
EXHIBIT B
[RESTRICTED STOCK AWARD AGREEMENT]
THE MACERICH COMPANY
RESTRICTED STOCK AWARD AGREEMENT
AMENDED AND RESTATED 1994 INCENTIVE PLAN
PARTICIPANT NAME: ________________________
SOC. SEC. NO.: ________________________
NO. OF SHARES: ________________________
VESTING SCHEDULE: 20%* on each anniversary of the Award Date, beginning _____
__, 2001 and ending _________ __, 2005
AWARD DATE: ____________ __, 2000
THIS AGREEMENT is among THE MACERICH COMPANY, a Maryland corporation
(the "Corporation"), THE MACERICH PARTNERSHIP L.P., a Delaware limited
partnership (the "Operating Partnership"), and the employee named above, an
employee [of the Operating Partnership] (the "Participant") and is delivered
under The Macerich Company Amended and Restated 1994 Incentive Plan (the
"Plan").
W I T N E S S E T H
WHEREAS, pursuant to the 1999 Cash Bonus/Restricted Stock and Stock
Unit Program (the "Program") under the Plan, the Corporation has granted to the
Participant with reference to services rendered and to be rendered to the
Company, effective as of the Award Date, a restricted stock award (the
"Restricted Stock Award" or "Award"), upon the terms and conditions set forth
herein and in the Plan and the Program.
NOW THEREFORE, in consideration of services rendered by the Participant
and the mutual promises made herein and the mutual benefits to be derived
therefrom, the parties agree as follows:
1. DEFINED TERMS. Capitalized terms used herein and not otherwise
defined herein shall have the meaning assigned to such terms in the Plan.
2. GRANT. Subject to the terms of this Agreement, the Program and the
Plan, the Corporation grants to the Participant a Restricted Stock Award with
respect to an aggregate number of shares of Common Stock, par value $.01 per
share (the "Restricted Stock") set forth above. The Corporation acknowledges,
pursuant to Section 4.1 of the Plan, receipt of consideration for the shares on
the terms set forth in this Agreement in the form of services
- --------------------------------
* The Committee has the authority to change the vesting schedule.
1
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rendered to the Company by the Participant prior to the Award Date with a
value at least equal to the Cash Bonus that would otherwise have been payable
to the Participant but for the Participant's election to receive Restricted
Stock under the Program, which amount is not less than the minimum lawful
consideration under Maryland law.
3. VESTING. The Award shall vest, and restrictions (other than those
set forth in Section 6.4 of the Plan) shall lapse, with respect to the portion
of the total number of shares (subject to adjustment under Section 6.2 of the
Plan) on each of the anniversaries of the Award Date until the Award is fully
vested, as reflected in the Vesting Schedule above, subject to earlier
termination or acceleration as provided herein or in the Plan.
4. CONTINUANCE OF EMPLOYMENT REQUIRED. Except as otherwise provided in
Section 8 or pursuant to the Plan, the Vesting Schedule requires continued
service through each applicable vesting date as a condition to the vesting of
the applicable installment and rights and benefits under this Agreement. Partial
service, even if substantial, during any vesting period will not entitle the
Participant to any proportionate vesting or avoid or mitigate a termination of
rights and benefits upon or following a termination of employment or service as
provided in Section 8 below or under the Plan.
5. DIVIDEND AND VOTING RIGHTS. After the Award Date, the Participant
shall be entitled to cash dividends and voting rights with respect to the shares
of Restricted Stock subject to the Award even though such shares are not vested,
provided that such rights shall terminate immediately as to any shares of
Restricted Stock that cease to be eligible for vesting.
6. RESTRICTIONS ON TRANSFER. Prior to the time they become vested,
neither the shares of Restricted Stock comprising the Award, nor any other
rights of the Participant under this Agreement or the Plan may be transferred,
except as expressly provided in Sections 1.9 and 4.1 of the Plan. No other
exceptions have been authorized by the Committee.
7. STOCK CERTIFICATES.
(a) BOOK ENTRY FORM; INFORMATION STATEMENT POWER OF ATTORNEY.
The Corporation shall issue the shares of Restricted Stock subject to the Award
in book entry form, registered in the name of the Participant with notations
regarding applicable restrictions on transfer. Concurrent with the execution and
delivery of this Agreement, the Corporation shall deliver to the Participant a
written information statement with respect to such shares, and the Participant
shall deliver to the Corporation an executed stock power, in blank, with respect
to such shares. The Participant, by acceptance of the Award, shall be deemed to
appoint the Corporation and each of its authorized representatives as the
Participant's attorney(s)-in-fact to effect any transfer of unvested forfeited
shares (or shares otherwise reacquired by the Corporation hereunder) to the
Corporation as may be required pursuant to the Plan or this Agreement and to
execute such documents as the Corporation or such representatives deem necessary
or advisable in connection with any such transfer.
(b) CERTIFICATES TO BE HELD BY CORPORATION; LEGEND. Any
certificates representing Restricted Stock that the Participant may be entitled
to receive from the Corporation prior to vesting shall be redelivered to the
Corporation to be held by the Corporation
2
<PAGE>
until the restrictions on such shares shall have lapsed and the shares shall
thereby have become vested or the shares represented thereby have been
forfeited hereunder. Such certificates shall bear the following legend:
"The transferability of this certificate and the shares of stock
represented hereby are subject to the terms and conditions contained in
an Agreement entered into between the registered owner, The Macerich
Partnership L.P. and The Macerich Company. A copy of such Agreement is
on file in the office of the Secretary of The Macerich Company, 401
Wilshire Boulevard, Suite 700, Santa Monica, California 90401."
(c) DELIVERY OF CERTIFICATES UPON VESTING. Promptly after the lapse
or other release of restrictions, a certificate or certificates evidencing the
number of shares of Common Stock as to which the restrictions have lapsed or
been released or such lesser number as may be permitted pursuant to Section 6.5
of the Plan shall be delivered to the Participant or other person entitled under
the Plan to receive the shares. The Participant or such other person shall
deliver to the Corporation any representations or other documents or assurances
required pursuant to Section 6.4 of the Plan. The shares so delivered shall no
longer be restricted shares hereunder.
8. EFFECT OF TERMINATION OF EMPLOYMENT.
(a) FORFEITURE AFTER CERTAIN EVENTS. Except as provided in
Sections 8(c) and 9 hereof, the Participant's shares of Restricted Stock shall
be forfeited to the extent such shares have not become vested upon the date the
Participant is no longer employed by the Company for any reason, whether with or
without cause, voluntarily or involuntarily. If an entity ceases to be a
Subsidiary, such action shall be deemed to be a termination of employment of all
employees of that entity, but the Committee, in its sole and absolute
discretion, may make provision in such circumstances for accelerated vesting of
some or all of the remaining restricted shares under any Awards held by such
employees, effective immediately prior to such event.
(b) RETURN OF SHARES. Upon the occurrence of any forfeiture of
shares of Restricted Stock hereunder, such unvested, forfeited shares shall,
without payment of any consideration by the Corporation for such transfer, be
automatically transferred to the Corporation, without any other action by the
Participant, or the Participant's Beneficiary or Personal Representative, as the
case may be. The Corporation may exercise its powers under Section 7(a) hereof
and take any other action necessary or advisable to evidence such transfer. The
Participant, or the Participant's Beneficiary or Personal Representative, as the
case may be, and the Operating Partnership shall deliver any additional
documents of transfer that the Corporation may request to confirm the transfer
of such unvested, forfeited shares to the Corporation.
(c) TERMINATION WITHOUT CAUSE FOLLOWING CHANGE IN CONTROL EVENT.
If the Participant's employment is terminated by the Company other than
because of Participant's death or Disability or for Cause, or if the Participant
after a Change in Control Event terminates his or her employment for Good
Reason, then any portion of the Award that has not previously vested shall
thereupon vest, subject to the provisions of Sections 6.4 and 6.5
3
<PAGE>
of the Plan and Section 12 hereof; provided, however, that in no event shall
restrictions on the shares lapse or the shares vest earlier than six months
after the date hereof. As used in this Agreement, "Disability" shall mean (1) a
"permanent and total disability" within the meaning of Section 22(e)(3) of the
Code, (2) the absence of Participant from his or her duties with the Company on
a full-time basis for a period of nine months as a result of incapacity due to
mental or physical illness which is determined to be total and permanent by a
physician selected by the Company or its insurers and acceptable to the
Participant or the Participant's legal representative (such agreement as to
acceptability not to be withheld unreasonably), or (3) such other disabilities,
infirmities, afflictions or conditions as the Committee by rule may include.
"Incapacity" as used in this Agreement shall be limited only to a condition that
substantially prevents the Participant from performing his or her duties.
"Cause" as used in this Agreement shall mean that the Company, acting in good
faith based upon the information then known to the Company, determines that the
Participant has: (1) failed to perform required job duties in a material respect
without proper cause, (2) been convicted of a felony, or (3) committed an act of
fraud, dishonesty or gross misconduct which is injurious to the Company. "Good
Reason" as used in this Agreement shall mean (1) a materially adverse and
significant change in the Participant's position, duties, responsibilities, or
status with the Company, (2) a change in the Participant's office location to a
point more than 50 miles from the Participant's office immediately prior to a
Change in Control, (3) the taking of any action following a Change in Control by
the Company to eliminate benefit plans without providing reasonable substitutes
therefor, to materially reduce benefits thereunder or to substantially diminish
the aggregate value of incentive awards or other fringe benefits, (4) any
reduction in the Participant's base salary, or (5) any material breach by the
Company of the written employment contract with Participant, if any.
9. EFFECT OF DISABILITY, DEATH OR RETIREMENT. If the Participant incurs
a Disability or dies while employed by the Company, then any portion of his or
her Award that has not previously vested shall thereupon vest, subject to the
provisions of Sections 6.4 and 6.5 of the Plan. If the Participant retires from
employment by the Company, the Committee may, on a case-by-case basis and in its
sole discretion, provide for partial or complete vesting prior to retirement of
that portion of his or her Award that has not previously vested.
10. ADJUSTMENTS UPON SPECIFIED EVENTS. Upon the occurrence of certain
events relating to the Corporation's stock contemplated by Section 6.2 of the
Plan, the Committee shall make adjustments if appropriate in the number and kind
of securities that may become vested under an Award. If any adjustment shall be
made under Section 6.2 of the Plan or a Change in Control Event shall occur and
the shares of Restricted Stock are not fully vested upon such Event or prior
thereto, the restrictions applicable to such shares of Restricted Stock shall
continue in effect with respect to any consideration or other securities (the
"RESTRICTED PROPERTY" and, for the purposes of this Agreement, "Restricted
Stock" shall include "Restricted Property", unless the context otherwise
requires) received in respect of such Restricted Stock. Such Restricted Property
shall vest at such times and in such proportion as the shares of Restricted
Stock to which the Restricted Property is attributable vest, or would have
vested pursuant to the terms hereof if such shares of Restricted Stock had
remained outstanding. Notwithstanding the foregoing, to the extent that the
Restricted Property includes any cash, the commitment hereunder shall become an
unsecured promise to pay an amount equal to such cash
4
<PAGE>
(with earnings attributable thereto as if such amount had been invested,
pursuant to policies established by the Committee, in interest bearing,
FDIC-insured (subject to applicable insurance limits) deposits of a depository
institution selected by the Committee) at such times and in such proportions as
the Restricted Stock would have vested.
11. POSSIBLE EARLY TERMINATION OF AWARD. As permitted by Section 6.2(b)
of the Plan, the Committee retains the right to terminate the Award to the
extent not vested upon an event or transaction which the Corporation does not
survive. This Section 11 is not intended to prevent vesting of the Award as a
result of termination without Cause following a Change in Control Event as
provided in Section 8(c) hereof.
12. LIMITATIONS ON ACCELERATION AND REDUCTION IN BENEFITS IN EVENT OF
TAX LIMITATIONS.
(a) LIMITATION ON ACCELERATION. Notwithstanding anything contained
herein or in the Plan or any other agreement to the contrary, in no event shall
the vesting of any share of Restricted Stock be accelerated pursuant to Section
6.3 of the Plan or Section 8(c) hereof to the extent that the Company would be
denied a federal income tax deduction for such vesting because of Section 280G
of the Code and, in such circumstances, the restricted shares not subject to
acceleration will continue to vest in accordance with and subject to the other
provisions hereof.
(b) REDUCTION IN BENEFITS. If the Participant would be entitled to
benefits, payments or coverage hereunder and under any other plan, program or
agreement which would constitute "parachute payments," then notwithstanding any
other provision hereof or of any other existing agreement to the contrary, the
Participant may by written notice to the Secretary of the Corporation designate
the order in which such "parachute payments" shall be reduced or modified so
that the Company is not denied federal income tax deductions for any "parachute
payments" because of Section 280G of the Code.
(c) DETERMINATION OF LIMITATIONS. The term "parachute payments" shall
have the meaning set forth in and be determined in accordance with Section 280G
of the Code and regulations issued thereunder. All determinations required by
this Section 12, including without limitation the determination of whether any
benefit, payment or coverage would constitute a parachute payment, the
calculation of the value of any parachute payment and the determination of the
extent to which any parachute payment would be nondeductible for federal income
tax purposes because of Section 280G of the Code, shall be made by an
independent accounting firm (other than the Corporation's outside auditing firm)
having nationally recognized expertise in such matters selected by the
Committee. Any such determination by such accounting firm shall be binding on
the Corporation, its Subsidiaries and the Participant.
13. TAX WITHHOLDING. The entity within the Company last employing the
Participant shall be entitled to require a cash payment by or on behalf of the
Participant and/or to deduct from other compensation payable to the Participant
any sums required by federal, state or local tax law to be withheld with respect
to the payment of dividends in respect of and with respect to the vesting of any
Restricted Stock, but, in the alternative the Participant or other person in
whom the Restricted Stock vests may irrevocably elect, in such manner and at
such
5
<PAGE>
time or times prior to any applicable tax date as may be permitted or
required under Section 6.5 of the Plan and rules established by the Committee,
to have the entity last employing the Participant withhold and reacquire shares
of Restricted Stock at their Fair Market Value at the time of vesting to satisfy
any withholding obligations of the Company with respect to such vesting. Any
election to have shares so held back and reacquired shall be subject to such
rules and procedures, which may include prior approval of the Committee, as the
Committee may impose, and shall not be available if the Participant makes or has
made an election pursuant to Section 83(b) of the Code with respect to such
Award.
14. NOTICES. Any notice to be given under the terms of this Agreement
shall be in writing and addressed to the Corporation at its principal office
located at 401 Wilshire Boulevard, Suite 700, Santa Monica, California 90401, to
the attention of the Corporate Secretary and to the Participant at the address
given beneath the Participant's signature hereto, or at such other address as
either party may hereafter designate in writing to the other.
15. PLAN. The Award and all rights of the Participant with respect
thereto are subject to, and the Participant agrees to be bound by, all of the
terms and conditions of the provisions of the Plan and the Program, incorporated
herein by reference, to the extent such provisions are applicable to Awards
granted to Eligible Employees. The Participant acknowledges receipt of a copy of
the Plan and the Program, which is made a part hereof by this reference, and
agrees to be bound by the terms thereof. Unless otherwise expressly provided in
other Sections of this Agreement, provisions of the Plan and the Program that
confer discretionary authority on the Committee do not (and shall not be deemed
to) create any rights in the Participant unless such rights are expressly set
forth herein or are otherwise in the sole discretion of the Committee so
conferred by appropriate action of the Committee under the Plan or the Program
after the date hereof.
16. NO SERVICE COMMITMENT BY COMPANY. Nothing contained in this
Agreement, the Program or the Plan constitutes an employment or other commitment
by the Company as to the Participant's service, confers upon the Participant any
right to remain employed by or in service of the Company or any subsidiary,
interferes in any way with the right of the Company or any subsidiary at any
time to terminate such employment or service, or affects the right of the
Company or any subsidiary to increase or decrease his or her other compensation.
17. LIMITATION ON PARTICIPANT'S RIGHTS. Participation in the Program
confers no rights or interests other than as herein provided. This Agreement
creates only a contractual obligation on the part of the Company as to amounts
payable and shall not be construed as creating a trust.
6
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written. By the Participant's execution of this Agreement, the
Participant agrees to the terms and conditions hereof and of the Plan.
THE MACERICH COMPANY
(a Maryland corporation)
By ___________________________
Richard A. Bayer
General Counsel & Secretary
THE MACERICH PARTNERSHIP, L.P.
(a Delaware limited partnership)
By: The Macerich Company
(its general partner)
By ___________________________
Richard A. Bayer
General Counsel & Secretary
PARTICIPANT
-----------------------------
(Signature)
-----------------------------
(Print Name)
-----------------------------
(Address)
-----------------------------
(City, State, Zip Code)
7
<PAGE>
CONSENT OF SPOUSE
In consideration of the execution of the foregoing Restricted Stock
Award Agreement by The Macerich Company and The Macerich Partnership L.P., I,
__________________, the spouse of the Participant therein named, do hereby join
with my spouse in executing the foregoing Restricted Stock Award Agreement and
do hereby agree to be bound by all of the terms and provisions thereof and of
the Plan.
Dated: _____________, _____.
---------------------------
Signature of Spouse
8
<PAGE>
EXHIBIT C
STOCK UNIT AWARD AGREEMENT
<PAGE>
EXHIBIT C
[STOCK UNIT AWARD AGREEMENT]
THE MACERICH COMPANY
STOCK UNIT AWARD AGREEMENT
AMENDED AND RESTATED 1994 INCENTIVE PLAN
PARTICIPANT NAME: _____________________
SOC. SEC. NO.: _____________________
NO. STOCK UNITS: _____________________
VESTING SCHEDULE: 20%* on each anniversary of the Award Date, beginning _______
__, 2001 and ending _________ __, 2005
AWARD DATE: ____________ __, 2000
THIS AGREEMENT is among THE MACERICH COMPANY, a Maryland corporation
(the "Corporation"), THE MACERICH PARTNERSHIP L.P., a Delaware limited
partnership (the "Operating Partnership"), and the employee named above, an
employee [of the Operating Partnership] (the "Participant") and is delivered
under The Macerich Company Amended and Restated 1994 Incentive Plan (the
"Plan").
W I T N E S S E T H
WHEREAS, pursuant to the 1999 Cash Bonus/Restricted Stock and Stock
Unit Program (the "Program") under the Plan, the Corporation has granted to the
Participant with reference to services rendered and to be rendered to the
Company, effective as of the Award Date, a stock unit award (the "Stock Unit
Award" or "Award"), upon the terms and conditions set forth herein and in the
Plan and the Program.
NOW THEREFORE, in consideration of services rendered by the Participant
and the mutual promises made herein and the mutual benefits to be derived
therefrom, the parties agree as follows:
1. DEFINED TERMS. Capitalized terms used herein and not otherwise
defined herein shall have the meaning assigned to such terms in the Plan.
2. GRANT. Subject to the terms of this Agreement, the Program and the
Plan the Corporation grants to the Participant a Stock Unit Award with respect
to an aggregate number of Stock Units (the "Stock Units") set forth above. The
Corporation acknowledges receipt of consideration for the shares payable with
respect to the Stock Units on the terms set forth in this Agreement in the form
of services rendered to the Company by the Participant prior to the Award Date
with a value at least equal to the Cash Bonus that would otherwise have been
- ----------------------------
*The Committee has the authority to change the vesting schedule.
<PAGE>
payable to the Participant but for the Participant's election to receive Stock
Units under the Program, which amount is not less than the minimum lawful
consideration under Maryland law.
3. VESTING. The Award shall vest and become nonforfeitable (except as
set forth in Section 6.4 of the Plan), with respect to the portion of the total
number of Stock Units comprising the Award (subject to adjustment under Section
6.2 of the Plan) on each of the anniversaries of the Award Date until the Award
is fully vested, as reflected in the Vesting Schedule above, subject to earlier
termination or acceleration as provided herein or in the Plan.
4. CONTINUANCE OF EMPLOYMENT REQUIRED. Except as otherwise provided in
Section 9 or pursuant to the Plan, the Vesting Schedule requires continued
service through each applicable vesting date as a condition to the vesting of
the applicable installment and rights and benefits under this Agreement. Partial
service, even if substantial, during any vesting period will not entitle the
Participant to any proportionate vesting or avoid or mitigate a termination of
rights and benefits upon or following a termination of employment or service as
provided in Section 9 below or under the Plan.
5. DIVIDEND AND VOTING RIGHTS.
(a) LIMITATIONS ON RIGHTS ASSOCIATED WITH UNITS. The Participant
shall have no rights as a stockholder of the Company, no dividend rights (except
as expressly provided in Section 5(b) with respect to Dividend Equivalent
Rights) and no voting rights, with respect to the Stock Units and any shares of
Common Stock underlying or issuable in respect of such Stock Units until such
shares of Common Stock are actually issued to and held of record by the
Participant. No adjustments will be made for dividends or other rights of a
holder for which the record date is prior to the date of issuance of the stock
certificate.
(b) DIVIDEND EQUIVALENT RIGHTS DISTRIBUTIONS. As of any applicable
dividend or distribution payment date, the Participant shall receive a cash
payment in an amount equal to the amount of the Dividend Equivalent Rights
multiplied by the number of Units in the Account as of the applicable dividend
payment date.
6. RESTRICTIONS ON TRANSFER. Prior to the time they vest, neither the
Stock Units comprising the Award nor any other rights of the Participant under
this Agreement or the Plan may be transferred, except as expressly provided in
Section 1.9 of the Plan. No other exceptions have been authorized by the
Committee.
7. TIMING AND MANNER OF DISTRIBUTION WITH RESPECT TO STOCK UNITS. Any
Stock Unit credited to a Participant's Stock Unit Account will be distributed in
shares of Common Stock as it vests. The Participant or other person entitled
under the Plan to receive the shares shall deliver to the Company any
representations or other documents or assurances required pursuant to Section
6.4 of the Plan.
8. EFFECT OF TERMINATION OF EMPLOYMENT.
(a) FORFEITURE AFTER CERTAIN EVENTS. Except as provided in Sections
8(c) and 9 hereof, the Participant's Stock Units shall be extinguished to the
extent such Stock Units have not become vested upon the date the Participant is
no longer employed by the Company for any reason, whether with or without cause,
voluntarily or involuntarily. If an entity
2
<PAGE>
ceases to be a Subsidiary, such action shall be deemed to be a termination of
employment of all employees of that entity, but the Committee, in its sole and
absolute discretion, may make provision in such circumstances for accelerated
vesting of some or all of the remaining Stock Units held by such employees,
effective immediately prior to such event.
(b) TERMINATION OF STOCK UNITS. If any Stock Units are extinguished
hereunder, such unvested, extinguished Stock Units, without payment of any
consideration by the Company, shall automatically terminate and the related
Stock Unit Account shall be cancelled, without any other action by the
Participant, or the Participant's Beneficiary or Personal Representative, as the
case may be.
(c) TERMINATION WITHOUT CAUSE FOLLOWING CHANGE IN CONTROL EVENT.
If the Participant's employment is terminated by the Company other than because
of the Participant's death or Disability or for Cause, or if the Participant
after a Change in Control Event terminates his or her employment for Good
Reason, then any portion of the Award that has not previously vested shall
thereupon vest, subject to the provisions of Sections 6.4 and 6.5 of the Plan
and Section 12 hereof; provided, however, that in no event shall restrictions on
the Stock Units lapse or the Stock Units vest earlier than six months after the
date hereof. As used in this Agreement, "Disability" shall mean (1) a "permanent
and total disability" within the meaning of Section 22(e)(3) of the Code, (2)
the absence of Participant from his or her duties with the Company on a
full-time basis for a period of nine months as a result of incapacity due to
mental or physical illness which is determined to be total and permanent by a
physician selected by the Company or its insurers and acceptable to the
Participant or the Participant's legal representative (such agreement as to
acceptability not to be withheld unreasonably), or (3) such other disabilities,
infirmities, afflictions or conditions as the Committee by rule may include.
"Incapacity" as used in this Agreement shall be limited only to a condition that
substantially prevents the Participant from performing his or her duties.
"Cause" as used in this Agreement shall mean that the Company, acting in good
faith based upon the information then known to the Company, determines that the
Participant has: (1) failed to perform required job duties in a material respect
without proper cause, (2) been convicted of a felony, or (3) committed an act of
fraud, dishonesty or gross misconduct which is injurious to the Company. "Good
Reason" as used in this Agreement shall mean (1) a materially adverse and
significant change in the Participant's position, duties, responsibilities, or
status with the Company, (2) a change in the Participant's office location to a
point more than 50 miles from the Participant's office immediately prior to a
Change in Control, (3) the taking of any action following a Change in Control by
the Company to eliminate benefit plans without providing reasonable substitutes
therefor, to materially reduce benefits thereunder or to substantially diminish
the aggregate value of incentive awards or other fringe benefits, (4) any
reduction in the Participant's base salary, or (5) any material breach by the
Company of the written employment contract with Participant, if any.
9. EFFECT OF DISABILITY, DEATH OR RETIREMENT. If the Participant incurs
a Disability or dies while employed by the Company, then any portion of his or
her Award that has not previously vested shall thereupon vest, subject to the
provisions of Sections 6.4 and 6.5 of the Plan. If the Participant retires from
employment by the Company, the Committee may, on a case-by-case basis and in its
sole discretion, provide for partial or complete vesting prior to retirement of
that portion of his or her Award that has not previously vested.
3
<PAGE>
10. ADJUSTMENTS UPON SPECIFIED EVENTS. Upon the occurrence of certain
events relating to the Corporation's stock contemplated by Section 6.2 of the
Plan, the Committee shall make adjustments as it deems appropriate in the number
and kind of securities or other consideration that may become payable with
respect to the Award. If any adjustment shall be made under Section 6.2 of the
Plan or a Change in Control Event shall occur and the Stock Unit Award is not
fully vested upon such Event or prior thereto, the Stock Unit Award may be
payable in the securities or other consideration (the "Restricted Property")
payable in respect of the Common Stock otherwise payable in respect of the Stock
Unit Award. Such Restricted Property shall become payable at such times and in
such proportion as the Stock Unit Award vests. Notwithstanding the foregoing, to
the extent that the Restricted Property includes any cash, the commitment
hereunder shall become an unsecured promise to pay an amount equal to such cash
(with earnings attributable thereto as if such amount had been invested,
pursuant to policies established by the Committee, in interest bearing, FDIC
insured (subject to applicable insurance limits) deposits of a depository
institution selected by the Committee) at such times and in such proportions as
the Stock Unit Award vests. Notwithstanding the foregoing, the Stock Unit Award
and Common Stock payable in respect of the Stock Unit Award shall continue to be
subject to such proportionate and equitable adjustments (if any) under Section
6.2 of the Plan consistent with the effect of such event on stockholders
generally, as the Committee determines to be necessary or appropriate, in the
number, kind and/or character of shares of Common Stock or other securities,
property and/or rights payable in respect of Stock Units and Stock Unit Accounts
credited under the Plan. All rights of the Participant hereunder are subject to
those adjustments.
11. POSSIBLE EARLY TERMINATION OF AWARD. As permitted by Section 6.2(b)
of the Plan, the Committee retains the right to terminate the Award to the
extent not vested upon an event or transaction which the Corporation does not
survive. This Section 11 is not intended to prevent vesting of the Award as a
result of termination without Cause following a Change in Control Event as
provided in Section 8(c) hereof.
12. LIMITATIONS ON ACCELERATION AND REDUCTION IN BENEFITS IN EVENT OF
TAX LIMITATIONS.
(a) LIMITATION ON ACCELERATION. Notwithstanding anything
contained herein or in the Plan or any other agreement to the contrary, in no
event shall the vesting of any Stock Unit be accelerated pursuant to Section 6.3
of the Plan or Section 8(c) hereof to the extent that the Company would be
denied a federal income tax deduction for such vesting or the distribution of
shares of Common Stock in respect of the Award because of Section 280G of the
Code and, in such circumstances, the Stock Units not subject to acceleration
will continue to vest in accordance with and subject to the other provisions
hereof.
(b) REDUCTION IN BENEFITS. If the Participant would be entitled to
benefits, payments or coverage hereunder and under any other plan, program or
agreement which would constitute "parachute payments," then notwithstanding any
other provision hereof or of any other existing agreement to the contrary, the
Participant may by written notice to the Secretary of the Corporation designate
the order in which such "parachute payments" shall be reduced or modified so
that the Company is not denied federal income tax deductions for any "parachute
payments" because of Section 280G of the Code.
4
<PAGE>
(c) DETERMINATION OF LIMITATIONS. The term "parachute payments" shall
have the meaning set forth in and be determined in accordance with Section 280G
of the Code and regulations issued thereunder. All determinations required by
this Section 12, including without limitation the determination of whether any
benefit, payment or coverage would constitute a parachute payment, the
calculation of the value of any parachute payment and the determination of the
extent to which any parachute payment would be nondeductible for federal income
tax purposes because of Section 280G of the Code, shall be made by an
independent accounting firm (other than the Corporation's outside auditing firm)
having nationally recognized expertise in such matters selected by the
Committee. Any such determination by such accounting firm shall be binding on
the Corporation, its Subsidiaries and the Participant.
13. TAX WITHHOLDING. Upon payment of Dividend Equivalent Rights and/or
the distribution of shares of Common Stock in respect of a Participant's Stock
Unit Account, the entity within the Company last employing the Participant shall
have the right at its option to (i) require the Participant (or the
Participant's Personal Representative or Beneficiary, as the case may be) to pay
or provide for payment in cash of the amount of any taxes which the Company may
be required to withhold with respect to such payment or distribution or (ii)
deduct from any amount payable to the Participant the amount of any taxes which
the Company may be required to withhold with respect to such payment or
distribution. In any case where a tax is required to be withheld in connection
with the delivery of shares of Common Stock under this Agreement, the Committee
may permit the Participant to elect, pursuant to such rules and subject to such
conditions as the Committee may establish, to have the Company reduce the number
of shares to be delivered by (or otherwise reacquire) the appropriate number of
shares valued at their then Fair Market Value, to satisfy such withholding
obligation.
14. NOTICES. Any notice to be given under the terms of this Agreement
shall be in writing and addressed to the Corporation at its principal office
located at 401 Wilshire Boulevard, Suite 700, Santa Monica, California 90401, to
the attention of the Corporate Secretary and to the Participant at the address
given beneath the Participant's signature hereto, or at such other address as
either party may hereafter designate in writing to the other.
15. PLAN. The Award and all rights of the Participant with respect
thereto are subject to, and the Participant agrees to be bound by, all of the
terms and conditions of the provisions of the Plan and the Program, incorporated
herein by reference, to the extent such provisions are applicable to Awards
granted to Eligible Employees. The Participant acknowledges receipt of a copy of
the Plan and the Program, which is made a part hereof by this reference, and
agrees to be bound by the terms thereof. Unless otherwise expressly provided in
other Sections of this Agreement, provisions of the Plan and the Program that
confer discretionary authority on the Committee do not (and shall not be deemed
to) create any rights in the Participant unless such rights are expressly set
forth herein or are otherwise in the sole discretion of the Committee so
conferred by appropriate action of the Committee under the Plan or the Program
after the date hereof.
16. NO SERVICE COMMITMENT BY COMPANY. Nothing contained in this
Agreement, the Program or the Plan constitutes an employment or other commitment
by the Company as to the Participant's service, confers upon the Participant any
right to remain employed by or in service of the Company or any subsidiary,
interferes in any way with the right of the Company or any subsidiary at any
time to terminate such employment or service, or
5
<PAGE>
affects the right of the Company or any subsidiary to increase or decrease his
or her other compensation.
17. LIMITATION ON PARTICIPANT'S RIGHTS. Participation in the Program
confers no rights or interests other than as herein provided. This Agreement
creates only a contractual obligation on the part of the Company as to amounts
payable and shall not be construed as creating a trust. Neither the Plan nor the
Program, in and of itself, has any assets. The Participant shall have only the
rights of a general unsecured creditor of the Company (or applicable Subsidiary)
with respect to amounts credited and benefits payable, if any, on Stock Unit
Account(s), and rights no greater than the right to receive the Common Stock (or
equivalent value) as a general unsecured creditor with respect to Stock Units,
as and when payable thereunder.
6
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written. By the Participant's execution of this Agreement, the
Participant agrees to the terms and conditions hereof and of the Plan.
THE MACERICH COMPANY
(a Maryland corporation)
By ___________________________
Richard A. Bayer
General Counsel & Secretary
THE MACERICH PARTNERSHIP, L.P.
(a Delaware limited partnership)
By: The Macerich Company
(its general partner)
By ___________________________
Richard A. Bayer
General Counsel & Secretary
PARTICIPANT
-----------------------------
(Signature)
-----------------------------
(Print Name)
-----------------------------
(Address)
-----------------------------
(City, State, Zip Code)
7
<PAGE>
CONSENT OF SPOUSE
In consideration of the execution of the foregoing Stock Unit Award
Agreement by The Macerich Company and The Macerich Partnership L.P., I,
__________________, the spouse of the Participant therein named, do hereby join
with my spouse in executing the foregoing Stock Unit Award Agreement and do
hereby agree to be bound by all of the terms and provisions thereof and of the
Plan.
Dated: _____________, _____.
---------------------------
Signature of Spouse
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THE CONSOLIDATED BALANCE SHEETS AND CONSOLIDATED STATEMENTS OF OPERATIONS FOUND
ON PAGE 1 AND 2 OF THE COMPANY'S 10-Q 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-31-1999
<PERIOD-START> JAN-31-1999
<PERIOD-END> SEP-30-1999
<CASH> 23,325
<SECURITIES> 0
<RECEIVABLES> 113,734
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 2,262,043
<DEPRECIATION> (286,202)
<TOTAL-ASSETS> 2,486,237
<CURRENT-LIABILITIES> 55,502
<BONDS> 1,717,702
0
91
<COMMON> 340
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 2,486,237
<SALES> 0
<TOTAL-REVENUES> 242,768
<CGS> 0
<TOTAL-COSTS> 106,200
<OTHER-EXPENSES> 23,376
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 85,168
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 1,016
<CHANGES> 0
<NET-INCOME> 27,008
<EPS-BASIC> 0.79
<EPS-DILUTED> 0.79
</TABLE>
