<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark one)
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1999.
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from __________________ to __________________
Commission File Number 1-12504
THE MACERICH COMPANY
(Exact Name of Registrant as Specified in Its Charter)
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<S> <C>
Maryland 95-4448705
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
401 Wilshire Boulevard, # 700
Santa Monica, California 90401
(Address of principal executive office) (Zip Code)
</TABLE>
Registrant's telephone number, including area code: (310) 394-6000
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
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<CAPTION>
Name of each exchange
Title of each class on which registered
------------------- -------------------
<S> <C>
Common Stock,
$0.01 Par Value New York Stock Exchange
Preferred Share New York Stock Exchange
Purchase Rights
</TABLE>
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: NONE
INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS
REQUIRED TO BE FILED BY SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934 DURING THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIODS THAT THE
REGISTRANT WAS REQUIRED TO FILE SUCH REPORT(S)) AND (2) HAS BEEN SUBJECT TO SUCH
FILING REQUIREMENTS FOR THE PAST 90 DAYS. YES X NO .
--- ---
Indicate by a check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to the Form 10-K. / /
As of February 29, 2000, the aggregate market value of the 25,479,497
shares of Common Stock held by non-affiliates of the registrant was $513 million
based upon the closing price ($20.125) on the New York Stock Exchange composite
tape on such date. (For this computation, the registrant has excluded the market
value of all shares of its Common Stock reported as beneficially owned by
executive officers and directors of the registrant and certain other
shareholders; such exclusion shall not be deemed to constitute an admission that
any such person is an "affiliate" of the registrant.) As of February 29, 2000,
there were 34,107,497 shares of Common Stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the proxy statement for the annual stockholders meeting to
be held in 2000 are incorporated by reference into Part III.
<PAGE>
THE MACERICH COMPANY
ANNUAL REPORT ON FORM 10-K
FOR THE YEAR ENDED DECEMBER 31, 1999
TABLE OF CONTENTS
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ITEM NO. PAGE NO.
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PART I
1. Business..................................................................... 1-10
2. Properties................................................................... 11-17
3. Legal Proceedings............................................................ 18
4. Submission of Matters to a Vote of Security Holders.......................... 18
PART II
5. Market for the Registrant's Common Equity and Related Stockholder Matters.... 19-20
6. Selected Financial Data...................................................... 20-22
7. Management's Discussion and Analysis of Financial
Condition and Results of Operations...................................... 23-34
7A. Quantitative and Qualitative Disclosures
About Market Risk........................................................ 35
8. Financial Statements and Supplementary Data.................................. 35
9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure...................................... 35
PART III
10. Directors and Executive Officers of the Company.............................. 36
11. Executive Compensation....................................................... 36
12. Security Ownership of Certain Beneficial Owners and Management............... 36
13. Certain Relationships and Related Transactions............................... 36
PART IV
14. Exhibits, Financial Statements, Financial Statement Schedules and
Reports on Form 8-K.......................................................... 37-92
SIGNATURES
</TABLE>
<PAGE>
PART I
ITEM I. BUSINESS
GENERAL
The Macerich Company (the "Company") is involved in the acquisition,
ownership, redevelopment, management and leasing of regional and community
shopping centers located throughout the United States. The Company is the
sole general partner of, and owns a majority of the ownership interests in,
The Macerich Partnership, L.P., a Delaware limited partnership (the
"Operating Partnership"). The Operating Partnership owns or has an ownership
interest in 47 regional shopping centers and five community shopping centers
aggregating approximately 42 million square feet of gross leasable area
("GLA"). These 52 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 as a Maryland corporation in September
1993 to continue and expand the shopping center operations of Mace Siegel,
Arthur M. Coppola, Dana K. Anderson and Edward C. Coppola and certain of
their business associates.
All references to the Company in this Form 10-K include the Company,
those entities owned or controlled by the Company and predecessors of the
Company, unless the context indicates otherwise.
RECENT DEVELOPMENTS
A. ACQUISITIONS AND JOINT VENTURE DEVELOPMENTS
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 $427.0
million. The purchase price was funded with a $120.0 million loan placed
concurrently with the closing, $140.4 million of debt from an affiliate of
the seller, and $39.4 million 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 $111.0 million. The purchase price was funded with a $76.7
million 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. The two non-contiguous community shopping
centers were subsequently sold in October and November of 1999.
On June 2, 1999, Macerich Cerritos, LLC, ("Cerritos") a wholly-owned
subsidiary of Macerich Management Company, acquired Los Cerritos Center, a
1,304,262 square foot super regional mall in Cerritos, California. The total
purchase price was $188.0 million, which was funded with $120.0 million of
debt placed concurrently with the closing and a $70.8 million loan from the
Company. The Company funded this loan from borrowings under a $60.0 million
bank loan agreement and the balance from the Company's line of credit.
On October 26, 1999, 49% of the membership interests of Macerich
Stonewood, LLC ("Stonewood"), Cerritos and Macerich Lakewood, LLC ("Lakewood")
were sold to Ontario Teachers' and concurrently Ontario Teachers' and the
Company contributed their 99% collective membership interests in Stonewood
and Cerritos and 100% of their collective membership interests in Lakewood to
Pacific Premier Retail Trust ("PPRT"), a real estate investment trust, owned
approximately 51% by the Company and 49% by Ontario Teachers. Lakewood,
Stonewood and Cerritos, own Lakewood Mall, Stonewood Mall and Los Cerritos
Center, respectively. The total value of the transaction was approximately
$535.0 million. The properties were contributed to PPRT subject to existing
debt of $322.0 million. The net cash proceeds to the Company were
approximately $104.0 million 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 560,623
square foot regional mall located in Santa Monica, California. The total
purchase price was $130.8 million, which was funded with $80.0 million of
debt placed concurrently with the closing with the balance funded from
proceeds from the PPRT transaction described above.
1
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B. REFINANCINGS
On February 4, 1999, the Company refinanced the debt on Queens
Center. A $65.1 million floating rate loan was paid in full and a new note
was issued for $100.0 million bearing interest at a fixed rate of 6.88% and
maturing March 1, 2009.
On February 17, 1999, the Company refinanced the debt on South
Plains Mall. A $28.4 million loan, at an effective interest rate of 6.3%, was
paid in full and a new note was issued for $65.0 million bearing interest at
a fixed rate of 8.22% and maturing March 1, 2009.
On April 30, 1999, the Company refinanced the debt on Carmel Plaza.
A $25.0 million floating rate loan was paid in full and a new note was issued
for $29.0 million bearing interest at a fixed rate of 8.18% and maturing May
1, 2009.
On October 8, 1999, the Company refinanced the debt on Village at
Corte Madera. A $60.0 million floating rate loan was paid in full and a new
note was issued for $72.0 million bearing interest at a fixed rate of 7.75%
and maturing November 1, 2009.
C. OTHER EVENTS
On November 15, 1999, the Company redeemed $25.1 million of
Operating Partnership Units ("OP Units") of the Operating Partnership for
cash from various unit holders. A total of 1,266,687 of OP Units were
redeemed for cash at the Company's option in lieu of exchanging common stock
for OP Units.
On November 16, 1999, the Company sold Huntington Center. Huntington
Center is a shopping center located in Huntington Beach, California, that was
purchased by the Company in December 1996. The Center was purchased as part
of a package with Fresno Fashion Fair in Fresno, California, and Pacific View
(formerly know as Buenaventura Mall) in Ventura, California. The Center was
sold for $48.0 million and the net cash proceeds from the sale were used for
general corporate purposes.
THE SHOPPING CENTER INDUSTRY
GENERAL
There are several types of retail shopping centers, which are
differentiated primarily based on size and marketing strategy. Regional
shopping centers generally contain in excess of 400,000 square feet of GLA,
are typically anchored by two or more department or large retail stores
("Anchors") and are referred to as "Regional Shopping Centers" or "Malls".
Regional Shopping Centers also typically contain numerous diversified retail
stores ("Mall Stores"), most of which are national or regional retailers
typically located along corridors connecting the Anchors. Community Shopping
Centers, also referred to as "strip centers," are retail shopping centers
that are designed to attract local or neighborhood customers and are
typically anchored by one or more supermarkets, discount department stores
and/or drug stores. Community Shopping Centers typically contain 100,000
square feet to 400,000 square feet of GLA. In addition, freestanding retail
stores are located along the perimeter of the shopping centers ("Freestanding
Stores"). Anchors, Mall and Freestanding Stores and other tenants typically
contribute funds for the maintenance of the common areas, property taxes,
insurance, advertising and other expenditures related to the operation of the
shopping center.
REGIONAL SHOPPING CENTERS
A Regional Shopping Center draws from its trade area by offering a
variety of fashion merchandise, hard goods and services and entertainment,
generally in an enclosed, climate controlled environment with convenient
parking. Regional Shopping Centers provide an array of retail shops and
entertainment facilities and often serve as the town center and the preferred
gathering place for community, charity, and promotional events.
The Company focuses on the acquisition and redevelopment of Regional
Shopping Centers. Regional Shopping Centers have generally provided owners
with relatively stable growth in income despite the cyclical nature of the
retail business. This stability is due both to the diversity of tenants and
to the typical dominance of Regional Shopping Centers in their trade areas.
Regional Shopping Centers are difficult to develop because of the significant
barriers to entry, including the limited availability of capital and suitable
development sites, the presence of existing Regional Shopping Centers in most
markets, a limited number of Anchors, and the associated development costs
and risks. Consequently, the Company believes that few new Regional Shopping
Centers will be built in the next five years. However, many of the market,
financing and economic risks typically associated with the development of new
Regional Shopping Centers can be mitigated by acquiring and redeveloping an
existing Regional Shopping Center. Furthermore, the value of Regional
Shopping Centers can be significantly enhanced through redevelopment,
renovation and expansion.
2
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REGIONAL SHOPPING CENTERS - CONTINUED:
Regional Shopping Centers have different strategies with regard to
price, merchandise offered and tenant mix, and are generally tailored to meet
the needs of their trade areas. Anchor tenants are located along common areas
in a configuration designed to maximize consumer traffic for the benefit of
the Mall Stores. Mall GLA, which generally refers to gross leasable area
contiguous to the Anchors for tenants other than Anchors, is leased to a wide
variety of smaller retailers. Mall Stores typically account for the bulk of
the revenues of a Regional Shopping Center.
Although a variety of retail formats compete for consumer purchases,
the Company believes that Regional Shopping Centers will continue to be a
preferred shopping destination. The combination of a climate controlled
shopping environment, a dominant location, and a diverse tenant mix has
resulted in Regional Shopping Centers generating higher tenant sales than are
generally achieved at smaller retail formats. Further, the Company believes
that department stores located in Regional Shopping Centers will continue to
provide a full range of current fashion merchandise at a limited number of
locations in any one market, allowing them to command the largest
geographical trade area of any retail format.
COMMUNITY SHOPPING CENTERS
Community Shopping Centers are designed to attract local and
neighborhood customers and are typically open air shopping centers, with one
or more supermarkets, drugstores or discount department stores. National
retailers such as Kids-R-Us at Bristol Shopping Center, Toys-R-Us at Boulder
Plaza, Saks Fifth Avenue at Carmel Plaza and The Gap, Victoria's Secret and
Express/Bath and Body at Villa Marina, provide the Company's Community
Shopping Centers with the opportunity to draw from a much larger trade area
than a typical supermarket or drugstore anchored Community Shopping Center.
BUSINESS OF THE COMPANY
MANAGEMENT AND OPERATING PHILOSOPHY
The Company believes that the shopping center business requires
specialized skills across a broad array of disciplines for effective and
profitable operations. For this reason, the Company has developed a fully
integrated real estate organization with in-house acquisition, redevelopment,
property management, leasing, finance, construction, marketing, legal and
accounting expertise. In addition, the Company emphasizes a philosophy of
decentralized property management, leasing and marketing performed by on-site
professionals. The Company believes that this strategy results in the optimal
operation, tenant mix and drawing power of each Center as well as the ability
to quickly respond to changing competitive conditions of the Center's trade
area.
PROPERTY MANAGEMENT AND LEASING. The Company believes that on-site
property managers can most effectively operate the Centers. Each Center's
property manager is responsible for overseeing the operations, marketing,
maintenance and security functions at the Center. Property managers focus
special attention on controlling operating costs, a key element in the
profitability of the Centers, and seek to develop strong relationships with
and to be responsive to the needs of retailers.
The Company believes strongly in decentralized leasing and
accordingly, most of its leasing managers are located on-site to better
understand the market and the community in which a Center is located. Leasing
managers are charged with more than the responsibility of leasing space; they
continually assess and fine tune each Center's tenant mix, identify and
replace under performing tenants and seek to optimize existing tenant sizes
and configurations.
ACQUISITIONS. Since its initial public offering ("IPO"), the Company
has acquired interests in shopping centers nationwide. These acquisitions
were identified and consummated by the Company's staff of acquisition
professionals who are strategically located in Santa Monica, Dallas, Denver,
and Atlanta. The Company believes that it is geographically well positioned
to cultivate and maintain ongoing relationships with potential sellers and
financial institutions and to act quickly when acquisition opportunities
arise. The Company focuses on assets that are or can be dominant in their
trade area, have a franchise and where there is intrinsic value.
The Company made the following acquisitions in 1998: The Company
along with a 50/50 joint venture partner, acquired a portfolio of twelve
regional malls totaling 10.7 million square feet on February 27, 1998; South
Plains Mall in Lubbock, Texas on June 19,1998; Westside Pavilion in Los
Angeles, California on July 1, 1998; Village at Corte Madera in Corte Madera,
California in June and July 1998; Carmel Plaza in Carmel, California on
August 10, 1998; and Northwest Arkansas Mall in Fayetteville, Arkansas on
December 15, 1998. Together, these properties are known as the "1998
Acquisition Centers."
3
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MANAGEMENT AND OPERATING PHILOSOPHY - CONTINUED:
On February 18, 1999, the Company, along with a joint venture
partner, acquired a portfolio of three regional malls, the retail component
of a mixed-use development, five contiguous properties and two non-contiguous
community shopping centers totaling approximately 3.6 million square feet.
The Company is a 51% owner of this portfolio. The second phase of this
transaction, which closed on July 12, 1999, consisted of the acquisition of
the office component of the mixed-use development. The two non-contiguous
community shopping centers were subsequently sold in October and November of
1999. Additionally, the Company acquired Los Cerritos Center in Cerritos,
California, on June 2, 1999 and Santa Monica Place in Santa Monica,
California, on October 29, 1999. Together, these properties are known as the
"1999 Acquisition Centers."
REDEVELOPMENT. One of the major components of the Company's growth
strategy is its ability to redevelop acquired properties. For this reason,
the Company has built a staff of redevelopment professionals who have primary
responsibility for identifying redevelopment opportunities that will result
in enhanced long-term financial returns and market position for the Centers.
The redevelopment professionals oversee the design and construction of the
projects in addition to obtaining required governmental and Anchor approvals.
THE CENTERS. As of December 31, 1999, the Centers consist of 47
Regional Shopping Centers and five Community Shopping Centers aggregating
approximately 42 million square feet of GLA. The 47 Regional Shopping Centers
in the Company's portfolio average approximately 874,000 square feet of GLA
and range in size from 1.8 million square feet of GLA at Lakewood Mall to
324,959 square feet of GLA at Panorama Mall. The Company's five Community
Shopping Centers, Boulder Plaza, Bristol Shopping Center, Carmel Plaza, Great
Falls Marketplace and Villa Marina Marketplace, have an average of 213,523
square feet of GLA. The 47 Regional Shopping Centers presently include 184
Anchors totaling approximately 23.1 million square feet of GLA and
approximately 6,050 Mall and Freestanding Stores totaling approximately 19.1
million square feet of GLA.
Total revenues increased from $283.9 million in 1998 to $327.4
million in 1999 primarily due to the 1999 and 1998 acquisitions. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations." Lakewood Mall generated 10.5% of total shopping center revenues
in 1997. No Center generated more than 10% of shopping center revenues during
1998 and 1999.
COST OF OCCUPANCY
The Company's management believes that in order to maximize the
Company's operating cash flow, the Centers' Mall Store tenants must be able
to operate profitably. A major factor contributing to tenant profitability is
cost of occupancy. The following table summarizes occupancy costs for Mall
Store tenants in the Centers as a percentage of total Mall Store sales for
the last three years:
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<CAPTION>
For the Years Ended December 31,
1997 (2) 1998 (3) 1999 (4)
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<S> <C> <C> <C>
Minimum rents 7.9% 7.7% 7.4%
Percentage rents 0.4% 0.4% 0.5%
Expense recoveries (1) 3.0% 3.0% 2.9%
---------- ---------- ----------
Mall tenant occupancy costs 11.3% 11.1% 10.8%
========== ========== ==========
</TABLE>
(1) Represents real estate tax and common area maintenance charges.
(2) Excludes Centers acquired in 1997 (the "1997 Acquisition Centers"). See
"Management's Discussion and Analysis of Financial Condition and
Results of Operations."
(3) Excludes 1998 Acquisition Centers.
(4) Excludes 1999 Acquisition Centers.
4
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COMPETITION
The 47 Regional Shopping Centers are generally located in developed
areas in middle to upper income markets where there are relatively few other
Regional Shopping Centers. In addition, 46 of the 47 Regional Shopping
Centers contain more than 400,000 square feet of GLA. The Company intends to
consider additional expansion and renovation projects to maintain and enhance
the quality of the Centers and their competitive position in their trade
areas.
There are numerous owners and developers of real estate that compete
with the Company in its trade areas. There are nine other publicly traded
mall companies, any of which under certain circumstances, could compete
against the Company for an acquisition, an Anchor or a tenant. This results
in competition for both acquisition of centers and for tenants to occupy
space. The existence of competing shopping centers could have a material
impact on the Company's ability to lease space and on the level of rent that
can be achieved. There is also increasing competition from other forms of
retail, such as factory outlet centers, power centers, discount shopping
clubs, mail-order services, internet shopping and home shopping networks that
could adversely affect the Company's revenues.
MAJOR TENANTS
The Centers derived approximately 90.2% of their total rents for the
year ended December 31, 1999 from Mall and Freestanding Stores. One tenant
accounted for approximately 5.2% of annual base rents of the Company, and no
other single tenant accounted for more than 3.2%, as of December 31, 1999.
The following tenants (including their subsidiaries) represent the
10 largest tenants in the Company's portfolio (including joint ventures)
based upon minimum rents in place as of December 31, 1999:
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NUMBER OF STORES % OF TOTAL MINIMUM RENTS
TENANT IN THE CENTERS AS OF DECEMBER 31, 1999
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<S> <C> <C>
The Limited, Inc. 144 5.2%
Venator Group, Inc. 142 3.2%
AT&T Wireless Services 3 2.8%
The Gap, Inc. 48 2.4%
J.C. Penney Co., Inc. 33 1.7%
Barnes and Noble, Inc. 24 1.3%
Claire Stores, Inc. 87 1.2%
The Musicland Group, Inc. 47 1.1%
Federated Department Stores 22 1.1%
Sears, Roebuck & Company 30 1.1%
</TABLE>
MALL AND FREESTANDING STORES
Mall and Freestanding Store leases generally provide for tenants
to pay rent comprised of a fixed base (or "minimum") rent and a percentage
rent based on sales. In some cases, tenants pay only a fixed minimum rent,
and in some cases, tenants pay only percentage rents. Most leases for Mall
and Freestanding Stores contain provisions that allow the Centers to recover
their costs for maintenance of the common areas, property taxes, insurance,
advertising and other expenditures related to the operations of the Center.
The Company uses tenant spaces 10,000 square feet and under for
comparing rental rate activity. Tenant space 10,000 square feet and under in
the portfolio at December 31, 1999, comprises 76.9% of all Mall and
Freestanding Store space. The Company believes that to include space over
10,000 square feet would provide a less meaningful comparison.
When an existing lease expires, the Company is often able to enter
into a new lease with a higher base rent component. The average base rent for
new Mall and Freestanding Store leases, 10,000 square feet or under,
commencing during 1999 was $29.76 per square foot, or 16% higher than the
average base rent for all Mall and Freestanding Stores (10,000 square feet or
under) at December 31, 1999 of $25.60 per square foot.
5
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MALL AND FREESTANDING STORES - CONTINUED:
The following table sets forth for the Centers the average base rent
per square foot of Mall and Freestanding GLA, for tenants 10,000 square feet
and under, as of December 31 for each of the past three years:
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<CAPTION>
Average Base Average Base
Average Base Rent Per Sq. Ft. on Rent Per Sq. Ft. on
Rent Per Leases Commencing Leases Expiring
Square Foot (1) During the Year (2) During the Year (3)
--------------- ------------------- -------------------
<S> <C> <C> <C>
DECEMBER 31,
1997............................ $24.27 $27.58 $24.84
1998............................ $25.08 $28.58 $26.34
1999............................ $25.60 $29.76 $27.29
</TABLE>
(1) Average base rent per square foot is based on Mall and Freestanding Store
GLA for spaces 10,000 square feet or under occupied as of December 31 for
each of the Centers owned by the Company in 1997 (excluding the 1997
Acquisition Centers), 1998 (excluding the 1998 Acquisition Centers), and
1999 (excluding the 1999 Acquisition Centers).
(2) The base rent on lease signings during the year represents the actual rent
to be paid on a per square foot basis during the first twelve months. The
1997 average excludes the 1997 Acquisition Centers, the 1998 average
excludes the 1998 Acquisition Centers and the 1999 average excludes the
1999 Acquisition Centers.
(3) The average base rent on leases expiring during the year represents the
final year minimum rent, on a cash basis, for all tenant leases 10,000
square feet or under expiring during the year. On a comparable space
basis, average initial rents, excluding the impact of straight lining of
rent, on leases 10,000 square feet or under commencing in 1999 was $30.85
compared to expiring rents of $27.29. The average base rent on leases
expiring in 1997 excludes the 1997 Acquisition Centers, the average for
1998 excludes 1998 Acquisition Centers and the average for 1999 excludes
the 1999 Acquisition Centers.
BANKRUPTCY AND/OR CLOSURE OF RETAIL STORES
The bankruptcy and/or closure of an Anchor, or its sale to a less
desirable retailer, could adversely affect customer traffic in a Center and
thereby reduce the income generated by that Center. Furthermore, the closing
of an Anchor could, under certain circumstances, allow certain other Anchors
or other tenants to terminate their leases or cease operating their stores at
the Center or otherwise adversely affect occupancy at the Center.
Retail stores at the Centers other than Anchors may also seek the
protection of the bankruptcy laws and/or close stores, which could result in
the termination of such tenants' leases and thus cause a reduction in the
cash flow generated by the Centers. Although no single retailer accounts for
greater than 5.2% of total rents, the bankruptcy and/or closure of stores
could result in decreased occupancy levels, reduced rental income or
otherwise adversely impact the Centers. Although certain tenants have filed
for bankruptcy, the Company does not believe such filings and any subsequent
closures of their stores will have a material adverse impact on its
operations.
6
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LEASE EXPIRATIONS
The following table shows scheduled lease expirations (for Centers
owned as of December 31, 1999) of Mall and Freestanding Stores 10,000 square
feet or under for the next ten years, assuming that none of the tenants exercise
renewal options:
<TABLE>
<CAPTION>
Approximate % of Total Ending
Number of GLA of Leased GLA Base Rent per
Year Ending Leases Expiring Represented by Square Foot of
December 31, Expiring Leases Expiring Leases (1) Expiring Leases (1)
- ------------ -------- ------ ------------------- -------------------
<S> <C> <C> <C> <C>
2000 649 1,160,538 10.8% $ 25.60
2001 511 978,840 9.1% $ 26.96
2002 489 937,921 8.7% $ 26.80
2003 501 1,083,078 10.1% $ 25.38
2004 454 978,543 9.1% $ 26.31
2005 424 1,043,255 9.7% $ 27.40
2006 375 981,021 9.1% $ 28.66
2007 379 1,012,442 9.4% $ 28.20
2008 380 1,017,344 9.5% $ 29.39
2009 273 703,890 6.6% $ 29.32
</TABLE>
(1) For leases 10,000 square feet or under
ANCHORS
Anchors have traditionally been a major factor in the public's
identification with Regional Shopping Centers. Anchors are generally department
stores whose merchandise appeals to a broad range of shoppers. Although the
Centers receive a smaller percentage of their operating income from Anchors than
from Mall and Freestanding Stores, strong Anchors play an important part in
maintaining customer traffic and making the Centers desirable locations for Mall
and Freestanding Store tenants.
Anchors either own their stores, the land under them and in some cases
adjacent parking areas, or enter into long-term leases with an owner at rates
that are lower than the rents charged to tenants of Mall and Freestanding
Stores. Each Anchor which owns its own store, and certain Anchors which lease
their stores, enter into reciprocal easement agreements with the owner of the
Center covering among other things, operational matters, initial construction
and future expansion.
Anchors accounted for approximately 9.8% of the Company's total rent
for the year ended December 31, 1999.
The following table identifies each Anchor, each parent company that
owns multiple Anchors and the number of square feet owned or leased by each such
Anchor or parent company in the Company's portfolio at December 31, 1999:
7
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ANCHORS - CONTINUED:
<TABLE>
<CAPTION>
GLA GLA TOTAL GLA
NUMBER OF OWNED LEASED OCCUPIED
NAME ANCHOR STORES BY ANCHOR BY ANCHOR BY ANCHOR
- ---- ------------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
J.C. Penney (1) 33 1,320,631 3,056,055 4,376,686
Sears 30 2,197,192 1,625,942 3,823,134
Target Corp.
Mervyn's 12 571,016 432,307 1,003,323
Target 9 581,260 379,871 961,131
Dayton's 2 115,193 100,790 215,983
------------- ----------- ----------- -----------
Total 23 1,267,469 912,968 2,180,437
Federated Department Stores
Macy's (2) 10 1,366,344 411,599 1,777,943
Macy's Men's & Children 1 -- 76,650 76,650
Macy's Men's & Home 2 -- 155,614 155,614
Macy's Men's & Juniors 1 -- 70,256 70,256
The Bon Marche 2 -- 181,000 181,000
Lazarus 1 159,068 -- 159,068
------------- ----------- ----------- -----------
Total 17 1,525,412 895,119 2,420,531
May Department Stores Co.
Robinsons-May 6 676,928 494,102 1,171,030
Foley's 4 725,316 -- 725,316
Hechts 2 140,000 141,772 281,772
Famous Barr 1 180,000 -- 180,000
Meier & Frank 1 242,505 -- 242,505
Meier & Frank - ZCMI 1 -- 200,000 200,000
------------- ----------- ----------- -----------
Total 15 1,964,749 835,874 2,800,623
Dillard's 14 1,257,162 662,735 1,919,897
Saks, Inc.
Younker's 6 -- 609,177 609,177
Herberger's 5 188,000 283,891 471,891
------------- ----------- ----------- -----------
11 188,000 893,068 1,081,068
Montgomery Ward (3) 7 180,431 853,745 1,034,176
Gottschalks 5 332,638 283,772 616,410
Nordstrom 5 226,853 503,369 730,222
Von Maur 3 186,686 59,563 246,249
Belk 2 -- 127,950 127,950
Boscov's 2 -- 314,717 314,717
Wal-Mart 2 281,455 -- 281,455
Beall's 1 -- 40,000 40,000
DeJong 1 -- 43,811 43,811
Emporium 1 -- 50,625 50,625
Home Depot 1 -- 130,232 130,232
Kohl's 1 -- 92,466 92,466
Lamonts 1 -- 50,000 50,000
Peebles 1 -- 42,090 42,090
Service Merchandise 1 -- 60,000 60,000
Vacant (3) 7 224,222 387,673 611,895
------------- ----------- ----------- -----------
184 11,152,900 11,921,774 23,074,674
============= =========== =========== ===========
</TABLE>
---------------------------
(1) This does not include the J.C. Penney currently under construction at
Chesterfield Mall.
(2) This does not include the Macy's currently under construction at Lakewood
Mall.
(3) Montgomery Ward filed for bankruptcy in 1997 and emerged from bankruptcy
in late 1999. Montgomery Ward closed its stores at Holiday Village,
Rimrock and Southridge in 1999. These three stores are included in Vacant
Anchors as of December 31, 1999. The Montgomery Ward at Holiday Village is
now owned by Herbergers. Dillards owns the former Montgomery Ward building
at Rimrock.
8
<PAGE>
ENVIRONMENTAL MATTERS
Under various federal, state and local laws, ordinances and
regulations, a current or prior owner or operator of real estate may be liable
for the costs of removal or remediation of certain hazardous or toxic substances
on, under or in such property. Such laws often impose such liability without
regard to whether the owner or operator knew of, or was responsible for, the
presence of such hazardous or toxic substances. The costs of investigation,
removal or remediation of such substances may be substantial, and the presence
of such substances, or the failure to properly remediate such substances, may
adversely affect the owner's or operator's ability to sell or rent such property
or to borrow using such property as collateral. Persons or entities who arrange
for the disposal or treatment of hazardous or toxic substances may also be
liable for the costs of removal or remediation of a release of such substances
at a disposal or treatment facility, whether or not such facility is owned or
operated by such person or entity. Certain environmental laws impose liability
for release of asbestos-containing materials ("ACMs") into the air and third
parties may seek recovery from owners or operators of real properties for
personal injury associated with exposure to ACMs. In connection with the
ownership (direct or indirect), operation, management and development of real
properties, the Company may be considered an owner or operator of such
properties or as having arranged for the disposal or treatment of hazardous or
toxic substances and therefore potentially liable for removal or remediation
costs, as well as certain other related costs, including governmental fines and
injuries to persons and property.
Each of the Centers has been subjected to a Phase I audit (which
involves review of publicly available information and general property
inspections, but does not involve soil sampling or ground water analysis)
completed by an environmental consultant.
Based on these audits, and on other information, the Company is aware
of the following environmental issues that are reasonably possible to result in
costs associated with future investigation or remediation, or in environmental
liability:
- ASBESTOS. The Company has conducted ACM surveys at various
locations within the Centers. The surveys indicate that ACMs
are present or suspected in certain areas, primarily vinyl
floor tiles, mastics, roofing materials, drywall tape and
joint compounds. The identified ACMs are generally
non-friable, in good condition, and possess low probabilities
for disturbance. At certain Centers where ACMs are present or
suspected, however, some ACMs have been or may be classified
as "friable," and ultimately may require removal under certain
conditions. The Company has developed and implemented an
operations and maintenance (O&M) plan to manage ACMs in place.
- UNDERGROUND STORAGE TANKS. Underground storage tanks ("USTs")
are or were present at certain of the Centers, often in
connection with tenant operations at gasoline stations or
automotive tire, battery and accessory service centers located
at such Centers. USTs also may be or have been present at
properties neighboring certain Centers. Some of these tanks
have either leaked or are suspected to have leaked. Where
leakage has occurred, investigation, remediation, and
monitoring costs may be incurred by the Company if responsible
current or former tenants, or other responsible parties, are
unavailable to pay such costs.
- CHLORINATED HYDROCARBONS. The presence of chlorinated
hydrocarbons such as perchloroethylene ("PCE") and its
degradation byproducts have been detected at certain of the
Centers, often in connection with tenant dry cleaning
operations. Where PCE has been detected, the Company may incur
investigation, remediation and monitoring costs if responsible
current or former tenants, or other responsible parties, are
unavailable to pay such costs.
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. $149,466
and $153,100 have already been incurred by the joint venture for remediation,
and professional and legal fees for the periods ending December 31, 1999 and
1998, respectively. An additional $258,566 remains reserved by the joint venture
as of
9
<PAGE>
ENVIRONMENTAL MATTERS, CONTINUED:
December 31, 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.
The Company acquired Fresno Fashion Fair in December 1996. Asbestos has
been detected in structural fireproofing throughout much of the Center. Testing
data conducted by professional environmental consulting firms indicates that the
fireproofing is largely inaccessible to building occupants and is well adhered
to the structural members. Additionally, airborne concentrations of asbestos
were well within OSHA's permissible exposure limit ("PEL") of .1 fcc. The
accounting for this acquisition includes a reserve of $3.3 million to cover
future removal of this asbestos, as necessary. The Company incurred $90,876 and
$255,500 in remediation costs for the twelve months ending December 31, 1999 and
1998, respectively.
INSURANCE
The Company has comprehensive liability, fire, flood, extended coverage
and rental loss insurance with respect to the Centers. The Company or the joint
venture, as applicable, also currently carries earthquake insurance covering the
Centers located in California. Management believes that such insurance provides
adequate coverage.
QUALIFICATION AS A REAL ESTATE INVESTMENT TRUST
The Company elected to be taxed as a REIT under the Internal Revenue
Code of 1986, as amended (the "Code"), commencing with its first taxable year
ended December 31, 1994, and intends to conduct its operations so as to continue
to qualify as a REIT under the Code. As a REIT, the Company generally will not
be subject to federal and state income taxes on its net taxable income that it
currently distributes to stockholders. Qualification and taxation as a REIT
depends on the Company's ability to meet certain dividend distribution tests,
share ownership requirements and various qualification tests prescribed in the
Code.
EMPLOYEES
The Company and the Management Companies employ approximately 1,651
persons, including eight executive officers, personnel in the areas of
acquisitions and business development (7), property management (270), leasing
(75), redevelopment/construction (25), financial services (49) and legal affairs
(31). In addition, in an effort to minimize operating costs, the Company
generally maintains its own security staff (572) and maintenance staff (614).
Approximately 6 of these employees are represented by a union. The Company
believes that relations with its employees are good.
10
<PAGE>
ITEM 2. PROPERTIES The following table sets forth certain information about each
of the Centers:
<TABLE>
<CAPTION>
Year of Year of Percentage
Company's Original Most Recent Mall and of Mall and
Ownership Name of Center / Construction/ Expansion / Total Free-standing Free-standing
% Location (1) Acquisition Renovation GLA (2) GLA GLA Leased
- --------- ----------------------------------- ------------- ----------- ----------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
100% Boulder Plaza 1969 / 1989 1991 158,997 158,997 100.0%
Boulder, Colorado
100% Bristol Shopping Center (4) 1966 / 1986 1992 165,279 165,279 90.6%
Santa Ana, California
50% Broadway Plaza (4) 1951 / 1985 1994 685,368 239,871 99.4%
Walnut Creek, California
100% Capitola Mall (4) 1977 / 1995 1988 584,872 205,155 90.2%
Capitola, California
100% Carmel Plaza 1974 / 1998 1993 115,215 115,215 91.2%
Carmel, California
100% Chesterfield Towne Center 1975 / 1994 1997 884,100 421,135 95.3%
Richmond, Virginia
100% Citadel, The 1972 / 1997 1995 1,045,469 450,129 84.7%
Colorado Springs, Colorado
100% Corte Madera, Village at 1985 / 1998 1994 428,398 210,398 92.0%
Corte Madera, California
100% County East Mall 1966 / 1986 1989 494,342 175,782 93.5%
Antioch, California
100% Crossroads Mall 1974 / 1994 1991 1,175,047 435,359 85.6%
Oklahoma City, Oklahoma
100% Fresno Fashion Fair 1970 / 1996 1983 874,306 313,425 96.1%
Fresno, California
100% Great Falls Marketplace 1997 / 1997 - 179,821 179,821 100.0%
Great Falls, Montana
100% Greeley Mall 1973 / 1986 1987 573,238 229,876 80.0%
Greeley, Colorado
100% Green Tree Mall (4) 1968 / 1975 1995 785,037 341,041 83.1%
Clarksville, Indiana
100% Holiday Village Mall (4) 1959 / 1979 1992 594,735 267,216 79.9%
Great Falls, Montana
10% Manhattan Village Shopping Ctr (4) 1981 / 1997 1992 551,847 375,793 97.0%
Manhattan Beach, California
100% Northgate Mall 1964 / 1986 1987 743,795 273,464 90.2%
San Rafael, California
100% Northwest Arkansas Mall 1972 / 1998 1997 822,703 309,033 94.4%
Fayetteville, Arkansas
50% Panorama Mall 1955 / 1979 1980 324,959 159,959 94.4%
Panorama, California
100% Queens Center 1973 / 1995 1991 624,260 156,117 100.0%
Queens, New York
<CAPTION>
Company's Sales Per
Ownership Name of Center / Square
% Location (1) Anchors Foot (3)
- --------- ----------------------------------- ------------------------------------------ ---------
<S> <C> <C> <C>
100% Boulder Plaza ----- $328
Boulder, Colorado
100% Bristol Shopping Center (4) ----- 345
Santa Ana, California
50% Broadway Plaza (4) Macy's, Nordstrom, 517
Walnut Creek, California Macy's Men's and Juniors
100% Capitola Mall (4) Gottschalks, J.C. Penney, 320
Capitola, California Mervyn's, Sears
100% Carmel Plaza ----- 346
Carmel, California
100% Chesterfield Towne Center Dillard's (two), Hechts, Sears 324
Richmond, Virginia J.C. Penney (9)
100% Citadel, The Dillard's, Foley's, J.C. Penney, Mervyn's 277
Colorado Springs, Colorado
100% Corte Madera, Village at Macy's, Nordstrom 545
Corte Madera, California
100% County East Mall Sears, Gottschalks, Mervyn's (6) 286
Antioch, California
100% Crossroads Mall Dillards, Foley's, J.C. Penney, 263
Oklahoma City, Oklahoma Montgomery Ward
100% Fresno Fashion Fair Gottschalks, J.C. Penney, Macy's, 342
Fresno, California Macy's Men's and Children
100% Great Falls Marketplace ----- 212
Great Falls, Montana
100% Greeley Mall Dillard's (two), J.C. Penney, Sears, 256
Greeley, Colorado Montgomery Ward
100% Green Tree Mall (4) Dillard's, J.C. Penney, 333
Clarksville, Indiana Sears, Target
100% Holiday Village Mall (4) Herberger's, J.C. Penney, Sears (5)(6) 251
Great Falls, Montana
10% Manhattan Village Shopping Ctr (4) Macy's, Macy's Men's & Home 659
Manhattan Beach, California
100% Northgate Mall Macy's, Mervyns, Sears 294
San Rafael, California
100% Northwest Arkansas Mall Dillard's (two), J.C. Penney, Sears 300
Fayetteville, Arkansas
50% Panorama Mall Wal-Mart 431
Panorama, California
100% Queens Center J.C. Penney, Macy's 746
Queens, New York
</TABLE>
11
<PAGE>
ITEM 2. PROPERTIES, CONTINUED
<TABLE>
<CAPTION>
Year of Year of Percentage
Company's Original Most Recent Mall and of Mall and
Ownership Name of Center / Construction/ Expansion / Total Free-standing Free-standing
% Location (1) Acquisition Renovation GLA (2) GLA GLA Leased
- --------- ----------------------------------- ------------- ----------- ----------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
100% Rimrock Mall 1978 / 1996 1980 610,184 294,744 97.0%
Billings, Montana
100% Salisbury, Centre at 1990 / 1995 1990 883,634 278,653 90.6%
Salisbury, Maryland
100% Santa Monica Place 1980/1999 1990 560,623 277,373 99.4%
Santa Monica, California
100% South Plains Mall 1972 / 1998 1995 1,142,737 400,950 92.6%
Lubbock, Texas
100% South Towne Center 1987/1997 1997 1,235,499 458,987 95.6%
Sandy, Utah
100% Valley View Center 1973 / 1996 1996 1,567,574 509,677 90.9%
Dallas, Texas
100% Villa Marina Marketplace 1972 /1996 1995 448,301 448,301 99.8%
Marina Del Rey, California
100% Vintage Faire Mall 1977 / 1996 - 1,031,678 331,759 90.9%
Modesto, California
19% West Acres 1972 / 1986 1992 929,822 377,267 95.6%
Fargo, North Dakota
100% Westside Pavilion 1985 / 1998 1991 756,017 397,889 93.8%
Los Angeles, California ----------- --------- -------
TOTAL / AVERAGE AT DECEMBER 31, 1999 (a) 20,977,857 8,958,665 92.6%
----------- --------- -------
PACIFIC PREMIER RETAIL TRUST PROPERTIES (b):
51% Cascade Mall 1989 / 1999 1998 584,614 265,733 89.1%
Burlington, Washington
51% Kitsap Mall (4) 1985 / 1999 1997 850,129 340,146 83.5%
Silverdale, Washington
51% Lakewood Mall (10) 1953 / 1975 2000 1,838,826 895,177 98.5%
Lakewood, California
51% Los Cerritos Center (4) 1971 / 1999 1998 1,304,262 502,981 97.9%
Cerritos, California
<CAPTION>
Company's Sales Per
Ownership Name of Center / Square
% Location (1) Anchors Foot (3)
- --------- ----------------------------------- ------------------------------------------ ---------
<S> <C> <C> <C>
100% Rimrock Mall Dillard's, Herbergers, J.C. Penney (5)(6) 286
Billings, Montana
100% Salisbury, Centre at Boscov's, J.C. Penney, Hechts, 314
Salisbury, Maryland Montgomery Ward, Sears
100% Santa Monica Place Macy's, Robinsons-May 379
Santa Monica, California
100% South Plains Mall Beall's, Dillards (two), J.C. Penney, 322
Lubbock, Texas Meryvn's, Sears
100% South Towne Center Dillard's, J.C. Penney, Mervyn's, 240
Sandy, Utah Target, Meier & Frank - ZCMI
100% Valley View Center Dillard's, Foleys, J.C. Penney, 303
Dallas, Texas Sears
100% Villa Marina Marketplace ----- 459
Marina Del Rey, California
100% Vintage Faire Mall Gottschalks, J.C. Penney, Macy's, 335
Modesto, California Macy's Men's & Home, Sears
19% West Acres Daytons, Herberger's, J.C. Penney, Sears 363
Fargo, North Dakota
100% Westside Pavilion Nordstrom, Robinsons-May 388
Los Angeles, California ------
TOTAL / AVERAGE AT DECEMBER 31, 1999 (a) $358
------
PACIFIC PREMIER RETAIL TRUST PROPERTIES (b):
51% Cascade Mall The Bon Marche, Emporium, $269
Burlington, Washington J.C. Penney, Sears, Target
51% Kitsap Mall (4) The Bon Marche, J.C. Penney, Lamonts, 314
Silverdale, Washington Mervyn's, Sears
51% Lakewood Mall (10) Home Depot, J.C. Penney, Mervyn's, 351
Lakewood, California Montgomery Ward, Robinsons-May
51% Los Cerritos Center (4) Macy's, Mervyn's, Nordstrom, 369
Cerritos, California Robinsons-May, Sears
</TABLE>
12
<PAGE>
ITEM 2. PROPERTIES, CONTINUED
<TABLE>
<CAPTION>
Year of Year of Percentage
Company's Original Most Recent Mall and of Mall and
Ownership Name of Center / Construction/ Expansion / Total Free-standing Free-standing
% Location (1) Acquisition Renovation GLA (2) GLA GLA Leased
- --------- ----------------------------------- ------------- ----------- ----------- ------------- -------------
PACIFIC PREMIER RETAIL TRUST PROPERTIES, CONTINUED:
<S> <C> <C> <C> <C> <C> <C>
51% Redmond Town Center (4) (8) 1997 / 1999 2000 1,149,373 1,149,373 97.0%
Redmond, Washington
51% Stonewood Mall (4) 1953 / 1997 1991 927,508 356,761 86.8%
Downey, California
51% Washington Square 1974 / 1999 1995 1,391,434 423,107 100.0%
Tigard, Oregon
--------- --------- ------
TOTAL / AVERAGE PACIFIC PREMIER RETAIL TRUST PROPERTIES 8,046,146 3,933,278 95.2%
--------- --------- ------
SDG MACERICH PROPERTIES, L.P. PROPERTIES:
50% Eastland Mall (4) 1978 / 1998 1995 1,075,745 482,790 89.9%
Evansville, Indiana
50% Empire Mall (4) 1975 / 1998 1988 1,315,673 625,566 91.4%
Sioux Falls, South Dakota
50% Granite Run Mall 1974 / 1998 1993 1,022,984 522,175 97.5%
Media, Pennsylvania
50% Lake Square Mall 1980 / 1998 1992 561,077 265,040 86.4%
Leesburg, Florida
50% Lindale Mall 1963 / 1998 1997 690,964 385,401 88.7%
Cedar Rapids, Iowa
50% Mesa Mall 1980 / 1998 1991 856,258 430,441 93.8%
Grand Junction, Colorado
50% NorthPark Mall 1973 / 1998 1994 1,040,868 389,335 88.1%
Davenport, Iowa
50% Rushmore Mall 1978 / 1998 1992 834,491 429,831 89.3%
Rapid City, South Dakota
50% Southern Hills Mall 1980 / 1998 -- 752,712 439,135 96.6%
Sioux City, Iowa
50% SouthPark Mall 1974 / 1998 1990 1,034,852 456,796 89.9%
Moline, Illinois
50% SouthRidge Mall (4) 1975 / 1998 1998 1,008,607 510,801 90.4%
Des Moines, Iowa
50% Valley Mall 1978 / 1998 1992 482,370 196,307 92.9%
Harrisonburg, Virginia --------- ------- -------
TOTAL / AVERAGE SDG MACERICH PROPERTIES, L.P. PROPERTIES 10,676,601 5,133,618 91.5%
---------- ---------- -------
GRAND TOTAL / AVERAGE AT DECEMBER 31, 1999 (c) 39,700,604 18,025,561 92.8%
========== ========== =======
<CAPTION>
Company's Sales Per
Ownership Name of Center / Square
% Location (1) Anchors Foot (3)
- --------- ----------------------------------- ------------------------------------------ ---------
PACIFIC PREMIER RETAIL TRUST PROPERTIES, CONTINUED:
<S> <C> <C> <C>
51% Redmond Town Center (4) (8) ----- $285
Redmond, Washington
51% Stonewood Mall (4) J.C. Penney, Mervyn's, Robinsons-May, 325
Downey, California Sears
51% Washington Square J.C. Penney, Meier & Frank, Mervyn's, 488
Tigard, Oregon Nordstrom, Sears -----
TOTAL / AVERAGE PACIFIC PREMIER RETAIL TRUST PROPERTIES $353
-----
SDG MACERICH PROPERTIES, L.P. PROPERTIES:
50% Eastland Mall (4) DeJong, Famous Barr, J.C. Penney, $355
Evansville, Indiana Lazarus, Service Merchandise
50% Empire Mall (4) Daytons, J.C. Penney, Kohl's 372
Sioux Falls, South Dakota Sears, Target, Younkers (6)
50% Granite Run Mall Boscov's, J.C. Penney, Sears 286
Media, Pennsylvania
50% Lake Square Mall Belk, J.C. Penney, Sears, Target 224
Leesburg, Florida
50% Lindale Mall Sears, Von Maur, Younkers 284
Cedar Rapids, Iowa
50% Mesa Mall Herberger's, J.C. Penney, Mervyn's, 227
Grand Junction, Colorado Sears, Target
50% NorthPark Mall J.C. Penney, Montgomery Ward, Sears, 231
Davenport, Iowa Von Maur, Younkers
50% Rushmore Mall Herberger's, J.C. Penney, Sears, 271
Rapid City, South Dakota Target
50% Southern Hills Mall Sears, Target, Younkers 329
Sioux City, Iowa
50% SouthPark Mall J.C. Penney, Sears, Younkers, 221
Moline, Illinois Von Maur, Montgomery Ward
50% SouthRidge Mall (4) Sears, Younkers, J.C. Penney, 243
Des Moines, Iowa Target, (5)(6)
50% Valley Mall Belk, J.C. Penney, Wal-Mart, 304
Harrisonburg, Virginia Peeble's ----
TOTAL / AVERAGE SDG MACERICH PROPERTIES, L.P. PROPERTIES 284
----
GRAND TOTAL / AVERAGE AT DECEMBER 31, 1999 (c) $336
====
</TABLE>
13
<PAGE>
ITEM 2. PROPERTIES, CONTINUED
<TABLE>
<CAPTION>
Year of Year of Percentage
Company's Original Most Recent Mall and of Mall and
Ownership Name of Center / Construction/ Expansion / Total Free-standing Free-standing
% Location (1) Acquisition Renovation GLA (2) GLA GLA Leased
- --------- ---------------------------------------- ------------- ----------- ----------- ------------- -------------
MAJOR REDEVELOPMENT PROPERTIES:
<S> <C> <C> <C> <C> <C> <C>
100% Crossroads Mall (4) 1963 / 1979 1998 811,450 368,013 (7)
Boulder, Colorado
100% Pacific View (formerly Buenaventura 1965 / 1996 1999 1,248,579 422,105 (7)
Mall)
Ventura, California
100% Parklane Mall (4) 1967 / 1978 1998 386,911 257,191 (7)
Reno, Nevada
----------- ---------
TOTAL MAJOR REDEVELOPMENT PROPERTIES 2,446,940 1,047,309
----------- ---------
GRAND TOTAL 42,147,544 19,072,870
=========== =========
<CAPTION>
Company's Sales Per
Ownership Name of Center / Square
% Location (1) Anchors Foot (3)
- --------- ----------------------------------- ---------------------------------------------------- ---------
MAJOR REDEVELOPMENT PROPERTIES:
<S> <C> <C> <C>
100% Crossroads Mall (4) Foley's, J.C. Penney, Sears (6) (7)
Boulder, Colorado
100% Pacific View (formerly Buenaventura J.C. Penney, Macy's, Montgomery Ward, Robinsons-May, (7)
Mall) Sears
Ventura, California
100% Parklane Mall (4) Gottschalks (7)
Reno, Nevada
</TABLE>
a) Excluding Pacific Premier Retail Trust Properties, SDG Macerich Properties,
L.P. Properties and Major Redevelopment Properties
b) Includes five contiguous freestanding properties
c) Excluding Major Redevelopment Properties
14
<PAGE>
ITEM 2. PROPERTIES, CONTINUED
(1) The land underlying thirty-seven of the Centers is owned in fee entirely
by the Company or, in the case of jointly-owned Centers, by the joint
venture property partnership or limited liability company. All or part of
the land underlying the remaining Centers is owned by third parties and
leased to the Company or property partnership pursuant to long-term ground
leases. Under the terms of a typical ground lease, the Company or property
partnership pays rent for the use of the land and is generally responsible
for all costs and expenses associated with the building and improvements.
In some cases, the Company or property partnership has an option or right
of first refusal to purchase the land. The termination dates of the ground
leases range from 2000 to 2070.
(2) Includes GLA attributable to Anchors (whether owned or non-owned) and Mall
and Freestanding Stores as of December 31, 1999.
(3) Sales are based on reports by retailers leasing Mall and Freestanding
Stores for the year ending December 31, 1999 for tenants which have
occupied such stores for a minimum of twelve months. Consistent with
industry practices, sales per square foot are based on gross leased and
occupied area, excluding theaters, and are not based on GLA.
(4) Portions of the land on which the Center is situated are subject to one or
more ground leases.
(5) During 1997, Montgomery Ward filed for bankruptcy and emerged from
bankruptcy in late 1999. Montgomery Ward closed its stores at Holiday
Village Mall, Rimrock Mall and Southridge Mall in 1999. The Montgomery
Ward at Holiday Village is owned by Herbergers. Dillards owns the former
Montgomery Ward Building at Rimrock.
(6) These properties have a vacant Anchor location. The Company is
contemplating various replacement tenant/redevelopment opportunities for
these vacant sites.
(7) Certain spaces have been intentionally held off the market and remain
vacant because of major redevelopment plans. As a result, the Company
believes the percentage of Mall and Freestanding GLA leased and the sales
per square foot at these major redevelopment properties is not meaningful
data.
(8) The office portion of this mixed-use development does not have retail
sales.
(9) J.C. Penney is currently building a store at Chesterfield Mall.
(10) Macy's is currently building a store at Lakewood Mall.
15
<PAGE>
MORTGAGE DEBT
The following table sets forth certain information regarding the
mortgages encumbering the Centers, including those Centers in which the Company
has less than a 100% interest. All mortgage debt is nonrecourse to the Company.
The information set forth below is as of December 31, 1999.
<TABLE>
<CAPTION>
Earliest Date
Annual Balance on which all
Annual Principal Debt Due on Notes Can
Property Pledged Fixed or Interest Balance Service Maturity Maturity Be Defeased
As Collateral Floating Rate (000'S) (000'S) Date (000'S) or Be Prepaid
- ------------- -------- ---- ------- ------- ---- ------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Wholly-Owned Centers:
Capitola Mall Fixed 9.25% $ 36,983 $ 3,801 12/15/2001 $ 36,193 Any Time
Carmel Plaza Fixed 8.18% 28,869 2,421 5/1/2009 25,642 5/26/2001
Chesterfield Towne Center (1) Fixed 9.07% 64,358 6,580 1/1/2024 1,087 1/1/2006
Citadel Fixed 7.20% 73,377 6,648 1/1/2008 59,962 1/1/2003
Corte Madera, Village at Fixed 7.75% 71,949 6,190 11/1/2009 62,941 10/4/2003
Crossroads Mall - Boulder Fixed 7.08% 34,893 3,948 12/15/2010 28,107 1/15/2000
Fresno Fashion Fair Fixed 6.52% 69,000 4,561 8/10/2008 62,890 11/16/2000
Greeley Mall Fixed 8.50% 16,228 2,245 9/15/2003 12,519 Any Time
Green Tree Mall/Crossroads - OK/
Salisbury Fixed 7.23% 117,714 8,499 3/5/2004 117,714 Any Time
Holiday Village Fixed 6.75% 17,000 1,147 4/1/2001 17,000 Any Time
Northgate Mall Fixed 6.75% 25,000 1,688 4/1/2001 25,000 Any Time
Northwest Arkansas Mall Fixed 7.33% 62,080 5,209 1/10/2009 49,304 1/1/2004
Parklane Mall Fixed 6.75% 20,000 1,350 4/1/2001 20,000 Any Time
Queens Center Fixed 6.88% 100,000 7,595 3/1/2009 88,651 2/4/2002
Rimrock Mall Fixed 7.70% 30,445 2,924 1/1/2003 28,496 1/1/2000
Santa Monica Place Floating 7.16%(2) 80,000 5,728 2/1/2001 80,000 Any Time
South Plains Mall Fixed 8.22% 64,623 5,448 3/1/2009 57,557 2/17/2002
South Towne Center Fixed 6.61% 64,000 4,289 10/10/2008 64,000 7/24/2001
Valley View Mall Fixed 7.89% 51,000 4,080 10/10/2006 51,000 4/16/2000
Villa Marina Marketplace Fixed 7.23% 58,000 4,249 10/10/2006 58,000 8/29/2000
Vintage Faire Mall Fixed 7.65% 53,537 5,122 1/1/2003 50,089 1/1/2000
Westside Pavilion Fixed 6.67% 100,000 6,529 7/1/2008 91,133 10/7/2000
----------
Total - Wholly Owned Centers $1,239,056
----------
Joint Venture Centers (at pro rata share):
Broadway Plaza (50%) (3) Fixed 6.68% 36,690 3,089 8/1/2008 29,315 Any Time
Pacific Premier Retail Trust (51%) (3):
Cascade Mall Fixed 6.50% 13,837 1,461 8/1/2014 141 Any Time
Kitsap Mall (4) Fixed 6.50% 20,452 2,137 6/1/2000 19,571 Any Time
Lakewood Mall Fixed 7.20% 64,770 4,661 8/10/2005 64,770 Any Time
Los Cerritos Center Fixed 7.13% 60,909 5,054 7/1/2006 54,955 6/1/2002
North Point Fixed 6.50% 1,889 190 12/1/2015 47 2/7/2004
Redmond Town Center - Retail Fixed 6.50% 32,743 2,686 2/1/2011 23,850 Any Time
Redmond Town Center - Office Fixed 6.77% 42,248 3,575 7/10/2009 26,223 6/1/2002
Stonewood Mall Floating 8.23%(5) 38,250 3,251 2/1/2001 38,250 Any Time
Washington Square Fixed 6.70% 60,471 5,051 1/1/2009 48,289 3/1/2004
Washington Square Too Fixed 6.50% 6,533 634 12/1/2016 116 2/17/2004
SDG Macerich Properties L.P. (50%) (3) Fixed 6.23%(6) 159,282 11,114 5/15/2006 150,000 Any Time
SDG Macerich Properties L.P. (50%) (3) Floating 6.96%(6) 92,500 5,689 5/15/2003 92,500 Any Time
West Acres Center (19%) (3) Fixed 6.52% 7,600 495 1/1/2009 7,538 1/4/2002
----------
Total - Joint Venture Centers (3) $638,174
----------
Total - All Centers $1,877,230
==========
</TABLE>
16
<PAGE>
MORTGAGE DEBT, CONTINUED:
Notes:
(1) The annual debt service payment represents the payment of principal
and interest. In addition, contingent interest, as defined in the
loan agreement, may be due to the extent that 35% of the gross
receipts (as defined in the loan agreement) exceeds a base amount
specified therein. Contingent interest recognized was $385,556 for
the year ended December 31, 1999 and $387,101 for the year ended
December 31, 1998.
(2) The loan bears interest at LIBOR plus 1.75%. At December 31, 1999,
the total interest rate was 7.16%. In addition, the Company can,
subject to certain conditions, increase the borrowing amount up to
$90.0 million. As of January 6, 2000, an additional $5.0 million was
advanced for total borrowings outstanding of $85.0 million.
(3) Reflects the Company's pro rata share of debt.
(4) In connection with the acquisition of this Center, the joint venture
assumed $39.4 million of debt. At acquisition, this debt was
recorded at the fair value of $41.5 million which included an
unamortized premium of $2.1 million. 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
$349,000 and is calculated using an 8.60% interest rate. At December
31, 1999, the joint venture's unamortized premium was $1.4 million.
(5) The loan bears interest at LIBOR plus 1.75%. At December 31, 1999,
the total interest rate was 8.23%.
(6) In connection with the acquisition of these Centers, the joint
venture assumed $485 million of mortgage notes payable which are
secured by the properties. At acquisition, this debt reflected a
fair value of $322.7 million, which included an unamortized
premium of $22.7 million. This premium is being amortized as
interest expense over the life of the loan using the effective
interest method. At December 31, 1999, the unamortized balance of
the debt premium was $18.6 million. This debt is due in May 2006 and
requires a monthly payment of $1.9 million. $185 million of this
debt is due in May 2003 and requires monthly interest payments at
a variable weighted average rate (based on LIBOR) of 6.96% at
December 31, 1999. This variable rate debt is covered by an
interest rate cap agreement which effectively prevents the
interest rate from exceeding 11.53%.
The Company has a credit facility of $150 million with a maturity of
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
December 31, 1999 and December 31, 1998, $57.4 million and $137.0 million of
borrowings were outstanding under this line of credit at interest rates of 7.65%
and 6.79%, respectively.
Additionally, the Company issued $776,000 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 $89.2 million of costs related to the redevelopment of Pacific
View. See "Item 2. Properties." The loan bears interest at LIBOR plus 2.25% and
matures in February 2001. Principal is drawn as construction costs are incurred.
As of December 31, 1999, $72.7 million of principal has been drawn under the
loan.
In addition, the Company had a note payable of $30.6 million due in
February 2000 payable to the seller of the acquired portfolio. The note bore
interest at 6.5%. The loan was paid in full on February 18, 2000.
During 1997, the Company issued and sold $161.4 million 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.
17
<PAGE>
ITEM 3. LEGAL PROCEEDINGS.
The Company, the Operating Partnership, the Management Companies and
their respective affiliates are not currently involved in any material
litigation nor, to the Company's knowledge, is any material litigation currently
threatened against such entities or the Centers, other than routine litigation
arising in the ordinary course of business, most of which is expected to be
covered by liability insurance. For information about certain environmental
matters, see "Business of the Company - Environmental Matters."
ITEM 4. SUBMISSION OF MATTER TO A VOTE OF SECURITY HOLDERS.
None.
18
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
The common stock of the Company is listed and traded on the New York
Stock Exchange ("NYSE") under the symbol "MAC". The common stock began trading
on March 10, 1994 at a price of $19 per share. In 1999, the Company's shares
traded at a high of $27.0625 and a low of $17.8125.
As of February 29, 2000, there were approximately 457 stockholders of
record. The following table shows high and low closing prices per share of
common stock during each quarter in 1998 and 1999 and dividends/distributions
per share of common stock declared and paid by quarter:
<TABLE>
<CAPTION>
Quarters Ended Market Quotation Per Share Dividends/Distributions
- -------------- -------------------------- -----------------------
- -------------- High Low Declared and Paid
---- --- -----------------
<S> <C> <C> <C>
March 31, 1998 $30 3/8 $27 $ 0.46
June 30, 1998 29 3/4 26 1/16 0.46
September 30, 1998 29 3/8 22 1/4 0.46
December 31, 1998 28 7/16 24 0.485
March 31, 1999 26 11/16 22 7/16 0.485
June 30, 1999 27 1/16 22 1/8 0.485
September 30, 1999 26 10/16 21 8/16 0.485
December 31, 1999 22 10/16 17 13/16 0.51
</TABLE>
The Company has issued 3,627,131 shares of its Series A cumulative
convertible redeemable preferred stock ("Series A Preferred Stock"), and
5,487,471 shares of its Series B cumulative convertible redeemable preferred
stock ("Series B Preferred Stock"). The Series A Preferred Stock and Series B
Preferred Stock can be converted into shares of common stock on a one-to-one
basis. There is no established public trading market for either the Series A
Preferred Stock or the Series B Preferred Stock. All of the outstanding shares
of the Series A Preferred Stock are held by Security Capital Preferred Growth
Incorporated. All of the outstanding shares of the Series B Preferred Stock are
held by Ontario Teachers' Pension Plan Board. The Series A Preferred Stock and
Series B Preferred Stock were issued on February 25, 1998 and June 16, 1998,
respectively. The following table shows the dividends per share of preferred
stock declared and paid for each quarter in 1998 and 1999. Preferred stock
dividends are accrued quarterly and paid in arrears. 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.
<TABLE>
<CAPTION>
Series A Series B
Preferred Stock Preferred Stock
Dividends Dividends
--------------- ---------------
QUARTERS ENDED Declared Paid Declared Paid
-------- ---- -------- ----
<S> <C> <C> <C> <C>
March 31, 1998 ............ N/A N/A N/A N/A
June 30, 1998 ............. $0.179 N/A N/A N/A
September 30, 1998 ........ 0.460 $0.179 $0.071 N/A
December 31, 1998.......... 0.485 0.460 0.485 $0.071
QUARTERS ENDED
March 31, 1999 ............ 0.485 0.485 0.485 0.485
June 30, 1999 ............. 0.485 0.485 0.485 0.485
September 30, 1999 ........ 0.510 0.485 0.510 0.485
December 31, 1999.......... 0.510 0.510 0.510 0.510
</TABLE>
19
<PAGE>
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS -
CONTINUED
On February 26, 1999, the Company issued 20,700 shares of common stock
upon the redemption of 20,700 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.
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 6. SELECTED FINANCIAL DATA.
The following sets forth selected financial data for the Company on a
historical basis. The following data should be read in conjunction with the
financial statements (and the notes thereto) of the Company and "Management's
Discussion And Analysis of Financial Condition and Results of Operations" each
included elsewhere in this Form 10-K.
The Selected Financial Data is presented on a consolidated basis. The
limited partnership interests in the Operating Partnership (not owned by the
REIT) are reflected as minority interest. Centers in which the Company does not
have a controlling ownership interest (Panorama Mall, North Valley Plaza,
Broadway Plaza, Manhattan Village, Pacific Premier Retail Trust, SDG Macerich
Properties, L.P. and West Acres Shopping Center) are referred to as the "Joint
Venture Centers", and along with the Management Companies, are reflected in the
selected financial data under the equity method of accounting. Accordingly, the
net income from the Joint Venture Centers and the Management Companies that is
allocable to the Company is included in the statement of operations as "Equity
in income (loss) of unconsolidated joint ventures and Management Companies."
20
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA, CONTINUED
<TABLE>
<CAPTION>
The Company
-----------------------------------------------------------------
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
(All amounts in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
OPERATING DATA:
Revenues:
Minimum rents $ 204,568 $ 179,710 $ 142,251 $ 99,061 $ 69,253
Percentage rents 15,106 12,856 9,259 6,142 4,814
Tenant recoveries 99,126 86,740 66,499 47,648 26,961
Other 8,644 4,555 3,205 2,208 1,441
--------- --------- --------- --------- ---------
Total revenues 327,444 283,861 221,214 155,059 102,469
Shopping center expenses 100,327 89,991 70,901 50,792 31,580
REIT general and
administrative expenses 5,488 4,373 2,759 2,378 2,011
Depreciation and amortization 61,383 53,141 41,535 32,591 25,749
Interest expense 113,348 91,433 66,407 42,353 25,531
--------- --------- --------- --------- ---------
Income before minority interest,
unconsolidated entities and
extraordinary item 46,898 44,923 39,612 26,945 17,598
Minority interest (1) (38,335) (12,902) (10,567) (10,975) (8,246)
Equity in income (loss) of
unconsolidated joint ventures
and management companies (2) 25,945 14,480 (8,063) 3,256 3,250
Gain on sale of assets 95,981 9 1,619 -- --
Extraordinary loss on early
extinguishment of debt (1,478) (2,435) (555) (315) (1,299)
--------- --------- --------- --------- ---------
Net income 129,011 44,075 22,046 18,911 11,303
Less preferred dividends 18,138 11,547 -- -- --
--------- --------- --------- --------- ---------
Net income available to
common stockholders $ 110,873 $ 32,528 $ 22,046 $ 18,911 $ 11,303
========= ========= ========= ========= =========
Earnings per share - basic: (3)
Income before extraordinary item $ 3.30 $ 1.14 $ 0.86 $ 0.92 $ 0.78
Extraordinary item (0.04) (0.08) (0.01) (0.01) (0.05)
--------- --------- --------- --------- ---------
Net income per share - basic $ 3.26 $ 1.06 $ 0.85 $ 0.91 $ 0.73
========= ========= ========= ========= =========
Earnings per share - diluted: (3)(4)(7)
Income before extraordinary item $ 3.01 $ 1.11 $ 0.86 $ 0.90 $ 0.78
Extraordinary item (0.02) (0.05) (0.01) (0.01) (0.05)
--------- --------- --------- --------- ---------
Net income per share - diluted $ 2.99 $ 1.06 $ 0.85 $ 0.89 $ 0.73
========= ========= ========= ========= =========
OTHER DATA:
Funds from operations-diluted (4) $ 164,302 $ 120,518 $ 83,427 $ 62,428 $ 44,938
EBITDA (5) $ 221,629 $ 189,497 $ 147,554 $ 101,889 $ 68,878
Cash flows from (used in):
Operating activities $ 139,576 $ 85,176 $ 78,476 $ 80,431 $ 48,186
Investing activities ($247,685) ($761,147) ($215,006) ($296,675) ($ 88,413)
Financing activities $ 123,421 $ 675,960 $ 146,041 $ 216,317 $ 51,973
Number of centers at year end 52 47 30 26 19
Weighted average number of
shares outstanding - basic (6) 46,130 43,016 37,982 32,934 26,930
Weighted average number of
shares outstanding - diluted (4)(6)(7) 60,893 43,628 38,403 33,320 26,984
Cash distributions
declared per common share $ 1.965 $ 1.865 $ 1.78 $ 1.70 $ 1.66
FFO per share - diluted (4) $ 2.698 $ 2.426 $ 2.172 $ 1.874 $ 1.669
</TABLE>
21
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA, CONTINUED
<TABLE>
<CAPTION>
The Company
------------------------------------------------------------------
December 31,
------------------------------------------------------------------
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
( All amounts in thousands)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Investment in real estate
(before accumulated depreciation) $2,174,535 $2,213,125 $1,607,429 $1,273,085 $ 833,998
Total assets $2,404,293 $2,322,056 $1,505,002 $1,187,753 $ 763,398
Total mortgage, notes and debentures
payable $1,561,127 $1,507,118 $1,122,959 $ 789,239 $ 485,193
Minority interest (1) $ 157,599 $ 165,524 $ 100,463 $ 112,242 $ 95,740
Stockholders' equity $ 620,286 $ 577,413 $ 216,295 $ 237,749 $ 158,345
</TABLE>
(1) "Minority Interest" reflects the ownership interest in the Operating
Partnership not owned by the REIT.
(2) Unconsolidated joint ventures include all Centers in which the Company
does not have a controlling ownership interest and the Management
Companies. The Management Companies have been reflected using the equity
method.
(3) Earnings per share is based on SFAS No. 128 for all years presented.
(4) Funds from Operations ("FFO") represents net income (loss) (computed in
accordance with generally accepted accounting principles ("GAAP")),
excluding gains (or losses) from debt restructuring and sales 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 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 for the
twelve month period ending December 31, 1998 are anti-dilutive and are not
included in the FFO calculation. The convertible debentures are dilutive
for the twelve month period ending December 31, 1999 and are included in
the FFO calculation. 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. The preferred stock can be
converted on a one-for-one basis for common stock. The preferred stock
was dilutive to FFO in 1998 and 1999 and the preferred stock and the
convertible debentures were dilutive to net income in 1999.
(5) EBITDA represents earnings before interest, income taxes, depreciation,
amortization, minority interest, equity in income (loss) of unconsolidated
entities, extraordinary items, gain (loss) on sale of assets and preferred
dividends. This data is relevant to an understanding of the economics of
the shopping center business as it indicates cash flow available from
operations to service debt and satisfy certain fixed obligations. EBITDA
should not be construed by the reader as an alternative to operating
income as an indicator of the Company's operating performance, or to cash
flows from operating activities (as determined in accordance with GAAP) or
as a measure of liquidity.
(6) Assumes that all OP Units are converted to common stock.
(7) Assumes issuance of common stock for in-the-money options and restricted
stock calculated using the Treasury method in accordance with SFAS No. 128
for all years presented.
22
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
GENERAL BACKGROUND AND PERFORMANCE MEASUREMENT
The Company believes that the most significant measures of its
operating performance are Funds from Operations and EBITDA. Funds from
Operations is defined as net income (loss) (computed in accordance with GAAP),
excluding gains (or losses) from debt restructuring and sales 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. Funds from Operations does not represent cash
flow from operations as defined by GAAP and is not necessarily indicative of
cash available to fund all cash flow needs.
EBITDA represents earnings before interest, income taxes, depreciation,
amortization, minority interest, equity in income (loss) of unconsolidated
entities, extraordinary items, gain (loss) on sale of assets and preferred
dividends. This data is relevant to an understanding of the economics of the
shopping center business as it indicates cash flow available from operations to
service debt and satisfy certain fixed obligations. EBITDA should not be
construed as an alternative to operating income as an indicator of the Company's
operating performance, or to cash flows from operating activities (as determined
in accordance with GAAP) or as a measure of liquidity. While the performance of
individual Centers and the Management Companies determines EBITDA, the Company's
capital structure also influences Funds from Operations. The most important
component in determining EBITDA and Funds from Operations is Center revenues.
Center revenues consist primarily of minimum rents, percentage rents and tenant
expense recoveries. Minimum rents will increase to the extent that new leases
are signed at market rents that are higher than prior rents. Minimum rents will
also fluctuate up or down with changes in the occupancy level. Additionally, to
the extent that new leases are signed with more favorable expense recovery
terms, expense recoveries will increase.
Percentage rents generally increase or decrease with changes in tenant
sales. As leases roll over, however, a portion of historical percentage rent is
often converted to minimum rent. It is therefore common for percentage rents to
decrease as minimum rents increase. Accordingly, in discussing financial
performance, the Company combines minimum and percentage rents in order to
better measure revenue growth.
The following discussion is based primarily on the consolidated
financial statements of the Company for the years ended December 31, 1999, 1998
and 1997. The following discussion compares the activity for the year ended
December 31, 1999 to results of operations for 1998. Also included is a
comparison of the activities for the year ended December 31, 1998 to the results
for the year ended December 31, 1997. This information should be read in
conjunction with the accompanying consolidated financial statements and notes
thereto.
FORWARD-LOOKING STATEMENTS
This annual report on Form 10-K contains or incorporates statements
that constitute forward-looking statements. Those statements appear in a number
of places in this Form 10-K 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 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; and
environmental and safety requirements. The Company will not update any
forward-looking information to reflect actual results or changes in the factors
affecting the forward-looking information.
23
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The following table reflects the Company's acquisitions in 1997, 1998
and 1999:
<TABLE>
<CAPTION>
Date
Acquired Location
-------- --------
<S> <C> <C>
"1997 ACQUISITION CENTERS":
South Towne Center March 27, 1997 Sandy, Utah
Stonewood Mall August 6, 1997 Downey, California
Manhattan Village (*) August 19, 1997 Manhattan Beach, California
The Citadel Mall December 19, 1997 Colorado Springs, Colorado
Great Falls Marketplace December 31, 1997 Great Falls, Montana
"1998 ACQUISITION CENTERS":
ERE/Yarmouth Portfolio (*) 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 located in Oregon and Ohio, respectively.
Los Cerritos Center (***) June 2, 1999 Cerritos, California
Santa Monica Place October 29, 1999 Santa Monica, California
</TABLE>
- --------------------------------------------------------------------------------
(*) denotes the Company owns these Centers through a joint venture
partnership.
(**) denotes the Company owns its interests in these Centers through one of the
Management Companies. On October 27, 1999 and November 12, 1999, Albany
Plaza and Eastland Plaza were sold, respectively.
(***) denotes the Company owned an interest in this Center through one of the
Management Companies from the date of acquisition through October 25,
1999. On October 26, 1999, 99% of the membership interests of the entity
owning this Center were contributed to Pacific Premier Retail Trust.
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.
24
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS - CONTINUED:
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 2000, and in future years, there will be
similar acquisitions and corresponding increases in revenues, net income and FFO
that occurred as a result of the 1999 and 1998 Acquisition Centers. Management
anticipates the pace of acquisitions to slow considerably in 2000 compared to
1999 and 1998. 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."
Huntington Center was sold on November 16, 1999. All other Centers, excluding
the 1999 and 1998 Acquisition Centers and Redevelopment Centers, are referred to
herein as the "Same Centers", unless the context otherwise requires.
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. Other retail
stores at the Centers may also seek the protection of bankruptcy laws and/or
close stores, which could result in the termination of such tenants leases and
thus cause a reduction in cash flow generated by the Centers.
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.
ASSETS AND LIABILITIES
Total assets increased to $2,404 million at December 31, 1999 compared
to $2,322 million at December 31, 1998 and $1,505 million at December 31, 1997.
During that same period, total liabilities increased from $1,188 million in 1997
to $1,579 million in 1998 and $1,626 million in 1999. These changes were
primarily a result of the 1998 common stock offerings of 7,920,181 shares, the
1998 preferred stock offerings of 9,114,602 shares, the 1997 offering of $161.4
million of debentures, the purchase of the 1999, 1998 and 1997 Acquisition
Centers and related debt transactions.
A. ACQUISITIONS AND JOINT VENTURE DEVELOPMENTS
On February 18, 1999, the Company, through a 51/49 joint venture with
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 $427.0 million. The purchase price was funded with a $120.0
million loan placed concurrently with the closing, $140.4 million of debt from
an affiliate of the seller, and $39.4 million 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 $111.0 million. The purchase price was funded with a $76.7 million
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. The two non-contiguous community shopping centers were
subsequently sold in October and November of 1999.
On June 2, 1999, Cerritos, a wholly-owned subsidiary of Macerich
Management Company, acquired Los Cerritos Center, a 1,304,262 square foot super
regional mall in Cerritos, California. The total purchase price was $188.0
million, which was funded with $120.0 million of debt placed concurrently with
the closing and a $70.8 million loan from the Company. The Company funded this
loan from borrowings under a $60.0 million bank loan agreement and the balance
from the Company's line of credit.
25
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS - CONTINUED:
ASSETS AND LIABILITIES - CONTINUED:
On October 26, 1999, 49% of the membership interests of Stonewood,
Cerritos and Lakewood were sold to Ontario Teachers' and concurrently Ontario
Teachers' and the Company contributed their 99% collective membership
interests in Stonewood and Cerritos and 100% of their collective membership
interests in Lakewood to PPRT, a real estate investment trust, owned
approximately 51% by the Company and 49% by Ontario Teachers. Lakewood,
Stonewood, and Cerritos own Lakewood Mall, Stonewood Mall and Los Cerritos
Center, respectively. The total value of the transaction was approximately
$535.0 million. The properties were contributed to PPRT subject to existing
debt of $322.0 million. The net cash proceeds to the Company were
approximately $104.0 million 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 560,623
square foot regional mall located in Santa Monica, California. The total
purchase price was $130.8 million, which was funded with $80.0 million of
debt placed concurrently with the closing with the balance funded from
proceeds from the PPRT transaction described above.
B. REFINANCINGS
On February 4, 1999, the Company refinanced the debt on Queens Center.
A $65.1 million floating rate loan was paid in full and a new note was issued
for $100.0 million bearing interest at a fixed rate of 6.88% and maturing March
1, 2009.
On February 17, 1999, the Company refinanced the debt on South Plains
Mall. A $28.4 million loan, at an effective interest rate of 6.3%, was paid in
full and a new note was issued for $65.0 million bearing interest at a fixed
rate of 8.22% and maturing March 1, 2009.
On April 30, 1999, the Company refinanced the debt on Carmel Plaza. A
$25.0 million floating rate loan was paid in full and a new note was issued for
$29.0 million bearing interest at a fixed rate of 8.18% and maturing May 1,
2009.
On October 8, 1999, the Company refinanced the debt on Village at Corte
Madera. A $60.0 million floating rate loan was paid in full and a new note was
issued for $72.0 million bearing interest at a fixed rate of 7.75% and maturing
November 1, 2009.
C. OTHER EVENTS
On November 15, 1999, the Company redeemed $25.1 million of OP Units
of the Operating Partnership for cash from various unit holders. A total of
1,266,687 of OP Units were redeemed for cash at the Company's option in lieu
of exchanging common stock for OP Units.
On November 16, 1999, the Company sold Huntington Center. Huntington
Center is a shopping center located in Huntington Beach, California, that was
purchased by the Company in December 1996. The Center was purchased as part of a
package with Fresno Fashion Fair in Fresno, California, and Pacific View
(formerly know as Buenaventura Mall) in Ventura, California. The Center was sold
for $48.0 million and the net cash proceeds from the sale were used for general
corporate purposes.
26
<PAGE>
RESULTS OF OPERATIONS
COMPARISON OF YEARS ENDED DECEMBER 31, 1999 AND 1998
REVENUES
Minimum and percentage rents increased by 14.1% to $219.7 million in
1999 from $192.6 million in 1998. Approximately $26.3 million of the
increase resulted from the 1998 Acquisition Centers, $1.9 million from the
1999 acquisition of Santa Monica Place and $5.2 million of the increase
was attributable to the Same Centers. These increases were partially
offset by revenue decreases at the Redevelopment Centers of $2.1 million
in 1999 and $4.2 million of the decrease related to the contribution of
100% and 99% of the membership interests of Lakewood Mall and Stonewood
Mall, respectively, to the PPRT joint venture on October 26,1999.
Tenant recoveries increased to $99.1 million in 1999 from $86.7
million in 1998. The 1998 Acquisition Centers generated $12.9 million of
this increase, $1.3 million was from the acquisition of Santa Monica
Place, and $1.9 million of the increase was from the Same Centers. These
increases were partially offset by revenue decreases at the Redevelopment
Centers of $2.1 million in 1999 and $1.6 million of the decrease resulted
from the contribution of Lakewood Mall and Stonewood Mall to the PPRT
joint venture.
Other income increased to $8.6 million in 1999 from $4.5 million in
1998. Approximately $0.7 million of the increase related to the 1998
Acquisition Centers and the 1999 acquisition of Santa Monica Place, and
$3.7 million of the increase was attributable to the Same Centers.
EXPENSES
Shopping center expenses increased to $100.3 million in 1999
compared to $90.0 million in 1998. Approximately $13.2 million of the
increase resulted from the 1998 Acquisition Centers and the 1999
acquisition of Santa Monica Place and $1.1 million of the increase
resulted from increased property taxes and recoverable expenses at the
Same Centers. The Redevelopment Centers had a net decrease of $2.0 million
in shopping center expenses resulting primarily from decreased property
taxes and recoverable expenses. The contribution of Lakewood Mall and
Stonewood Mall to the PPRT joint venture resulted in $2.0 million of this
decrease.
General and administrative expenses increased to $5.5 million in
1999 from $4.4 million in 1998 primarily as a result 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
attributable to higher executive and director compensation expense.
INTEREST EXPENSE
Interest expense increased to $113.3 million in 1999 from $91.4
million in 1998. This increase of $22.1 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 $61.4 million from $53.1 million in 1998.
This increase relates primarily to the 1998 and 1999 Acquisition Centers.
MINORITY INTEREST
The minority interest represents the 26.3% weighted average interest
of the Operating Partnership that was not owned by the Company during
1999. This compares to 28.4% not owned by the Company during 1998.
INCOME FROM UNCONSOLIDATED JOINT VENTURES AND MANAGEMENT COMPANIES
The income from unconsolidated joint ventures and the Management
Companies was $25.9 million for 1999, compared to income of $14.5 million
in 1998. A total of $3.2 million of the change is attributable to the 1998
acquisitions of SDG Macerich Properties, L.P. and $7.9 million of the
change is attributable to the 1999 acquisitions by Pacific Premier Retail
Trust.
27
<PAGE>
RESULTS OF OPERATIONS - CONTINUED:
COMPARISON OF YEARS ENDED DECEMBER 31, 1999 AND 1998
GAIN ON SALE OF ASSETS
A gain on sale of assets of $96.0 million is a result of the Company
selling approximately 49% of the membership interests of Stonewood and
Lakewood to Ontario Teachers' in October 1999 and the Company's sale
of Huntington Center on November 16, 1999.
EXTRAORDINARY LOSS FROM EARLY EXTINGUISHMENT OF DEBT
In 1999, the Company wrote off $1.5 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, including the gain on sale of assets,
net income available to common stockholders increased to $110.9 million in
1999 from $32.5 million in 1998.
OPERATING ACTIVITIES
Cash flow from operations was $139.6 million in 1999 compared to
$85.2 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 $247.7 million in 1999
compared to $761.1 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 $116.9 million in 1999,
and the proceeds from the sale of assets in 1999 of $106.9 million.
FINANCING ACTIVITIES
Cash flow from financing activities was $123.4 million in 1999
compared to $676.0 million in 1998. The decrease resulted from no equity
offerings in 1999 compared to 7,920,181 shares of common stock sold in
1998. Additionally, 9,114,602 shares of preferred stock were sold in the
first and second quarters of 1998.
EBITDA AND FUNDS FROM OPERATIONS
Primarily because of the factors mentioned above, EBITDA increased
16.9% to $221.6 million in 1999 from $189.5 million in 1998 and Funds from
Operations - Diluted increased 36.3% to $164.3 million from $120.5 million
in 1998.
28
<PAGE>
RESULTS OF OPERATIONS - CONTINUED:
COMPARISON OF YEARS ENDED DECEMBER 31, 1998 AND 1997
REVENUES
Minimum and percentage rents increased by 27% to $192.6 million in
1998 from $151.5 million in 1997. Approximately $18.9 million of the
increase resulted from the 1997 Acquisition Centers, $18.8 million
resulted from the 1998 Acquisition Centers and $5.0 million of the
increase was attributable to the Same Centers. These increases were
partially offset by revenue decreases at the Redevelopment Centers of $1.6
million in 1998.
Tenant recoveries increased to $86.7 million in 1998 from $66.5
million in 1997. The 1998 and 1997 Acquisition Centers generated $17.7
million of this increase and $2.2 million of the increase was from the
Same Centers.
Other income increased to $4.5 million in 1998 from $3.2 million in
1997. Approximately $0.6 million of the increase related to the 1998 and
1997 Acquisition Centers, $0.7 million of the increase was attributable to
the Same Centers and the Redevelopment Centers.
EXPENSES
Shopping center expenses increased to $90.0 million in 1998 compared
to $70.9 million in 1997. Approximately $17.3 million of the increase
resulted from the 1998 and 1997 Acquisition Centers. The other Centers had
a net increase of $1.8 million in shopping center expenses resulting
primarily from increased property taxes and recoverable expenses.
General and administrative expenses increased to $4.4 million in
1998 from $2.8 million in 1997 primarily due to the accounting change
required by EITF 97-11, "Accounting for Internal Costs Relating to Real
Estate Property Acquisitions," which requires the expensing of internal
acquisition costs. Previously in accordance with GAAP, certain internal
acquisition costs were capitalized. The increase is also attributable to
higher executive and director compensation expense.
INTEREST EXPENSE
Interest expense increased to $91.4 million in 1998 from $66.4
million in 1997. This increase of $25.0 million is primarily attributable
to the acquisition activity in 1997 and 1998, which was partially funded
with secured debt and borrowings under the Company's line of credit. In
addition, in June and July of 1997, the Company issued $161.4 million of
convertible debentures, which contributed to $5.7 million of this
increase.
DEPRECIATION AND AMORTIZATION
Depreciation and amortization increased to $53.1 million from $41.5
million in 1997. This increase relates primarily to the 1997 and 1998
Acquisition Centers.
MINORITY INTEREST
The minority interest represents the 28.4% weighted average interest
of the Operating Partnership that was not owned by the Company during
1998. This compares to 31.8% not owned by the Company during 1997.
29
<PAGE>
RESULTS OF OPERATIONS - CONTINUED:
COMPARISON OF YEARS ENDED DECEMBER 31, 1998 AND 1997 - CONTINUED:
INCOME (LOSS) FROM UNCONSOLIDATED JOINT VENTURES AND MANAGEMENT COMPANIES
The income from unconsolidated joint ventures and the Management
Companies was $14.5 million for 1998, compared to a loss of $8.1 million
in 1997. A total of $14.5 million of the change is attributable to the
1998 acquisition of the ERE/Yarmouth portfolio. Also, in 1997, there was a
write-down and loss of $10.5 million on the sale of North Valley Plaza.
GAIN ON SALE OF ASSETS
During 1997, the Company sold a parcel of land for a net gain of
$1.6 million compared to a minimal amount of gain on sale recognized in
1998.
EXTRAORDINARY LOSS FROM EARLY EXTINGUISHMENT OF DEBT
In 1998, the Company wrote off $2.4 million of unamortized financing
costs, compared to $0.6 million written off in 1997.
NET INCOME AVAILABLE TO COMMON STOCKHOLDERS
As a result of the foregoing, net income available to common
stockholders increased to $32.5 million in 1998 from $22.0 million in
1997.
OPERATING ACTIVITIES
Cash flow from operations was $85.2 million in 1998 compared to
$78.4 million in 1997. The increase resulted from the factors discussed
above, primarily the impact of the 1997 and 1998 Acquisition Centers.
INVESTING ACTIVITIES
Cash flow used in investing activities was $761.1 million in 1998
compared to $215.0 million in 1997. The change resulted primarily from the
higher volume of acquisition activity completed in 1998 compared to 1997.
FINANCING ACTIVITIES
Cash flow from financing activities was $676.0 million in 1998
compared to $146.0 million in 1997. The increase resulted from the
offerings of 7,920,181 shares of common stock, 3,627,131 shares of Series
A Preferred Stock and 5,487,471 shares of Series B Preferred Stock
completed in 1998. No equity was raised in 1997.
EBITDA AND FUNDS FROM OPERATIONS
Primarily because of the factors mentioned above, EBITDA increased
28% to $189.5 million in 1998 from $147.6 million in 1997 and Funds from
Operations - Diluted increased 44% to $120.5 million from $83.4 million in
1997.
30
<PAGE>
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. See "Item 2. Properties." 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. The Company believes such
joint venture arrangements provide an attractive alternative to other
forms of financing. See "Acquisitions and Joint Venture Developments."
The Company's total outstanding loan indebtedness at December 31,
1999 was $2.2 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 66% at December 31, 1999. The Company's debt
consists primarily of fixed-rate conventional mortgages payable secured by
individual properties. See "Properties-Mortgage Debt" for a description of
the Company's outstanding mortgage indebtedness.
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.
The Company has an unsecured line of credit for up to $150.0
million. There was $57.4 million of borrowings outstanding at December 31,
1999.
At December 31, 1999, the Company had cash and cash equivalents
available of $40.5 million.
31
<PAGE>
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 COMPLIANCE PROGRAM
Approximately two years ago, the Company initiated a Year 2000
compliance program which consisted 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 included a review of both information technology
("IT") and non-IT systems of the Company's offices and the Centers in which
the Company has an ownership interest and manages. In addition, material
tenants, anchors and vendors of the Centers were surveyed for Year 2000
compliance and contingency plans were prepared for each Center.
YEAR 2000 COMPLIANCE PROGRAM RESULTS
Two of the key dates of the Company's Year 2000 program were January 1,
2000 and February 29, 2000. The Company encountered no Year 2000 compliance
issues with any operating system, material tenant, anchor and/or vendor on
either date because the Company was able to successfully identify and address
the potential Year 2000 issues in advance.
COSTS
The Company was able to minimize costs by using its own personnel to
administer the Year 2000 program. No outside consultants or third parties
were hired except for testing purposes. The preliminary final costs for the
Company's Year 2000 program were approximately $120,000 and consisted of the
following:
(a) IT SYSTEMS: One IT hardware system needed a Year 2000 upgrade at a
cost of $13,100.
(b) NON-IT SYSTEMS: Certain critical systems, 14 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. Replacement
and/or remediation of all non-IT systems at the Centers and offices
cost the Company approximately $47,194.
(c) ELECTRICAL INSPECTION: The electrical infrastructure of each Center
was inspected to ensure Year 2000 compliance at an estimated cost of
approximately $13,230.
(d) TESTING OF CRITICAL SYSTEM: All date-sensitive critical operating
systems at each Center and office were tested to ensure Year 2000
compliance. In most cases outside vendors tested the system and
charged a fee. The Company's total testing costs were approximately
$9,125.
(e) SECURITY CONTINGENCY PLANS: Each Center implemented security
contingency plans. The aggregate costs of approximately $37,500
included the costs associated with hiring additional personnel and
obtaining necessary equipment and back-up supplies ranging from
emergency generators to flashlights.
(f) PERSONNEL: The Company did 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 were part
of the Year 2000 program.
32
<PAGE>
FUNDS FROM OPERATIONS
The Company believes that the most significant measure of its
performance is 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>
1999 1998
----------------------- ----------------------
Shares Amount Shares Amount
--------- --------- --------- ---------
(amounts in thousands)
<S> <C> <C> <C> <C>
Net income - available to common stockholders $ 110,873 $ 32,528
Adjustments to reconcile net income to FFO-basic:
Minority interest 38,335 12,902
Loss on early extinguishment of debt 1,478 2,435
Gain on sale of wholly-owned assets (95,981) (9)
Loss on sale or write-down of assets from
unconsolidated entities (pro rata) 193 143
Depreciation and amortization on wholly owned centers 61,383 53,141
Depreciation and amortization on joint ventures and
from the management companies (pro rata) 19,715 10,879
Less: depreciation on personal property and
amortization of loan costs and interest rate caps (4,271) (3,716)
--------- ---------
FFO - basic (1) 46,130 $ 131,725 43,016 $ 108,303
Additional adjustment to arrive at FFO-diluted
Impact of convertible preferred stock 9,115 18,138 6,058 11,547
Impact of stock options and restricted stock using
the treasury method 462 1,823 612 668
Impact of convertible debentures 5,186 12,616 (n/a anti-dilutive)
--------- --------- --------- ---------
FFO - diluted (2) 60,893 $ 164,302 49,686 $ 120,518
========= ========= ========= =========
</TABLE>
33
<PAGE>
FUNDS FROM OPERATIONS, CONTINUED:
(1) Calculated based upon basic net income as adjusted to reach basic
FFO. Weighted average number of shares includes the weighted average
shares of common stock outstanding for 1999 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 for the twelve month period ending December 31, 1998 were
anti-dilutive and were not included in the FFO calculation. The
debentures are dilutive at December 31, 1999 and are included in the
FFO calculation. 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. The preferred stock
can be converted on a one-for-one basis for common stock. The
preferred shares are assumed converted for purposes of 1999 net
income as they are dilutive to that calculation. The preferred
shares are anti-dilutive to net income for 1998. The preferred
shares are assumed converted for purposes of FFO-diluted per share
as they are dilutive to that calculation.
Included in minimum rents were rents attributable to the accounting
practice of straight lining of rents. The amount of straight lining of
rents that impacted minimum rents was $2,628,000 for 1999, $3,814,000 for
1998 and $3,599,000 for 1997.
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, plus the
accounting change discussed below for percentage rent, earnings are generally
higher in the fourth quarter of each year.
NEW PRONOUNCEMENTS ISSUED
In May 1998, the Financial Accounting Standards Board ("FASB"),
through the Emerging Issues Task Force ("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" ("EITF
98-9"). The Company applied this accounting change as of April 1, 1998. The
accounting change had the effect of deferring $3,241,000, including the pro
rata share of joint ventures, of percentage rent from the second and third
quarters of 1998 to the quarter ended December 31, 1998. During the fourth
quarter of 1998, the FASB reversed EITF 98-9. Accordingly, the Company
resumed accounting for percentage rent on the accrual basis for 1999. In
December 1999, the Securities and Exchange Committee issued Staff Accounting
Bulletin 101, "Revenue Recognition in Financial Statements," ("SAB 101")
which will be effective for periods beginning after December 15, 1999. This
bulletin again modified the timing of revenue recognition for percentage rent
received from tenants and adopted the method mandated by EITF 98-9. The
Company expects this change to defer recognition of a significant amount of
percentage rent for the first three calendar quarters into the fourth
quarter. The Company applied this accounting change as of January 1, 2000.
Estimates of the effects of this change have not yet been determined.
In June 1998, the FASB issued Statement of Financial Accounting
Standard ("SFAS") 133, "Accounting for Derivative Instruments and Hedging
Activities," ("SFAS 133") which requires companies to record derivatives on
the balance sheet, measured at fair value. Changes in the fair values of
those derivatives will be accounted for depending on the use of the
derivative and whether it qualifies for hedge accounting. The key criterion
for hedge accounting is that the hedging relationship must be highly
effective in achieving offsetting changes in fair value or cash flows. In
June 1999, the FASB issued SFAS 137, "Accounting for Derivative Instruments
and Hedging Activities," which delays the implementation of SFAS 133 from
January 1, 2000 to January 1, 2001. The Company has not yet determined when
it will implement SFAS 133 nor has it completed the analysis required
to determine the impact on its financial statements.
34
<PAGE>
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company's primary market risk exposure is interest rate risk.
The Company has managed and will continue to manage interest rate risk by
(1) maintaining a 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 December 31, 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)
2000 2001 2002 2003 2004 Thereafter Total FV
--------- --------- --------- --------- --------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Long term debt:
Fixed rate $ 39,264 $ 108,479 $ 11,717 $ 101,229 $ 127,705 $ 801,263 $1,189,657 $1,130,015
Average interest rate 7.40% 7.37% 7.37% 7.33% 7.34% 7.34% 7.38% --
Fixed rate - Debentures -- -- 161,400 -- -- -- 161,400 157,175
Average interest rate -- -- 7.25% -- -- -- 7.25% --
Variable rate -- 210,069 -- -- -- -- 210,069 210,069
Average interest rate -- 7.37% -- -- -- -- 7.37% --
--------- --------- --------- --------- --------- ---------- ---------- ----------
Total debt - Wholly owned Centers $ 39,264 $ 318,548 $ 173,117 $ 101,229 $ 127,705 $ 801,263 $1,561,126 $1,497,259
--------- --------- --------- --------- --------- ---------- ---------- ----------
Joint Venture Centers:
(at Company's pro rata share)
Fixed rate $ 26,515 $ 6,498 $ 6,939 $ 7,413 $ 7,913 $ 452,146 $ 507,424 $ 461,553
Average interest rate 6.65% 6.65% 6.65% 6.65% 6.65% 6.55% 6.64% --
Variable rate -- 38,250 -- 92,500 -- -- 130,750 130,750
Average interest rate -- 8.23% -- 6.15% -- -- 6.76% --
--------- --------- --------- --------- --------- ---------- ---------- ----------
Total debt - Joint Ventures $ 26,515 $ 44,748 $ 6,939 $ 99,913 $ 7,913 $ 452,146 $ 638,174 $ 592,303
--------- --------- --------- --------- --------- ---------- ---------- ----------
Total debt - All Centers $ 65,779 $ 363,296 $ 180,056 $ 201,142 $ 135,618 $1,253,409 $2,199,300 $2,089,562
========= ========= ========= ========= ========= ========== ========== ==========
</TABLE>
$57.4 million of variable debt maturing in 2001 represents the outstanding
borrowings under the Company's credit facility. The credit facility
matures in February 2001.
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 $3.4 million per year
based on $340.8 million outstanding at December 31, 1999.
The fair value of the Company's long term debt is estimated based on
discounted cash flows at interest rates that management believes reflects
the risks associated with long term debt of similar risk and duration.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Refer to the Index to Financial Statements and Financial Statement
Schedules for the required information.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
35
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY.
There is hereby incorporated by reference the information which appears
under the captions "Election of Directors," "Executive Officers" and "Section 16
Reporting" in the Company's definitive proxy statement for its 2000 Annual
Meeting of Stockholders.
ITEM 11. EXECUTIVE COMPENSATION.
There is hereby incorporated by reference the information which appears
under the caption "Executive Compensation" in the Company's definitive proxy
statement for its 2000 Annual Meeting of Stockholders; provided, however, that
neither the Report of the Compensation Committee on executive compensation nor
the Stock Performance Graph set forth therein shall be incorporated by reference
herein, in any of the Company's prior or future filings under the Securities Act
of 1933, as amended, or the Securities Exchange Act of 1934, as amended, except
to the extent the Company specifically incorporates such report or stock
performance graph by reference therein and shall not be otherwise deemed filed
under either of such Acts.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
There is hereby incorporated by reference the information which appears
under the captions "Principal Stockholders," "Information Regarding Nominees and
Directors" and "Executive Officers" in the Company's definitive proxy statement
for its 2000 Annual Meeting of Stockholders.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
There is hereby incorporated by reference the information which appears
under the captions "Certain Transactions" in the Company's definitive proxy
statement for its 2000 Annual Meeting of Stockholders.
36
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, FINANCIAL STATEMENT SCHEDULES AND
REPORTS ON FORM 8-K
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
(a) 1. Financial Statements of the Company
Report of Independent Accountants........................................................... 39
Consolidated balance sheets of the Company as of December 31, 1999 and 1998................. 40
Consolidated statements of operations of the Company for the years ended December 31,
1999, 1998 and 1997......................................................................... 41
Consolidated statements of stockholders' equity of the Company for the years ended
December 31, 1999, 1998 and 1997............................................................ 42
Consolidated statements of cash flows of the Company for the years ended December 31,
1999, 1998 and 1997......................................................................... 43
Notes to consolidated financial statements.................................................. 44-64
2. Financial Statements of Pacific Premier Retail Trust
Report of Independent Accountants........................................................... 65
Consolidated balance sheet of Pacific Premier Retail Trust as of December 31, 1999.......... 66
Consolidated statement of operations of Pacific Premier Retail Trust for the period from
February 18, 1999 (Inception) through December 31, 1999..................................... 67
Consolidated statement of stockholders' equity of Pacific Premier Retail Trust for the
period from February 18, 1999 (Inception) through December 31,1999.......................... 68
Consolidated statement of cash flows of Pacific Premier Retail Trust for the
period from February 18, 1999 (Inception) through December 31, 1999......................... 69
Notes to consolidated financial statements.................................................. 70-75
3. Financial Statements of SDG Macerich Properties, L.P.
Independent Auditors' Report................................................................ 76
Balance sheets of SDG Macerich Properties, L.P. as of December 31, 1999 and 1998 ........... 77
Statements of operations of SDG Macerich Properties, L.P. for the years ended December 31,
1999 and 1998..................................... ......................................... 78
Statements of cash flows of SDG Macerich Properties, L.P. for the years ended December 31,
1999 and 1998..................................... ......................................... 79
Statements of partners' equity of SDG Macerich Properties, L.P. for the years ended
December 31, 1999 and 1998.................................................................. 80
Notes to financial statements............................................................... 81-83
</TABLE>
37
<PAGE>
<TABLE>
<CAPTION>
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON PAGE
FORM 8-K, CONTINUED: ----
<S> <C>
4. Financial Statement Schedules
Schedule III - Real estate and accumulated depreciation of the Company...................... 84-85
Schedule III - Real estate and accumulated depreciation of Pacific Premier Retail Trust..... 86
Schedule III - Real estate and accumulated depreciation of SDG Macerich Properties, L.P..... 87
(b) 1. Reports on Form 8-K
A report on Form 8-K dated March 4, 1999, event date
February 18, 1999, was filed with the Securities and
Exchange Commission for the purpose of disclosing the
acquisition of three regional malls, the retail component
of one mixed-use development and five contiguous properties
by Pacific Premier Retail Trust.............................................................
A report on Form 8-K/A, Amendment No. 1, dated April 21,
1999, event date February 18, 1999, was filed with the
Securities and Exchange Commission for the purpose of
disclosing certain financial statements and pro forma
financial information regarding the acquisition of three
regional Malls, the retail component of one mixed-use
development and five contiguous properties by Pacific
Premier Retail Trust........................................................................
A report on Form 8-K dated June 14, 1999, event date June
2, 1999, was filed with the Securities and Exchange
Commission for the purpose of disclosing the acquisition of
Los Cerritos Center.........................................................................
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........................................................................
A report of Form 8-K dated November 10, 1999, event date
October 26, 1999, was filed with the Securities and
Exchange Commission ("SEC") for the purpose of disclosing
(i) the acquisition of Santa Monica Place by an indirect
subsidiary of the Company and (ii) the contribution of
membership interests in Macerich Stonewood, LLC, Macerich
Cerritos, LLC and Lakewood Mall, LLC to Pacific Premier
Retail Trust................................................................................
A report on Form 8-K dated November 30, 1999, event date
November 16, 1999, was filed with the SEC for the purpose
of disclosing the sale of Huntington Center located in
Huntington Beach, California................................................................
(c) 1. Exhibits
The Exhibit Index attached hereto is incorporated by
reference under this item...................................................................
</TABLE>
38
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of The Macerich Company:
We have audited the consolidated financial statements and financial statement
schedule of The Macerich Company ("the Company") as listed in Items 14(a)(1)
and (4) of this Form 10-K. These financial statements and financial statement
schedule are the responsibility of the Company's management. Our
responsibility is to express an opinion on these statements and financial
statement schedule based on our audits. We did not audit the financial
statements of SDG Macerich Properties, L.P. (the "Partnership") the
investment in which is reflected in the accompanying consolidated financial
statements using the equity method of accounting. The investment in the
Partnership represents approximately 10% of 1999 and 1998 consolidated total
assets of the Company, and the equity in its net income represents
approximately 6% and 33% of the Company's 1999 and 1998 consolidated net
income, respectively. Those statements were audited by other auditors whose
report has been furnished to us and our opinion, insofar as it relates to the
amounts included for the Partnership, is based solely on the report of the
other auditors.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits and the report of the other auditors
provide a reasonable basis for our opinion.
In our opinion, based on our audits and the report of the other auditors, the
financial statements referred to above present fairly, in all material
respects, the consolidated financial position of The Macerich Company as of
December 31, 1999 and 1998, and the consolidated results of its operations
and its cash flows for the years ended December 31, 1999, 1998 and 1997, in
conformity with accounting principles generally accepted in the United
States. In addition, in our opinion, the financial statement schedule
referred to above, when considered in relation to the basic financial
statements taken as a whole, presents fairly, in all material respects, the
information required to be included therein.
PricewaterhouseCoopers LLP
Los Angeles, California
February 14, 2000
39
<PAGE>
THE MACERICH COMPANY
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
December 31,
------------------------------------------
1999 1998
---- ----
<S> <C> <C>
ASSETS:
Property, net $1,931,415 $1,966,845
Cash and cash equivalents 40,455 25,143
Tenant receivables, including accrued overage rents of
$7,367 in 1999 and $5,917 in 1998 34,423 37,373
Deferred charges and other assets, net 55,065 62,673
Investments in joint ventures and the Management Companies 342,935 230,022
-------------------- --------------------
Total assets $2,404,293 $2,322,056
==================== ====================
LIABILITIES AND STOCKHOLDERS' EQUITY:
Mortgage notes payable:
Related parties $133,876 $134,625
Others 1,105,180 1,074,093
-------------------- --------------------
Total 1,239,056 1,208,718
Bank notes payable 160,671 137,000
Convertible debentures 161,400 161,400
Accounts payable and accrued expenses 27,815 27,701
Due to affiliates 6,969 2,953
Other accrued liabilities 25,849 36,927
Preferred stock dividend payable 4,648 4,420
-------------------- --------------------
Total liabilities 1,626,408 1,579,119
Minority interest in Operating Partnership 157,599 165,524
-------------------- --------------------
Commitments and contingencies (Note 11)
Stockholders' equity:
Series A cumulative convertible redeemable preferred stock, $.01 par
value, 3,627,131 shares authorized, issued and
outstanding at December 31, 1999 and 1998 36 36
Series B cumulative convertible redeemable preferred stock, $.01 par
value, 5,487,471 shares authorized, issued and
outstanding at December 31, 1999 and 1998 55 55
Common stock, $.01 par value, 100,000,000 shares
authorized, 34,072,625 and 33,901,963 shares issued and
outstanding at December 31, 1999 and 1998, respectively 338 338
Additional paid in capital 582,837 581,508
Accumulated earnings 43,514 -
Unamortized restricted stock (6,494) (4,524)
-------------------- --------------------
Total stockholders' equity 620,286 577,413
-------------------- --------------------
Total liabilities and stockholders' equity $2,404,293 $2,322,056
==================== ====================
</TABLE>
The accompanying notes are an integral part of these financial statements.
40
<PAGE>
THE MACERICH COMPANY
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
For the years ended
December 31,
-----------------------------------------------------------
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
REVENUES:
Minimum rents $204,568 $179,710 $142,251
Percentage rents 15,106 12,856 9,259
Tenant recoveries 99,126 86,740 66,499
Other 8,644 4,555 3,205
------------------ ------------------ -------------------
Total revenues 327,444 283,861 221,214
------------------ ------------------ -------------------
EXPENSES:
Shopping center expenses 100,327 89,991 70,901
General and administrative expense 5,488 4,373 2,759
------------------ ------------------ -------------------
105,815 94,364 73,660
------------------ ------------------ -------------------
Interest expense:
Related parties 10,170 10,224 10,287
Others 103,178 81,209 56,120
------------------ ------------------ -------------------
Total interest expense 113,348 91,433 66,407
------------------ ------------------ -------------------
Depreciation and amortization 61,383 53,141 41,535
Equity in income (loss) of
unconsolidated joint ventures
and the management companies 25,945 14,480 (8,063)
Gain on sale of assets 95,981 9 1,619
------------------ ------------------ -------------------
Income before minority interest
and extraordinary item 168,824 59,412 33,168
Extraordinary loss on early
extinguishment of debt (1,478) (2,435) (555)
------------------ ------------------ -------------------
Income of the Operating Partnership 167,346 56,977 32,613
Less minority interest in net income
of the Operating Partnership 38,335 12,902 10,567
------------------ ------------------ -------------------
Net income 129,011 44,075 22,046
Less preferred dividends 18,138 11,547 -
------------------ ------------------ -------------------
Net income available to common stockholders $110,873 $32,528 $22,046
================== ================== ===================
Earnings per common share - basic:
Income before extraordinary item $3.30 $1.14 $0.86
Extraordinary item (0.04) (0.08) (0.01)
------------------ ------------------ -------------------
Net income - available to common stockholders $3.26 $1.06 $0.85
================== ================== ===================
Weighted average number of common shares
outstanding - basic 34,007,000 30,805,000 25,891,000
================== ================== ===================
Weighted average number of common shares
outstanding - basic, assuming full conversion
of operating units outstanding 46,130,000 43,016,000 37,982,000
================== ================== ===================
Earnings per common share - diluted:
Income before extraordinary item $3.01 $1.11 $0.86
Extraordinary item (0.02) (0.05) (0.01)
------------------ ------------------ -------------------
Net income - available to common stockholders $2.99 $1.06 $0.85
================== ================== ===================
Weighted average number of common shares
outstanding - diluted for EPS 60,893,000 43,628,000 38,403,000
================== ================== ===================
</TABLE>
The accompanying notes are an integral part of these financial statements.
41
<PAGE>
THE MACERICH COMPANY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
Common Preferred
Common Preferred Stock Stock
Stock Stock Par Par
(# Shares) (# of Shares) Value Value
---------- ------------- ----- ------
<S> <C> <C> <C> <C>
Balance December 31, 1996 25,743,000 - $257 -
Issuance costs
Issuance of restricted stock 89,958
Unvested restricted stock (89,958)
Restricted stock vested in 1997 8,248
Exercise of stock options 253,552 3
Distributions paid ($1.78 per share)
Net income
Adjustment to reflect minority
interest on a pro rata basis
according to year end ownership
percentage of Operating Partnership
---------- ----------- ------ ------
Balance December 31, 1997 26,004,800 - 260 -
Common stock issued to public 7,828,124 78
Preferred stock issued 9,114,602 $91
Issuance costs
Issuance of restricted stock 83,018
Unvested restricted stock (83,018)
Restricted stock vested in 1998 26,039
Exercise of stock options 43,000
Distributions paid ($1.865) per share
Net income
Adjustment to reflect minority interest
on a pro rata basis according to year
end ownership percentage of
Operating Partnership
---------- ----------- ------ ------
Balance December 31, 1998 33,901,963 9,114,602 338 91
Issuance costs
Issuance of restricted stock 176,600
Unvested restricted stock (176,600)
Restricted stock vested in 1999 51,675
Exercise of stock options 88,250
Distributions paid ($1.965) per share
Net income
Conversion of OP units to common stock 30,737
Adjustment to reflect minority interest
on a pro rata basis according to year
end ownership percentage of
Operating Partnership
---------- ----------- ------ ------
Balance December 31, 1999 34,072,625 9,114,602 $338 $91
========== =========== ====== ======
</TABLE>
<TABLE>
<CAPTION>
Additional Unamortized Total
Paid In Accumulated Restricted Stockholders'
Capital Earnings Stock Equity
-------- --------- ------ ------
<S> <C> <C> <C> <C>
Balance December 31, 1996 $238,346 - ($854) $237,749
Issuance costs (352) (352)
Issuance of restricted stock 2,471 2,471
Unvested restricted stock (2,471) (2,471)
Restricted stock vested in 1997 239 239
Exercise of stock options 2,410 2,413
Distributions paid ($1.78 per share) (24,061) ($22,046) (46,107)
Net income 22,046 22,046
Adjustment to reflect minority
interest on a pro rata basis
according to year end ownership
percentage of Operating Partnership 307 307
---------- ----------- ------- --------
Balance December 31, 1997 219,121 - (3,086) 216,295
Common stock issued to public 214,562 214,640
Preferred stock issued 249,909 250,000
Issuance costs (13,813) (13,813)
Issuance of restricted stock 2,383 2,383
Unvested restricted stock (2,383) (2,383)
Restricted stock vested in 1998 945 945
Exercise of stock options 839 839
Distributions paid ($1.865) per share (24,464) (32,528) (56,992)
Net income 32,528 32,528
Adjustment to reflect minority interest
on a pro rata basis according to year
end ownership percentage of
Operating Partnership (67,029) (67,029)
---------- ----------- ------- --------
Balance December 31, 1998 581,508 - (4,524) 577,413
Issuance costs (198) (198)
Issuance of restricted stock 4,007 4,007
Unvested restricted stock (4,007) (4,007)
Restricted stock vested in 1999 2,037 2,037
Exercise of stock options 1,705 1,705
Distributions paid ($1.965) per share (67,359) (67,359)
Net income 110,873 110,873
Conversion of OP units to common stock 441 441
Adjustment to reflect minority interest
on a pro rata basis according to year
end ownership percentage of
Operating Partnership (4,626) (4,626)
---------- ----------- ------- --------
Balance December 31, 1999 $582,837 $43,514 ($6,494) $620,286
========== =========== ======= ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
42
<PAGE>
THE MACERICH COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31,
----------------------------------------
1999 1998 1997
----------- --------------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income - available to common stockholders $110,873 $32,528 $22,046
Preferred dividends 18,138 11,547 -
----------- ----------- -----------
Net income 129,011 44,075 22,046
Adjustments to reconcile net income to
net cash provided by operating activities:
Extraordinary loss on early extinguishment of debt 1,478 2,435 555
Gain on sale of assets (95,981) (9) (1,619)
Depreciation and amortization 61,383 53,141 41,535
Amortization of net discount (premium) on trust deed note payable 191 (635) 33
Minority interest in the net income of the Operating Partnership 38,335 12,902 10,567
Changes in assets and liabilities:
Tenant receivables, net (3,174) (13,677) (504)
Other assets 9,817 (19,772) (10,899)
Accounts payable and accrued expenses 2,407 10,366 1,938
Due to affiliates 4,059 (12,156) 14,679
Other liabilities (8,178) 4,086 145
Accrued preferred stock dividend 228 4,420 -
----------- ----------- -----------
Total adjustments 10,565 41,101 56,430
----------- ----------- -----------
Net cash provided by operating activities 139,576 85,176 78,476
----------- ----------- -----------
Cash flows from investing activities:
Acquisitions of property and improvements (142,564) (481,735) (199,729)
Renovations and expansions of centers (74,560) (40,545) (12,929)
Tenant allowances (7,213) (5,383) (2,599)
Deferred charges (17,352) (14,536) (12,542)
Equity in (income) loss of unconsolidated joint ventures and
the management companies (25,945) (14,480) 8,063
Distributions from joint ventures 29,989 32,623 8,181
Contributions to joint ventures (116,944) (240,196) (7,783)
Loans to affiliates - 3,105 -
Proceeds from sale of assets 106,904 - 4,332
----------- ----------- -----------
Net cash used in investing activities (247,685) (761,147) (215,006)
----------- ----------- -----------
Cash flows from financing activities:
Proceeds from mortgages, notes and debentures payable 584,270 480,348 331,400
Payments on mortgages and notes payable (328,452) (165,671) (119,515)
Net proceeds from equity offerings - 450,828 -
Dividends and distributions (114,259) (77,998) (65,844)
Dividends to preferred shareholders (18,138) (11,547) -
----------- ----------- -----------
Net cash provided by financing activities 123,421 675,960 146,041
----------- ----------- -----------
Net increase (decrease) in cash 15,312 (11) 9,511
Cash and cash equivalents, beginning of period 25,143 25,154 15,643
----------- ----------- -----------
Cash and cash equivalents, end of period $40,455 $25,143 $25,154
=========== =========== ===========
Supplemental cash flow information:
Cash payment for interest, net of amounts capitalized $112,399 $89,543 $65,475
=========== =========== ===========
Non-cash transactions:
Acquisition of property by assumption of debt - $70,116 $121,800
=========== =========== ===========
Acquisition of property by issuance of OP Units - $7,917 -
=========== =========== ===========
Contributions of liabilities in excess of assets to joint venture $8,820 - -
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
43
<PAGE>
THE MACERICH COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
1. ORGANIZATION AND BASIS OF PRESENTATION:
The Macerich Company (the "Company") commenced operations effective
with the completion of its initial public offering (the "IPO") on March 16,
1994. The Company is the sole general partner of and holds an 80% ownership
interest in The Macerich Partnership, L. P. (the "Operating Partnership").
The interests in the Operating Partnership are known as OP Units. OP Units
not held by the Company are redeemable, subject to certain restrictions, on
a one-for-one basis, for the Company's common stock or cash at the
Company's option.
The Company was organized to qualify as a real estate investment trust
("REIT") under the Internal Revenue Code of 1986, as amended. The 20%
limited partnership interest of the Operating Partnership not owned by the
Company is reflected in these financial statements as minority interest.
The property management, leasing and redevelopment of the Company's
portfolio is provided by the Macerich Management Company, Macerich Property
Management Company and Macerich Manhattan Management Company, all
California corporations (together referred to hereafter as the "Management
Companies"). The non-voting preferred stock of the Macerich Management
Company and Macerich Property Management Company is owned by the Operating
Partnership, which provides the Operating Partnership the right to receive
95% of the distributable cash flow from the Management Companies. Macerich
Manhattan Management Company is a 100% subsidiary of Macerich Management
Company.
BASIS OF PRESENTATION:
The consolidated financial statements of the Company include the
accounts of the Company and the Operating Partnership. The properties in
which the Operating Partnership does not have a controlling interest in,
and the Management Companies, have been accounted for under the equity
method of accounting. These entities are reflected on the Company's
consolidated financial statements as "Investments in joint ventures and the
Management Companies."
All significant intercompany accounts and transactions have been
eliminated in the consolidated financial statements.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
CASH AND CASH EQUIVALENTS:
The Company considers all highly liquid investments with an original
maturity of 90 days or less when purchased to be cash equivalents, for
which cost approximates market. Included in cash is restricted cash of
$1,418 at December 31, 1999 and $5,954 at December 31, 1998.
TENANT RECEIVABLES:
Included in tenant receivables are allowances for doubtful accounts of
$1,752 and $1,707 at December 31, 1999 and 1998, respectively.
REVENUES:
Minimum rental revenues are recognized on a straight-line basis over
the terms of the related lease. The difference between the amount of rent
due in a year and the amount recorded as rental income is referred to as
the "straight lining of rent adjustment." Rental income was increased by
$2,628 in 1999, $3,814 in 1998 and $3,599 in 1997 due to the straight
lining of rent adjustment. Percentage rents are recognized on an accrual
basis. Recoveries from tenants for real estate taxes, insurance and other
shopping center operating expenses are recognized as revenues in the period
the applicable costs are incurred.
The Management Companies provide property management, leasing,
corporate, redevelopment and acquisition services to affiliated and
non-affiliated shopping centers. In consideration for these services, the
Management Companies receive monthly management fees generally ranging from
1.5% to 5% of the gross monthly rental revenue of the properties managed.
44
<PAGE>
THE MACERICH COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED:
PROPERTY:
Costs related to the redevelopment, construction and improvement of
properties are capitalized. Interest costs are capitalized until
construction is substantially complete.
Expenditures for maintenance and repairs are charged to operations as
incurred. Realized gains and losses are recognized upon disposal or
retirement of the related assets and are reflected in earnings.
Property is recorded at cost and is depreciated using a straight-line
method over the estimated useful lives of the assets as follows:
Buildings and improvements 5-40 years
Tenant improvements initial term of related lease
Equipment and furnishings 5- 7 years
The Company assesses whether there has been an impairment in the value
of its long-lived assets by considering factors such as expected future
operating income, trends and prospects, as well as the effects of demand,
competition and other economic factors. Such factors include the tenants'
ability to perform their duties and pay rent under the terms of the leases.
The Company may recognize an impairment loss if the income stream is not
sufficient to cover its investment. Such a loss would be determined between
the carrying value and the fair value of a center. Management believes no
such impairment has occurred in its net property carrying values at
December 31, 1999 and 1998.
DEFERRED CHARGES:
Costs relating to financing of shopping center properties and
obtaining tenant leases are deferred and amortized over the initial term of
the agreement. The straight-line method is used to amortize all costs
except financing, for which the effective interest method is used. The
range of the terms of the agreements are as follows:
Deferred lease costs 1 - 15 years
Deferred financing costs 1 - 15 years
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 has historically
capitalized these costs, in accordance with generally accepted accounting
principles ("GAAP"). The Company has adopted the FASB's interpretation
effective March 19, 1998.
DEFERRED ACQUISITION LIABILITY:
As part of the Company's total consideration to the seller of Capitola
Mall, the Company will issue $5,000 of OP Units five years after the
acquisition date, which was December 21, 1995. The number of OP Units will
be determined based on the Company's common stock price at that time.
INCOME TAXES:
The Company has elected to be taxed as a REIT under the Internal
Revenue Code of 1986, as amended. A REIT is generally not subject to income
taxation on that portion of its income that qualifies as REIT taxable
income as long as it distributes at least 95 percent of its taxable income
to its stockholders and complies with other requirements. Accordingly, no
provision has been made for income taxes in the consolidated financial
statements.
45
<PAGE>
THE MACERICH COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED:
INCOME TAXES - CONTINUED:
On a tax basis, the distributions of $1.965 paid during 1999
represented $1.30 of ordinary income and $0.665 of capital gain. The
distributions of $1.865 per share during 1998 represented $1.12 of ordinary
income and $0.745 of return of capital. During 1997, the distributions were
$1.78 per share of which $0.96 was ordinary income and $0.82 was return of
capital.
Each partner is taxed individually on its share of partnership income
or loss, and accordingly, no provision for federal and state income tax is
provided for the Operating Partnership in the consolidated financial
statements.
RECLASSIFICATIONS:
Certain reclassifications have been made to the 1997 and 1998
consolidated financial statements to conform to the 1999 financial
statement presentation.
ACCOUNTING PRONOUNCEMENTS:
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" ("EITF
98-9"). The Company applied this accounting change as of April 1, 1998. The
accounting change had the effect of deferring $3,241,000, including the
prorata share of joint ventures, of percentage rent from the second and
third quarters of 1998 to the quarter ended December 31, 1998. During the
fourth quarter of 1998, the FASB reversed EITF 98-9. Accordingly, the
Company resumed accounting for percentage rent on the accrual basis for
1999. In December 1999, the Securities and Exchange Committee issued Staff
Accounting Bulletin 101, "Revenue Recognition in Financial Statements,"
("SAB 101") which will be effective for periods beginning after December
15, 1999. This bulletin again modified the timing of revenue recognition
for percentage rent received from tenants and adopted the method mandated
by EITF 98-9. The Company expects this change to defer recognition of a
significant amount of percentage rent for the first three calendar quarters
into the fourth quarter. The Company applied this accounting change as of
January 1, 2000. Estimates of the effects of this change have not yet been
determined.
In June 1998, the FASB issued Statement of Financial Accounting
Standard ("SFAS") 133, "Accounting for Derivative Instruments and Hedging
Activities," ("SFAS 133") which requires companies to record derivatives on
the balance sheet, measured at fair value. Changes in the fair values of
those derivatives will be accounted for depending on the use of the
derivative and whether it qualifies for hedge accounting. The key criterion
for hedge accounting is that the hedging relationship must be highly
effective in achieving offsetting changes in fair value or cash flows. In
June 1999, the FASB issued SFAS 137, "Accounting for Derivative Instruments
and Hedging Activities," which delays the implementation of SFAS 133 from
January 1, 2000 to January 1, 2001. The Company has not yet determined when
it will implement SFAS 133 nor has it completed the analysis required to
determine the impact on its consolidated financial statements.
FAIR VALUE OF FINANCIAL INSTRUMENTS:
To meet the reporting requirement of SFAS No. 107, "Disclosures about
Fair Value of Financial Instruments," the Company calculates the fair value
of financial instruments and includes this additional information in the
notes to consolidated financial statements when the fair value is different
than the carrying value of those financial instruments. When the fair value
reasonably approximates the carrying value, no additional disclosure is
made. The estimated fair value amounts have been determined by the Company
using available market information and appropriate valuation methodologies.
However, considerable judgment is required in interpreting market data to
develop the estimates of fair value. Accordingly, the estimates presented
herein are not necessarily indicative of the amounts that the Company could
realize in a current market exchange. The use of different market
assumptions and/or estimation methodologies may have a material effect on
the estimated fair value amounts.
46
<PAGE>
THE MACERICH COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED:
FAIR VALUE OF FINANCIAL INSTRUMENTS, CONTINUED:
Interest rate cap agreements are purchased by the Company from third
parties to hedge the risk of interest rate increases on some of the
Company's variable rate debt. The cost of these cap agreements is amortized
over the life of the cap agreement on a straight line basis. Payments
received as a result of the cap agreements are recorded as a reduction of
interest expense. The unamortized costs of the cap agreements are included
in deferred charges. The fair value of these caps will vary with
fluctuations in interest rates. The Company is exposed to credit loss in
the event of nonperformance by these counter parties to the financial
instruments; however, management does not anticipate nonperformance by the
counter parties.
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.
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 years
ended December 31, 1999, 1998 and 1997. 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 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. The following table reconciles
the basic and diluted earnings per share calculation:
<TABLE>
<CAPTION>
For the years ended
(in thousands, except per share data)
1999 1998 1997
--------------------------------- -------------------------------- ---------------------------
Net Per Net Per Net Per
Income Shares Share Income Shares Share Income Shares Share
------ ------ ----- ------ ------ ----- ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net income $129,011 34,007 $44,075 30,805 $22,046 25,891
Less: Preferred stock dividends 18,138 11,547 -
Basic EPS
Net income - available to --------------------------------- -------------------------------- ---------------------------
common stockholders $110,873 34,007 $3.26 $32,528 30,805 $1.06 $22,046 25,891 $0.85
DILUTED EPS:
Conversion of OP units 38,335 12,123 12,902 12,211 10,567 12,091
Employee stock options
and restricted stock 1,824 462 668 612 239 421
Convertible preferred stock 18,138 9,115 n/a - antidilutive N/A
Convertible debentures 12,616 5,186 n/a - antidilutive N/A
Net income - available to --------------------------------- -------------------------------- ---------------------------
common stockholders $181,786 60,893 $2.99 $46,098 43,628 $1.06 $32,852 38,403 $0.85
========================= ======= ============ ========== ======== ========== ================
</TABLE>
47
<PAGE>
THE MACERICH COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED:
CONCENTRATION OF RISK:
The Company maintains its cash accounts in a number of commercial
banks. Accounts at these banks are guaranteed by the Federal Deposit
Insurance Corporation ("FDIC") up to $100. At various times during the
year, the Company had deposits in excess of the FDIC insurance limit.
Lakewood Mall generated 10.5% of total shopping center revenues in
1997. No Center generated more than 10% of shopping center revenues during
1999 and 1998.
The Centers derived approximately 90.2%, 89.9% and 89.5% of their
total rents for the years ended December 31, 1999, 1998, and 1997,
respectively, from Mall and Freestanding Stores. The Limited represented
5.2% and 6.1% of total minimum rents in place as of December 31, 1999
and 1998, respectively, and no other retailer represented more than
3.2% and 4.5% of total minimum rents as of December 31, 1999 and 1998,
respectively.
MANAGEMENT ESTIMATES:
The preparation of financial statements in conformity with GAAP
requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
YEAR 2000 COMPLIANCE:
Approximately two years ago, the Company initiated a Year 2000
compliance program which consisted 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 included a review of both
information technology ("IT") and non-IT systems of the Company's offices
and the Centers in which the Company has an ownership interest and manages.
In addition, material tenants, anchors and vendors of the Centers were
surveyed for Year 2000 compliance and contingency plans were prepared for
each Center.
Two of the key dates of the Company's Year 2000 program were January
1, 2000 and February 29, 2000. The Company encountered no Year 2000
compliance issues, with any operating system, material tenant, anchor
and/or vendor on either date. As of December 31, 1999, the Company did not
expend significant amounts for the Year 2000 program.
3. INVESTMENTS IN JOINT VENTURES AND THE MANAGEMENT COMPANIES:
The following are the Company's investments in various real estate
joint ventures which own regional retail and community shopping centers.
The Operating Partnership's interest in each joint venture as of December
31, 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>
48
<PAGE>
THE MACERICH COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
3. INVESTMENTS IN JOINT VENTURES AND THE MANAGEMENT COMPANIES, CONTINUED:
The Operating Partnership also owns the non-voting preferred stock of
the Macerich Management Company and Macerich Property Management Company
and is entitled to receive 95% of the distributable cash flow of these two
entities. Macerich Manhattan Management Company is a 100% subsidiary of
Macerich Management Company. The Company accounts for the Management
Companies and joint ventures using the equity method of accounting.
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 redeemable 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 ("Cerritos"), 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.
On October 26, 1999, 49% of the membership interests of Macerich
Stonewood, LLC ("Stonewood"), Cerritos and Macerich Lakewood, LLC
("Lakewood"), were sold to Ontario Teachers' and concurrently Ontario
Teachers' and the Company contributed their 99% collective membership
interests in Stonewood and Cerritos and 100% of their collective
membership interests in Lakewood to Pacific Premier Retail Trust
("PPRT"), a real estate investment trust, owned approximately 51% by the
Company and 49% by Ontario Teachers. Lakewood, Stonewood, and Cerritos
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 PPRT subject to existing debt of
$322,000. The net cash proceeds to the Company were approximately
$104,000 which were used for reduction of debt and for general corporate
purposes.
The results of these joint ventures 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 Macerich Management Company, was sold.
On November 12, 1999, Eastland Plaza, a 65,313 square foot community
center, which was 51% owned by the Macerich Management Company, was sold.
49
<PAGE>
THE MACERICH COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
3. INVESTMENTS IN 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.
<TABLE>
<CAPTION>
COMBINED AND CONDENSED BALANCE SHEETS OF JOINT VENTURES
AND THE MANAGEMENT COMPANIES
December 31, December 31,
1999 1998
---- ----
<S> <C> <C>
Assets:
Properties, net $2,117,711 $1,141,984
Other assets 58,412 38,103
-------------------- ------------------
Total assets $2,176,123 $1,180,087
==================== ==================
Liabilities and partners' capital:
Mortgage notes payable $1,287,732 $618,384
Other liabilities 62,891 42,048
The Company's capital 342,935 230,022
Outside partners' capital 482,565 289,633
-------------------- ------------------
Total liabilities and partners' capital $2,176,123 $1,180,087
==================== ==================
</TABLE>
50
<PAGE>
THE MACERICH COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
COMBINED AND CONDENSED STATEMENTS OF OPERATIONS OF JOINT VENTURES
AND THE MANAGEMENT COMPANIES
----------------------------
For the years ended December 31,
<TABLE>
<CAPTION>
1999
--------------------------------------------------------------------------------------
SDG Pacific
Macerich Premier Retail Other Joint Management
Properties, L.P. Trust Ventures Companies Total
--------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenues:
Minimum rents $88,014 $46,170 $25,497 $5,940 $165,621
Percentage rents 7,422 3,497 2,268 191 13,378
Tenant recoveries 40,647 15,866 11,305 2,917 70,735
Management fee - - - 10,033 10,033
Other 2,291 336 1,243 897 4,767
--------------------------------------------------------------------------------------
Total revenues 138,374 65,869 40,313 19,978 264,534
--------------------------------------------------------------------------------------
Expenses:
Management Company expense - - - 12,737 12,737
Shopping center expenses 50,972 18,373 13,205 2,724 85,274
Interest expense 30,565 21,642 7,579 5,291 65,077
Depreciation and amortization 21,451 10,463 3,362 2,405 37,681
-------------------------------------- --------------- ----------------- -------------
Total operating expenses 102,988 50,478 24,146 23,157 200,769
-------------------------------------- --------------- ----------------- -------------
Gain (loss) on sale
or write down of assets 5 - 961 (392) 574
-------------------------------------- --------------- ----------------- -------------
Net income (loss) $35,391 $15,391 $17,128 ($3,571) $64,339
====================================== =============== ================= =============
</TABLE>
<TABLE>
<CAPTION>
1998 1997
---------------------------------------------------------- ---------------------------------
SDG Other
Macerich Joint Management Joint Management
Properties, L.P. Ventures Companies Total Ventures Companies Total
--------------------------------------------------------- ----------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues:
Minimum rents $71,892 $25,213 - $97,105 $20,644 - $20,644
Percentage rents 6,138 1,208 - 7,346 2,084 - 2,084
Tenant recoveries 31,752 10,905 - 42,657 8,787 - 8,787
Management fee - - 6,605 6,605 - $3,987 3,987
Other 1,723 940 486 3,149 967 176 1,143
---------------- ------------ ------------- ------------ ----------- ----------- -----------
Total revenues 111,505 38,266 7,091 156,862 32,482 4,163 36,645
---------------- ------------ ------------- ------------ ----------- ----------- -----------
Expenses:
Management Company expense - - 10,122 10,122 - 4,738 4,738
Shopping center expenses 38,673 12,877 - 51,550 11,952 - 11,952
Interest expense 26,432 7,129 (398) 33,163 6,361 (204) 6,157
Depreciation and amortization 17,383 4,288 787 22,458 4,600 392 4,992
---------------- ------------ ------------- ------------ ----------- ----------- -----------
Total operating expenses 82,488 24,294 10,511 117,293 22,913 4,926 27,839
---------------- ------------ ------------- ------------ ----------- ----------- -----------
Gain (loss) on sale
or write down of assets 29 140 (198) (29) (20,491) 184 (20,307)
---------------- ------------ ------------- ------------ ----------- ----------- -----------
Net income (loss) $29,046 $14,112 ($3,618) $39,540 ($10,922) ($579) ($11,501)
================ ============ ============= ============ =========== =========== ===========
</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 $156,219, $74,612 and $43,500 for the years
ended December 31, 1999, 1998 and 1997, respectively. NML is considered a
related party because they are a joint venture partner with the Company in
Macerich Northwestern Associates. Interest expense incurred on these borrowings
amounted to $7,138, $3,786 and $2,974 for the years ended December 31, 1999,
1998 and 1997, respectively.
Included in the gain (loss) on sale or write-down of assets is $20,990 of
loss on the sale and write-down of North Valley Plaza in 1997.
51
<PAGE>
THE MACERICH COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
The following table sets forth the Operating Partnership's beneficial
interest in the joint ventures and the Management Companies:
<TABLE>
<CAPTION>
PRO RATA SHARE OF COMBINED AND CONDENSED STATEMENT OF OPERATIONS OF JOINT VENTURES
AND THE MANAGEMENT COMPANIES
----------------------------
For the years ended December 31,
1999
--------------------------------------------------------------------------------------
SDG Pacific
Macerich Premier Retail Other Joint Management
Properties, L.P. Trust Ventures Companies Total
----------------------- ----------------- --------------- ---------------- -----------
<S> <C> <C> <C> <C> <C>
Revenues:
Minimum rents $44,007 $23,547 $7,822 $5,643 $81,019
Percentage rents 3,711 1,783 730 181 6,405
Tenant recoveries 20,323 8,092 3,214 2,771 34,400
Management fee - - - 9,531 9,531
Other 1,146 171 262 852 2,431
----------------------- ----------------- --------------- ---------------- -----------
Total revenues 69,187 33,593 12,028 18,978 133,786
----------------------- ----------------- --------------- ---------------- -----------
Expenses:
Management Company expense - - - 12,100 12,100
Shopping center expenses 25,486 9,370 4,077 2,579 41,512
Interest 15,283 11,037 2,973 5,028 34,321
Depreciation and amortization 10,726 5,336 1,371 2,282 19,715
----------------------- ----------------- --------------- ---------------- -----------
Total operating costs 51,495 25,743 8,421 21,989 107,648
----------------------- ----------------- --------------- ---------------- -----------
Gain (loss) on sale
or write down of assets 3 - 176 (372) (193)
----------------------- ----------------- --------------- ---------------- -----------
Net income (loss) $17,695 $7,850 $3,783 ($3,383) $25,945
======================= ================= =============== ================ ===========
</TABLE>
<TABLE>
<CAPTION>
For the years ended December 31,
1998 1997
---------------------------------------------------------------------------------------------
SDG Other Other
Macerich Joint Management Joint Management
Properties, L.P. Ventures Companies Total Ventures Companies Total
---------------- ----------- ------------- ----------- ----------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues:
Minimum rents $35,946 7,763 - $43,709 $7,420 - $7,420
Percentage rents 3,069 416 - 3,485 737 - 737
Tenant recoveries 15,876 2,963 - 18,839 2,804 - 2,804
Management fee - - 6,275 6,275 - $3,788 3,788
Other 862 212 461 1,535 236 167 403
---------------- ----------- ------------- ----------- ----------- ------------ -----------
Total revenues 55,753 11,354 6,736 73,843 11,197 3,955 15,152
---------------- ----------- ------------- ----------- ----------- ------------ -----------
Expenses:
Management Company expense - - 9,616 9,616 - 4,328 4,328
Shopping center expenses 19,337 4,025 - 23,362 4,238 - 4,238
Interest 13,216 2,525 (378) 15,363 2,129 (192) 1,937
Depreciation and amortization 8,692 1,439 748 10,879 1,940 372 2,312
---------------- ----------- ------------- ----------- ----------- ------------ -----------
Total operating costs 41,245 7,989 9,986 59,220 8,307 4,508 12,815
---------------- ----------- ------------- ----------- ----------- ------------ -----------
Gain (loss) on sale
or write down of assets 15 30 (188) (143) (10,400) - (10,400)
---------------- ----------- ------------- ----------- ----------- ------------ -----------
Net income (loss) $14,523 $3,395 ($3,438) $14,480 ($7,510) ($553) ($8,063)
---------------- ----------- ------------- ----------- ----------- ------------ -----------
</TABLE>
52
<PAGE>
THE MACERICH COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)
4. PROPERTY:
Property is summarized as follows:
<TABLE>
<CAPTION>
December 31,
---------------------------------------
1999 1998
---- ----
<S> <C> <C>
Land $399,172 $422,592
Building improvements 1,603,348 1,684,188
Tenant improvements 49,654 47,808
Equipment & furnishings 11,272 9,097
Construction in progress 111,089 49,440
------------ ------------
2,174,535 2,213,125
Less, accumulated depreciation (243,120) (246,280)
------------ ------------
$1,931,415 $1,966,845
============ ============
</TABLE>
Depreciation expense for the years ended December 31, 1999, 1998 and 1997 was
$52,592, $46,030 and $35,833, respectively.
A gain on sale of assets of $95,981 is a result of the Company selling
approximately 49% of the membership interests of Stonewood and Lakewood to
Ontario Teachers' on October 26, 1999 and the Company's sale of Huntington
Center on November 16, 1999.
5. DEFERRED CHARGES AND OTHER ASSETS:
Deferred charges and other assets are summarized as follows:
<TABLE>
<CAPTION>
December 31,
---------------------------------
1999 1998
---- ----
<S> <C> <C>
Leasing $32,934 $30,338
Financing 20,773 19,137
--------- ---------
53,707 49,475
Less, accumulated amortization (22,131) (20,108)
--------- ---------
31,576 29,367
Other assets 23,489 33,306
--------- ---------
$55,065 $62,673
========= =========
</TABLE>
53
<PAGE>
THE MACERICH COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)
6. MORTGAGE NOTES PAYABLE:
Mortgage notes payable at December 31, 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 ---- $36,983 ---- $37,345 9.25% 316(a) 2001
Carmel Plaza (b) $28,869 ---- $25,000 ---- 8.18% 202(a) 2009
Chesterfield Towne Center 64,358 ---- 65,064 ---- 9.07% 548(c) 2024
Chesterfield Towne Center ---- ---- 3,266 ---- 8.54% 31(a) 1999
Citadel 73,377 ---- 74,575 ---- 7.20% 554(a) 2008
Corte Madera, Village at (d) 71,949 ---- 60,000 ---- 7.75% 516(a) 2009
Crossroads Mall-Boulder (e) ---- 34,893 ---- 35,280 7.08% 244(a) 2010
Fresno Fashion Fair 69,000 ---- 69,000 ---- 6.52% interest only 2008
Greeley Mall 16,228 ---- 17,055 ---- 8.50% 187(a) 2003
Green Tree Mall/Crossroads - OK/
Salisbury (f) 117,714 ---- 117,714 ---- 7.23% interest only 2004
Holiday Village ---- 17,000 ---- 17,000 6.75% interest only 2001
Lakewood Mall (g) ---- ---- 127,000 ---- 7.20% interest only 2005
Northgate Mall ---- 25,000 ---- 25,000 6.75% interest only 2001
Northwest Arkansas Mall 62,080 ---- 63,000 ---- 7.33% 434(a) 2009
Parklane Mall ---- 20,000 ---- 20,000 6.75% interest only 2001
Queens Center (h) 100,000 ---- 65,100 ---- 6.88% 633(a) 2009
Rimrock Mall 30,445 ---- 31,002 ---- 7.70% 244(a) 2003
Santa Monica Place (i) 80,000 ---- ---- ---- 7.16% interest only 2001
South Plains Mall (j) 64,623 ---- 28,795 ---- 8.22% 454(a) 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 (k) 53,537 ---- 54,522 ---- 7.65% 427(a) 2003
Westside Pavilion 100,000 ---- 100,000 ---- 6.67% interest only 2008
============ ========== ============ ==========
Total - Wholly Owned Centers $1,105,180 $133,876 $1,074,093 $134,625
============ ========== ============ ==========
</TABLE>
54
<PAGE>
THE MACERICH COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)
6. MORTGAGE NOTES PAYABLE, CONTINUED:
<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 Centers (at pro rata share):
Broadway Plaza (50%) (l) ---- $36,690 ---- $37,306 6.68% 257(a) 2008
Pacific Premier Retail Trust (51%) (l):
Cascade Mall $13,837 ---- ---- ---- 6.50% 122(a) 2014
Kitsap Mall 20,452 ---- ---- ---- 6.50% (m) 178(a) 2000
Lakewood Mall (g) 64,770 ---- ---- ---- 7.20% interest only 2005
Los Cerritos Center 60,909 ---- ---- ---- 7.13% 421(a) 2006
North Point Plaza 1,889 ---- ---- ---- 6.50% 16(a) 2015
Redmond Town Center - Retail 32,743 ---- ---- ---- 6.50% 224(a) 2011
Redmond Town Center - Office (n) ---- 42,248 ---- ---- 6.77% 298(a) 2009
Stonewood Mall (o) 38,250 ---- ---- ---- 8.23% interest only 2001
Washington Square 60,471 ---- ---- ---- 6.70% 421(a) 2009
Washington Square Too 6,533 ---- ---- ---- 6.50% 53(a) 2016
SDG Macerich Properties L.P. (50%) (l) 159,282 ---- $160,434 ---- 6.23% (p) 926(a) 2006
SDG Macerich Properties L.P. (50%) (l) 92,500 ---- 92,500 ---- 6.96% (p) interest only 2003
West Acres Center (19%) (l) 7,600 ---- 7,202 ---- 6.52% (q) interest only 2009
------------ ---------- ------------ ----------
Total - Joint Venture Centers $559,236 $78,938 $260,136 $37,306
------------ ---------- ------------ ----------
============ ========== ============ ==========
Total - All Centers $1,664,416 $212,814 $1,334,229 $171,931
============ ========== ============ ==========
Weighted average interest rate at December 31, 1999 7.39%
=====
Weighted average interest rate at December 31, 1998 7.24%
=====
</TABLE>
(a) This represents the monthly payment of principal and interest.
(b) 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.
(c) 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 $385 for the year
ended December 31, 1999 and $387 for the year ended December 31,
1998.
(d) The old loan bore 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.
(e) This note was issued at a discount. The discount is being
amortized over the life of the loan using the effective interest
method. At December 31, 1999 and December 31, 1998 the unamortized
discount was $364 and $397, respectively.
55
<PAGE>
THE MACERICH COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)
6. MORTGAGE NOTES PAYABLE, CONTINUED:
(f) This loan is cross collateralized by Green Tree Mall, Crossroads
Mall-Oklahoma and the Centre at Salisbury.
(g) 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 December 31, 1999 and at 1998. All
of the Notes were assumed by the Pacific Premier Retail Trust
joint venture on October 26, 1999.
(h) 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.
(i) The loan bears interest at LIBOR plus 1.75%. In addition, the
Company can increase the loan amount up to $90,000. As of January
6, 2000, an additional $5,000 was advanced for total borrowings
outstanding of $85,000.
(j) The old note of $28,795 was assumed at acquisition. At the time of
acquisition in June 1998, this debt was recorded at fair 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.
(k) Included in cash and cash equivalents is $0 and $3,030 at December
31, 1999 and 1998 respectively, of cash restricted under the terms
of this loan agreement.
(l) Reflects the Company's pro rata share of debt.
(m) In connection with the acquisition of this Center, the joint
venture assumed $39,425 of debt. At acquisition, this debt was
recorded at fair 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 December 31, 1999,
the joint venture's unamortized premium was $1,365.
(n) 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 December 31, 1999, $6,745 of principal had been
drawn under the construction loan by the joint venture.
(o) The loan bears interest at LIBOR plus 1.75%. At December 31, 1999
the total interest rate was 8.23%.
56
<PAGE>
THE MACERICH COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)
6. MORTGAGE NOTES PAYABLE, CONTINUED:
(p) 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 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
December 31, 1999 and December 31, 1998, the unamortized balance
of the debt premium was $18,565 and 20,868, respectively. This
debt is due in May 2006 and requires monthly payments of $1,852.
$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 6.96% and 5.86% at December 31, 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%.
(q) On January 4, 1999, the joint venture replaced the old debt with a
new loan of $40,000. The loan is at an interest rate of 6.52% and
matures January 2009. The debt is interest only until January 2001
at which time monthly payments of principal and interest will be
due of $299.
Certain mortgage loan agreements contain a prepayment penalty provision for
the early extinguishment of the debt.
Total interest expense capitalized during 1999, 1998 and 1997 was $6,670,
$3,199 and $2,224, respectively.
The fair value of mortgage notes payable for wholly-owned Centers at
December 31, 1999 and December 31, 1998 is estimated to be approximately
$1,179,469 and $1,271,853, respectively, based on current interest rates
for comparable loans.
The above debt matures as follows:
<TABLE>
<CAPTION>
Joint Venture
Years Ending Wholly-Owned Centers
December 31, Centers (at pro rata share) Total
------------ ------------------ ------------------ ------------------
<S> <C> <C> <C>
2000 $8,664 $26,515 $35,179
2001 188,479 44,748 233,227
2002 11,717 6,939 18,656
2003 101,229 99,913 201,142
2004 127,705 7,913 135,618
2005 and beyond 801,262 452,146 1,253,408
------------- ------------- -------------
$1,239,056 $638,174 $1,877,230
============= ============= =============
</TABLE>
The Company is currently in negotiations to refinance $20.5 million of
the debt maturing in 2000. The remaining debt maturing in 2000 reflects
the amortization of principal on existing debt.
57
f<PAGE>
THE MACERICH COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
7. BANK AND OTHER NOTES PAYABLE:
The Company has a credit facility of $150,000 with a maturity of
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 December 31, 1999 and December 31, 1998, $57,400 and $137,000 of
borrowings were outstanding under this line of credit at interest rates of
7.65% and 6.79%, respectively.
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 December
31, 1999, $72,671 of principal has been drawn under the loan.
In addition, the Company had a note payable of $30,600 due in February
2000 payable to the seller of the acquired portfolio. The note bore
interest at 6.5%. The entire $30,600 loan was paid off on February 18,
2000.
8. 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.
9. RELATED-PARTY TRANSACTIONS:
The Company engaged the Management Companies to manage the operations
of its properties and certain unconsolidated joint ventures. During 1999,
1998 and 1997, management fees of $3,247, $2,817 and $2,219, respectively,
were paid to the Management Companies by the Company. During 1999, 1998 and
1997, management fees of $4,982, $2,375, and $633, respectively, were paid
to the Management Companies by the joint ventures.
Certain mortgage notes are held by one of the Company's joint venture
partners. Interest expense in connection with these notes was $10,171,
$10,224 and $10,287 for the years ended December 31, 1999, 1998 and 1997,
respectively. Included in accounts payables and accrued expense is interest
payable to these partners of $513 and $512 at December 31, 1999 and 1998,
respectively.
In 1997 and 1999, certain executive officers, received loans from the
Company totaling $6,500. These loans are full recourse to the executives.
$6,000 of the loans were issued under the terms of the employee stock
incentive plan, bear interest at 7%, are due in 2007 and 2009 and are
secured by 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 December 31, 1999
and 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.
58
<PAGE>
THE MACERICH COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
10. FUTURE RENTAL REVENUES:
Under existing noncancellable operating lease agreements, tenants are
committed to pay the following minimum rental payments to the Company:
<TABLE>
<CAPTION>
Years Ending
December 31,
------------
<S> <C>
2000 $166,586
2001 154,489
2002 143,616
2003 130,190
2004 116,321
2005 and beyond 432,357
-------
$1,143,559
==========
</TABLE>
11. 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 $890 (including contingent
rent of $0) in 1999, $1,125 (including contingent rent of $0) in 1998 and
$817 (including contingent rents of $0) in 1997.
Minimum future rental payments required under the leases are as
follows:
<TABLE>
<CAPTION>
Years Ending
December 31,
------------
<S> <C>
2000 $446
2001 440
2002 440
2003 440
2004 444
2005 and beyond 20,225
------
$22,435
=======
</TABLE>
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. $149 and
$153 have already been incurred by the joint venture for remediation and
professional and legal fees for the years ending December 31, 1999 and 1998,
respectively. An additional $259 remains reserved by the joint venture as of
December 31, 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.
59
<PAGE>
THE MACERICH COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
11. COMMITMENTS AND CONTINGENCIES - CONTINUED:
The Company acquired Fresno Fashion Fair in December 1996. Asbestos has
been detected in structural fireproofing throughout much of the Center.
Testing data conducted by professional environmental consulting firms
indicates that the fireproofing is largely inaccessible to building
occupants and is well adhered to the structural members. Additionally,
airborne concentrations of asbestos were well within OSHA's permissible
exposure limit (PEL) of .1 fcc. The accounting for this acquisition
includes a reserve of $3,300 to cover future removal of this asbestos, as
necessary. The Company incurred $91 and $255 in remediation costs for the
years ending December 31, 1999 and 1998, respectively.
12. PROFIT SHARING PLAN:
The Management Companies and the Company have a retirement profit
sharing plan that was established in 1984 covering substantially all of
their eligible employees. The plan is qualified in accordance with section
401(a) of the Internal Revenue Code. Effective January 1, 1995, this plan
was modified to include a 401(k) plan whereby employees can elect to defer
compensation subject to Internal Revenue Service withholding rules. This
plan was further amended effective February 1, 1999, to add the Macerich
Company Common Stock Fund as a new investment alternative under the plan.
150,000 shares of common stock were reserved for issuance under the plan.
Contributions by the Management Companies are made at the discretion of the
Board of Directors and are based upon a specified percentage of employee
compensation. The Management Companies and the Company contributed $615,
$509 and $400 to the plan during the years ended December 31, 1999, 1998
and 1997, respectively.
13. STOCK OPTION PLAN:
The Company has established an employee stock incentive plan under
which stock options or restricted stock may be awarded for the purpose of
attracting and retaining executive officers, directors and key employees.
The Company has issued options to employees and directors to purchase
shares of the Company under the stock incentive plan. The term of these
options is ten years from the grant date. These options generally vest 33
1/3% per year over three years and were issued and are exercisable at the
market value of the common stock at the grant date.
In addition, the Company has established a plan for non employee
directors. The non employee director options have a term of ten years from
the grant date, vest six months after grant and are issued at the market
value of the common stock on the grant date. The plan reserved 50,000
shares of which 42,500 shares were granted as of December 31, 1999.
390,815 shares of restricted stock also have been issued under the
employees stock incentive plan to executives. These awards are granted
based on certain performance criteria for the Company. The restricted stock
generally vests over 5 years and the compensation expense related to these
grants is determined by the market value at the vesting date and is
amortized over the vesting period on a straight line basis. As of December
31, 1999 and 1998, 85,962 and 34,287 shares, respectively, of restricted
stock had vested. A total of 176,600 shares at a weighted average price of
$22.69 were issued in 1999, 83,018 shares at a weighted average price of
$28.71 were issued in 1998 and 89,958 shares at a weighted average price of
$27.46 were issued during 1997. Restricted stock is subject to restrictions
determined by the Company's compensation committee. Restricted stock has
the same dividend and voting rights as common stock and is considered
issued when vested. Compensation expense for restricted stock was $2,037,
$944 and $239 in 1999, 1998 and 1997, respectively.
Approximately 319,000 and 803,000 additional shares were reserved and
were available for issuance under the stock incentive plan at December 31,
1999 and 1998, respectively. The plan allows for, among other things,
granting options or restricted stock at market value.
60
<PAGE>
THE MACERICH COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
13. STOCK OPTION PLAN, CONTINUED:
<TABLE>
<CAPTION>
Weighted
Average
Exercise Price
Employee Plan Director Plan # of On Exercisable
------------- ------------- Options
Option Price Option Price Exercisable Options
Shares Per Share Shares Per Share At Year End At Year End
------ --------- ------ --------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Shares outstanding at December 31, 1996 1,512,334 $19.00-$21.62 27,500 $19.00-$26.12 793,697 $19.09
--------- ------------- ------ ------------- --------- ----------
Granted 369,109 $26.50-$26.88 5,000 $28.50
Exercised (253,552) $19.00 - -
Forfeited (8,000) - - -
--------- ------------- ------ ------------- --------- ----------
Shares outstanding at December 31, 1997 1,619,891 $19.00-$26.88 32,500 $19.00-$28.50 1,230,227 $20.58
--------- ------------- ------ ------------- --------- ----------
Granted 412,500 $27.38 5,000 $25.625
Exercised (66,080) $19.00 (7,000) $19.00-$21.375
Forfeited - -
--------- ------------- ------ ------------- --------- ----------
Shares outstanding at December 31, 1998 1,966,311 $19.00-$27.38 30,500 $19.00-$28.50 1,330,654 $19.38
--------- ------------- ------ ------------- --------- ----------
Granted 520,000 $23.375 5,000 $20.6875
Exercised (88,250) $19.00 -
Forfeited (18,500) - -
--------- ------------- ------ ------------- --------- ----------
Shares outstanding at December 31, 1999 2,379,561 $19.00-$27.38 35,500 $19.00-$28.50 1,536,473 $21.72
========= ============= ====== ============= ========= ==========
</TABLE>
The weighted average exercise price for options granted in 1997 was $27.06,
in 1998 was $27.38 and in 1999 was $23.35.
The weighted average remaining contractual life for options outstanding
at December 31, 1999 was 5 years and the weighted average remaining
contractual life for options exercisable at December 31, 1999 was 5 years.
The Company records options granted using Accounting Principles Board
(APB) opinion Number 25, "Accounting for Stock Issued to Employees and
Related Interpretations." Accordingly, no compensation expense is recognized
on the date the options are granted. If the Company had recorded compensation
expense using the methodology prescribed in SFAS 123, "Accounting for
Stock-Based Compensation", the Company's net income would have been reduced
by approximately $488 or $0.01 per share for the year ended December 31,
1999 and $228 or $0.00 per share for the year ended December 31, 1998.
61
<PAGE>
THE MACERICH COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
13. STOCK OPTION PLAN, CONTINUED:
The weighted average fair value of options granted during 1999 and 1998
were $0.98 and $2.01, respectively. The fair value of each option grant issued
in 1999 and 1998 is estimated at the date of grant using the Black-Scholes
option-pricing model with the following weighted average assumptions: (a)
dividend yield of 10% in 1999 and 7.8% in 1998 , (b) expected volatility of the
Company's stock of 17.29% in 1999 and 17.26% in 1998, (c) a risk free interest
rate based on U.S. Zero Coupon Bonds with time of maturity approximately equal
to the options' expected time to exercise and (d) expected option lives of five
years for options granted in 1999 and 1998.
14. DEFERRED COMPENSATION PLANS:
The Company has established deferred compensation plans under which key
executives of the Company may elect to defer receiving a portion of their cash
compensation otherwise payable in one calendar year until a later year. The
Company may, as determined by the Board of Directors in its sole discretion,
credit a participant's account with an amount equal to a percentage of the
participant's deferral. The Company contributed $296 during 1999 and $295 during
1998 to two of these plans.
In addition, certain executives have split dollar life insurance agreements
with the Company whereby the Company generally pays annual premiums on a life
insurance policy in an amount equal to the executives deferral under one of the
Company's deferred compensation plans.
15. ACQUISITIONS AND OTHER DEVELOPMENTS:
On February 18, 1999, the Company, through a 51/49 joint venture with
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, Cerritos, a wholly-owned subsidiary of Macerich Management
Company, acquired Los Cerritos Center, a 1,304,262 square foot super regional
mall 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.
On October 29, 1999, Macerich Santa Monica, LLC, a wholly-owned indirect
subsidiary of the Company, acquired Santa Monica Place, a 560,623 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 a joint venture transaction
with Ontario Teachers'.
On November 15, 1999, the Company redeemed $25,133 of OP Units of the
Operating Partnership for cash from various unit holders. A total of
1,266,687 of OP Units were redeemed for cash at the Company's option in lieu
of exchanging common stock for OP Units.
62
<PAGE>
THE MACERICH COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
16. PRO FORMA FINANCIAL INFORMATION (UNAUDITED):
The following unaudited pro forma financial information combines the
consolidated results of operations of the Company for 1999 and 1998 as if
the 1999 Acquisitions had occurred on January 1, 1998, after giving effect
to certain adjustments, including depreciation, interest expense relating
to debt incurred to finance the acquisitions and general and administrative
expense to manage the properties. The pro forma information is based on
assumptions management believes to be appropriate. The pro forma
information is not necessarily indicative of what the actual results would
have been had the acquisitions occurred at the beginning of the period
indicated, nor does it purport to project the Company's financial position
or results of operations at any future date or for any future period.
<TABLE>
<CAPTION>
Years ended December 31,
---------------------------------------
1999 1998
---- ----
<S> <C> <C>
Revenues $341,445 $302,377
Income before minority interest and extraordinary items $169,378 $59,096
Income before extraordinary items $111,853 $34,737
Net income - available to common stockholders $110,375 $32,302
Per share income before extraordinary items - basic $3.29 $1.13
Net income per share - available to common stockholders - basic $3.25 $1.05
Weighted average number of common shares outstanding - basic 34,007 30,805
Per share income before extraordinary items - diluted $3.02 $1.10
Net income per share - available to common stockholders - diluted $2.99 $1.05
Weighted average number of common shares outstanding - diluted 60,893 43,628
</TABLE>
17. REDEEMABLE 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 redeemable 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.
63
<PAGE>
THE MACERICH COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
18. QUARTERLY FINANCIAL DATA (UNAUDITED):
The following is a summary of periodic results of operations for 1999 and
1998:
<TABLE>
<CAPTION>
1999 Quarter Ended 1998 Quarter Ended
----------------------------------------- -------------------------------------------
Dec 31 Sept 30 June 30 Mar 31 Dec 31 Sept 30 June 30 Mar 31
------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues $84,676 $83,244 $80,675 $78,849 $86,200 $75,079 $61,407 $61,175
Income before minority interest
and extraordinary items 117,438 17,200 16,665 17,521 23,583 12,653 12,607 10,569
Income before
extraordinary items 84,327 9,153 9,001 9,870 13,780 6,903 7,368 6,912
Net income - available to common
stockholders 83,865 9,125 8,986 8,897 13,759 4,579 7,368 6,822
Income before extraordinary
items per share $2.48 $0.27 $0.26 $0.29 $0.42 $0.23 $0.24 $0.25
Net income - available to common
stockholders per share - basic $2.47 $0.27 $0.26 $0.26 $0.42 $0.15 $0.24 $0.25
</TABLE>
19.SEGMENT INFORMATION:
During 1998, the Company adopted SFAS No. 131, "Disclosures about
Segments of an Enterprise and Related Information." SFAS No. 131
established standards for disclosure about operating segments and related
disclosures about products and services, geographic areas and major
customers. The Company currently operates in one business segment, the
acquisition, ownership, redevelopment, management and leasing of regional
and community shopping centers. Additionally, the Company operates in one
geographic area, the United States.
20.SUBSEQUENT EVENTS (UNAUDITED):
On February 14, 2000 a dividend/distribution of $0.51 per share was
declared for common stockholders and OP Unit holders of record on February
18, 2000. 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
March 7, 2000.
64
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Trustees and Stockholders of Pacific Premier Retail Trust:
We have audited the consolidated financial statements and financial statement
schedule of Pacific Premier Retail Trust (the "Trust") as listed in Items
14(a) (2) and (4) of this Form 10-K. These financial statements and financial
statement schedule are the responsibility of the Trust's management. Our
responsibility is to express an opinion on these statements and financial
statement schedule based on our audit.
We conducted our audit in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respect, the consolidated financial position of Pacific Premier
Retail Trust as of December 31, 1999, and the consolidated results of its
operations and its cash flows for the period from February 18, 1999
(Inception) to December 31, 1999, in conformity with accounting principles
generally accepted in the United States. In addition, in our opinion, the
financial statement schedule referred to above, when considered in relation to
the basic financial statements taken as a whole, presents fairly, in all
material respects, the information required to be included therein.
PricewaterhouseCoopers LLP
Los Angeles, California
February 14, 2000
65
<PAGE>
PACIFIC PREMIER RETAIL TRUST
(A MARYLAND REAL ESTATE INVESTMENT TRUST)
CONSOLIDATED BALANCE SHEET
AS OF DECEMBER 31, 1999
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
<S> <C>
ASSETS:
Property, net 984,743
Cash 4,295
Tenant receivables, net 6,793
Deferred rent receivables 2,501
Deferred charges, less accumulated amortization of $161 1,116
Other assets 778
----------
Total assets $1,000,226
==========
LIABILITIES AND STOCKHOLDERS' EQUITY:
Notes payable $670,787
Accounts payable 3,086
Accrued interest payable 3,556
Accrued real estate taxes 912
Tenant security deposits 1,018
Other accrued liabilities 9,192
Due to related parties 1,479
----------
Total liabilities 690,030
Commitments (Note 8)
Stockholders' equity:
Series A redeemable preferred stock, $.01 par value, 625 shares
authorized, issued and outstanding at December 31, 1999 -
Common stock, $.01 par value, 219,611 shares authorized
issued and outstanding at December 31, 1999 2
Additional paid in capital 307,613
Accumulated earnings 2,581
----------
Total stockholders' equity 310,196
----------
Total liabilities and stockholders' equity $1,000,226
==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
66
<PAGE>
PACIFIC PREMIER RETAIL TRUST
(A MARYLAND REAL ESTATE INVESTMENT TRUST)
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE PERIOD FROM FEBRUARY 18, 1999 (INCEPTION)
THROUGH DECEMBER 31, 1999
(DOLLARS IN THOUSANDS)
<TABLE>
<S> <C>
Revenues:
Minimum rents $46,170
Percentage rents 3,497
Tenant recoveries 15,866
Other income 336
-------
Total revenues 65,869
-------
Expenses:
Interest 21,642
Maintenance and repairs 4,627
Real estate taxes 4,743
Management fees 2,253
General and administrative 1,132
Ground rent 905
Insurance 301
Marketing 662
Utilities 2,012
Security 1,724
-------
Total expenses 40,001
-------
Income before depreciation and amortization
and minority interest 25,868
Depreciation and amortization 10,463
Minority interest 14
-------
Net income $15,391
=======
</TABLE>
The accompanying notes are an integral part of these financial statements.
67
<PAGE>
PACIFIC PREMIER RETAIL TRUST
(A MARYLAND REAL ESTATE INVESTMENT TRUST)
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE PERIOD FROM FEBRUARY 18, 1999 (INCEPTION)
THROUGH DECEMBER 31, 1999
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
COMMON PREFERRED ADDITIONAL TOTAL
STOCK STOCK COMMON STOCK PAID IN ACCUMULATED STOCKHOLDERS'
(# OF SHARES) (# OF SHARES) PAR VALUE CAPITAL EARNINGS EQUITY
------------- ------------- ------------ ---------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Common stock issued to
Macerich PPR Corp. 111,691 $1 $115,527 $115,528
Common stock issued to
Ontario Teachers' Pension
Plan Board 107,920 1 189,677 189,678
Preferred stock issued 625 2,500 2,500
Issuance costs (91) (91)
Common stock distributions
paid to Macerich PPR Corp. ($6,524) (6,524)
Common stock distributions paid
to Ontario Teachers' Pension
Plan Board (6,268) (6,268)
Preferred stock distributions
paid (18) (18)
Net income 15,391 15,391
---------- ------------- ------------ ---------- ----------- -------------
Balance December 31, 1999 219,611 625 $2 $307,613 $2,581 $310,196
---------- ------------- ------------ ---------- ----------- -------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
68
<PAGE>
PACIFIC PREMIER RETAIL TRUST
(A MARYLAND REAL ESTATE INVESTMENT TRUST)
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE PERIOD FROM FEBRUARY 18, 1999 (INCEPTION)
THROUGH DECEMBER 31, 1999
(DOLLARS IN THOUSANDS)
<TABLE>
<S> <C>
Cash flows from operating activities:
Net income $15,391
--------
Adjustment to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 10,463
Changes in assets and liabilities:
Tenant receivables, net (3,438)
Deferred rent receivables (2,501)
Other assets 27
Accounts payable 2,870
Accrued interest payable 2,285
Accrued real estate taxes (1,228)
Tenant security deposits 315
Other accrued liabilities 5,449
Due to related parties 4,108
--------
Total adjustments 18,350
--------
Net cash flows provided by operating activities 33,741
--------
Cash flows from investing activities:
Acquisition of property and improvements (389,536)
Deferred charges (704)
--------
Net cash flows used in investing activities (390,240)
Cash flows from financing activities:
Proceeds from notes payable 203,444
Payments on notes payable (4,942)
Net proceeds from preferred stock offering 409
Contributions 175,266
Distributions (12,792)
Preferred dividends paid (18)
Deferred finance costs (573)
--------
Net cash flows provided by financing activities 360,794
Net increase in cash 4,295
Cash, beginning of period -
--------
Cash, end of year $4,295
========
Supplemental cash flow information:
Cash payments for interest, net of amounts capitalized $18,087
========
Non-cash transactions:
Non-cash contribution of assets, net of assumed debt $131,100
========
Non-cash assumption of debt $150,625
========
</TABLE>
The accompanying notes are an integral part of these financial statements.
69
<PAGE>
PACIFIC PREMIER RETAIL TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
1. ORGANIZATION AND BASIS OF PRESENTATION:
On February 18, 1999, Macerich PPR Corp. (the "Corp"), an indirect wholly
owned subsidiary of the Macerich Company (the "Company"), and Ontario
Teachers' Pension Plan Board ("Ontario Teachers'") acquired a portfolio of
properties in the first of a two-phase acquisition and formed the Pacific
Premier Retail Trust (the "Trust").
The first phase of the acquisition consisted of three regional malls, the
retail component of a mixed-use development and five contiguous properties
comprising approximately 3.4 million square feet for a total purchase price
of approximately $415,000. The purchase price was funded with a $120,000
loan placed concurrently with the closing, $109,800 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 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.
On October 26, 1999, 99% of the membership interests of Los Cerritos Center
and Stonewood Mall and 100% of the membership interests of Lakewood Mall
were contributed to the Trust. The total value of the transaction was
approximately $535,000. The properties were contributed to the Trust
subject to existing debt of $322,000. The properties were recorded at
approximately $453,100 to reflect the cost basis of the assets contributed
to the Trust.
The Trust was organized to qualify as a real estate investment trust
("REIT") under the Internal Revenue Code of 1986, as amended. The Corp
maintains a 51% ownership interest in the Trust, while Ontario Teachers'
maintains a 49% ownership interest in the Trust.
The properties as of December 31, 1999 and their locations are as follows:
<TABLE>
<S> <C>
Cascade Mall Burlington, Washington
Creekside Crossing Mall Redmond, Washington
Cross Court Plaza Burlington, Washington
Kitsap Mall Silverdale, Washington
Kitsap Place Mall Silverdale, Washington
Lakewood Mall Lakewood, California
Los Cerritos Center Cerritos, California
Northpoint Plaza Silverdale, Washington
Redmond Towne Center Redmond, Washington
Redmond Office Redmond, Washington
Stonewood Mall Downey, California
Washington Square Mall Tigard, Oregon
Washington Square Too Tigard, Oregon
</TABLE>
70
<PAGE>
PACIFIC PREMIER RETAIL TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
CASH AND CASH EQUIVALENTS:
The Trust considers all highly liquid investments with an original maturity
of 90 days or less when purchased to be cash equivalents, for which cost
approximates market. Included in cash is restricted cash of $1,299 at
December 31, 1999.
TENANT RECEIVABLES:
Included in tenant receivables are accrued overage rents of $2,835 and an
allowance for doubtful accounts of $171 at December 31, 1999.
REVENUES:
Minimum rental revenues are recognized on a straight-line basis over the
terms of the related lease. The difference between the amount of rent due
in a year and the amount recorded as rental income is referred to as the
"straight lining of rent adjustment." Rental income was increased by $2,501
in 1999 due to the straight lining of rents. Percentage rents are
recognized on an accrual basis. Recoveries from tenants for real estate
taxes, insurance and other shopping center operating expenses are
recognized as revenues in the period the applicable costs are incurred.
The Trust engages the Macerich Management Company (the "Management
Company"), an affiliate of the Company, to manage the operations of the
Trust. The Management Company provides property management, leasing,
corporate, redevelopment and acquisitions services to the properties of the
Trust. In consideration of these services, the Management Company receives
monthly management fees ranging from 1.0% to 4.0% of the gross monthly
rental revenue of the properties managed.
PROPERTY:
Costs related to the redevelopment, construction and improvement of
properties are capitalized. Interest costs are capitalized until
construction is substantially complete.
Expenditures for maintenance and repairs are charged to operations as
incurred. Realized gains and losses are recognized upon disposal or
retirement of the related assets and are reflected in earnings.
Property is recorded at cost and is depreciated using a straight-line
method over the estimated lives of the assets as follows:
Building and improvements 5-39 years
Tenant improvements initial term of related lease
Equipment and furnishings 5 years
The Trust assesses whether there has been an impairment in the value of its
long-lived assets by considering factors such as expected future operating
income, trends and prospects, as well as the effects of demand, competition
and other economic factors. Such factors include the tenants' ability to
perform their duties and pay rent under the terms of the leases. The Trust
may recognize an impairment loss if the income stream is not sufficient to
cover its investments. Such a loss would be determined between the carrying
value and the fair value of a property. Management believes no such
impairment has occurred in its net property carrying values at December 31,
1999.
DEFERRED CHARGES:
Costs relating to financing of properties and obtaining tenant leases are
deferred and amortized over the initial term of the agreement. The
straight-line method is used to amortize all costs except financing, for
which the effective interest method is used. The range of the terms of the
agreements are as follows:
Deferred lease costs 1 - 9 years
Deferred financing costs 1 - 12 years
71
<PAGE>
PACIFIC PREMIER RETAIL TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
INCOME TAXES:
The Trust has elected to be taxed as a REIT under the Internal Revenue Code
of 1986, as amended. A REIT is generally not subject to income taxation on
that portion of its income that qualifies as REIT taxable income as long as
it distributes at least 95% of its taxable income to its stockholders and
complies with other requirements. Accordingly, no provision has been made
for income taxes in the financial statements.
FAIR VALUE OF FINANCIAL INSTRUMENTS:
To meet the reporting requirements of SFAS No. 107, "Disclosures about Fair
Value of Financial Instruments," the Trust calculates the fair value of
financial instruments and includes this additional information in the notes
to the consolidated financial statements when the fair value is different
than the carrying value of those financial instruments. When the fair value
reasonably approximates the carrying value, no additional disclosure is
made. The estimated fair value amounts have been determined by the Trust
using available market information and appropriate valuation methodologies.
However, considerable judgment is required in interpreting market data to
develop the estimates of fair value. Accordingly, the estimates presented
herein are not necessarily indicative of the amounts that the Trust could
realize in a current market exchange. The use of different market
assumptions and/or estimation methodologies may have a material effect on
the estimated fair value amounts.
CONCENTRATION OF RISK:
The Trust maintains its cash accounts in a number of commercial banks.
Accounts at these banks are guaranteed by the Federal Deposit Insurance
Corporation ("FDIC") up to $100. At various times during the year, the
Trust had deposits in excess of the FDIC insurance limit.
AT&T Wireless Services represented 9.5% of total minimum rents in place
as of December 31, 1999, and no other tenant represented more than 2.7%
of total minimum rents as of December 31, 1999.
MANAGEMENT ESTIMATES:
The preparation of financial statements in conformity with generally
accepted accounting principles ("GAAP") requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ
from those estimates.
3. PROPERTY:
Property is summarized as follows:
<TABLE>
<CAPTION>
December 31,
1999
----
<S> <C>
Land $239,194
Building and improvements 735,258
Tenant improvements 89
Equipment and furnishings 148
Construction in progress 20,356
--------
995,045
--------
Less, accumulated depreciation (10,302)
--------
$984,743
========
</TABLE>
72
<PAGE>
PACIFIC PREMIER RETAIL TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
4. MORTGAGE NOTES PAYABLE:
Mortgage notes payable at December 31, 1999 consist of the following:
<TABLE>
<CAPTION>
Carrying Amount of Notes
--------------------------------------------------------------
1999
--------------------------------------------------------------
Property Pledged Related Interest Payment Maturity
As Collateral Other Party Rate Terms Date
---------------- ----- ----- ---- ----- ----
<S> <C> <C> <C> <C> <C>
Cascade Mall $27,130 ---- 6.50% 239(e) 2014
Kitsap Mall 40,101 ---- 6.50% (c) 349(e) 2000
Lakewood Mall (a) 127,000 ---- 7.20% interest only 2005
Los Cerritos Center 119,430 ---- 7.13% 826(e) 2006
North Point Plaza 3,705 ---- 6.50% 31(e) 2015
Redmond Town Center - Retail 64,202 ---- 6.50% 439(e) 2011
Redmond Town Center - Office (b) ---- $82,839 6.77% 584(e) 2009
Stonewood Mall 75,000 ---- 8.23% (d) interest only 2001
Washington Square 118,571 ---- 6.70% 825(e) 2009
Washington Square Too 12,809 ---- 6.50% 104(e) 2016
-------- -------
Total $587,948 $82,839
======== =======
Weighted average interest rate at
December 31, 1999 6.85%
=====
</TABLE>
(a) In connection with the acquisition of this property, the Trust assumed
$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 Trust to deposit all cash flow from the
property operations with a trustee to meet its obligations under the
Notes. Cash in excess of the required amount, as defined, is released.
Included in cash and cash equivalents is $750 of restricted cash
deposited with the trustee at December 31, 1999.
(b) Concurrent with the acquisition of the property, the Trust 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 December 31, 1999, $6,745 of principal has been drawn
under the construction loan.
(c) In connection with the acquisition of this property, the Trust assumed
$39,425 of debt. At acquisition, this debt was recorded at the fair
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 Trust's monthly debt
service is $349 and is calculated based on an 8.60% interest rate. At
December 31, 1999, the Trust's unamortized premium was $1,365.
(d) This loan pays interest at LIBOR plus 1.75%. At December 31, 1999
the total interest rate was 8.23%.
(e) This represents the monthly payment of principal and interest.
73
<PAGE>
PACIFIC PREMIER RETAIL TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
4. MORTGAGE NOTES PAYABLE - CONTINUED:
Certain mortgage loan agreements contain a prepayment penalty provision for
the early extinguishment of the debt.
Total interest costs capitalized during the period from February 18, 1999
(Inception) through December 31, 1999 were $290.
The fair value of mortgage notes payable at December 31, 1999 is estimated
to be approximately $621,393 based on interest rates for comparable loans.
The above debt matures as follows:
<TABLE>
<CAPTION>
Years Ending December 31,
- -------------------------
<S> <C>
2000 $48,298
2001 83,773
2002 9,381
2003 10,031
2004 10,720
2005 and beyond 508,584
--------
$670,787
========
</TABLE>
The Trust is currently in negotiations to refinance $40,101 of the debt
maturing in 2000. The remaining debt maturing in 2000 reflects the
amortization of principal on existing debt.
5. RELATED PARTY TRANSACTIONS:
The Trust engaged the Management Company to manage the operations of its
properties. During 1999, the Trust incurred management fees of $2,253 to
the Management Company.
A mortgage note collateralized by the office component of Redmond Town
Center is held by one of the Company's joint venture partners. In
connection with this note, interest expense was $2,192 during the year
ended December 31, 1999. Additionally, $248 of interest costs were
capitalized during the year ended December 31, 1999 in relation to this
note.
6. FUTURE RENTAL REVENUES:
The property leases generally provide for fixed annual minimum rent,
overage rent based on sales, and reimbursement for certain operating
expenses, including real estate taxes. For leases in effect at December 31,
1999, fixed minimum rents to be received in each of the next five years and
thereafter are summarized as follows:
<TABLE>
<CAPTION>
<S> <C>
2000 $82,468
2001 79,055
2002 75,601
2003 69,648
2004 64,234
Thereafter 331,153
--------
$702,159
========
</TABLE>
74
<PAGE>
PACIFIC PREMIER RETAIL TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
7. REDEEMABLE PREFERRED STOCK:
On October 6, 1999, the Trust issued 125 shares of Series A Redeemable
Preferred Shares of Beneficial Interest ("Preferred Stock") for proceeds
totaling $500 in a private placement. On October 26, 1999 the Trust
issued 254 and 246 shares of Preferred Stock to the Corp and Ontario
Teachers', respectively. The Preferred Stock can be redeemed by the
Trust at any time with 15 days notice for $4,000 per share plus
accumulated and unpaid dividends and the applicable redemption premium.
The Preferred Stock will pay a semiannual dividend equal to $300 per
share. The Preferred Stock has limited voting rights.
8. COMMITMENTS:
The Trust has certain properties subject to non-cancelable operating ground
leases. The leases expire at various times through 2069, subject in some
cases to options to extend the terms of the lease. Ground rent expense was
$905 for the period from February 18, 1999 (Inception) through December 31,
1999.
Minimum future rental payments required under the leases are as follows:
<TABLE>
<CAPTION>
Years Ending December 31,
- -------------------------
<S> <C>
2000 $1,215
2001 1,215
2002 1,215
2003 1,215
2004 1,230
Thereafter 105,492
--------
$111,582
========
</TABLE>
75
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Partners
SDG Macerich Properties, L.P.:
We have audited the accompanying balance sheets of SDG Macerich Properties,
L.P. as of December 31, 1999 and 1998, and the related statements of
operations, cash flows, and partners' equity for the years then ended. In
connection with our audits of the financial statements, we have also
audited the related financial statement schedule (Schedule III). These
financial statements and the financial statement schedule are the
responsibility of the Partnership's management. Our responsibility is to
express an opinion on these financial statements and the financial
statement schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of SDG Macerich
Properties, L.P. as of December 31, 1999 and 1998, and the results of its
operations and its cash flows for the years then ended in conformity with
generally accepted accounting principles. Also, in our opinion, the related
financial statement schedule (Schedule III), when considered in relation to
the basic financial statements taken as a whole, presents fairly, in all
material respects, the information set forth therein.
KPMG LLP
Indianapolis, Indiana
February 11, 2000
76
<PAGE>
SDG MACERICH PROPERTIES, L.P.
BALANCE SHEETS
AS OF DECEMBER 31, 1999 AND 1998
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
ASSETS:
1999 1998
------------ -------------
<S> <C> <C>
Properties:
Land $200,123 199,377
Building and improvements 815,559 804,724
Equipment and furnishings 1,125 472
------------ -------------
1,016,807 1,004,573
Less accumulated depreciation 38,818 17,383
------------ -------------
977,989 987,190
Cash and cash equivalents 8,332 9,156
Tenant receivables, including accrued revenue
less allowance for doubtful accounts of $979 and $804 20,700 20,579
Prepaid real estate taxes and other assets 2,178 1,096
------------ -------------
$1,009,199 1,018,021
============ =============
LIABILITIES AND PARTNERS' EQUITY
Mortgage notes payable $503,565 505,868
Accounts payable 7,755 10,935
Due to affiliates 633 443
Accrued real estate taxes 14,859 12,423
Accrued interest expense 1,562 1,562
Accrued management and leasing fees 322 249
Other liabilities 674 1,503
------------ ------------
Total liabilities 529,370 532,983
Partners' equity 479,829 485,038
------------ ------------
$1,009,199 1,018,021
============ ============
</TABLE>
See accompanying notes to financial statements.
77
<PAGE>
SDG MACERICH PROPERTIES, L.P.
STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1999 AND 1998
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
1999 1998
--------- ----------
<S> <C> <C>
Revenues:
Minimum rents $88,051 72,016
Overage rents 6,905 5,782
Tenant recoveries 47,161 35,806
Other 2,382 1,822
--------- ----------
144,499 115,426
--------- ----------
Expenses:
Property operations 18,750 13,561
Depreciation of properties 21,451 17,383
Real estate taxes 18,603 13,577
Repairs and maintenance 6,979 6,312
Advertising and promotion 7,481 5,013
Management fees 3,763 3,062
Provision for credit losses 748 809
Interest on mortgage notes 30,565 26,432
Other 768 231
--------- ---------
109,108 86,380
--------- ---------
Net income $35,391 29,046
========= =========
</TABLE>
See accompanying notes to financial statements.
78
<PAGE>
SDG MACERICH PROPERTIES, L.P.
STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1999 AND 1998
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
1999 1998
---------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 35,391 29,046
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation of properties 21,451 17,383
Amortization of debt premium (2,303) (1,843)
Change in tenant receivables (121) (14,452)
Change in accrued real estate taxes 2,436 (527)
Other items (4,684) 8,871
---------- ---------
Net cash provided by operating activities 52,170 38,478
---------- ---------
Cash flows from investing activities:
Acquisition of properties, net of mortgage notes assumed - (480,392)
Additions to properties (12,394) (4,922)
---------- ---------
Net cash used by investing activities (12,394) (485,314)
---------- ---------
Cash flows from financing activities:
Contributions by partners - 480,392
Distributions to partners (40,600) (24,400)
---------- ---------
Net cash provided by financing activities (40,600) 455,992
---------- ---------
Net increase (decrease) in cash and cash equivalents (824) 9,156
Cash and cash equivalents at beginning of year 9,156 -
---------- ---------
Cash and cash equivalents at end of year $ 8,332 9,156
========== =========
Supplemental cash flow information:
Cash payments for interest $ 32,868 26,713
========== =========
Non-cash transaction:
Fair value of mortgage notes assumed with properties acquired - 507,711
Fair value of other liabilities, net, assumed with properties acquired - 11,548
========== =========
</TABLE>
See accompanying notes to financial statements.
79
<PAGE>
SDG MACERICH PROPERTIES, L.P.
STATEMENTS OF PARTNERS' EQUITY
YEARS ENDED DECEMBER 31, 1999 AND 1998
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
Simon Property The Macerich Total
Group, Inc. Company
affiliates affiliates
-------------- ------------ -----------
<S> <C> <C> <C>
Percentage ownership interest 50% 50% 100%
============== ============ ===========
Balance at January 1, 1998 $ - - -
Contributions 240,196 240,196 480,392
Distributions (12,200) (12,200) (24,400)
Net income for the year 14,523 14,523 29,046
-------------- ------------ -----------
Balance at December 31, 1998 242,519 242,519 485,038
Distributions (20,300) (20,300) (40,600)
Net income for the year 17,695 17,696 35,391
-------------- ------------ -----------
Balance at December 31, 1999 $ 239,914 239,915 479,829
============== ============ ===========
</TABLE>
See accompanying notes to financial statements.
80
<PAGE>
SDG MACERICH PROPERTIES, L.P.
Notes to Financial Statements
December 31, 1999 and 1998
(Dollars in thousands)
(1) GENERAL
(a) PARTNERSHIP ORGANIZATION
On December 29, 1997, affiliates of Simon Property Group, Inc.
(Simon) and The Macerich Company (Macerich) formed a limited
partnership to acquire and operate a portfolio of 12 regional
shopping centers. SDG Macerich Properties, L.P. (the Partnership)
acquired the properties on February 27, 1998, and the accompanying
financial statements include the results of operations of the
properties since the date of acquisition. As a result, the
statement of operations presented for 1998 only represents ten
months of activity.
(b) PROPERTIES
Simon and Macerich have divided the property management services,
and affiliates of each company manage six of the shopping centers.
The shopping centers and their locations are as follows:
Simon managed properties:
South Park Mall Moline, Illinois
Valley Mall Harrisonburg, Virginia
Granite Run Mall Media, Pennsylvania
Eastland Mall and Convenience Center Evansville, Indiana
Lake Square Mall Leesburg, Florida
North Park Mall Davenport, Iowa
Macerich managed properties:
Lindale Mall Cedar Rapids, Iowa
Mesa Mall Grand Junction, Colorado
South Ridge Mall Des Moines, Iowa
Empire Mall and Empire East Sioux Falls, South Dakota
Rushmore Mall Rapid City, South Dakota
Southern Hills Mall Sioux City, Iowa
The shopping center leases generally provide for fixed annual
minimum rent, overage rent based on sales, and reimbursement for
certain operating expenses, including real estate taxes. For
leases in effect at December 31, 1999, fixed minimum rents to be
received in each of the next five years and thereafter are
summarized as follows:
<TABLE>
<S> <C>
2000 $ 72,730
2001 66,183
2002 60,239
2003 53,401
2004 45,992
Thereafter 149,455
---------
$ 448,000
=========
</TABLE>
81
<PAGE>
SDG MACERICH PROPERTIES, L.P.
Notes to Financial Statements
December 31, 1999 and 1998
(Dollars in thousands)
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) REVENUES
All leases are classified as operating leases, and minimum rents
are recognized monthly on a straight-line basis over the terms of
the leases.
Most retail tenants are also required to pay overage rents based
on sales over a stated base amount during the lease year,
generally ending on January 31. Overage rents are recognized as
revenues based on reported and estimated sales for each tenant
through December 31, less a proration of the base amount.
Differences between estimated and actual amounts are recognized in
the subsequent year.
During January 2000, the Emerging Issues Task Force finalized
Issue No. 98-9 on ACCOUNTING FOR CONTINGENT RENT. The EITF
clarified the recognition of overage rent by stating that revenue
for such contingent rent should not be recognized until the sales
of the tenant have exceeded its base amount. The Partnership will
be required to adopt this new method as of January 1, 2000. The
effect of this pronouncement will be to delay the recognition of
revenue until later in the year and into the subsequent year.
Estimates of the effects of this change have not yet been
determined.
Tenant recoveries for real estate taxes and common area
maintenance are adjusted annually based on the actual expenses,
and the related revenues are recognized in the year in which the
expenses are incurred. Charges for other operating expenses are
billed monthly with periodic adjustments based on the estimated
utility usage and/or a current price index, and the related
revenues are recognized as the amounts are billed and as
adjustments become determinable.
(b) CASH EQUIVALENTS
All highly liquid debt instruments purchased with a maturity of
three months or less are considered to be cash equivalents.
(c) PROPERTIES
Properties are recorded at cost and are depreciated using the
straight-line method over the estimated useful lives of the assets
as follows:
Buildings and improvements 39 years
Equipment and furnishings 5-7 years
Tenant improvements Initial term of related lease
Improvements and replacements are capitalized when they extend the
useful life, increase capacity, or improve the efficiency of the
asset. All other repairs and maintenance items are expensed as
incurred.
The Partnership assesses whether there has been an impairment in
the value of a property by considering factors such as expected
future operating income, trends and prospects, as well as the
effects of demand, competition and other economic factors. Such
factors include the tenants' ability to perform their duties and
pay rent under the terms of the leases. The Partnership would
recognize an impairment loss if the estimated future income stream
of a property is not sufficient to recover its investment. Such a
loss would be the difference between the carrying value and the
fair value of a property. Management believes no impairment in its
net property carrying values has occurred at December 31, 1999 or
1998.
82
<PAGE>
SDG MACERICH PROPERTIES, L.P.
Notes to Financial Statements
December 31, 1999 and 1998
(Dollars in thousands)
(d) USE OF ESTIMATES
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
(e) INCOME TAXES
As a partnership, the allocated share of income or loss for the
year is includable in the income tax returns of the partners;
accordingly, income taxes are not reflected in the accompanying
financial statements.
(3) MORTGAGE NOTES PAYABLE AND FAIR VALUE OF FINANCIAL INSTRUMENTS
In connection with the acquisition of the properties, the Partnership
assumed $485,000 of mortgage notes payable which are secured by liens on
the properties. The notes consist of $300,000 of debt which is due in
May 2006 and requires monthly interest payments at a fixed weighted
average rate of 7.41% and $185,000 of debt which is due in May 2003 and
requires monthly interest payments at a variable weighted average rate
(based on LIBOR) of 6.96% at December 31, 1999 (5.86% at December 31,
1998). The variable rate debt is covered by an interest cap agreement
which effectively prevents the variable rate from exceeding 11.53%.
The fair value assigned to the $300,000 fixed-rate debt at the
acquisition date based on an estimated market interest rate of 6.23% was
$322,711, and the resultant debt premium is being amortized to interest
expense over the remaining term of the debt using a level yield method.
At December 31, 1999 and 1998, the unamortized balance of the debt
premium was $18,565 and $20,868, respectively.
The fair value of the $300,000 fixed-rate debt at December 31, 1999 and
1998 based on an interest rate of 8.34% and 6.70%, respectively, is
estimated to be $266,530 and $312,000, respectively. The $185,000
carrying value of the variable-rate debt and the Partnership's other
financial instruments are estimated to equal their financial statement
values.
The Partnership intends to obtain additional mortgage financing secured
by the properties of up to $140,000 in 2000. The new financing is
expected to have the same maturity as the existing fixed rate mortgage
notes, which mature on May 15, 2006.
(4) MANAGEMENT SERVICES
Management fees incurred in 1999 and 1998 totaled $1,960 and $1,592,
respectively, for the Simon-managed properties and $1,803 and $1,470,
respectively, for the Macerich-managed properties, both based on a fee
of 4% of gross receipts, as defined.
(5) CONTINGENT LIABILITY
The Partnership currently is not involved with any litigation other than
routine and administrative proceedings arising in the ordinary course of
business. On the basis of consultation with counsel, management believes
that these items will not have a material adverse impact on the
Partnership's financial statements taken as a whole.
83
<PAGE>
THE MACERICH COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999
(Dollars in thousands)
Schedule III. Real Estate and Accumulated Depreciation
<TABLE>
<CAPTION>
Initial Cost to Company
------------------------------------
Cost
Equipment Capitalized
Building and and Subsequent to
Land Improvements Furnishings Acquisition
---- ------------ ----------- -----------
<S> <C> <C> <C> <C>
Shopping Centers/Entities:
Bristol Shopping Center $132 $11,587 $0 $1,449
Boulder Plaza 2,919 9,053 0 787
Capitola Mall 11,312 46,689 0 1,585
Carmel Plaza 9,080 36,354 0 437
Chesterfield Towne Center 18,517 72,936 2 9,522
Citadel, The 21,600 86,711 0 3,101
Corte Madera, Village at 24,433 97,821 0 1,174
County East Mall 4,096 20,317 1,425 7,060
Crossroads Mall - Boulder 50 37,793 64 36,655
Crossroads Mall - Oklahoma 10,279 43,486 291 13,039
Fresno Fashion Fair 17,966 72,194 0 (1,321)
Great Falls Marketplace 2,960 11,840 0 660
Greeley Mall 5,601 12,648 13 7,874
Green Tree Mall 4,947 14,925 332 23,488
Holiday Village Mall 3,491 18,229 138 19,014
Northgate Mall 8,400 34,865 841 19,236
Northwest Arkansas Mall 18,800 75,358 0 1,118
Pacific View
(formerly known as Buenaventura Mall) 8,697 8,696 0 85,660
Parklane Mall 2,311 15,612 173 14,849
Queens Center 21,460 86,631 8 4,136
Rimrock Mall 8,737 35,652 0 3,307
Salisbury, The Centre at 15,290 63,474 31 1,892
Santa Monica Place 26,400 105,600 0 273
South Plains Mall 23,100 92,728 0 1,426
South Towne Center 19,600 78,954 0 5,236
Valley View Center 17,100 68,687 0 10,525
Villa Marina Marketplace 15,852 65,441 0 279
Vintage Faire Mall 14,902 60,532 0 100
Westside Pavilion 34,100 136,819 0 2,597
The Macerich Partnership, L.P. 451 1,844 0 0
-------- ---------- ------ --------
$372,583 $1,523,476 $3,318 $275,158
======== ========== ====== ========
</TABLE>
<TABLE>
<CAPTION>
Gross Amount at Which Carried at Close of Period
------------------------------------------------------------------
Total Cost
Furniture, Net of
Building and Fixtures and Constuction Accumulated Accumulated
Land Improvements Equipment in Progress Total Depreciation Depreciation
---- ------------ --------- ----------- ----- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Shopping Centers/Entities:
Bristol Shopping Center $132 $13,033 $0 $3 $13,168 $6,186 $6,982
Boulder Plaza 2,919 9,840 0 0 12,759 3,232 9,527
Capitola Mall 11,309 48,199 78 0 59,586 5,153 54,433
Carmel Plaza 9,080 36,757 23 11 45,871 1,336 44,535
Chesterfield Towne Center 18,517 80,281 2,179 0 100,977 15,237 85,740
Citadel, The 21,600 89,410 273 129 111,412 4,904 106,508
Corte Madera, Village at 24,433 98,957 34 4 123,428 3,752 119,676
County East Mall 4,099 27,894 811 94 32,898 11,694 21,204
Crossroads Mall - Boulder 21,616 42,312 158 10,476 74,562 24,520 50,042
Crossroads Mall - Oklahoma 13,357 53,270 367 101 67,095 9,164 57,931
Fresno Fashion Fair 17,966 70,523 140 210 88,839 5,602 83,237
Great Falls Marketplace 3,090 12,370 0 0 15,460 619 14,841
Greeley Mall 5,601 20,377 142 16 26,136 10,806 15,330
Green Tree Mall 4,947 38,198 547 0 43,692 22,570 21,122
Holiday Village Mall 5,807 34,810 249 6 40,872 22,036 18,836
Northgate Mall 8,400 53,832 949 161 63,342 21,173 42,169
Northwest Arkansas Mall 18,800 76,413 41 22 95,276 2,096 93,180
Pacific View
(formerly known as
Buenaventura Mall) 8,697 8,797 277 85,282 103,053 712 102,341
Parklane Mall 2,426 25,246 411 4,862 32,945 17,323 15,622
Queens Center 21,454 87,498 647 2,636 112,235 9,195 103,040
Rimrock Mall 8,737 38,847 112 0 47,696 3,223 44,473
Salisbury, The Centre at 15,284 64,821 582 0 80,687 7,653 73,034
Santa Monica Place 26,400 105,864 9 0 132,273 476 131,797
South Plains Mall 23,100 94,004 130 20 117,254 3,791 113,463
South Towne Center 19,600 84,018 161 11 103,790 6,417 97,373
Valley View Center 17,100 73,116 639 5,457 96,312 6,617 89,695
Villa Marina Marketplace 15,852 65,666 38 16 81,572 6,826 74,746
Vintage Faire Mall 14,298 59,656 718 862 75,534 4,987 70,547
Westside Pavilion 34,100 137,149 1,557 710 173,516 5,372 168,144
The Macerich Partnership, L.P. 451 1,844 0 0 2,295 448 1,847
-------- ---------- ------- -------- ---------- -------- ----------
$399,172 $1,653,002 $11,272 $111,089 $2,174,535 $243,120 $1,931,415
======== ========== ======= ======== ========== ======== ==========
</TABLE>
84
<PAGE>
THE MACERICH COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999
(DOLLARS IN THOUSANDS)
SCHEDULE III. REAL ESTATE AND ACCUMULATED DEPRECIATION - CONTINUED:
Depreciation and amortization of the Company's investment in buildings and
improvements reflected in the statements of income are calculated over the
estimated useful lives of the asset as follows:
<TABLE>
<S> <C>
Buildings and improvements 5 - 40 years
Tenant improvements life of related lease
Equipment and furnishings 5 - 7 years
</TABLE>
The changes in total real estate assets for the three years ended December 31,
1999 are as follows:
<TABLE>
<CAPTION>
1997 1998 1999
---------- ---------- ----------
<S> <C> <C> <C>
Balance, beginning of year $1,273,085 $1,607,429 $2,213,125
Additions 334,344 605,696 224,322
Disposals and retirements - - (262,912)
---------- ---------- ----------
Balance, end of year $1,607,429 $2,213,125 $2,174,535
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
The changes in accumulated depreciation and amortization for the three years
ended December 31, 1999 are as follows:
<TABLE>
<CAPTION>
1997 1998 1999
-------- -------- --------
<S> <C> <C> <C>
Balance, beginning of year $164,417 $200,250 $246,280
Additions 35,833 46,030 52,592
Disposals and retirements - - (55,752)
-------- -------- --------
Balance, end of year $200,250 $246,280 $243,120
-------- -------- --------
</TABLE>
85
<PAGE>
PACIFIC PREMIER RETAIL TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999
(DOLLARS IN THOUSANDS)
SCHEDULE III. REAL ESTATE AND ACCUMULATED DEPRECIATION
<TABLE>
<CAPTION>
Initial Cost to Trust Gross Amount Which Carried at Close of Period
----------------------- Cost --------------------------------------------------------
Capitalized Furniture,
Building and Subsequent Building and Fixtures and Construction
Properties: Land Improvements to Acquisition Land Improvements Equipment in Progress Total
- ---------- ------- ------------ -------------- ------- ------------ ------------ ------------ --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Cascade Mall $ 8,200 $ 32,843 $ 23 $ 8,200 $ 32,842 $ 19 $ 5 $ 41,066
Creekside Crossing Mall 620 2,495 11 620 2,495 - 11 3,126
Cross Court Plaza 1,400 5,629 - 1,400 5,629 - - 7,029
Kitsap Mall 13,590 56,672 239 13,590 56,893 18 - 70,501
Kitsap Place Mall 1,400 5,627 - 1,400 5,627 - - 7,027
Lakewood Mall 48,025 112,059 2,825 48,025 112,128 1 2,755 162,909
Los Cerritos Center 57,000 133,000 69 57,000 133,052 17 - 190,069
Northpoint Plaza 1,400 5,627 - 1,400 5,627 - - 7,027
Redmond Towne Center 18,381 73,868 1,593 18,381 74,217 39 1,205 93,842
Redmond Office 20,676 90,929 8,347 20,676 82,904 - 16,372 119,952
Stonewood Mall 30,902 72,104 - 30,902 72,104 - - 103,006
Washington Square Mall 33,600 135,084 719 33,600 135,742 53 8 169,403
Washington Square Too 4,000 16,087 1 4,000 16,087 1 - 20,088
-----------------------------------------------------------------------------------------------------
$239,194 $742,024 $13,827 $239,194 $735,347 $148 $20,356 $995,045
=====================================================================================================
<CAPTION>
Total Cost
Net of
Accumulated Accumulated
Properties: Depreciation Depreciation
- ---------- ------------ ------------
<S> <C> <C>
Cascade Mall $ 735 $ 40,331
Creekside Crossing Mall 56 3,070
Cross Court Plaza 125 6,904
Kitsap Mall 1,283 69,218
Kitsap Place Mall 125 6,902
Lakewood Mall 752 162,157
Los Cerritos Center 627 189,442
Northpoint Plaza 125 6,902
Redmond Towne Center 1,672 92,170
Redmond Office 1,010 118,942
Stonewood Mall 386 102,620
Washington Square Mall 3,048 166,355
Washington Square Too 358 19,730
------------------------------
$10,302 $984,743
==============================
</TABLE>
<TABLE>
<S> <C>
Depreciation and amortization of the Trust's The changes in total real estate assets for
investment in buildings and improvements reflected the year ended December 31, 1999 are as follows:
in the statement of income are calculated
over the estimated useful lives of the assets as follows: Balance, beginning of period $ -
Building and improvements 5 - 39 years Acquisitions 981,218
Tenant improvements life of related lease Additions 13,827
Equipment and furnishings 5 years Disposals and retirements -
--------
Balance, end of period $ 995,045
=========
<CAPTION>
<C>
The changes in accumulated depreciation for the year
ended December 31, 1999 are as follows:
Balance, beginning of period $ -
Additions 10,302
Disposals and retirements -
--------
Balance, end of period $ 10,302
========
</TABLE>
86
<PAGE>
SDG MACERICH PROPERTIES, L.P.
Schedule III - Real Estate and Accumulated Depreciation
As of December 31, 1999
(Dollars in thousands)
<TABLE>
<CAPTION>
Initial Cost to Partnership Costs
------------------------------------- Capitalized
Building and Equipment Subsequent
Shopping Center (1) Location Land Improvements and Furnishings to Acquisition
- ------------------- -------- ---- ------------ --------------- --------------
<S> <C> <C> <C> <C> <C>
Mesa Mall Grand Junction, Colorado $ 11,155 44,635 -- 576
Lake Square Mall Leesburg, Florida 7,348 29,392 -- 716
South Park Mall Moline, Illinois 21,341 85,540 -- 1,518
Eastland Mall Evansville, Indiana 28,160 112,642 -- 2,727
Lindale Mall Cedar Rapids, Iowa 12,534 50,151 -- 521
North Park Mall Davenport, Iowa 17,210 69,042 -- 1,443
South Ridge Mall Des Moines, Iowa 11,524 46,097 -- 3,708
Granite Run Mall Media, Pennsylvania 26,147 104,671 -- 1,446
Rushmore Mall Rapid City, South Dakota 12,089 50,588 -- 1,089
Empire Mall Sioux Falls, South Dakota 23,706 94,860 -- 1,574
Empire East Sioux Falls, South Dakota 2,073 8,291 -- --
Southern Hills Mall Sioux City, South Dakota 15,697 62,793 -- 925
Valley Mall Harrisonburg, Virginia 10,393 41,572 -- 913
---------------------------------------------------------
$199,377 800,274 -- 17,156
=========================================================
<CAPTION>
Gross Book Value at December 31, 1999 Total Cost
--------------------------------------- Net of
Building and Equipment Accumulated Accumulated
Shopping Center (1) Location Land Improvements and Furnishings Depreciation Depreciation
- ------------------- -------- ---- ------------ --------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Mesa Mall Grand Junction, Colorado 11,155 45,186 25 2,155 54,211
Lake Square Mall Leesburg, Florida 7,348 30,044 64 1,438 36,018
South Park Mall Moline, Illinois 21,341 86,965 92 4,177 104,221
Eastland Mall Evansville, Indiana 28,160 115,160 209 5,433 138,096
Lindale Mall Cedar Rapids, Iowa 12,535 50,646 25 2,438 60,768
North Park Mall Davenport, Iowa 17,210 70,463 22 3,323 84,372
South Ridge Mall Des Moines, Iowa 12,278 48,897 154 2,279 59,050
Granite Run Mall Media, Pennsylvania 26,147 105,819 298 5,013 127,251
Rushmore Mall Rapid City, South Dakota 12,089 51,641 36 2,550 61,216
Empire Mall Sioux Falls, South Dakota 23,697 96,343 101 4,607 115,534
Empire East Sioux Falls, South Dakota 2,073 8,291 - 390 9,974
Southern Hills Mall Sioux City, South Dakota 15,697 63,632 86 3,045 76,370
Valley Mall Harrisonburg, Virginia 10,393 42,472 13 1,970 50,908
-------------------------------------------------------------------------
200,123 815,559 1,125 38,818 977,989
=========================================================================
</TABLE>
<TABLE>
<S> <C>
Depreciation and amortization of the Partnership's The changes in total shopping center properties for
investment in shopping center properties reflected the years ended December 31, 1999 and 1998 are as follows:
in the statement of operations are calculated
over the estimated useful lives of the assets as follows: Balance at January 1, 1998 $ --
Building and improvements 39 years Acquisitions in 1998 999,651
Additions in 1998 4,922
Equipment and furnishings 5-7 years Disposals and retirements in 1998 --
--------------------
Balance at December 31, 1998 1,004,573
Acquisitions in 1999 --
Additions in 1999 12,394
Disposals and retirements in 1999 (160)
--------------------
Balance at December 31, 1999 $ 1,016,807
====================
<CAPTION>
<C>
The changes in accumulated depreciation for the years
ended December 31, 1999 and 1998 are as follows:
Balance at January 1, 1998 $ --
Additions in 1998 17,383
Disposals and retirements in 1998 --
-------------------
Balance at December 31, 1998 17,383
Additions in 1999 21,451
Disposals and retirements in 1999 (16)
-------------------
Balance at December 31, 1999 $ 38,818
===================
</TABLE>
(1) All of the shopping centers are encumbered by mortgage notes payable with
a carrying value of $503,565 and $505,868 at December 31, 1999 and 1998,
respectively.
87
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
THE MACERICH COMPANY
By /s/ ARTHUR M. COPPOLA
----------------------------------------
Arthur M. Coppola
President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE CAPACITY DATE
<S> <C> <C>
/s/ ARTHUR M. COPPOLA President and Chief Executive Officer
- --------------------------------- And Director March 21, 2000
Arthur M. Coppola
/s/ MACE SIEGEL Chairman of the Board March 21, 2000
- ---------------------------------
Mace Siegel
/s/ DANA K. ANDERSON Vice Chairman of the Board March 21, 2000
- ---------------------------------
Dana K. Anderson
/s/ EDWARD C. COPPOLA Executive Vice President March 21, 2000
- ---------------------------------
Edward C. Coppola
/s/ JAMES COWNIE Director March 21, 2000
- ---------------------------------
James Cownie
/s/ THEODORE HOCHSTIM Director March 21, 2000
- ---------------------------------
Theodore Hochstim
/s/ FREDERICK HUBBELL Director March 21, 2000
- ---------------------------------
Frederick Hubbell
/s/ STANLEY MOORE Director March 21, 2000
- ---------------------------------
Stanley Moore
/s/ WILLIAM SEXTON Director March 21, 2000
- ---------------------------------
William Sexton
/s/ THOMAS E. O'HERN Executive Vice President, Treasurer and
- --------------------------------- Chief Financial and Accounting Officer March 21, 2000
Thomas E. O'Hern
</TABLE>
88
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION SEQUENTIALLY
NUMBERED PAGE
<S> <C> <C>
3.1* Articles of Amendment and Restatement of the Company
3.1.1** Articles Supplementary of the Company
3.1.2*** Articles Supplementary of the Company (Series A Preferred Stock)
3.1.3**** Articles Supplementary of the Company (Series B Preferred Stock)
3.1.4### Articles Supplementary of the Company (Series C Junior Participating Preferred
Stock)
3.2***** Amended and Restated Bylaws of the Company
4.1***** Form of Common Stock Certificate
4.2****** Form of Preferred Stock Certificate (Series A Preferred Stock)
4.2.1### Form of Preferred Stock Certificate (Series B Preferred Stock)
4.2.2***** Form of Preferred Stock Certificate (Series C Junior Participating Preferred
Stock)
4.3******* Indenture for Convertible Subordinated Debentures dated June 27, 1997
4.4***** Agreement dated as of November 10, 1998 between the Company and First Chicago
Trust Company of New York, as Rights Agent
10.1******** Amended and Restated Limited Partnership Agreement for the Operating
Partnership dated as of March 16, 1994
10.1.1****** Amendment to Amended and Restated Limited Partnerships Agreement for the
Operating Partnership dated June 27, 1997
10.1.2****** Amendment to Amended and Restated Limited Partnership Agreement for the
Operating Partnership dated November 16, 1997
10.1.3****** Fourth Amendment to Amended and Restated Limited Partnership Agreement for the
Operating Partnership dated February 25, 1998
10.1.4****** Fifth Amendment to Amended and Restated Limited Partnership Agreement for the
Operating Partnership dated February 26, 1998
10.1.5### Sixth Amendment to Amended and Restated Limited Partnership Agreement for the
Operating Partnership dated June 17, 1998
10.1.6### Seventh Amendment to Amended and Restated Limited Partnership Agreement for
the Operating Partnership dated December 31, 1999
</TABLE>
89
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NUMBER DESCRIPTION SEQUENTIALLY
NUMBERED PAGE
<S> <C> <C>
10.2******** Employment Agreement between the Company and Mace Siegel dated as of March 16,
1994
10.2.1******** List of Omitted Employment Agreements
10.2.2****** Employment Agreement between Macerich Management Company and Larry Sidwell
dated as of February 11, 1997
10.3****** The Macerich Company Amended and Restated 1994 Incentive Plan
10.4# The Macerich Company 1994 Eligible Directors' Stock Option Plan
10.5# The Macerich Company Deferred Compensation Plan
10.6# The Macerich Company Deferred Compensation Plan for Mall Executives
10.7******** The Macerich Company Eligible Directors' Deferred Compensation Plan/Phantom
Stock Plan
10.8******** The Macerich Company Executive Officer Salary Deferral Plan
10.9#### 1999 Cash Bonus/Restricted Stock Program and Stock Unit Program under the
Amended and Restated 1994 Incentive Plan (including the forms) Award Agreements
10.10******** Registration Rights Agreement, dated as of March 16, 1994, between the Company
and The Northwestern Mutual Life Insurance Company
10.11******** Registration Rights Agreement, dated as of March 16, 1994, among the Company
and Mace Siegel, Dana K. Anderson, Arthur M. Coppola and Edward C. Coppola
10.12******* Registration Rights Agreement, dated as of March 16, 1994, among the Company,
Richard M. Cohen and MRII Associates
10.13******* Registration Rights Agreement dated as of June 27, 1997
10.14******* Registration Rights Agreement dated as of February 25, 1998 between the
Company and Security Capital Preferred Growth Incorporated
10.15******** Incidental Registration Rights Agreement dated March 16, 1994
10.16****** Incidental Registration Rights Agreement dated as of July 21, 1994
10.17****** Incidental Registration Rights Agreement dated as of August 15, 1995
10.18****** Incidental Registration Rights Agreement dated as of December 21, 1995
10.18.1****** List of Incidental/Demand Registration Rights Agreements, Election Forms,
Accredited/Non-Accredited Investors Certificates and Investor Certificates
</TABLE>
90
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NUMBER DESCRIPTION SEQUENTIALLY
NUMBERED PAGE
<S> <C> <C>
10.19### Registration Rights Agreement dated as of June 17, 1998 between the Company
and the Ontario Teachers' Pension Plan Board
10.20### Redemption, Registration Rights and Lock-Up Agreement dated as of July 24,
1998 between the Company and Harry S. Newman, Jr. and LeRoy H. Brettin
10.21******** Indemnification Agreement, dated as of March 16, 1994, between the Company and
Mace Siegel
10.21.1******** List of Omitted Indemnification Agreements
10.22* Partnership Agreement for Macerich Northwestern Associates, dated as of
January 17, 1985, between Macerich Walnut Creek Associates and the
Northwestern Mutual Life Insurance Company
10.23******** First Amendment to Macerich Northwestern Associates Partnership Agreement
between Operating Partnership and the Northwestern Mutual Life Insurance
Company
10.24* Agreement of Lease (Crossroads-Boulder), dated December 31, 1960, between H.R.
Hindry, as lessor, and Gerri Von Frellick, as lessee, with amendments and
supplements thereto
10.25****** Secured Full Recourse Promissory Note dated November 17, 1997 Due November 16,
2007 made by Edward C. Coppola to the order of the Company
10.25.1****** List of Omitted Secured Full Recourse Notes
10.26****** Stock Pledge Agreement dated as of November 17, 1997 made by Edward C. Coppola
for the benefit of the Company
10.26.1****** List of omitted Stock Pledge Agreement
10.27****** Promissory Note dated as of May 2, 1997 made by David J. Contis to the order
of Macerich Management Company
10.28## Purchase and Sale Agreement between the Equitable Life Assurance Society of
the United States and S.M. Portfolio Partners
10.29****** Partnership Agreement of S.M. Portfolio Ltd. Partnership
10.30### First Amended and Restated Credit Agreement, dated as of June 25, 1998,
between the Operating Partnership, the Company and Wells Fargo Bank, National
Association
10.31 Secured full recourse promissory note dated November
30, 1999 due November 29, 2009 made by Arthur M.
Coppola to the order of the Company.
10.32 Stock Pledge Agreement dated as of November 30, 1999 made by Arthur M. Coppola
for the benefit of the Company.
</TABLE>
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<TABLE>
<CAPTION>
EXHIBIT NUMBER DESCRIPTION SEQUENTIALLY
NUMBERED PAGE
<S> <C> <C>
21.1 List of Subsidiaries
23.1 Consent of Independent Accountants (PricewaterhouseCoopers LLP)
23.2 Consent of Independent Auditors (KPMG LLP)
* Previously filed as an exhibit to the Company's Registration Statement on Form
S-11, as amended (No. 33-68964), and incorporated herein by reference.
** Previously filed as an exhibit to the Company's Current
Report on Form 8-K, event date May 30, 1995, and
incorporated herein by reference.
*** Previously filed as an exhibit to the Company's Current
Report on Form 8-K, event date February 25, 1998, and
incorporated herein by reference.
**** Previously filed as an exhibit to the Company's Current
Report on Form 8-K, event date June 17, 1998, and
incorporated herein by reference.
***** Previously filed as an exhibit to the Company's Current
Report on Form 8-K, event date November 10, 1998, as
amended, and incorporated herein by reference.
****** Previously filed as an exhibit to the Company's Annual
Report on Form 10-K for the year ended December 31,
1997, and incorporated herein by reference.
******* Previously filed as an exhibit to the Company's Current
Report on Form 8-K, event date June 20, 1997, and
incorporated herein by reference.
******** Previously filed as an exhibit to the Company's Annual
Report on Form 10-K for the year ended December 31,
1996, and incorporated herein by reference.
# Previously filed as an exhibit to the Company's
Quarterly Statement on Form 10-Q for the quarter ended
June 30, 1994, and incorporated herein by reference.
## Previously filed as an exhibit to the Company's Current
Report on Form 8-K, event date February 27, 1998, and
incorporated herein by reference.
### Previously filed as an exhibit to the Company's Annual
Report on Form 10-K for the year ended December 31,
1998, and incorporated herein by reference.
#### Previously filed as an exhibit to the Company's
Quarterly Report on Form 10-Q for the quarter ended
September 30, 1999.
</TABLE>
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EXHIBIT 10.31
SECURED FULL RECOURSE
PROMISSORY NOTE
DUE NOVEMBER __, 2009
$1,000,000.00 Los Angeles, CA
- -------------- November __, 1999
FOR VALUE RECEIVED, Arthur M. Coppola, an individual ("MAKER"),
unconditionally promises to pay to The Macerich Company, a Maryland corporation
(together with any successor or assignee by operation of law or otherwise, the
"PAYEE"), on the earlier of December __, 2009 or such other date as provided
herein, in the manner and at the place hereinafter provided, the lesser of (i)
one million dollars ($1,000,000.00) and (ii) the unpaid principal amount of all
advances made by Payee to Maker for the purposes of Maker's purchase of common
stock of the Payee pursuant to the terms of The Macerich Company Amended and
Restated 1994 Incentive Plan (the "Plan"). All advances made under this Note
shall be noted hereon; PROVIDED, HOWEVER, that the failure to make a notation
shall not limit or otherwise affect the obligations of Maker hereunder with
respect to payments of principal or interest on this Note.
Maker also promises to pay interest on the unpaid principal balance of
this Note from the date such principal is advanced until such principal is paid
in full at a rate per annum equal to the lesser of: (i) the maximum amount
allowable pursuant to applicable law; or (ii) 7.00%. Interest that is due and
payable but not yet paid shall be added to principal and accrue interest from
the date due. Interest on this Note shall be computed on the basis of a 365-day
year, based on the actual number of days elapsed and shall be payable in arrears
quarterly on the fifteenth (15th) day of each March, June, September and
December, commencing on March 15, 2000, upon any prepayment of this Note (to the
extent accrued on the amount being prepaid) and at maturity.
1. PAYMENTS; VOLUNTARY REPAYMENT. All payments of principal and
interest in respect of this Note shall be made in lawful money of the United
States of America. Each payment made hereunder shall be credited first to
interest then due and the remainder of such payment shall be credited to
principal, and interest shall thereupon cease to accrue upon the principal so
credited. Maker shall have the right at any time and from time to time to prepay
the principal of this Note in whole or in part, without premium or penalty, such
prepayment hereunder being accompanied by interest on the principal amount of
the Note being prepaid to the date of prepayment. Notwithstanding any payment or
prepayment of principal hereunder by Maker, Maker acknowledges and agrees that
the aggregate advances made by Payee hereunder shall in no event exceed the sum
of $1,000,000.
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2. MANDATORY REPAYMENT.
(a) If the Board of Directors of Payee (the "Board") makes any
dividend or other distribution to its stockholders which it determines for these
purposes to be unusual or extraordinary (an "Extraordinary Distribution"), then
the Board, or the Compensation Committee of the Board, may, in its sole
discretion, require that Maker use the Net Cash Proceeds (as defined below) of
the Extraordinary Distribution to repay this Note. The Net Cash Proceeds shall
be applied first to accrued and unpaid interest on this Note and second to the
unpaid principal balance of this Note. As used herein, Net Cash Proceeds means
all cash or cash proceeds from an Extraordinary Distribution in respect of the
Pledged Collateral (as defined in that certain Pledge Agreement (the "Pledge
Agreement") dated as of November __, 1999 between Maker and Payee) MINUS the
amount of applicable federal, state and local taxes which the Board, or the
Compensation Committee of the Board, reasonably determines will be payable by
Maker in connection with the Extraordinary Distribution. The Board, or the
Compensation Committee of the Board, shall cause Payee to notify Maker in
writing at least 10 days prior to the payment date of any Extraordinary
Distribution with respect to which it intends to require Maker to use the Net
Cash Proceeds to repay this Note. If Maker is required to use the Net Cash
Proceeds to repay this Note, then within three (3) business days of receipt of
the Net Cash Proceeds, Maker shall pay to Payee an amount equal to the Net Cash
Proceeds to be so applied.
(b) In the event that Maker sells, transfers, assigns or otherwise
disposes of any of the Pledged Collateral as permitted by and in accordance with
Section 6 of the Pledge Agreement, Maker shall concurrently repay the unpaid
principal balance of this Note in an amount equal to the greater of: (i)(A) the
percentage of the total Pledged Collateral (prior to such disposition) that the
shares so disposed of represents MULTIPLIED BY (B) the unpaid principal amount
of this Note or (ii) the amount by which the unpaid principal amount of this
Note exceeds the Fair Market Value (as defined in the Pledge Agreement) of the
Pledged Collateral (after giving effect to the release of collateral set forth
in Section 6 of the Pledge Agreement).
(c) If there shall occur a Termination of Employment (as such term is
defined in the Plan) of Maker, the unpaid principal amount of this Note together
with accrued interest thereon shall become due and payable on the 10th business
day after the Termination of Employment of Maker except as otherwise provided in
Section 1.8(d) of the Plan.
3. FULL RECOURSE NOTE. This Note is the Note referred to in the
Pledge Agreement. This Note is a full recourse Note and Maker shall be liable
for the full payment of
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principal of and interest on this Note. This Note is also secured by, and is
entitled to the benefit of, the Pledge Agreement, the terms and provisions of
which are hereby incorporated herein as if set forth herein in full.
4. EVENTS OF DEFAULT. Each of the following shall constitute an
Event of Default:
(a) The sale, transfer, assignment or other disposition of any
Pledged Collateral, other than in accordance with the terms and conditions of
Section 2(b) of this Note and Section 6(c) of the Pledge Agreement;
(b) The failure by Maker to pay any principal under this Note when
due, whether at stated maturity, by acceleration, or otherwise, or failure to
pay any interest or other amount due under this Note within five (5) days after
the date due;
(c) any challenge, or institution of any proceedings to challenge by
Maker of the validity, binding effect or enforceability of this Note or any
endorsement of this Note;
(d) any default by Maker of any other obligation under this Note or
the Pledge Agreement; or
(e) The initiation of any proceeding relating to Maker under any
bankruptcy, reorganization, arrangement of debt, insolvency, readjustment of
debt or receivership law or statute, whether filed by or against Maker, or the
assignment for the benefit of creditors by Maker.
Upon an Event of Default set forth in clauses (a), (b) and (e) above,
the principal amount of this Note together with accrued interest thereon shall
become immediately due and payable, without presentment, demand, notice, protest
or other requirements of any kind (all of which are hereby expressly waived by
Maker). Upon any other Event of Default, Payee may, by written notice to Maker,
declare the principal amount of this Note together with accrued interest thereon
to be due and payable, and the principal amount of this Note together with such
interest shall thereupon immediately become due and payable without presentment,
further notice, protest or other requirements of any kind (all of which are
hereby expressly waived by Maker).
5. SET-OFF. Payee shall be entitled to set-off against this Note any
and all amounts owed by Payee to Maker as and when such amounts become due and
payable, whether presently existing or hereafter incurred, to the maximum extent
allowable under applicable laws. To the extent that Maker's consent to the
set-off is required, this Note constitutes Maker's consent.
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<PAGE>
6. MISCELLANEOUS.
(a) All notices and other communications provided for hereunder shall
be in writing (including telegraphic, telex, telefacsimile or cable
communication) and hand-delivered, mailed, or telecopied as follows: if to
Maker, at its address specified opposite its signature below; and if to Payee,
at 401 Wilshire Boulevard, Santa Monica, CA 90401; or in each case at such other
address as shall be designated by Payee or Maker. All such notices and
communications shall, when hand-delivered, mailed, or telecopied (with
answer-back confirmation) be effective when deposited in the mails, delivered or
sent by telecopier.
(b) No failure or delay on the part of Payee or any other holder of
this Note to exercise any right, power or privilege under this Note and no
course of dealing between Maker and Payee shall impair such right, power or
privilege or operate as a waiver of any default or an acquiescence therein, nor
shall any single or partial exercise of any such right, power or privilege
preclude any other or further exercise thereof or the exercise of any other
right, power or privilege. The rights and remedies expressly provided in this
Note are cumulative to, and not exclusive of, any rights or remedies that Payee
would otherwise have. No notice to or demand on Maker in any case shall entitle
Maker to any other or further notice or demand in similar or other circumstances
or constitute a waiver of the right of Payee to any other or further action in
any circumstances without notice or demand.
(c) Maker and any endorser of this Note hereby consent to renewals
and extensions of time at or after the maturity hereof, without notice, and
hereby waive diligence, presentment, protest, demand and notice of every kind
and, to the full extent permitted by law, the right to plead any statute of
limitations as a defense to any demand hereunder. To the fullest extent
permitted by law, the obligations of Maker hereunder shall not be subject to any
counterclaim, set-off, deduction, diminution, abatement, recoupment, deferment,
suspension, reduction or defense (other than the full and strict compliance by
Maker with those obligations) based on any claim that Maker may have against
Payee or any other person.
(d) No provision of this Note may be waived, modified or discharged
orally, but only by an agreement signed by the party against whom enforcement is
sought.
(e) If any provision in or obligation under this Note shall be
invalid, illegal or unenforceable in any jurisdiction, the validity, legality
and enforceability of the remaining provisions or obligations, or of such
provision or obligation in any other jurisdiction, shall not in any way be
affected or impaired thereby.
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<PAGE>
(f) This note and the rights and obligations of maker and payee
hereunder shall be governed by, and shall be construed and enforced in
accordance with the laws of the State of California except for such matters as
are subject to the General Corporation Law of the State of Maryland.
IN WITNESS WHEREOF, Maker has executed and delivered this Note as of
the day and year and at the place first above written.
----------------------------------
Arthur M. Coppola
Notice Address:
Arthur M. Coppola
c/o The Macerich Company
401 Wilshire Blvd., Suite 700
Santa Monica, CA 90401
5
<PAGE>
TRANSACTIONS ON PROMISSORY NOTE
AMOUNT OF OUTSTANDING
AMOUNT OF PRINCIPAL PRINCIPAL
LOAN MADE REPAID ON BALANCE ON
DATE ON THIS DATE THIS DATE THIS DATE
6
<PAGE>
EXHIBIT 10.32
STOCK PLEDGE AGREEMENT
This STOCK PLEDGE AGREEMENT (this "AGREEMENT") is dated as of
November __, 1999 and entered into by and between ARTHUR M. COPPOLA, AN
INDIVIDUAL("PLEDGOR"), and THE MACERICH COMPANY, a Maryland corporation
("SECURED PARTY").
WITNESSETH
WHEREAS, pursuant to the terms of a promissory note dated of even date
herewith executed by Pledgor in favor of Secured Party (said promissory note, as
it may hereafter be amended, supplemented or otherwise modified from time to
time, being the "NOTE," the terms defined therein and not otherwise defined
herein being used herein as therein defined), Secured Party has agreed to loan
(the "LOAN") up to one million dollars ($1,000,000) to Pledgor;
WHEREAS, the proceeds of the Loan will be used to pay for the purchase
by Pledgor of shares of common stock of the Secured Party; and
WHEREAS, as a condition to the making of such Loans by Secured Party
the repayment of which is evidenced by the Note, Pledgor has agreed to grant the
security interests and undertake the obligations contemplated by this Agreement.
NOW, THEREFORE, in consideration of the premises and in order to
induce Secured Party to make the Loan the repayment of which is evidenced by the
Note and for other good and valuable consideration, the receipt and adequacy of
which are hereby acknowledged, Pledgor hereby agrees with Secured Party as
follows:
SECTION 1. CERTAIN DEFINITIONS. The following terms used in this
Agreement shall have the following meanings:
"AGREEMENT" means this Pledge Agreement dated as of November __, 1999
by and between Pledgor and Secured Party.
"BOARD" means the Board of Directors of Secured Party, or the
Compensation Committee thereof.
"CONTRACTUAL OBLIGATION," as applied to any Person, means any
provision of any security issued by that Person or of any material indenture,
mortgage, deed of trust, contract, undertaking, agreement or other instrument to
which that Person
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is a party or by which it or any of its properties is bound or to which it or
any of its properties is subject.
"EVENT OF DEFAULT" has the meaning assigned to such term in the Note.
"FAIR MARKET VALUE," with respect to shares of the Company's common
stock or any other securities, means the average closing sale price as reported
on the New York Stock Exchange (or such other national exchange or market system
on which the Company's common stock or such other securities may then be listed
or quoted) for the ten (10) trading days immediately preceding the date of
valuation or such other method as may be required by applicable Legal Limits,
or, if the Company's common stock or such other securities are not listed or
quoted on a national exchange or market system, then a value determined in good
faith by the Board. "Fair Market Value," with respect to any other property
shall be determined in good faith by the Board of Directors.
"LEGAL LIMITS" means any legal restrictions applicable to the release
of the Pledged Collateral and the extension or maintenance of credit or its
repayment, including without limitation those included in Regulation G of the
Federal Reserve Board.
"LIEN" means any lien, mortgage, pledge, assignment, security
interest, charge or encumbrance of any kind (including any conditional sale or
other title retention agreement, any lease in the nature thereof, and any
agreement to give any security interest) and any option, trust or other
preferential arrangement having the practical effect of any of the foregoing.
"LOAN" has the meaning assigned to such term in the recitals to this
Agreement.
"MANDATORY REPAYMENT OBLIGATIONS" means the obligations of Pledgor to
repay the Note pursuant to Section 2 of the Note.
"NOTE" has the meaning assigned to such term in the recitals to this
Agreement.
"PERSON" means and includes natural persons, corporations, limited
partnerships, general partnerships, joint stock companies, joint ventures,
associations, companies, trusts, banks, trust companies, land trusts, business
trusts or other organizations, whether or not legal entities, and governments
and agencies and political subdivisions thereof.
"PLEDGED COLLATERAL" has the meaning assigned to such term in
Section 2.
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<PAGE>
"PLEDGED SHARES" means all shares of common stock of the Company
purchased by Pledgor using the proceeds of the Loan, and any other securities
into which such shares are converted or reclassified (by stock split, merger,
extraordinary distribution or otherwise) or for which such shares are exchanged
by operation of law or consent of Secured Party.
"PLEDGOR" means Arthur M. Coppola, Jr.
"PROCEEDS" has the meaning assigned to such term in Section 2(c).
"SEC" means the Securities and Exchange Commission.
"SECURED OBLIGATIONS" has the meaning assigned to such term in
Section 3.
"SECURED PARTY" means The Macerich Company, a Maryland corporation,
and its successors and assigns by operation of law or otherwise.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"UNDERLYING DEBT" has the meaning assigned to such term in Section 3.
SECTION 2. PLEDGE OF SECURITY. Subject to Section 8(a), Pledgor hereby
pledges and assigns to Secured Party, and hereby grants to Secured Party a
security interest in, all of Pledgor's right, title and interest in and to the
following and all interests therein (the "PLEDGED COLLATERAL"):
(a) the Pledged Shares and the certificates representing the Pledged
Shares and any interest of Pledgor in the entries on the books of any financial
intermediary pertaining to the Pledged Shares, and all dividends, warrants,
rights, securities, instruments and other property or proceeds distrib uted in
respect of or in exchange for any or all of the Pledged Shares; and
(b) all proceeds of any or all of the foregoing Pledged Collateral.
For purposes of this Agreement, the term "PROCEEDS" includes whatever is
receivable or received when Pledged Collateral or proceeds are sold, exchanged,
collected or otherwise disposed of, whether such disposition is voluntary or
involuntary, and includes, without limitation, proceeds of any indemnity or
guaranty payable to Pledgor or Secured Party from time to time with respect to
any of the Pledged Collateral.
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SECTION 3. SECURITY FOR OBLIGATIONS. This Agreement secures, and the
Pledged Collateral is collateral security for, the prompt payment or performance
in full when due, whether at stated maturity, by required prepayment,
declaration, acceleration, demand or otherwise (including the payment of amounts
that would become due but for the operation of the automatic stay under Section
362(a) of the Bankruptcy Code, 11 U.S.C. Section 362(a)), of all obligations and
liabilities of every nature of Pledgor now or hereafter existing under or
arising out of or in connection with the Note and all extensions or renewals
thereof, whether for principal, interest (including without limitation interest
that, but for the filing of a petition in bankruptcy with respect to Pledgor,
would accrue on such obligations), fees, expenses, indemnities or otherwise,
whether voluntary or involuntary, direct or indirect, absolute or contingent,
liquidated or unliquidated, whether or not jointly owed with others, and whether
or not from time to time decreased or extinguished and later increased, created
or incurred, and all or any portion of such obligations or liabilities that are
paid, to the extent all or any part of such payment is avoided or recovered
directly or indirectly from Secured Party as a preference, fraudulent transfer
or otherwise (all such obligations and liabilities being the "UNDERLYING DEBT"),
and all obligations of every nature of Pledgor now or hereafter existing under
this Agreement (all such obligations of Pledgor, together with the Underlying
Debt, being the "SECURED OBLIGATIONS").
SECTION 4. DELIVERY OF PLEDGED COLLATERAL. All certificates or
instruments representing or evidencing the Pledged Collateral shall be delivered
to and held by or on behalf of Secured Party pursuant hereto and shall be in
suitable form for transfer by delivery or, as applicable, shall be accompanied
by Pledgor's endorsement, where necessary, or duly executed instruments of
transfer or assignment in blank, all in form and substance satisfactory to
Secured Party. Secured Party shall have the right, at any time in its discretion
and without notice to Pledgor, to transfer to or to register in the name of
Secured Party or any of its nominees any or all of the Pledged Collateral. In
addition, Secured Party shall have the right at any time to exchange
certificates or instruments representing or evidencing Pledged Collateral for
certificates or instruments of smaller or larger denominations.
SECTION 5. REPRESENTATIONS AND WARRANTIES. Pledgor represents and
warrants that, as of the date that the Loan is made and at all times that the
Loan remains outstanding:
(a) GOOD TITLE. Pledgor is the record and beneficial owner of, and
has good and marketable title to, the Pledged Shares and such shares are and
will remain free and clear of all adverse claims, pledges, liens, security
interests and other encumbrances, restrictions and rights whatsoever, except the
lien and security interest created by this Pledge Agreement.
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(b) BINDING OBLIGATION. Each of the Note and this Agreement has been
duly executed and delivered by Pledgor and is the legally valid and binding
obligation of Pledgor, enforceable against him in accordance with its terms,
except as enforcement may be limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws or equitable principles relating to or limiting
creditors' rights generally.
(c) PERFECTION. The pledge of the Pledged Collateral pursuant to this
Agreement creates a valid and perfected first priority security interest in the
Pledged Collateral, securing the payment of the Secured Obligations.
(d) OTHER INFORMATION. All information heretofore, herein or
hereafter supplied to Secured Party by or on behalf of Pledgor with respect to
the Pledged Collateral is and will be accurate and complete in all respects.
(e) NO CONSENTS. No consent, approval or authorization of or
designation or filing with any authority or third party on the part of Pledgor
is required in connection with the execution, delivery or performance of the
Note, this Agreement or the pledge and security interest granted pursuant to
this Agreement.
SECTION 6. TRANSFERS AND OTHER LIENS; ADDITIONAL PLEDGED COLLATERAL;
RELEASE OF COLLATERAL.
(a) Pledgor shall not, without the prior written consent of Secured
Party (i) sell, assign (by operation of law or otherwise) or otherwise dispose
of, or grant any option with respect to, any of the Pledged Collateral or (ii)
create or suffer to exist any Lien upon or with respect to any of the Pledged
Collateral, except for the security interest under this Agreement.
(b) Pledgor shall pay promptly when due all taxes, assessments and
governmental charges or levies imposed upon, and all claims against, the Pledged
Collateral, except to the extent the validity thereof is being contested in good
faith; PROVIDED that Pledgor shall in any event pay such taxes, assessments,
charges, levies or claims not later than five days prior to the date of any
proposed sale under any judgement, writ or warrant of attachment entered or
filed against Pledgor or any of the Pledged Collateral as a result of the
failure to make such payment.
(c) Secured Party currently anticipates that it will consent to a
sale, assignment, transfer or other disposition (each, a "TRANSFER") of all or
any portion of the Pledged Collateral so long as: (i) Pledgor repays the Note to
the extent required by Section 2(b) thereof; (ii) no Event of Default is is
continuing under the Note and Pledgor is not in default of his obligations
hereunder; and (iii) the sale, assignment, transfer
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<PAGE>
or disposition, including the effect thereof on Secured Party, complies with
Section 1.8 of The Macerich Company Amended and Restated 1994 Incentive Plan and
any applicable Legal Limits (as determined by the Board in its sole discretion).
In the event of any such Transfer of Pledged Collateral to which Secured Party
has given its consent, Secured Party shall release its security interest and
lien with respect to the Pledged Collateral so transferred in accordance with
Section 6(d) below. Such release shall take place promptly upon receipt of the
proceeds of any required prepayment under the Note or, to the extent permitted
by applicable law, in advance of Secured Party's receipt of the proceeds if
Secured Party has received assurances satisfactory to Secured Party that such
release would be in conformity with any applicable Legal Limits and that all
such proceeds will be delivered to Secured Party. With respect to any
disposition of the Pledged Collateral under this Section 6(c), Pledgor shall pay
all costs and expenses, including broker's commissions, of such disposition.
(d) Upon any repayment of the principal of the Loan, whether a
voluntary or mandatory repayment, Secured Party shall, subject to any applicable
Legal Limits, release that percentage of the Pledged Collateral obtained by
dividing (i) the amount of such repayment, by (ii) the unpaid principal balance
of the Loan (prior to the repayment); PROVIDED, HOWEVER, that Pledged Collateral
shall be released only to the extent that the Fair Market Value of Pledged
Collateral remaining after such release is at least equal to the remaining
unpaid principal amount of the Loan.
(e) Notwithstanding anything in this Section 6 to the contrary,
Pledgor may not sell, transfer, assign or otherwise dispose of any part of the
Pledged Collateral at any time that such sale, transfer, assignment or
disposition: (i) would violate any applicable Legal Limits or other applicable
law, including without limitation restrictions on insider trading; (ii) would
impair the Payee's ability to have any then-pending or completed transaction be
accounted for as a pooling of interests; or (iii) is prohibited by Secured
Party's policies relating to insider trading of its stock.
SECTION 7. FURTHER ASSURANCES; PLEDGE AMENDMENTS.
Pledgor agrees that from time to time Pledgor will promptly execute
and deliver all further instruments and documents, and take all further action,
that may be necessary or desirable, or that Secured Party may request, in order
to perfect and protect any security interest granted or purported to be granted
hereby or to enable Secured Party to exercise and enforce its rights and
remedies hereunder with respect to any Pledged Collateral. Without limiting the
generality of the foregoing, Pledgor will: (i) execute and file such financing
or continuation statements, or amendments thereto, and such other
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instruments or notices, as may be necessary or desirable, or as Secured Party
may request, in order to perfect and preserve the security interests granted or
purported to be granted hereby; (ii) deliver any certificates representing any
security issued in connection with any share dividend, share distribution, or
any other rights, whether as an addition to, in substitution for, or in exchange
for any of the Pledged Collateral together with stock transfer powers duly
endorsed in blank; and (iii) at Secured Party's request, appear in and defend
any action or proceeding that may affect Pledgor's title to or Secured Party's
security interest in all or any part of the Pledged Collateral.
SECTION 8. VOTING RIGHTS; DIVIDENDS; ETC.
(a) So long as no Event of Default shall have occurred and be
continuing:
(i) Pledgor shall be entitled to exercise any and all voting and
other consensual rights pertaining to the Pledged Collateral or any
part thereof for any purpose not inconsistent with the terms of this
Agree ment or the Note.
(ii) Subject to the Mandatory Repayment Obligations, Pledgor may
retain, and may utilize free and clear of the lien of this Agreement,
all dividends, distributions and other payments paid (or payable) in
cash with respect to the Pledged Collateral.
(iii) All dividends, distributions and other payments paid or
payable other than in cash in respect of, and instruments and other
property received, receivable or otherwise distributed in respect of,
or in exchange for, any Pledged Collateral shall be, and shall
forthwith be delivered to, Secured Party to hold as Pledged Collateral
and shall, if received by Pledgor, be received in trust for the
benefit of Secured Party, be segregated from the other property or
funds of Pledgor and be forthwith delivered to Secured Party as
Pledged Collateral in the same form as so received (with all necessary
endorsements); PROVIDED THAT Pledgor may retain, to the extent
divisible, the portion of such non-cash dividends, distributions and
other payments that the Board reasonably determines must be used by
Pledgor for the sole purpose of paying taxes applicable to such
dividends, distributions or other payments.
(iv) Secured Party shall promptly execute and deliver (or cause
to be executed and delivered) to Pledgor all such proxies, dividend
payment orders and other instruments as Pledgor may from time to time
reasonably request for the purpose of enabling Pledgor
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<PAGE>
to exercise the voting and other consensual rights which it is
entitled to exercise pursuant to paragraph (i) above and to receive
the dividends, principal or interest payments which it is authorized
to receive and retain pursuant to paragraph (ii) above.
(b) Upon the occurrence and during the continuation of an Event of
Default:
(i) Upon written notice from Secured Party to Pledgor, all
rights of Pledgor to exercise the voting and other consensual rights
which it would otherwise be entitled to exercise pursuant to Section
8(a)(i) shall cease, and all such rights shall thereupon become vested
in Secured Party who shall thereupon have the sole right to exercise
such voting and other consensual rights.
(ii) Without limiting the Mandatory Repayment Obligations, all
rights of Pledgor to receive the dividends, distributions and other
payments which it would otherwise be authorized to receive and retain
pursuant to Section 8(a)(ii) shall cease, and all such rights shall
thereupon become vested in Secured Party who shall thereupon have the
sole right to receive and hold as Pledged Collateral such dividends
and interest payments.
(iii) All dividends, distributions and other payments which are
received by Pledgor contrary to the provisions of paragraph (ii) of
this Section 8(b) shall be received in trust for the benefit of
Secured Party, shall be segregated from other funds of Pledgor and
shall forthwith be paid over to Secured Party as Pledged Collateral in
the same form as so received (with any necessary endorsements).
(c) In order to permit Secured Party to exercise the voting and other
consensual rights which it may be entitled to exercise pursuant to Section
8(b)(i) and to receive all dividends and other distributions which it may be
entitled to receive under Section 8(a)(ii) or Section 8(b)(ii), (i) Pledgor
shall promptly execute and deliver (or cause to be executed and delivered) to
Secured Party all such proxies, dividend payment orders and other instruments as
Secured Party may from time to time reasonably request and (ii) without limiting
the effect of the immediately preceding clause (i), Pledgor hereby grants to
Secured Party an irrevocable proxy to vote (to the extent permitted by law) the
Pledged Shares and to exercise all other rights, powers, privileges and remedies
to which a holder of the Pledged Shares would be entitled (including, without
limitation, giving or withholding written consents of shareholders, calling
special meetings of shareholders and voting at such meetings), which proxy shall
be effective, automatically and without the necessity
8
<PAGE>
of any action (including any transfer of any Pledged Shares on the record books
of the issuer thereof) by any other Person (including the issuer of the Pledged
Shares or any officer or agent thereof), upon the occurrence of an Event of
Default and which proxy shall only terminate upon the payment in full of the
Secured Obligations or the curing (as determined by Secured Party) of such Event
of Default.
SECTION 9. SECURED PARTY APPOINTED ATTORNEY-IN-FACT. Pledgor hereby
irrevocably appoints Secured Party as Pledgor's attorney-in-fact, with full
authority in the place and stead of Pledgor and in the name of Pledgor, Secured
Party or otherwise, from time to time in Secured Party's discretion to take any
action and to execute any instrument that Secured Party may deem necessary or
advisable to accomplish the purposes of this Agreement, including without
limitation:
(a) to file one or more financing or continuation statements, or
amendments thereto, relative to all or any part of the Pledged Collateral
without the signature of Pledgor;
(b) to ask, demand, collect, sue for, recover, compound, receive and
give acquittance and receipts for moneys due and to become due under or in
respect of any of the Pledged Collateral;
(c) to receive, endorse and collect any instruments made payable to
Pledgor representing any dividend, principal or interest payment or other
distribution in respect of the Pledged Collateral or any part thereof and to
give full discharge for the same; and
(d) to file any claims or take any action or institute any
proceedings that Secured Party may deem necessary or desirable for the
collection of any of the Pledged Collateral or otherwise to enforce the rights
of Secured Party with respect to any of the Pledged Collateral.
SECTION 10. SECURED PARTY MAY PERFORM. If Pledgor fails to perform any
agreement contained herein, Secured Party may itself perform, or cause
performance of, such agreement, and the expenses of Secured Party incurred in
connection therewith shall be payable by Pledgor under Section 13(b).
SECTION 11. STANDARD OF CARE. The powers conferred on Secured Party
hereunder are solely to protect its interest in the Pledged Collateral and shall
not impose any duty upon it to exercise any such powers. Except for the exercise
of reasonable care in the custody of any Pledged Collateral in its possession
and the accounting for moneys actually received by it hereunder, Secured Party
shall have no duty as to any Pledged Collateral, it being understood that
Secured Party shall have no responsibility for (a) ascertaining or taking action
with respect to calls,
9
<PAGE>
conversions, exchanges, maturities, tenders or other matters relating to any
Pledged Collateral, whether or not Secured Party has or is deemed to have
knowledge of such matters, (b) taking any necessary steps (other than steps
taken in accordance with the standard of care set forth above to maintain
possession of the Pledged Collateral) to preserve rights against any parties
with respect to any Pledged Collateral, (c) taking any necessary steps to
collect or realize upon the Secured Obligations or any guarantee therefor, or
any part thereof, or any of the Pledged Collateral, or (d) initiating any action
to protect the Pledged Collateral against the possibility of a decline in market
value. Secured Party shall be deemed to have exercised reasonable care in the
custody and preservation of Pledged Collateral in its possession if such Pledged
Collateral is accorded treatment substantially equal to that which Secured Party
accords its own property consisting of negotiable securities.
SECTION 12. REMEDIES.
(a) If any Event of Default shall have occurred and be continuing,
all of the Secured Obligations shall immediately become due and payable and
Secured Party may exercise in respect of the Pledged Collateral, in addition to
all other rights and remedies provided for herein or otherwise available to it,
all the rights and remedies of a secured party on default under the Uniform
Commercial Code as in effect in any relevant jurisdiction (whether or not the
Uniform Commercial Code applies to the affected Pledged Collateral). Secured
Party shall have full recourse to Pledgor (directly and as to a deficiency in
respect of the Pledged Collateral) and the Pledged Collateral in respect of the
Secured Obligations arising under the Note. In exercising its remedies against
the Pledged Collateral, Secured Party may, upon ten (10) days' written notice to
Pledgor, but without any other demand or notice whatsoever, transfer ownership
of the Pledged Collateral to Secured Party in discharge of the Secured
Obligations to the extent of the Fair Market Value of the Pledged Collateral so
transferred, to the extent required to pay all of the Secured Obligations, such
transfer to be free and clear of any right or equity of redemption, which right
or equity is hereby expressly waived and released.
(b) In the event that Pledged Collateral is transferred to Secured
Party in discharge of any or all of the Secured Obligations as set forth in the
last sentence of the foregoing paragraph, such transfer shall be applied first
to all costs and expenses of such transfer and second to the Secured Obligations
arising in respect of the Note (first to interest and then to principal). All
proceeds received by Secured Party in respect of any sale of, collection from,
or other realization upon all or any part of the Pledged Collateral shall be
applied first to all costs and expenses of such sale, collection or other
realization and second to the Secured Obligations arising in respect of the Note
(first to interest and then to principal).
10
<PAGE>
In the event that the amount received from the sale of, collection from, or
other realization upon the Pledged Collateral, or in the case of a transfer of
the Pledged Collateral to Secured Party, the Fair Market Value of the Pledged
Collateral, exceeds the aggregate amount of the Secured Obligations (plus the
costs and expenses described above) Secured Party shall pay such excess to or
upon the order of Pledgor, or to whosoever may be lawfully entitled to receive
the same or as a court of competent jurisdiction may direct. All rights and
remedies hereunder are in addition to whatever other rights the parties hereto
may otherwise have against one another, and no exercise of any such rights or
remedies shall be deemed to preclude the exercise of any other rights or
remedies.
(c) Pledgor recognizes that Secured Party may be unable to effect a
public sale or disposition of any or all the Pledged Collateral by reason of
certain prohibitions contained in the Securities Act, the rules promulgated by
the SEC thereunder, and applicable state securities laws but may be compelled to
resort to one or more private sales or dispositions thereof to a restricted
group of purchasers who will be obliged to agree, among other things, to acquire
such securities for their own account for investment and not with a view to the
distribution or resale thereof. Pledgor acknowledges and agrees that any such
private sale or disposition may result in prices and other terms (including the
terms of any securities or other property received in connection therewith) less
favorable to the seller than if such sale or disposition were a public sale or
disposition and, notwithstanding such circumstances, agrees that any such
private sale or disposition shall be deemed to have been made in a commercially
reasonable manner. Secured Party shall be under no obligation to delay a sale or
disposition of any of the Pledged Collateral to permit the registration of such
securities (or trust certificates representing such securities) for public sale
under the Act, or under applicable state securities laws, even if the Company
would agree to do so.
(d) Pledgor further agrees to do or cause to be done all such other
acts and things as may be necessary to make such sale or sales or dispositions
of any portion or all of the Pledged Collateral valid and binding and in
compliance with any and all applicable laws, regulations, orders, writs,
injunctions, decrees or awards of any and all courts, arbitrators or
governmental instrumentalities, domestic or foreign, having jurisdiction over
any such sale or sales or dispositions, all at Pledgor's expense. Pledgor
further agrees that a breach of any of the covenants contained in this Section
12 will cause irreparable injury to Secured Party, that Secured Party has no
adequate remedy at law in respect of such breach and, as a consequence, agrees
that each and every covenant contained in this section shall be specifically
enforceable against Pledgor, and Pledgor hereby waives and agrees not to assert
any defenses against an action for specific performance of such covenants
11
<PAGE>
except for a defense that no Event of Default has occurred hereunder.
(e) If Secured Party determines to exercise its right to sell any or
all of the Pledged Collateral, upon written request, Pledgor shall and shall
cause each issuer of any Pledged Shares to be sold hereunder from time to time
to furnish to Secured Party all such information as Secured Party may request in
order to determine the number of shares and other instruments included in the
Pledged Collateral which may be sold by Secured Party in exempt transactions
under the Securities Act and the rules and regulations of the SEC thereunder, as
the same are from time to time in effect.
SECTION 13. INDEMNITY. Pledgor agrees to indemnify Secured Party from
and against any and all claims, losses and liabilities in any way relating to,
growing out of or resulting from this Agreement and the transactions
contemplated hereby (including, without limitation, enforcement of this
Agreement), except to the extent such claims, losses or liabilities result
solely from Secured Party's gross negligence or willful misconduct as finally
determined by a court of competent jurisdiction.
SECTION 14. CONTINUING SECURITY INTEREST; TRANSFER OF NOTE. This
Agreement shall create a continuing security interest in the Pledged Collateral
and shall (a) remain in full force and effect until the payment in full of all
Secured Obligations, (b) be binding upon Pledgor, its successors and assigns,
and (c) inure, together with the rights and remedies of Secured Party hereunder,
to the benefit of Secured Party and its successors and assigns by operation of
law or otherwise. Upon the payment in full of all Secured Obligations, the
security interest granted hereby shall terminate and all rights to the Pledged
Collateral shall revert to Pledgor. Upon any such termination Secured Party
will, at Pledgor's expense, execute and deliver to Pledgor such documents as
Pledgor shall reasonably request to evidence such termination and Pledgor shall
be entitled to the return, upon its request and at its expense, against receipt
and without recourse to Secured Party, of such of the Pledged Collateral as
shall not have been sold or otherwise applied pursuant to the terms hereof.
SECTION 15. AMENDMENTS; ETC. No amendment, modification, termination
or waiver of any provision of this Agreement, and no consent to any departure by
Pledgor therefrom, shall in any event be effective unless the same shall be in
writing and signed by Secured Party and, in the case of any such amendment or
modification, by Pledgor. Any such waiver or consent shall be effective only in
the specific instance and for the specific purpose for which it was given.
12
<PAGE>
SECTION 16. NOTICES. Any notice or other communication herein required
or permitted to be given shall be in writing and may be personally served,
telexed or sent by telefacsimile or United States mail or courier service and
shall be deemed to have been given when delivered in person or by courier
service, upon receipt of telefacsimile (with answer-back confirmation) or telex,
or three business days after depositing it in the United States mail with
postage prepaid and properly addressed. For the purposes hereof, the address of
each party hereto shall be as set forth under such party's name on the signature
pages hereof or, as to either party, such other address as shall be designated
by such party in a written notice delivered to the other party hereto.
SECTION 17. FAILURE OR INDULGENCE NOT WAIVER; REMEDIES CUMULATIVE.
No failure or delay on the part of Secured Party in the exercise of any power,
right or privilege hereunder shall impair such power, right or privilege or be
construed to be a waiver of any default or acquiescence therein, nor shall any
single or partial exercise of any such power, right or privilege preclude any
other or further exercise thereof or of any other power, right or privilege. All
rights and remedies existing under this Agreement are cumulative to, and not
exclusive of, any rights or remedies otherwise available.
SECTION 18. SEVERABILITY. In case any provision in or obligation under
this Agreement shall be invalid, illegal or unenforceable in any jurisdiction,
the validity, legality and enforceability of the remaining provisions or
obligations, or of such provision or obligation in any other jurisdiction, shall
not in any way be affected or impaired thereby.
SECTION 19. HEADINGS. Section and subsection headings in this
Agreement are included herein for convenience of reference only and shall not
constitute a part of this Agreement for any other purpose or be given any
substantive effect.
SECTION 20. GOVERNING LAW; TERMS. This Agreement and the rights and
obligations of the parties hereunder shall be governed by, and shall be
construed and enforced in accordance with the laws of the State of California
except: (i) for such matters as are subject to the jurisdiction of the General
Corporation Law of the State of Maryland; and (ii) to the extent that the
Uniform Commercial Code in effect in any jurisdiction provides that the validity
or perfection of the security interest hereunder, or remedies hereunder, in
respect of any particular pledged collateral are governed by the laws of a
jurisdiction other than the State of California. Unless otherwise defined herein
or in the Note, terms used in Articles 8 and 9 of the Uniform Commercial Code in
the State of California are used herein as therein defined.
13
<PAGE>
SECTION 21. COUNTERPARTS. This Agreement and any amendment hereto may
be executed in one or more counterparts and by different parties hereto in
separate counterparts, each of which when so executed and delivered shall be
deemed an original, but all such counterparts together shall constitute but one
and the same instrument; signature pages may be detached from multiple separate
counterparts and attached to a single counterpart so that all signature pages
are physically attached to the same document.
14
<PAGE>
IN WITNESS WHEREOF, Pledgor and Secured Party have caused this
Agreement to be duly executed and delivered as of the date first written above.
----------------------------------
Arthur M. Coppola
Notice Address:
Arthur M. Coppola
c/o The Macerich Company
401 Wilshire Blvd., Suite 700
Santa Monica, CA 90401
THE MACERICH COMPANY
----------------------------------
Richard A. Bayer
Executive Vice President &
General Counsel
Notice Address:
The Macerich Company
401 Wilshire Boulevard, Suite 700
Santa Monica, California 90401
Attn: General Counsel
S-1
<PAGE>
Exhibit 21.1
LIST OF SUBSIDIARIES
THE MACERICH PARTNERSHIP, L.P., a Delaware limited partnership
LAKEWOOD MALL BUSINESS COMPANY, a Delaware business trust
LAKEWOOD MALL FINANCE COMPANY, a Delaware corporation
MACERICH BRISTOL ASSOCIATES, a California general partnership
MACERICH BUENAVENTURA LIMITED PARTNERSHIP, a California limited partnership
MACERICH BUENAVENTURA GP CORP., a Delaware corporation
MACERICH CARMEL GP CORP, a Delaware corporation
MACERICH CARMEL LIMITED PARTNERSHIP, a California limited partnership
MACERICH CERRITOS, LLC, a California limited liability company
MACERICH CERRITOS MALL CORP., a Delaware corporation
MACERICH CITADEL LIMITED PARTNERSHIP, a California limited partnership
MACERICH CITADEL GP CORP., a Delaware corporation
MACERICH CM VILLAGE GP CORP, a Delaware corporation
MACERICH CM VILLAGE LIMITED PARTNERSHIP, a California limited partnership
MACERICH EQ LIMITED PARTNERSHIP, a California limited partnership
MACERICH EQ GP CORP., a Delaware corporation
MACERICH FARGO ASSOCIATES, a California general partnership
MACERICH FAYETTEVILLE GP CORP, a Delaware corporation
MACERICH FAYETTEVILLE LIMITED PARTNERSHIP, a California limited partnership
MACERICH FRESNO LIMITED PARTNERSHIP, a California limited partnership
MACERICH FRESNO GP CORP., a Delaware corporation
MACERICH GREAT FALLS LIMITED PARTNERSHIP, a California limited partnership
MACERICH GREAT FALLS GP CORP., a Delaware corporation
MACERICH GREELEY ASSOCIATES, a California general partnership
MACERICH HUNTINGTON LIMITED PARTNERSHIP, a California limited partnership
MACERICH HUNTINGTON GP CORP., a Delaware corporation
<PAGE>
MACERICH LAKEWOOD, LLC, a Delaware limited liability company
MACERICH LUBBOCK GP CORP, a Delaware corporation
MACERICH LUBBOCK LIMITED PARTNERSHIP, a California limited partnership
MACERICH MANAGEMENT COMPANY, a California corporation
MACERICH MANHATTAN LIMITED PARTNERSHIP, a California limited partnership
MACERICH MANHATTAN GP CORP., a Delaware corporation
MACERICH MANHATTAN MANAGEMENT COMPANY, a California corporation
MACERICH MARINA LIMITED PARTNERSHIP, a California limited partnership
MACERICH MARINA GP CORP., a Delaware corporation
MACERICH NORTHWESTERN ASSOCIATES, a California general partnership
MACERICH OKLAHOMA LIMITED PARTNERSHIP, a California limited partnership
MACERICH OKLAHOMA GP CORP., a Delaware corporation
MACERICH PPR CORP, a Maryland corporation
MACERICH PROPERTY EQ GP CORP., a Delaware corporation
MACERICH PROPERTY MANAGEMENT COMPANY, a California corporation
MACERICH QUEENS ADJACENT GP CORP., a Delaware corporation
MACERICH QUEENS ADJACENT GUARANTOR CORP., a Delaware corporation
MACERICH QUEENS ADJACENT LIMITED PARTNERSHIP, a California limited partnership
MACERICH QUEENS LIMITED PARTNERSHIP, a California limited partnership
MACERICH QUEENS FUNDING CORP., a Delaware corporation
MACERICH QUEENS GP CORP., a Delaware corporation
MACERICH RIMROCK GP CORP., a Delaware corporation
MACERICH RIMROCK LIMITED PARTNERSHIP, a California limited partnership
MACERICH SCG FUNDING GP CORP., a Delaware corporation
MACERICH SCG FUNDING LIMITED PARTNERSHIP, a California limited partnership
MACERICH SCG GP CORP., a Delaware corporation
MACERICH SCG HOLDINGS LIMITED PARTNERSHIP, a California limited partnership
MACERICH SCG LIMITED PARTNERSHIP, a California limited partnership
MACERICH SANTA MONICA LLC, a Delaware limited liability company
MACERICH SANTA MONICA PLACE CORP., a Delaware corporation
MACERICH SASSAFRAS GP CORP., a Delaware corporation
<PAGE>
MACERICH SASSAFRAS LIMITED PARTNERSHIP, a California limited partnership
MACERICH SOUTH TOWNE GP CORP., a Delaware corporation
MACERICH SOUTH TOWNE LIMITED PARTNERSHIP, a California limited partnership
MACERICH ST MARKETPLACE GP CORP., a Delaware corporation
MACERICH ST MARKETPLACE LIMITED PARTNERSHIP, a California limited partnership
MACERICH STONEWOOD CORP., a Delaware corporation
MACERICH STONEWOOD GP CORP., a Delaware corporation
MACERICH STONEWOOD LIMITED PARTNERSHIP, a California limited partnership
MACERICH STONEWOOD LLC, a Delaware limited liability company
MACERICH VALLEY VIEW ADJACENT GP CORP., a Delaware corporation
MACERICH VALLEY VIEW ADJACENT LIMITED PARTNERSHIP, a California limited
partnership
MACERICH VALLEY VIEW GP CORP., a Delaware corporation
MACERICH VALLEY VIEW LIMITED PARTNERSHIP, a California limited partnership
MACERICH VINTAGE FAIRE GP CORP., a Delaware corporation
MACERICH VINTAGE FAIRE LIMITED PARTNERSHIP, a California limited partnership
MACERICH WESTSIDE ADJACENT GP CORP., a Delaware corporation
MACERICH WESTSIDE ADJACENT LIMITED PARTNERSHIP, a California limited partnership
MACERICH WESTSIDE GP CORP, a Delaware corporation
MACERICH WESTSIDE LIMITED PARTNERSHIP, a California limited partnership
MANHATTAN VILLAGE, LLC, a California limited liability company
NORTHGATE MALL ASSOCIATES, a California general partnership
NORTH VALLEY PLAZA ASSOCIATES, a California general partnership
PACIFIC PREMIER RETAIL TRUST, a Maryland real estate investment trust
PANORAMA CITY ASSOCIATES, a California general partnership
PPR ALBANY PLAZA LLC, a Delaware limited liability company
PPR CASCADE LLC, a Delaware limited liability company
PPR CREEKSIDE CROSSING LLC, a Delaware limited liability company
PPR CROSS COURT LLC, a Delaware limited liability company
PPR EASTLAND PLAZA LLC, a Delaware limited liability company
PPR KITSAP MALL LLC, a Delaware limited liability company
<PAGE>
PPR KITSAP PLACE LLC, a Delaware limited liability company
PPR NORTH POINT LLC, a Delaware limited liability company
PPR REDMOND DEVELOPMENT LLC, a Delaware limited liability company
PPR REDMOND OFFICE LLC, a Delaware limited liability company
PPR REDMOND RETAIL LLC, a Delaware limited liability company
PPR SQUARE TOO LLC, a Delaware limited liability company
PPR WASHINGTON SQUARE LLC, a Delaware limited liability company
PPRT LAKEWOOD MALL CORP., a Delaware corporation
SOUTHRIDGE ADJACENT LLC, a California limited liability company
SDG MACERICH PROPERTIES, L.P., a Delaware limited partnership
SM PORTFOLIO LIMITED PARTNERSHIP, a Delaware limited partnership
WEST ACRES DEVELOPMENT, a North Dakota general partnership
<PAGE>
Exhibit 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration
statements of The Macerich Company on Form S-3 (File No. 333-21157), Form S-3
(File No. 333-38721) and Form S-8 of our report dated February 14, 2000, on
our audits of the consolidated financial statements and financial statement
schedule of The Macerich Company as of December 31, 1999 and 1998 and for the
years ended December 31, 1999, 1998 and 1997, which report is included in the
Annual Report on Form 10-K.
PricewaterhouseCoopers LLP
Los Angeles, California
March 21, 2000
<PAGE>
Exhibit 23.2
CONSENT OF INDEPENDENT AUDITORS
The Partners
SDG Macerich Properties, L.P.
and
The Board of Directors
The Macerich Company
We consent to the incorporation by reference in the registration
statements of The Macerich Company on Form S-3 (File No. 333-21157), Form S-3
(File No. 333-38721) and Form S-8 of our report dated February 11, 2000,
relating to the balance sheets of SDG Macerich Properties, L.P. as of
December 31, 1999 and 1998, and the related consolidated statements of
operations, cash flows, and partners' equity for the years then ended, and
the related schedule, which report appears in the December 31, 1999 Annual
Report on Form 10-K of The Macerich Company.
KPMG LLP
Indianapolis, Indiana
March 21, 2000
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEETS AND CONSOLIDATED STATEMENTS OF OPERATIONS FOUND ON
PAGES 40 AND 41 OF THE COMPANY'S FORM 10-K FOR THE YEAR AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 40,455
<SECURITIES> 0
<RECEIVABLES> 34,423
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 2,174,535
<DEPRECIATION> (243,120)
<TOTAL-ASSETS> 2,404,293
<CURRENT-LIABILITIES> 34,784
<BONDS> 1,561,127
91
0
<COMMON> 338
<OTHER-SE> 619,857
<TOTAL-LIABILITY-AND-EQUITY> 2,404,293
<SALES> 0
<TOTAL-REVENUES> 327,444
<CGS> 0
<TOTAL-COSTS> 105,815
<OTHER-EXPENSES> (4,070)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 113,348
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> (1,478)
<CHANGES> 0
<NET-INCOME> 110,873
<EPS-BASIC> 3.26
<EPS-DILUTED> 2.99
</TABLE>
