MACERICH CO - Quarter Report: 2011 September (Form 10-Q)

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2011

Commission File No. 1-12504

THE MACERICH COMPANY
(Exact name of registrant as specified in its charter)


MARYLAND		95-4448705
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification Number)
401 Wilshire Boulevard, Suite 700, Santa Monica, California 90401 (Address of principal executive office, including zip code)
(310) 394-6000 (Registrant's telephone number, including area code)
N/A (Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding twelve (12) months (or for such shorter period that the Registrant was required to file such reports) and (2) has been subject to such filing requirements for the past ninety (90) days.

YES ý NO o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding twelve (12) months (or for such shorter period that the registrant was required to submit and post such files).

YES ý NO o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act.


Large accelerated filer ý		Accelerated filer o		Non-accelerated filer o (Do not check if a smaller reporting company)		Smaller reporting company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

YES o NO ý

Number of shares outstanding as of November 3, 2011 of the registrant's common stock, par value $0.01 per share: 131,941,163 shares

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THE MACERICH COMPANY

FORM 10-Q

INDEX


Part I	Financial Information
Item 1.	Financial Statements (Unaudited)	3
	Consolidated Balance Sheets of the Company as of September 30, 2011 and December 31, 2010	3
	Consolidated Statements of Operations of the Company for the three and nine months ended September 30, 2011 and 2010	4
	Consolidated Statement of Equity and Redeemable Noncontrolling Interests of the Company for the nine months ended September 30, 2011	5
	Consolidated Statements of Cash Flows of the Company for the nine months ended September 30, 2011 and 2010	6
	Notes to Consolidated Financial Statements	7
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	34
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	49
Item 4.	Controls and Procedures	50
Part II	Other Information
Item 1.	Legal Proceedings	51
Item 1A.	Risk Factors	51
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	51
Item 3.	Defaults Upon Senior Securities	51
Item 4.	Removed and Reserved	51
Item 5.	Other Information	51
Item 6.	Exhibits	52
Signature		54

Table of Contents

THE MACERICH COMPANY

CONSOLIDATED BALANCE SHEETS

(Dollars in thousands, except share data)

(Unaudited)

				September 30, 2011			December 31, 2010

ASSETS:
Property, net				$	5,827,308		$	5,674,127
Cash and cash equivalents					139,420			445,645
Restricted cash					77,680			71,434
Marketable securities					25,360			25,935
Tenant and other receivables, net					94,884			95,083
Deferred charges and other assets, net					355,012			316,969
Loans to unconsolidated joint ventures					3,961			3,095
Due from affiliates					4,360			6,599
Investments in unconsolidated joint ventures					1,101,119			1,006,123

			Total assets	$	7,629,104		$	7,645,010

LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND EQUITY:
Mortgage notes payable:
	Related parties			$	275,583		$	302,344
	Others				2,896,534			2,957,131

			Total		3,172,117			3,259,475
Bank and other notes payable					889,874			632,595
Accounts payable and accrued expenses					87,243			70,585
Other accrued liabilities					287,770			257,678
Distributions in excess of investments in unconsolidated joint ventures					78,698			65,045
Co-venture obligation					126,862			160,270

			Total liabilities		4,642,564			4,445,648

Redeemable noncontrolling interests					—			11,366

Commitments and contingencies
Equity:
	Stockholders' equity:
		Common stock, $0.01 par value, 250,000,000 shares authorized, 132,111,519 and 130,452,032 shares issued and outstanding at September 30, 2011 and December 31, 2010, respectively			1,321			1,304
		Additional paid-in capital			3,484,207			3,456,569
		Accumulated deficit			(768,816	)		(564,357	)
		Accumulated other comprehensive income (loss)			3,019			(3,237	)

			Total stockholders' equity		2,719,731			2,890,279
	Noncontrolling interests				266,809			297,717

			Total equity		2,986,540			3,187,996

			Total liabilities, redeemable noncontrolling interests and equity	$	7,629,104		$	7,645,010

The accompanying notes are an integral part of these consolidated financial statements.

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THE MACERICH COMPANY

CONSOLIDATED STATEMENTS OF OPERATIONS

(Dollars in thousands, except per share amounts)

(Unaudited)

			For the Three Months September 30,						For the Nine Months September 30,

			2011			2010			2011			2010
Revenues:
	Minimum rents		$	113,889		$	105,550		$	333,168		$	309,022
	Percentage rents			4,137			3,862			10,235			9,957
	Tenant recoveries			66,784			61,808			189,197			179,791
	Management Companies			9,759			10,529			28,460			32,867
	Other			8,114			7,722			22,614			20,515

		Total revenues		202,683			189,471			583,674			552,152

Expenses:
	Shopping center and operating expenses			68,255			63,959			194,666			180,734
	Management Companies' operating expenses			20,251			22,042			67,030			68,696
	REIT general and administrative expenses			4,490			4,546			15,876			15,704
	Depreciation and amortization			67,996			62,185			197,531			180,234

				160,992			152,732			475,103			445,368

	Interest expense:
		Related parties		4,081			3,451			12,656			9,656
		Other		45,072			48,211			137,526			149,655

				49,153			51,662			150,182			159,311
	Loss (gain) on early extinguishment of debt			6			(2,096	)		9,139			(1,608	)

		Total expenses		210,151			202,298			634,424			603,071
Equity in income of unconsolidated joint ventures				20,039			19,687			75,521			51,908
Co-venture expense				(1,281	)		(269	)		(3,779	)		(3,646	)
Income tax benefit				1,566			2,662			5,811			5,252
Gain (loss) on remeasurement, sale or write down of assets, net				1,041			(8	)		(31,601	)		574

Income (loss) from continuing operations				13,897			9,245			(4,798	)		3,169

Discontinued operations:
	Gain (loss) on sale or write down of assets, net			348			48			(1,913	)		(23	)
	Income (loss) from discontinued operations			11			175			146			(484	)

Income (loss) from discontinued operations				359			223			(1,767	)		(507	)

Net income (loss)				14,256			9,468			(6,565	)		2,662
Less net income (loss) attributable to noncontrolling interests				1,315			1,039			(324	)		1,030

Net income (loss) attributable to the Company			$	12,941		$	8,429		$	(6,241	)	$	1,632

Earnings per common share attributable to Company—basic:
	Income (loss) from continuing operations		$	0.10		$	0.06		$	(0.05	)	$	—
	Discontinued operations			—			—			(0.01	)		—

	Net income (loss) available to common stockholders		$	0.10		$	0.06		$	(0.06	)	$	—

Earnings per common share attributable to Company—diluted:
	Income (loss) from continuing operations		$	0.10		$	0.06		$	(0.05	)	$	—
	Discontinued operations			—			—			(0.01	)		—

	Net income (loss) available to common stockholders		$	0.10		$	0.06		$	(0.06	)	$	—

Weighted average number of common shares outstanding:
	Basic			132,096,000			130,213,000			131,459,000			116,992,000

	Diluted			132,096,000			130,213,000			131,459,000			116,992,000

The accompanying notes are an integral part of these consolidated financial statements.

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THE MACERICH COMPANY

CONSOLIDATED STATEMENT OF EQUITY AND
REDEEMABLE NONCONTROLLING INTERESTS

(Dollars in thousands, except per share data)

(Unaudited)

		Stockholders' Equity

		Common Stock
		Common Stock										Accumulated Other Comprehensive Income (Loss)
		Shares		Par Value		Additional Paid-in Capital			Accumulated Deficit			Accumulated Other Comprehensive Income (Loss)			Total Stockholders' Equity			Noncontrolling Interests			Total Equity			Redeemable Noncontrolling Interests
Balance January 1, 2011			130,452,032	$	1,304	$	3,456,569		$	(564,357	)	$	(3,237	)	$	2,890,279		$	297,717		$	3,187,996		$	11,366

Comprehensive income:
	Net loss		—		—		—			(6,241	)		—			(6,241	)		(489	)		(6,730	)		165
	Interest rate swap/cap agreements		—		—		—			—			6,256			6,256			—			6,256			—

	Total comprehensive income		—		—		—			(6,241	)		6,256			15			(489	)		(474	)		165
Amortization of share and unit-based plans			591,066		6		15,043			—			—			15,049			—			15,049			—
Exercise of stock options			2,000		—		49			—			—			49			—			49			—
Employee stock purchases			7,405		—		320						—			320			—			320			—
Distributions paid ($1.50) per share			—		—		—			(198,218	)		—			(198,218	)		—			(198,218	)		—
Distributions to noncontrolling interests			—		—		—			—			—			—			(19,216	)		(19,216	)		(165	)
Contributions from noncontrolling interests			—		—		—			—			—			—			81			81			—
Other			—		—		985			—			—			985			—			985			—
Conversion of noncontrolling interests to common shares			1,059,016		11		20,981			—			—			20,992			(20,992	)		—			—
Redemption of noncontrolling interests			—		—		(20	)		—			—			(20	)		(12	)		(32	)		(11,366	)
Adjustment of noncontrolling interest in Operating Partnership			—		—		(9,720	)		—			—			(9,720	)		9,720			—			—

Balance September 30, 2011			132,111,519	$	1,321	$	3,484,207		$	(768,816	)	$	3,019		$	2,719,731		$	266,809		$	2,986,540		$	—

The accompanying notes are an integral part of these consolidated financial statements.

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THE MACERICH COMPANY

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in thousands)

(Unaudited)

				For the Nine Months Ended September 30,

				2011			2010
Cash flows from operating activities:
	Net (loss) income			$	(6,565	)	$	2,662
	Adjustments to reconcile net (loss) income to net cash provided by operating activities:
		Loss (gain) on early extinguishment of debt			139			(1,608	)
		Loss (gain) on remeasurement, sale or write down of assets, net			31,601			(574	)
		Loss on sale or write down of assets, net from discontinued operations			1,913			23
		Depreciation and amortization			208,832			191,718
		Amortization of net discount on mortgages, bank and other notes payable			6,993			1,503
		Amortization of share and unit-based plans			9,428			11,204
		Provision for doubtful accounts			2,375			3,427
		Income tax benefit			(5,811	)		(5,252	)
		Equity in income of unconsolidated joint ventures			(75,521	)		(51,908	)
		Co-venture expense			3,779			3,646
		Distributions of income from unconsolidated joint ventures			10,973			11,068
		Changes in assets and liabilities, net of acquisitions and dispositions:
			Tenant and other receivables		(1,360	)		19,461
			Other assets		(2,658	)		(37,289	)
			Due from affiliates		2,239			1,360
			Accounts payable and accrued expenses		13,307			(6,794	)
			Other accrued liabilities		(19,179	)		(15,822	)

		Net cash provided by operating activities			180,485			126,825

Cash flows from investing activities:
		Acquisitions of property, development, redevelopment and property improvements			(207,171	)		(129,643	)
		Proceeds from note receivable			—			11,763
		Maturities of marketable securities			772			654
		Deferred leasing costs			(26,635	)		(22,876	)
		Distributions from unconsolidated joint ventures			193,849			84,796
		Contributions to unconsolidated joint ventures			(149,841	)		(14,008	)
		Loans to unconsolidated joint ventures, net			(866	)		(4,656	)
		Proceeds from sale of assets			6,255			—
		Restricted cash			(879	)		(38,483	)

		Net cash used in investing activities			(184,516	)		(112,453	)

Cash flows from financing activities:
	Proceeds from mortgages, bank and other notes payable				432,000			612,227
	Payments on mortgages, bank and other notes payable				(450,775	)		(1,237,260	)
	Repurchase of convertible senior notes				—			(18,191	)
	Deferred financing costs				(17,604	)		(7,596	)
	Proceeds from share and unit-based plans				369			376
	Net proceeds from stock offering				—			1,220,880
	Redemption of stock warrants				—			(17,639	)
	Redemption of noncontrolling interests				(11,398	)		(9,592	)
	Dividends and distributions				(217,599	)		(153,927	)
	Distributions to co-venture partner				(37,187	)		(10,479	)

	Net cash (used in) provided by financing activities				(302,194	)		378,799

	Net (decrease) increase in cash and cash equivalents				(306,225	)		393,171
Cash and cash equivalents, beginning of period					445,645			93,255

Cash and cash equivalents, end of period				$	139,420		$	486,426

Supplemental cash flow information:
	Cash payments for interest, net of amounts capitalized			$	128,105		$	153,739

Non-cash transactions:
	Accrued development costs included in accounts payable and accrued expenses and other accrued liabilities			$	14,828		$	42,651

	Acquisition of properties by assumption of mortgage note payable and other accrued liabilities			$	192,566		$	—

Disposition of property in exchange for investments in unconsolidated joint ventures				$	56,952		$	—

Stock dividend				$	—		$	43,086

Conversion of Operating Partnership units to common stock				$	20,992		$	4,331

The accompanying notes are an integral part of these consolidated financial statements.

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THE MACERICH COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share amounts)

(Unaudited)

1. Organization:

The Macerich Company (the "Company") is involved in the acquisition, ownership, development, redevelopment, management and leasing of regional and community shopping centers (the "Centers") located throughout the United States.

The Company commenced operations effective with the completion of its initial public offering on March 16, 1994. As of September 30, 2011, the Company was the sole general partner of and held a 92% ownership interest in The Macerich Partnership, L.P. (the "Operating Partnership"). The Company was organized to qualify as a real estate investment trust ("REIT") under the Internal Revenue Code of 1986, as amended (the "Code").

The property management, leasing and redevelopment of the Company's portfolio is provided by the Company's management companies, Macerich Property Management Company, LLC, a single member Delaware limited liability company, Macerich Management Company, a California corporation, Macerich Arizona Partners LLC, a single member Arizona limited liability company, Macerich Arizona Management LLC, a single member Delaware limited liability company, Macerich Partners of Colorado LLC, a Colorado limited liability company, MACW Mall Management, Inc., a New York corporation, and MACW Property Management, LLC, a single member New York limited liability company. All seven of the management companies are collectively referred to herein as the "Management Companies."

All references to the Company in this Quarterly Report on Form 10-Q include the Company, those entities owned or controlled by the Company and predecessors of the Company, unless the context indicates otherwise.

2. Summary of Significant Accounting Policies:

Basis of Presentation:

The accompanying consolidated financial statements of the Company have been prepared in accordance with generally accepted accounting principles ("GAAP") for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. They do not include all of the information and footnotes required by GAAP for complete financial statements and have not been audited by independent public accountants.

The accompanying consolidated financial statements include the accounts of the Company and the Operating Partnership. Investments in entities in which the Company retains a controlling financial interest or entities that meet the definition of a variable interest entity in which the Company has, as a result of ownership, contractual or other financial interests, both the power to direct activities that most significantly impact the economic performance of the variable interest entity and the obligation to absorb losses or the right to receive benefits that could potentially be significant to the variable interest entity are consolidated; otherwise they are accounted for under the equity method of accounting and are reflected as "investments in unconsolidated joint ventures."

The Company had identified Shoppingtown Mall, L.P. ("Shoppingtown Mall") and Camelback Shopping Center Limited Partnership as variable interest entities that met the criteria for consolidation. On September 14, 2011, the Company redeemed the outside ownership interests in Shoppingtown Mall

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THE MACERICH COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands, except per share amounts)

(Unaudited)

2. Summary of Significant Accounting Policies: (Continued)

for a cash payment of $11,366 (See Note 13—Noncontrolling Interests). As a result of the redemption, the property is wholly-owned by the Company. The net assets and results of operations of Camelback Shopping Center Limited Partnership included in the accompanying consolidated financial statements are insignificant to the net assets and results of operations of the Company.

All intercompany accounts and transactions have been eliminated in the consolidated financial statements.

The unaudited interim consolidated financial statements should be read in conjunction with the Company's audited consolidated financial statements and notes thereto included in the Company's Current Report on Form 8-K filed on September 9, 2011. In the opinion of management, all adjustments (consisting of normal recurring adjustments) necessary for a fair presentation of the consolidated financial statements for the interim periods have been made. The preparation of consolidated 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 consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The accompanying consolidated balance sheet as of December 31, 2010 has been derived from the audited financial statements, but does not include all disclosures required by GAAP.

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THE MACERICH COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands, except per share amounts)

(Unaudited)

3. Earnings per Share ("EPS"):

The following table reconciles the numerator and denominator used in the computation of earnings per share for the three and nine months ended September 30, 2011, and 2010 (shares in thousands):

		For the Three Months Ended September 30,						For the Nine Months Ended September 30,

		2011			2010			2011			2010
Numerator
Income (loss) from continuing operations		$	13,897		$	9,245		$	(4,798	)	$	3,169
Income (loss) from discontinued operations			359			223			(1,767	)		(507	)
(Income) loss attributable to noncontrolling interests			(1,315	)		(1,039	)		324			(1,030	)

Net income (loss) attributable to the Company			12,941			8,429			(6,241	)		1,632
Allocation of earnings to participating securities			(288	)		(551	)		(1,119	)		(2,073	)

Numerator for basic and diluted earnings per share—net income (loss) available to common stockholders		$	12,653		$	7,878		$	(7,360	)	$	(441	)

Denominator
Denominator for basic and diluted earnings per share—weighted average number of common shares outstanding(1)			132,096			130,213			131,459			116,992

Earnings per common share—basic:
	Income (loss) from continuing operations	$	0.10		$	0.06		$	(0.05	)	$	—
	Discontinued operations		—			—			(0.01	)		—

	Net income (loss) available to common stockholders	$	0.10		$	0.06		$	(0.06	)	$	—

Earnings per common share—diluted:
	Income (loss) from continuing operations	$	0.10		$	0.06		$	(0.05	)	$	—
	Discontinued operations		—			—			(0.01	)		—

	Net income (loss) available to common stockholders	$	0.10		$	0.06		$	(0.06	)	$	—

(1)

The Senior Notes (See Note 11—Bank and Other Notes Payable) are excluded from diluted EPS for the three and nine months ended September 30, 2011 and 2010, as their effect was antidilutive.

Diluted EPS excludes 208,640 convertible non-participating preferred units for the three and nine months ended September 30, 2011 and 2010, as their impact was antidilutive.

Diluted EPS excludes 1,191,854 and 1,218,880 of unexercised stock appreciation rights ("SARs") for the three and nine months ended September 30, 2011, and 1,150,172 of unexercised SARs for the three and nine months ended September 30, 2010, as their effect was antidilutive.

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THE MACERICH COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands, except per share amounts)

(Unaudited)

3. Earnings per Share ("EPS"): (Continued)

Diluted EPS excludes 94,897 and 119,705 of unexercised stock options for the three and nine months ended September 30, 2011, respectively, and 127,500 of unexercised stock options for the three and nine months ended September 30, 2010, as their effect was antidilutive.

Diluted EPS excludes 935,358 of unexercised stock warrants for the three and nine months ended September 30, 2011 and 2010, as their effect was antidilutive.

Diluted EPS excludes 11,055,013 and 11,807,680 of Operating Partnership units ("OP Units") for the three months ended September 30, 2011 and 2010, respectively, and 11,465,479 and 12,006,574 of OP Units for the nine months ended September 30, 2011 and 2010, respectively, as their effect was antidilutive.

4. Investments in Unconsolidated Joint Ventures:

The Company has recently made the following investments in unconsolidated joint ventures:

On February 24, 2011, the Company's joint venture in Kierland Commons, a 434,690 square foot community center in Scottsdale, Arizona, acquired the ownership interest of another partner in the joint venture for $105,550. The Company's share of the purchase price consisted of a cash payment of $34,161 and the assumption of a pro rata share of debt of $18,613. As a result of the acquisition, the Company's ownership interest in Kierland Commons increased from 24.5% to 50.0%. The joint venture recognized a remeasurement gain of $25,019 on the acquisition based on the difference of the fair value received and its previously held investment in Kierland Commons. The Company's pro rata share of the gain recognized was $12,510.

On February 28, 2011, the Company in a 50/50 joint venture acquired The Shops at Atlas Park, a 400,000 square foot community center in Queens, New York for a total purchase price of $53,750. The Company's share of the purchase price was $26,875. The results of The Shops at Atlas Park are included below for the period subsequent to the acquisition.

On February 28, 2011, the Company acquired the additional 50% ownership interest in Desert Sky Mall, an 893,561 square foot regional shopping center in Phoenix, Arizona, that it did not own for $27,625. The purchase price was funded by a cash payment of $1,875 and the assumption of the third party's pro rata share of the mortgage note payable on the property of $25,750. Concurrent with the purchase of the partnership interest, the Company paid off the $51,500 loan on the property. Prior to the acquisition, the Company had accounted for its investment in Desert Sky Mall under the equity method. Since the date of acquisition, the Company has included Desert Sky Mall in its consolidated financial statements (See Note 15—Acquisitions).

On April 1, 2011, the Company's joint venture in SDG Macerich Properties, L.P. conveyed Granite Run Mall to the mortgage note lender with a deed-in-lieu of foreclosure. The mortgage note was non-recourse. The Company's pro rata share of gain on the early extinguishment of debt was $7,792.

On June 3, 2011, the Company entered into a transaction with General Growth Properties, Inc., whereby the Company acquired an additional 33.3% ownership interest in Arrowhead Towne Center, a 1,196,941 square foot regional shopping center in Glendale, Arizona; an additional 33.3% ownership interest in Superstition Springs Center, a 1,204,803 square foot regional shopping center in Mesa,

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THE MACERICH COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands, except per share amounts)

(Unaudited)

4. Investments in Unconsolidated Joint Ventures: (Continued)

Arizona; and an additional 50% ownership interest in the land under Superstition Springs Center ("Superstition Springs Land") in exchange for six anchor locations, including five former Mervyn's stores (See Note 16—Discontinued Operations), and a cash payment of $75,000. As a result of this transaction, the Company now owns a 66.7% ownership interest in Arrowhead Towne Center, a 66.7% ownership interest in Superstition Springs Center and a 100% ownership interest in Superstition Springs Land. Although the Company had a 66.7% ownership interest in Arrowhead Towne Center and Superstition Springs Center upon completion of the transaction, the Company does not have a controlling financial interest in these joint ventures due to the substantive participation rights of the outside partner and, therefore, continues to account for its investments in these joint ventures under the equity method of accounting. Accordingly, no remeasurement gain was recorded on the increase in ownership. The Company has consolidated its investment in Superstition Springs Land since the date of acquisition (See Note 15—Acquisitions) and has recorded a remeasurement gain of $1,734 (See Note 6—Property) as a result of the increase in ownership. This transaction is referred to herein as the "GGP Exchange".

Combined and condensed balance sheets and statements of operations are presented below for all unconsolidated joint ventures.

Table of Contents

THE MACERICH COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands, except per share amounts)

(Unaudited)

4. Investments in Unconsolidated Joint Ventures: (Continued)

Combined and Condensed Balance Sheets of Unconsolidated Joint Ventures and Other Related Information:

		September 30, 2011			December 31, 2010

Assets(1):
	Properties, net	$	5,022,600		$	5,047,022
	Other assets		479,572			470,922

	Total assets	$	5,502,172		$	5,517,944

Liabilities and partners' capital(1):
	Mortgage notes payable(2)	$	4,579,337		$	4,617,127
	Other liabilities		203,656			211,942
	Company's capital		323,130			349,175
	Outside partners' capital		396,049			339,700

	Total liabilities and partners' capital	$	5,502,172		$	5,517,944

Investments in unconsolidated joint ventures:
	Company's capital	$	323,130		$	349,175
	Basis adjustment(3)		699,291			591,903

	Investments in unconsolidated joint ventures	$	1,022,421		$	941,078

	Assets—Investments in unconsolidated joint ventures	$	1,101,119		$	1,006,123
	Liabilities—Distributions in excess of investments in unconsolidated joint ventures		(78,698	)		(65,045	)

		$	1,022,421		$	941,078

(1): These amounts include the assets and liabilities of the following significant subsidiaries as of September 30, 2011 and December 31, 2010:

	SDG Macerich Properties, L.P.		Pacific Premier Retail Trust		Tysons Corner LLC

As of September 30, 2011:
Total Assets	$	710,962	$	1,075,118	$	337,361
Total Liabilities	$	695,902	$	1,017,205	$	326,559
As of December 31, 2010:
Total Assets	$	817,995	$	1,101,186	$	330,117
Total Liabilities	$	815,884	$	1,019,513	$	324,527

(2): Certain mortgage notes payable could become recourse debt to the Company should the joint venture be unable to discharge the obligations of the related debt. As of September 30, 2011 and

Table of Contents

THE MACERICH COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands, except per share amounts)

(Unaudited)

4. Investments in Unconsolidated Joint Ventures: (Continued)

December 31, 2010, a total of $368,629 and $348,658, respectively, could become recourse debt to the Company. As of September 30, 2011 and December 31, 2010, the Company has indemnity agreements from joint venture partners for $176,749 and $162,451, respectively, of the guaranteed amount.

Included in mortgage notes payable are amounts due to affiliates of Northwestern Mutual Life ("NML") of $666,299 and $573,239 as of September 30, 2011 and December 31, 2010, respectively. NML is considered a related party because it is a joint venture partner with the Company in Macerich Northwestern Associates—Broadway Plaza. Interest expense incurred on these borrowings amounted to $11,166 and $10,208 for the three months ended September 30, 2011 and 2010, respectively, and $31,263 and $30,637 for the nine months ended September 30, 2011 and 2010, respectively.

(3): The Company amortizes the difference between the cost of its investments in unconsolidated joint ventures and the book value of the underlying equity into income on a straight-line basis consistent with the lives of the underlying assets. The amortization of this difference was $2,923 and $1,662 for the three months ended September 30, 2011 and 2010, respectively, and $7,042 and $4,942 for the nine months ended September 30, 2011 and 2010, respectively.

Table of Contents

THE MACERICH COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands, except per share amounts)

(Unaudited)

4. Investments in Unconsolidated Joint Ventures: (Continued)

Combined and Condensed Statements of Operations of Unconsolidated Joint Ventures:

			SDG Macerich Properties, L.P.		Pacific Premier Retail Trust		Tysons Corner LLC		Other Joint Ventures			Total

Three Months Ended September 30, 2011
Revenues:
	Minimum rents		$	20,807	$	31,841	$	15,618	$	90,284		$	158,550
	Percentage rents			969		1,190		318		4,992			7,469
	Tenant recoveries			10,370		13,867		10,270		41,967			76,474
	Other			748		1,267		595		10,183			12,793

		Total revenues		32,894		48,165		26,801		147,426			255,286

Expenses:
	Shopping center and operating expenses			11,959		14,477		8,290		55,968			90,694
	Interest expense			9,974		13,402		3,073		38,378			64,827
	Depreciation and amortization			6,770		10,403		5,068		34,070			56,311

	Total operating expenses			28,703		38,282		16,431		128,416			211,832

Gain (loss) on sale/remeasurement of assets				40		—		—		(134	)		(94	)
Gain on early extinguishment of debt				77		—		—		—			77

Net income			$	4,308	$	9,883	$	10,370	$	18,876		$	43,437

Company's equity in net income			$	2,155	$	5,025	$	4,011	$	8,848		$	20,039

Three Months Ended September 30, 2010
Revenues:
	Minimum rents		$	22,128	$	32,245	$	15,936	$	87,865		$	158,174
	Percentage rents			888		987		375		4,444			6,694
	Tenant recoveries			12,025		13,008		9,791		47,274			82,098
	Other			759		2,436		742		8,301			12,238

		Total revenues		35,800		48,676		26,844		147,884			259,204

Expenses:
	Shopping center and operating expenses			12,784		14,494		7,999		58,511			93,788
	Interest expense			11,722		13,148		4,055		38,878			67,803
	Depreciation and amortization			7,705		10,012		4,671		30,103			52,491

	Total operating expenses			32,211		37,654		16,725		127,492			214,082

Gain on sale of assets				3		468		—		985			1,456

Net income			$	3,592	$	11,490	$	10,119	$	21,377		$	46,578

Company's equity in net income			$	1,796	$	5,954	$	2,405	$	9,532		$	19,687

Table of Contents

THE MACERICH COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands, except per share amounts)

(Unaudited)

4. Investments in Unconsolidated Joint Ventures: (Continued)

			SDG Macerich Properties, L.P.		Pacific Premier Retail Trust			Tysons Corner LLC		Other Joint Ventures		Total

Nine Months Ended September 30, 2011
Revenues:
	Minimum rents		$	62,982	$	97,185		$	45,947	$	263,174	$	469,288
	Percentage rents			2,470		3,292			1,186		9,470		16,418
	Tenant recoveries			33,054		41,134			30,748		124,255		229,191
	Other			2,213		3,323			2,025		27,574		35,135

		Total revenues		100,719		144,934			79,906		424,473		750,032

Expenses:
	Shopping center and operating expenses			38,182		43,683			24,972		161,716		268,553
	Interest expense			31,317		36,826			10,891		114,813		193,847
	Depreciation and amortization			20,969		30,884			14,974		95,564		162,391

	Total operating expenses			90,468		111,393			50,837		372,093		624,791

Gain on sale/remeasurement of assets				40		—			—		24,411		24,451
Gain on early extinguishment of debt				15,583		—			—		—		15,583

Net income			$	25,874	$	33,541		$	29,069	$	76,791	$	165,275

Company's equity in net income			$	12,937	$	17,058		$	11,209	$	34,317	$	75,521

Nine Months Ended September 30, 2010
Revenues:
	Minimum rents		$	66,283	$	95,841		$	45,010	$	263,491	$	470,625
	Percentage rents			2,084		2,950			759		8,837		14,630
	Tenant recoveries			33,647		37,420			28,765		135,761		235,593
	Other			2,409		4,967			2,007		21,478		30,861

		Total revenues		104,423		141,178			76,541		429,567		751,709

Expenses:
	Shopping center and operating expenses			37,817		41,571			23,890		167,318		270,596
	Interest expense			34,807		39,222			12,204		116,391		202,624
	Depreciation and amortization			23,107		28,947			13,922		92,119		158,095

	Total operating expenses			95,731		109,740			50,016		375,828		631,315

Gain on sale of assets				6		468			—		357		831
Loss on early extinguishment of debt				—		(1,352	)		—		—		(1,352	)

Net income			$	8,698	$	30,554		$	26,525	$	54,096	$	119,873

Company's equity in net income			$	4,349	$	15,691		$	10,225	$	21,643	$	51,908

Property/Entity(1)	Notional Amount		Product				Fair Value

La Cumbre Plaza	$	30,000	Cap	3.00	%	12/9/2011	$	—
Westside Pavilion		175,000	Cap	5.50	%	6/5/2012		—

	September 30, 2011			December 31, 2010

Land	$	1,189,371		$	1,158,139
Building improvements		5,181,458			4,934,391
Tenant improvements		438,593			398,556
Equipment and furnishings		121,337			124,530
Construction in progress		273,000			292,891

		7,203,759			6,908,507
Less accumulated depreciation		(1,376,451	)		(1,234,380	)

	$	5,827,308		$	5,674,127

	September 30, 2011			December 31, 2010

Government debt securities, at par value	$	25,737		$	26,509
Less discount		(377	)		(574	)

		25,360			25,935
Unrealized gain		2,076			2,612

Fair value	$	27,436		$	28,547


1 year or less	$	1,378
2 to 5 years		24,359

	$	25,737

		September 30, 2011			December 31, 2010

Leasing		$	217,807		$	189,853
Financing			41,807			57,564
Intangible assets:
	In-place lease values		100,032			99,328
	Leasing commissions and legal costs		30,833			29,088
Other assets			158,393			152,167

			548,872			528,000
Less accumulated amortization(1)			(193,860	)		(211,031	)

		$	355,012		$	316,969

	September 30, 2011			December 31, 2010

Above-Market Leases
Original allocated value	$	64,894		$	50,615
Less accumulated amortization		(38,419	)		(36,935	)

	$	26,475		$	13,680

Below-Market Leases
Original allocated value	$	140,872		$	121,813
Less accumulated amortization		(89,430	)		(83,780	)

	$	51,442		$	38,033

	Carrying Amount of Mortgage Notes(1)

	September 30, 2011				December 31, 2010
Property Pledged as Collateral	Related Party		Other		Related Party		Other		Interest Rate(2)			Monthly Payment Term(3)		Maturity Date
Capitola Mall(4)	$	—	$	—	$	33,459	$	—		—		$	—		—
Chandler Fashion Center(5)		—		156,476		—		159,360		5.50	%		1,043		2012
Chesterfield Towne Center(6)		—		—		—		50,462		—			—		—
Danbury Fair Mall		117,974		117,974		109,657		109,657		5.53	%		1,351		2020
Deptford Mall		—		172,500		—		172,500		5.41	%		778		2013
Deptford Mall		—		15,087		—		15,248		6.46	%		101		2016
Fashion Outlets of Niagara Falls(7)		—		129,631		—		—		4.89	%		596		2020
Fiesta Mall		—		84,000		—		84,000		4.98	%		348		2015
Flagstaff Mall		—		37,000		—		37,000		5.03	%		155		2015
Freehold Raceway Mall(5)		—		232,900		—		232,900		4.20	%		805		2018
Fresno Fashion Fair		82,005		82,004		82,791		82,792		6.76	%		1,104		2015
Great Northern Mall		—		37,466		—		38,077		5.19	%		234		2013
Hilton Village(8)		—		—		—		8,581		—			—		—
La Cumbre Plaza(9)		—		19,765		—		23,113		2.41	%		18		2011
Northgate, The Mall at(10)		—		38,115		—		38,115		7.00	%		191		2013
Oaks, The(11)		—		257,264		—		257,264		2.25	%		482		2012
Pacific View(12)		—		—		—		84,096		—			—		—
Paradise Valley Mall(13)		—		84,750		—		85,000		6.30	%		445		2012
Prescott Gateway		—		60,000		—		60,000		5.86	%		293		2011
Promenade at Casa Grande(14)		—		77,660		—		79,104		5.21	%		291		2013
Rimrock Mall(15)		—		—		—		40,650		—			—		—
Salisbury, Center at		—		115,000		—		115,000		5.83	%		559		2016
SanTan Village Regional Center(16)				138,087		—		138,087		2.75	%		316		2012
Shoppingtown Mall(17)		—		38,968		—		39,675		8.00	%		319		2011
South Plains Mall		—		103,113		—		104,132		6.54	%		648		2015
South Towne Center		—		86,833		—		87,726		6.39	%		554		2015
Towne Mall		—		12,941		—		13,348		4.99	%		100		2012
Tucson La Encantada		75,604		—		76,437		—		5.84	%		448		2012
Twenty Ninth Street(18)		—		107,000		—		106,244		3.07	%		274		2016
Valley River Center		—		120,000		—		120,000		5.59	%		559		2016
Valley View Center(19)		—		125,000		—		125,000		5.72	%		596		2011
Victor Valley, Mall of(20)		—		97,000		—		100,000		2.19	%		177		2012
Vintage Faire Mall(21)		—		135,000		—		135,000		3.54	%		398		2015
Westside Pavilion(22)		—		175,000		—		175,000		2.48	%		362		2012
Wilton Mall(23)		—		40,000		—		40,000		1.23	%		41		2013

	$	275,583	$	2,896,534	$	302,344	$	2,957,131

Property Pledged as Collateral	September 30, 2011			December 31, 2010

Deptford Mall	$	(26	)	$	(30	)
Fashion Outlets of Niagara Falls		8,430			—
Great Northern Mall		(62	)		(82	)
Hilton Village		—			(19	)
Shoppingtown Mall		—			482
Towne Mall		112			183

	$	8,454		$	534


Property		$	46,603
Deferred charges, net			5,474
Cash and cash equivalents			6,057
Tenant receivables			202
Other assets, net			4,481

	Total assets acquired		62,817

Mortgage note payable			51,500
Accounts payable			33
Other accrued liabilities			3,017

	Total liabilities assumed		54,550

	Fair value of acquired net assets (at 100% ownership)	$	8,267


Fair value of existing ownership interest (at 50% ownership)		$	4,164
Carrying value of investment in Desert Sky Mall			(2,296	)

	Gain on remeasurement	$	1,868


Property		$	228,720
Restricted cash			5,367
Deferred charges			10,383
Other assets, net			3,090

	Total assets acquired		247,560

Mortgage note payable			130,006
Accounts payable			231
Other accrued liabilities			38,037

	Total liabilities assumed		168,274

	Fair value of acquired net assets	$	79,286

		LTIP Units					Stock Awards					Phantom Stock					Stock Units

		Units			Value(1)		Shares			Value(1)		Units			Value(1)		Shares			Value(1)
Balance at January 1, 2011			272,226		$	50.68		63,351		$	53.69		29,783		$	34.18		1,038,549		$	7.17
	Granted		422,631			46.38		11,350			48.47		8,123			48.43		64,463			48.36
	Vested		(504,857	)		49.85		(53,571	)		57.36		(18,221	)		39.81		(519,272	)		7.17
	Forfeited		—			—		—			—		—			—		(7,400	)		12.35

Balance at September 30, 2011			190,000		$	43.30		21,130		$	40.68		19,685		$	34.84		576,340		$	11.71

		SARs					Stock Options

		Units			Price(1)		Stock Options			Price(1)
Balance at January 1, 2011			1,242,314		$	56.56		132,314		$	67.16
	Granted		—			—		—			—
	Exercised		—			—		(2,000	)		24.63
	Forfeited		(85,329	)	$	56.63		(108,012	)		76.05

Balance at September 30, 2011			1,156,985		$	56.55		22,302		$	27.93


Buildings and improvements		5 - 40 years
Tenant improvements		5 - 7 years
Equipment and furnishings		5 - 7 years

	For the Three Months Ended Septebmer 30,				For the Nine Months Ended Septebmer 30,

	2011		2010		2011		2010
LTIP units	$	2,239	$	3,669	$	6,716	$	9,110
Stock awards		85		493		663		2,579
Stock units		891		2,181		6,634		7,227
Stock options		—		107		—		402
SARs		3		730		626		1,681
Phantom stock units		243		241		726		699

	$	3,461	$	7,421	$	15,365	$	21,698

	For the Nine Months Ended September 30,

(Dollars in thousands)	2011		2010
*Consolidated Centers:*
Acquisitions of property and equipment	$	294,980	$	11,231
Development, redevelopment and expansion of Centers		73,544		159,398
Tenant allowances		15,200		16,064
Deferred leasing charges		22,884		20,496

	$	406,608	$	207,189

*Joint Venture Centers (at Company's pro rata share):*
Acquisitions of property and equipment	$	139,116	$	2,832
Development, redevelopment and expansion of Centers		27,379		26,453
Tenant allowances		5,475		3,020
Deferred leasing charges		4,104		3,517

	$	176,074	$	35,822

	Payment Due by Period

Contractual Obligations	Total		Less than 1 year		1 - 3 years		3 - 5 years		More than five years
Long-term debt obligations (includes expected interest payments)	$	4,252,289	$	1,899,435	$	609,671	$	1,016,242	$	726,941
Operating lease obligations(1)		847,513		13,688		28,493		25,263		780,069
Purchase obligations(1)		3,645		3,645		—		—		—
Other long-term liabilities		279,185		219,246		4,143		18,347		37,449

	$	5,382,632	$	2,136,014	$	642,307	$	1,059,852	$	1,544,459

		For the years ended September 30,

		2012			2013			2014			2015			2016			Thereafter			Total			FV
CONSOLIDATED CENTERS:
Long term debt:
	Fixed rate	$	937,850		$	347,377		$	72,928		$	349,757		$	376,235		$	558,203		$	2,642,350		$	2,821,638
	Average interest rate		5.62	%		5.44	%		5.59	%		6.24	%		5.79	%		4.81	%		5.53	%
	Floating rate		883,779			78,941			80,137			131,697			107,000			138,087			1,419,641			1,429,952
	Average interest rate		2.84	%		4.04	%		5.16	%		3.54	%		3.07	%		2.75	%		3.11	%

Total debt—Consolidated Centers		$	1,821,629		$	426,318		$	153,065		$	481,454		$	483,235		$	696,290		$	4,061,991		$	4,251,590

UNCONSOLIDATED JOINT VENTURE CENTERS:
Long term debt (at Company's pro rata share):
	Fixed rate	$	230,634		$	491,118		$	230,373		$	236,493		$	610,318		$	330,804		$	2,129,740		$	2,328,622
	Average interest rate		6.91	%		6.20	%		5.24	%		5.97	%		6.08	%		4.82	%		5.90	%
	Floating rate		45,188			58,852			18,925			13,311			25,000			—			161,276			162,775
	Average interest rate		0.86	%		5.02	%		3.19	%		3.20	%		3.58	%					3.27	%

Total debt—Unconsolidated Joint Venture Centers		$	275,822		$	549,970		$	249,298		$	249,804		$	635,318		$	330,804		$	2,291,016		$	2,491,397


Deferred lease costs		1 - 15 years
Deferred financing costs		1 - 15 years
In-place lease values		Remaining lease term plus an estimate for renewal
Leasing commissions and legal costs		5 - 10 years

Exhibit Number			Description

	3.1		Articles of Amendment and Restatement of the Company (incorporated by reference as an exhibit to the Company's Registration Statement on Form S-11, as amended (No. 33-68964)).
	3.1.1		Articles Supplementary of the Company (incorporated by reference as an exhibit to the Company's Current Report on Form 8-K, event date May 30, 1995).
	3.1.2		Articles Supplementary of the Company (with respect to the first paragraph) (incorporated by reference as an exhibit to the Company's 1998 Form 10-K).
	3.1.3		Articles Supplementary of the Company (Series D Preferred Stock) (incorporated by reference as an exhibit to the Company's Current Report on Form 8-K, event date July 26, 2002).
	3.1.4		Articles Supplementary of the Company (incorporated by reference as an exhibit to the Company's Registration Statement on Form S-3, as amended (No. 333-88718)).
	3.1.5		Articles of Amendment (declassification of Board) (incorporated by reference as an exhibit to the Company's 2008 Form 10-K).
	3.1.6		Articles Supplementary (incorporated by reference as an exhibit to the Company's Current Report on Form 8-K, event date February 5, 2009).
	3.1.7		Articles of Amendment (increased authorized shares) (incorporated by reference as an exhibit to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2009).
	3.2		Amended and Restated Bylaws of the Company (incorporated by reference as an exhibit to the Company's Current Report on Form 8-K, event date June 30, 2010).
	4.1		Form of Common Stock Certificate (incorporated by reference as an exhibit to the Company's Current Report on Form 8-K, as amended, event date November 10, 1998).
	4.2		Form of Preferred Stock Certificate (Series D Preferred Stock) (incorporated by reference as an exhibit to the Company's Registration Statement on Form S-3 (No. 333-107063)).
	4.3		Indenture, dated as of March 16, 2007, among the Company, the Operating Partnership and Deutsche Bank Trust Company Americas (includes form of the Notes and Guarantee) (incorporated by reference as an exhibit to the Company's Current Report on Form 8-K, event date March 16, 2007).
	4.4		Warrant to Purchase Common Stock, dated as of September 30, 2009, between the Company and Heitman M-rich Investors LLC (incorporated by reference as an exhibit to the Company's 2009 Form 10-K).
	31.1		Section 302 Certification of Arthur Coppola, Chief Executive Officer
	31.2		Section 302 Certification of Thomas O'Hern, Chief Financial Officer
	32.1		Section 906 Certifications of Arthur Coppola and Thomas O'Hern
	101.INS		XBRL Instance Document
	101.SCH		XBRL Taxonomy Extension Schema Document
	101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document

Exhibit Number			Description

	101.LAB		XBRL Taxonomy Extension Label Linkbase Document
	101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document
	101.DEF		XBRL Taxonomy Extension Definition Linkbase Document


		THE MACERICH COMPANY
		By:		/s/ THOMAS E. O'HERN Thomas E. O'Hern Senior Executive Vice President and Chief Financial Officer (Principal Financial Officer)