SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13
OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported) November 5, 2004
THE MACERICH COMPANY
(Exact Name of Registrant as Specified in its Charter)
| MARYLAND (State or Other Jurisdiction of Incorporation) |
1-12504 (Commission File Number) |
95-4448705 (I.R.S. Employer Identification No.) |
401 Wilshire Boulevard, Suite 700, Santa Monica, California 90401
(Address of principal executive office, including zip code)
Registrant’s telephone number, including area code (310) 394-6000
N/A
(Former name, former address and former fiscal year, if changed since last report)
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
Listed below are the financial statements, pro forma financial information and exhibits filed as part of this report:
(a), (b) Not applicable.
(c) Exhibits.
Exhibit Index attached hereto and incorporated herein by reference.
ITEM 12. RESULTS OF OPERATIONS AND FINANCIAL CONDITION.
The Company issued a press release on November 5, 2004, announcing results of operations for the Company for the quarter ended September 30, 2004, and such press release is filed as Exhibit 99.1 hereto and is hereby incorporated by reference in its entirety.
The press release included as an exhibit with this filing is being furnished pursuant to Item 9 and Item 12 of Form 8-K.
2
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, The Macerich Company has duly caused this report to be signed by the undersigned, hereunto duly authorized, in the City of Santa Monica, State of California, on November 5, 2004.
| THE MACERICH COMPANY By: THOMAS E. O'HERN |
||
| /s/ Thomas E. O'Hern Executive Vice President, Chief Financial Officer And Treasurer |
3
EXHIBIT INDEX
| EXHIBIT NUMBER |
NAME |
|---|---|
| 99.1 | Press Release Dated November 5, 2004 |
4
PRESS RELEASE
For: THE MACERICH COMPANY
Press Contact: Arthur Coppola, President and Chief Executive Officer
or
Thomas E. O’Hern, Executive Vice President and
Chief Financial Officer
(310) 394-6000
MACERICH
ANNOUNCES QUARTERLY RESULTS
and
INCREASES 2004 GUIDANCE
Santa Monica, CA (11/5/04) — The Macerich Company (NYSE Symbol: MAC) today announced results of operations for the quarter and nine months ended September 30, 2004 which included funds from operations (“FFO”) per share – diluted increasing 12% to $.95 compared to $.85 for the quarter ended September 30, 2003 and increasing to $2.73 for the nine months ended September 30, 2004 compared to $2.54 for the comparable period in 2003. Total FFO – diluted increased by 14% to $73 million for the quarter compared to $64 million for the quarter ended September 30, 2003 and to $210 million for the nine months ended September 30, 2004 compared to $191 million for the comparable period in 2003. The Company’s definition of FFO is in accordance with the definition provided by the National Association of Real Estate Investment Trusts (“NAREIT”). A reconciliation of net income per common share-diluted (“EPS”) to FFO per share-diluted is included in the financial tables accompanying this press release.
Net income available to common stockholders for the quarter ended September 30, 2004 was $17.3 million or $.29 per share-diluted compared to $39.7 million or $.69 per share-diluted for the quarter ended September 30, 2003. Net income in the quarter ended September 30, 2003 was positively impacted by net gain on sales of consolidated assets of $23 million or $.31 per share-diluted compared to a net loss on asset sales of $.1 million or $.00 per share for the quarter ended September 30, 2004. The gain on sale of assets was primarily due to the sale of Bristol Center in August 2003. For the nine months ended September 30, 2004 net income was $52 million or $.89 per share-diluted compared to $88 million or $1.64 per share-diluted for the nine months ended September 30, 2003. A reconciliation of net income to FFO is included in the financial highlights section of this press release.
Recent highlights:
| o | During the quarter, Macerich signed 404,000 square feet of specialty store leases at average initial rents of $34.39 per square foot. First year rents on mall and freestanding store leases signed during the quarter were 19% higher than average expiring rents. |
| o | Total same center tenant sales, for the quarter ended September 30, 2004, were up 5.5% compared to sales levels for the quarter ended September 30, 2003. |
| o | Portfolio occupancy at September 30, 2004 was 91.8% compared to 92.9% at September 30, 2003. On a same center basis occupancy was 92.0% at September 30, 2004 compared to 92.4% at September 30, 2003. |
| o | The Company announced an increased quarterly dividend of $.65 per share payable on December 9, 2004 to stockholders of record on November 15, 2004. This represents the 10th consecutive year that Macerich has increased its dividend. |
Commenting on results and recent events, Arthur Coppola, President and Chief Executive Officer of Macerich stated, “The quarter was highlighted by continued strong leasing activity including very positive releasing spreads. Occupancy continues to be strong.
We are very near final completion on the Queens Center renovation and expansion and expect to see a 12% return on cost. That project will help fuel strong FFO growth in 2005 and beyond. In addition, we continue to make significant progress on our other development and redevelopment projects which provide a very strong internal pipeline for growth.”
Redevelopment and Development Activity
At Queens Center, the multi-phased $275 million redevelopment and expansion nears completion. The grand opening is set for the weekend of November 19th. The project increases the size of the center from 620,000 square feet to approximately one million square feet. As part of the redevelopment, Macy’s has added a fifth level to their store increasing their size to approximately 365,000 square feet and JC Penney has expanded their presence from 137,000 to 202,000 square feet by building a new store. During the course of the last 12 months, 92 new or expanded stores have opened at Queens Center. New tenants recently opened include Banana Republic, Godiva, Guess, Coach, Aldo Shoes, Club Monaco, Benetton, American Eagle Outfitters, and Bostonian. Tenants who have recently expanded their presence at Queens Center include, The Gap, H & M, Victoria’s Secret and Forever 21. Tenants which are expected to open shortly after the Grand Opening include Urban Outfitters, Applebee’s Neighbor Bar & Grill, GNC and Queens Diner.
Leasing activity has been robust as the overall property is 98% leased. By December 31, 2004, 91% of all spaces are expected to be open and operating with the remaining 7% of leased spaces expected to open during the first and second quarter of 2005.
At Fresno Fashion Fair, the Company is pursuing entitlements for the addition of a 92,780 square foot lifestyle retail center. Subject to the timing of entitlements, the planned opening of this expansion is late 2005.
At Washington Square in suburban Portland the Company is proceeding with an expansion project which consists of the addition of 80,000 square feet of shop space. The expansion is scheduled to start in January 2005 with substantial completion earmarked for the fourth quarter of 2005.
During the quarter, the Company unveiled its plans for San Tan Village. The 500 acre master planned Gilbert project will unfold during several phases of development which will be driven by market and retailers’ needs. Upon full completion, San Tan Village will represent 3,000,000 square feet of retail space. Phase I, featuring a 29 acre full service power center, will open a Wal-Mart in 2005 followed by a Sam’s Club later in the year. Phase II represents an additional 308,000 square feet of gross leaseable area. Leases have been signed with OfficeMax, Jo-Ann Superstore, Bed Bath & Beyond, Marshall’s and DSW Designer Shoes representing 157,000 square feet. Phase II is projected to open September 2005. The regional shopping center component of San Tan Village sits on 120 acres representing 1.3 million square feet. The center’s multi-faceted design will incorporate the very best elements from other retail formats including the successful traditional enclosed mall anchored by Dillard’s and May Co.‘s Robinsons-May, an open-air lifestyle center and an 18-screen Harkins Theatre entertainment district. Infrastructure improvements are underway. The entertainment district could open as early as 2006 followed by a projected Fall 2007 opening for the majority of the balance of the center.
Acquisitions
In July, the Company acquired La Cumbre Plaza in Santa Barbara, California and the Mall of Victor Valley in Victorville, California. La Cumbre Plaza is a 494,000 square foot Mediterranean themed, open-air regional mall anchored by Sears and Robinson-May. The specialty tenant annual sales per square foot are $369. The Mall of Victor Valley is a 507,000 square foot regional mall anchored by JC Penney, Harris, Sears and Mervyn’s. The mall is located in the Inland Empire, one of California’s fastest growing regions. Specialty tenant annual sales per square foot are $370. The combined total purchase price for both properties was $151.3 million. Projected first year net operating income from the two properties combined is $10.9 million.
Fiesta Mall is under contract for acquisition, with the closing expected in November. The acquisition of Fiesta will further solidify Macerich’s dominance in the Phoenix market. Fiesta is a 1,000,000 super regional mall. It is anchored by Dillard’s, Macy, Sears, Robinson May. The malls shops have annual sales of $362. The purchase price is $135 million. Concurrent with, or shortly after the planned November closing, the Company expects to place a 10 year $84 million fixed rate loan at 4.87%.
Financing Activity
The Company’s line of credit was amended and upsized to $ 1 billion from $425 million. The term was extended two years to 2007 and the borrowing spread was reduced by 100 basis points to LIBOR plus 1.50% based on the Company’s current leverage level. The 23 participating banks closed the transaction on July 30. Concurrently with the line of credit closing, a $196 million term loan bearing interest at LIBOR plus 2.75% was paid off.
Earnings Guidance
The Company is raising its year 2004 FFO per share guidance range and revising its EPS guidance as follows:
Earnings Guidance
The Company is raising its year 2004 FFO per share guidance range and revising its EPS guidance as follows:
| Range per share: | |
|---|---|
| Fully Diluted EPS Plus: Real Estate Depreciation and Amortization Less: impact of preferred shares (not dilutive to EPS) Less: Gain on Sale of depreciated Assets Fully Diluted FFO per share |
$1.71.........$1.78 $2.26.........$2.26 ($ .08).......($ .08) ($ .01).......($ .01) $3.88.........$3.95 |
In addition management is also providing guidance for 2005. Management currently estimates that FFO per share for 2005 will be in the range of $4.20 to $4.30 and EPS is estimated to be in the range of $2.05 to $2.15.
Guidance for 2005 and reconciliation of EPS to FFO per share and to EBITDA per share:
| Range per share: |
||
|---|---|---|
| Fully Diluted EPS Plus: Real Estate Depreciation and Amortization Less: impact of preferred shares (not dilutive to EPS) Less: Gain on Sale of Assets Fully Diluted FFO per share Plus: Interest Expense per share Plus: Non real estate depreciation, income taxes and ground rent expense per share EBITDA per share Less: management company expenses, REIT General and administrative expenses and EBITDA of non-comparable centers Same center EBITDA per share |
$2.05........$2.15 $2.25....... $2.25 ($ .10)......($ .10) $ .00.........$ .00 $4.20........$4.30 $3.15........$3.25 $ .16.........$ .16 $7.51........$7.71 ($1.00)......($1.10) $6.51.........$6.61 |
This range is based on many assumptions, including the following:
Management expects 2005 same center EBITDA to grow at a 2.5% to 3.0% rate compared to 2004 results. EBITDA represents earnings before interest, income taxes, depreciation, amortization, minority interest, extraordinary items, gain (loss) on sale of assets and preferred dividends and includes joint ventures at their pro rata share.
Management has assumed short-term LIBOR interest rates will increase to 3.0% by year-end 2005.
The guidance is based on management’s current view of the current market conditions in the regional mall business. Due to the uncertainty in the timing and economics of acquisitions and dispositions, the guidance ranges do not include any potential property acquisitions or dispositions other than those that have closed or are under contract as of November 5, 2004. The Company is not able to assess at this time the potential impact of such exclusions on future EPS and FFO. FFO does not include gains or losses on sales of depreciated operating assets
The Macerich Company is a fully integrated self-managed and self-administered real estate investment trust, which focuses on the acquisition, leasing, management, development and redevelopment of regional malls throughout the United States. The Company is the sole general partner and owns an 81% ownership interest in The Macerich Partnership, L.P. Macerich now owns approximately 61 million square feet of gross leaseable area consisting primarily of interests in 62 regional malls. Additional information about The Macerich Company can be obtained from the Company’s web site at www.macerich.com
Investor Conference Call
The Company will provide an online Web simulcast and rebroadcast of its quarterly earnings conference call. The call will be available on The Macerich Company’s website at www.macerich.com and through CCBN at www.fulldisclosure.com. The call begins today, November 5, 2004 at 10:30 AM Pacific Time. To listen to the call, please go to any of these web sites at least 15 minutes prior to the call in order to register and download audio software if needed. An online replay at www.macerich.com will be available for one year after the call.
Note: This release contains statements that constitute 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 to vary materially from those anticipated, expected or projected. 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, anchor or tenant bankruptcies, closures, mergers or consolidations, lease rates and terms, interest rate fluctuations, availability and cost of financing and operating expenses; adverse changes in the real estate markets including, among other things, competition from other companies, retail formats and technology, risks of real estate development and redevelopment, acquisitions and dispositions; governmental actions and initiatives (including legislative and regulatory changes); environmental and safety requirements; and terrorist activities which could adversely affect all of the above factors. The reader is directed to the Company’s various filings with the Securities and Exchange Commission, for a discussion of such risks and uncertainties.
(See attached tables)
##
THE MACERICH COMPANY
FINANCIAL HIGHLIGHTS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
| Results before SFAS 144 (f) | Impact of SFAS 144 (f) | Results after SFAS 144 (f) | |||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Results of Operations: | For the Three Months Ended September 30 |
For the Three Months Ended September 30 |
For the Three Months Ended September 30 | ||||||||||||||||||
| Unaudited | Unaudited | ||||||||||||||||||||
| 2004 |
2003 |
2004 |
2003 |
2004 |
2003 | ||||||||||||||||
| Minimum Rents (e) | 84,028 | 71,720 | (44) | (435) | 83,984 | 71,285 | |||||||||||||||
| Percentage Rents | 3,338 | 2,071 | -- | -- | 3,338 | 2,071 | |||||||||||||||
| Tenant Recoveries | 37,194 | 39,574 | (2) | (34) | 37,192 | 39,540 | |||||||||||||||
| Other Income | 3,858 | 4,356 | (9) | (33) | 3,849 | 4,323 | |||||||||||||||
|
| |||||||||||||||||||||
| Total Revenues | 128,418 | 117,721 | (55) | (502) | 128,363 | 117,219 | |||||||||||||||
|
| |||||||||||||||||||||
| Shopping center and operating expenses (c) | 39,395 | 42,940 | (4) | (208) | 39,391 | 42,732 | |||||||||||||||
| Depreciation and amortization | 35,644 | 25,364 | (3) | (87) | 35,641 | 25,277 | |||||||||||||||
| General, administrative and other expenses (c) | 2,788 | 1,687 | -- | -- | 2,788 | 1,687 | |||||||||||||||
| Interest expense | 37,507 | 31,858 | -- | -- | 37,507 | 31,858 | |||||||||||||||
| Loss on early extinguishment of debt | 1,237 | 126 | -- | -- | 1,237 | 126 | |||||||||||||||
| Gain (loss) on sale or writedown of assets | (101 | ) | 23,015 | 21 | (22,289) | (80) | 726 | ||||||||||||||
| Pro rata income (loss) of unconsolidated entities (c) | 12,090 | 13,252 | -- | -- | 12,090 | 13,252 | |||||||||||||||
| Income (loss) of the Operating Partnership from | |||||||||||||||||||||
| continuing operations | 23,836 | 52,013 | (27) | (22,496) | 23,809 | 29,517 | |||||||||||||||
| Discontinued Operations: | |||||||||||||||||||||
| Gain (loss) on sale of asset | -- | -- | (21) | 22,289 | (21) | 22,289 | |||||||||||||||
| Income from discontinued operations | -- | -- | 48 | 207 | 48 | 207 | |||||||||||||||
| Income before minority interests | 23,836 | 52,013 | -- | -- | 23,836 | 52,013 | |||||||||||||||
| Income allocated to minority interests | 4,180 | 10,214 | -- | -- | 4,180 | 10,214 | |||||||||||||||
| Net income before preferred dividends | 19,656 | 41,799 | -- | -- | 19,656 | 41,799 | |||||||||||||||
| Dividends earned by preferred stockholders (a) | 2,358 | 2,067 | -- | -- | 2,358 | 2,067 | |||||||||||||||
| Net income to common stockholders | 17,298 | 39,732 | -- | -- | 17,298 | 39,732 | |||||||||||||||
|
| |||||||||||||||||||||
| Average # of shares outstanding - basic | 58,673 | 53,396 | 58,673 | 53,396 | |||||||||||||||||
|
| |||||||||||||||||||||
| Average shares outstanding,-basic, assuming | |||||||||||||||||||||
| full conversion of OP Units (d) | 72,851 | 67,042 | 72,851 | 67,042 | |||||||||||||||||
|
| |||||||||||||||||||||
| Average shares outstanding - diluted for FFO (d) | 76,837 | 75,307 | 76,837 | 75,307 | |||||||||||||||||
|
| |||||||||||||||||||||
| Per share income- diluted before discontinued operations | -- | -- | 0.29 | 0.39 | |||||||||||||||||
|
| |||||||||||||||||||||
| Net income per share-basic | 0.29 | 0.74 | 0.29 | 0.74 | |||||||||||||||||
|
| |||||||||||||||||||||
| Net income per share- diluted | 0.29 | 0.69 | 0.29 | 0.69 | |||||||||||||||||
|
| |||||||||||||||||||||
| Dividend declared per share | 0.61 | 0.57 | 0.61 | 0.57 | |||||||||||||||||
|
| |||||||||||||||||||||
| Funds from operations "FFO" (b) (d)- basic | 70,529 | 61,696 | 70,529 | 61,696 | |||||||||||||||||
|
| |||||||||||||||||||||
| Funds from operations "FFO" (a) (b) (d) - diluted | 72,887 | 63,763 | 72,887 | 63,763 | |||||||||||||||||
|
| |||||||||||||||||||||
| FFO per share- basic (b) (d) | 0.97 | 0.92 | 0.97 | 0.92 | |||||||||||||||||
|
| |||||||||||||||||||||
| FFO per share- diluted (a) (b) (d) | 0.95 | 0.85 | 0.95 | 0.85 | |||||||||||||||||
|
| |||||||||||||||||||||
| percentage change from prior year - same period: | 12.03% | ||||||||||||||||||||
FINANCIAL HIGHLIGHTS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
| Results before SFAS 144 (f) | Impact of SFAS 144 (f) | Results after SFAS 144 (f) | |||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Results of Operations: | For the Nine Months Ended September 30 |
For the Nine Months Ended September 30 |
For the Nine Months Ended September 30 | ||||||||||||||||||
|
Unaudited |
Unaudited | ||||||||||||||||||||
| 2004 |
2003 |
2004 |
2003 |
2004 |
2003 | ||||||||||||||||
| Minimum Rents (e) | 240,101 | 217,788 | (212) | (2,551) | 239,889 | 215,237 | |||||||||||||||
| Percentage Rents | 8,165 | 5,041 | -- | -- | 8,165 | 5,041 | |||||||||||||||
| Tenant Recoveries | 120,035 | 115,329 | (4) | (336) | 120,031 | 114,993 | |||||||||||||||
| Other Income | 12,767 | 12,233 | (168) | (58) | 12,599 | 12,175 | |||||||||||||||
|
| |||||||||||||||||||||
| Total Revenues (e) | 381,068 | 350,391 | (384) | (2,945) | 380,684 | 347,446 | |||||||||||||||
|
| |||||||||||||||||||||
| Shopping center and operating expenses ( c) | 129,774 | 125,150 | (16) | (856) | 129,758 | 124,294 | |||||||||||||||
| Depreciation and amortization | 105,256 | 73,853 | (48) | (460) | 105,208 | 73,393 | |||||||||||||||
| General, administrative and other expenses (c) | 8,084 | 6,742 | -- | -- | 8,084 | 6,742 | |||||||||||||||
| Interest expense | 105,595 | 98,847 | -- | -- | 105,595 | 98,847 | |||||||||||||||
| Loss on early extinguishment of debt | 1,642 | 126 | -- | -- | 1,642 | 126 | |||||||||||||||
| Gain (loss) on sale or writedown of assets | 994 | 34,567 | (295) | (22,119) | 699 | 12,448 | |||||||||||||||
| Pro rata income of unconsolidated entities (c) | 40,250 | 42,859 | -- | -- | 40,250 | 42,859 | |||||||||||||||
| Income (loss) of the Operating Partnership from | |||||||||||||||||||||
| continuing operations | 71,961 | 123,099 | (615) | (23,748) | 71,346 | 99,351 | |||||||||||||||
| Discontinued Operations: | |||||||||||||||||||||
| Gain on sale of asset | -- | -- | 295 | 22,119 | 295 | 22,119 | |||||||||||||||
| Income from discontinued operations | -- | -- | 320 | 1,629 | 320 | 1,629 | |||||||||||||||
| Income before minority interest | 71,961 | 123,099 | -- | -- | 71,961 | 123,099 | |||||||||||||||
| Income allocated to minority interests | 12,650 | 22,913 | -- | -- | 12,650 | 22,913 | |||||||||||||||
| Net income before preferred dividends | 59,311 | 100,186 | -- | -- | 59,311 | 100,186 | |||||||||||||||
| Dividends earned by preferred stockholders (a) | 6,783 | 12,458 | -- | -- | 6,783 | 12,458 | |||||||||||||||
| Net income to common stockholders | 52,528 | 87,728 | -- | -- | 52,528 | 87,728 | |||||||||||||||
|
| |||||||||||||||||||||
| Average # of shares outstanding - basic | 58,479 | 52,305 | 58,479 | 52,305 | |||||||||||||||||
|
| |||||||||||||||||||||
| Average shares outstanding,-basic, assuming | |||||||||||||||||||||
| full conversion of OP Units (d) | 72,669 | 65,995 | 72,669 | 65,995 | |||||||||||||||||
|
| |||||||||||||||||||||
| Average shares outstanding - diluted for FFO (d) | 76,681 | 75,124 | 76,681 | 75,124 | |||||||||||||||||
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| |||||||||||||||||||||
| Per share income- diluted before discontinued operations | -- | -- | 0.88 | 1.32 | |||||||||||||||||
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| |||||||||||||||||||||
| Net income per share-basic | 0.90 | 1.68 | 0.90 | 1.68 | |||||||||||||||||
|
| |||||||||||||||||||||
| Net income per share- diluted | 0.89 | 1.64 | 0.89 | 1.64 | |||||||||||||||||
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| |||||||||||||||||||||
| Dividend declared per share | 1.83 | 1.71 | 1.83 | 1.71 | |||||||||||||||||
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| |||||||||||||||||||||
| Funds from operations "FFO" (b) (d)- basic | 202,835 | 178,351 | 202,835 | 178,351 | |||||||||||||||||
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| |||||||||||||||||||||
| Funds from operations "FFO" (a) (b) (d) - diluted | 209,618 | 190,809 | 209,618 | 190,809 | |||||||||||||||||
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| |||||||||||||||||||||
| FFO per share- basic (b) (d) | 2.79 | 2.70 | 2.79 | 2.70 | |||||||||||||||||
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| |||||||||||||||||||||
| FFO per share- diluted (a) (b) (d) | 2.73 | 2.54 | 2.73 | 2.54 | |||||||||||||||||
|
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| percentage change from prior year - same period: | 7.63% | ||||||||||||||||||||
| (a) | On February 25, 1998, the Company sold $100,000 of convertible preferred stock and on June 16, 1998 another $150,000 of convertible preferred stock was issued. The convertible preferred shares can be converted on a 1 for 1 basis for common stock. These preferred shares are assumed converted for purposes of net income per share for 2003 and are not assumed converted for purposes of net income per share for 2004 as it would be antidilutive to those calculations. On September 9, 2003, 5.487 million shares of Series B convertible preferred stock were converted into common shares. The weighted average preferred shares outstanding are assumed converted for purposes of FFO per diluted share as they are dilutive to that calculation for all periods presented. |
| (b) | The Company uses FFO in addition to net income to report its operating and financial results and considers FFO and FFO-diluted as supplemental measures for the real estate industry and a supplement to Generally Accepted Accounting Principles (GAAP) measures. NAREIT defines FFO as net income (loss) (computed in accordance with GAAP), excluding gains (or losses) from extraordinary items and sales of depreciated operating properties, plus real estate related depreciation and amortization and after adjustments for unconsolidated partnerships and joint ventures. Adjustments for unconsolidated partnerships and joint ventures are calculated to reflect FFO on the same basis. FFO and FFO on a fully diluted basis are useful to investors in comparing operating and financial results between periods. This is especially true since FFO excludes real estate depreciation and amortization, as the
Company believes real estate values fluctuate based on market conditions rather than depreciating in value ratably on a straight-line basis over time. FFO on a fully diluted basis is one of the measures investors find most useful in measuring the dilutive impact of outstanding convertible securities. FFO does not represent cash flow from operations as defined by GAAP, should not be considered as an alternative to net income as defined by GAAP and is not indicative of cash available to fund all cash flow needs. FFO as presented may not be comparable to similarly titled measures reported by other real estate investment trusts. Effective January 1, 2003, gains or losses on sale of peripheral land and the impact of SFAS 141 have been included in FFO. The inclusion of gains on sales of peripheral land increased FFO for the three and nine months ended September 30, 2004 by $537 and $2,955 respectively, or by $.01 per share and $.04 per share, respectively. Additionally, the impact of SFAS No. 141 increased FFO for the three and nine months ended September 30, 2004 by $4.2 million and $7.9 million, respectively, or by $.05 per share and approximately $.10 per share, respectively. The inclusion of gains on sales of peripheral land increased FFO for the 3 and 9 months ended September 30, 2003 by $663 and $1,252, respectively, or by approximately $.01 per share and $.02 per share, respectively. Additionally, the impact of SFAS 141 increased FFO for the three and nine months ended September 30, 2003 by $1.2 million and $3.5 million, respectively, or by $.015 per share and $.047 per share, respectively. The Company adopted SFAS No. 141 (see Note (e) below) effective October 1, 2002. |
| (c) | This includes, using the equity method of accounting, the Company's prorata share of the equity in income or loss of its unconsolidated joint ventures for all periods presented and for Macerich Management Company through June 2003. Effective July 1, 2003, the Company has consolidated Macerich Management Company. Certain reclassifications have been made in the 2003 financial highlights to conform to the 2004 financial highlights presentation. |
| (d) | The Company has operating partnership units ("OP units"). Each OP unit can be converted into a share of Company stock. Conversion of the OP units has been assumed for purposes of calculating the FFO per share and the weighted average number of shares outstanding. |
| (e) | Effective October 1, 2002, the Company adopted SFAS No. 141, Business Combinations, which requires companies that have acquired assets subsequent to June 2001 to reflect the discounted net present value of market rents in excess of rents in place at the date of acquisition as a deferred credit to be amortized into income over the average remaining life of the acquired leases. The impact on diluted EPS for the three and nine months ended September 30, 2004 was approximately $.06 and $.11 per share respectively. The impact on diluted EPS for the three and nine months periods ending September 30, 2003 was approximately $.02 per share and $.05 per share, respectively. In accordance with the NAREIT definition of FFO, the impact of this accounting treatment is included in FFO. |
| (f) | In October 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets" ("SFAS 144"). SFAS 144 addresses financial accounting and reporting for the impairment or disposal of long-lived assets. The Company adopted SFAS 144 on January 1, 2002. The Company sold its 67% interest in Paradise Village Gateway on January 2, 2003 (acquired in July 2002), and the loss on sale of $0.2 million has been reclassified to discontinued operations. Additionally, the Company sold Bristol Center on August 4, 2003, and the results for the period January 1, 2003 to September 30, 2003 and the results for the period July 1 to September 30, 2003 have been reclassified to discontinued operations. The sale of Bristol Center resulted in a gain on sale of asset of $22.3 million. |
| Summarized Balance Sheet Information | September 30 2004 |
Dec 31 2003 | |||||
|---|---|---|---|---|---|---|---|
| (UNAUDITED) | |||||||
| Cash and cash equivalents | $ 52,706 | $ 47,160 | |||||
| Investment in real estate, net (i) | $3,382,285 | $3,186,725 | |||||
| Investments in unconsolidated entities (j) | $ 614,728 | $ 577,908 | |||||
| Total Assets | $4,400,373 | $4,145,593 | |||||
| Mortgage and notes payable | $2,993,430 | $2,682,599 | |||||
| Pro rata share of debt on unconsolidated entities | $1,161,043 | $1,046,042 | |||||
| Additional financial data as of: |
September 30 2004 |
September 30 2003 | ||||
|---|---|---|---|---|---|---|
| Occupancy of centers (g): | ||||||
| consolidated assets | 91 | .40% | 91 | .60% | ||
| unconsolidated assets | 92 | .10% | 93 | .90% | ||
| total portfolio | 91 | .80% | 92 | .90% | ||
| Comparable quarter change in same center sales (g) (h): | ||||||
| consolidated assets | 3 | .90% | 0. | 00% | ||
| unconsolidated assets | 7 | .00% | 3. | 50% | ||
| total portfolio | 5 | .50% | 1 | .90% | ||
| Sales per square foot (h): | ||||||
| consolidated assets | $364 | $345 | ||||
| unconsolidated assets | $392 | $366 | ||||
| total portfolio | $378 | $356 | ||||
| Additional financial data for the nine months ended: | |||||
| Acquisitions of property and equipment - including joint ventures prorata | $197,313 | $152,370 | |||
| Redevelopment and expansions of centers- including joint ventures prorata | $118,545 | $121,377 | |||
| Renovations of centers- including joint ventures at prorata | $ 22,847 | $ 12,016 | |||
| Tenant allowances- including joint ventures at prorata | $ 11,437 | $ 5,675 | |||
| Deferred leasing costs- including joint ventures at prorata | $ 13,825 | $ 14,074 | |||
| (g) excludes redevelopment properties- Crossroads Mall- Boulder, Queens, Scottsdale 101, La Encantada, Santa Monica Place and Parklane Mall. (h) includes mall and freestanding stores. (i) includes construction in process on wholly owned assets of $160,872 at September 30, 2004 and $268,810 at December 31, 2003. (j) the Company's prorata share of construction in process on unconsolidated entities of $26,468 at September 30, 2004 and $8,188 at December 31, 2003. |
|
For the Three Months Ended September 30, |
For the Nine Months Ended September 30, | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| PRORATA SHARE OF JOINT VENTURES |
Unaudited |
Unaudited | |||||||||
|
(All amounts in thousands) |
(All amounts in thousands) | ||||||||||
| (Unaudited) | 2004 | 2003 | 2004 | 2003 | |||||||
| Revenues: | |||||||||||
| Minimum rents | $ 45,794 | $ 38,978 | $ 128,786 | $117,655 | |||||||
| Percentage rents | 1,725 | 1,250 | 4,454 | 3,538 | |||||||
| Tenant recoveries | 19,544 | 17,048 | 55,999 | 50,005 | |||||||
| Management fee ( c ) | -- | -- | -- | 5,250 | |||||||
| Other | 1,496 | 1,077 | 4,772 | 3,381 | |||||||
|
| |||||||||||
| Total revenues | 68,559 | 58,353 | 194,011 | 179,829 | |||||||
|
| |||||||||||
| Expenses: | |||||||||||
| Shopping center expenses | 23,046 | 19,425 | 67,257 | 57,625 | |||||||
| Interest expense | 17,906 | 14,395 | 47,936 | 42,311 | |||||||
| Management company expense ( c ) | -- | -- | -- | 3,014 | |||||||
| Depreciation and amortization | 15,854 | 11,240 | 40,988 | 34,180 | |||||||
|
| |||||||||||
| Total operating expenses | 56,806 | 45,060 | 156,181 | 137,130 | |||||||
|
| |||||||||||
| Gain (loss) on sale or writedown of assets | 498 | (41 | ) | 2,581 | 160 | ||||||
| Loss on early extinguishment of debt | (161 | ) | -- | (161 | ) | -- | |||||
|
| |||||||||||
| Net income | 12,090 | 13,252 | 40,250 | 42,859 | |||||||
|
| |||||||||||
| RECONCILIATION OF NET INCOME TO FFO | For the Three Months Ended September 30, |
For the Nine Months Ended September 30, | |||||||
|---|---|---|---|---|---|---|---|---|---|
| (All amounts in thousands) | (All amounts in thousands) | ||||||||
| (UNAUDITED) | (UNAUDITED) | ||||||||
| 2004 |
2003 |
2004 |
2003 | ||||||
| Net income - available to common stockholders | $ 17,298 | $ 39,732 | $ 52,528 | $ 87,728 | |||||
| Adjustments to reconcile net income to FFO- basic | |||||||||
| Minority interest | 4,180 | 10,214 | 12,650 | 22,913 | |||||
| (Gain ) loss on sale of wholly owned assets | 101 | (23,015 | ) | (994 | ) | (34,567 | ) | ||
| Add Gain (loss) on land sales- consolidated assets | 5 | 705 | 339 | 859 | |||||
| ( Gain) loss on sale or write-down of assets from | |||||||||
| unconsolidated entities (pro rata) | (498 | ) | 41 | (2,581 | ) | (160 | ) | ||
| Add Gain (loss) on land sales- unconsolidated assets | 533 | (41 | ) | 2,616 | 392 | ||||
| Depreciation and amortization on wholly owned centers | 35,644 | 25,364 | 105,256 | 73,853 | |||||
| Depreciation and amortization on joint ventures and | |||||||||
| from the management companies (pro rata) | 15,854 | 11,240 | 40,988 | 34,180 | |||||
| Less: depreciation on personal property and | |||||||||
| amortization of loan costs and interest rate caps | (2,588 | ) | (2,544 | ) | (7,967 | ) | (6,847 | ) | |
|
| |||||||||
| Total FFO - basic | 70,529 | 61,696 | 202,835 | 178,351 | |||||
| Additional adjustment to arrive at FFO -diluted | |||||||||
| Preferred stock dividends earned | 2,358 | 2,067 | 6,783 | 12,458 | |||||
| Effect of employee/director stock incentive plans | -- | -- | -- | -- | |||||
|
| |||||||||
| FFO - diluted | 72,887 | 63,763 | 209,618 | 190,809 | |||||
|
| |||||||||
| Weighted average shares outstanding - diluted (d) | 76,837 | 75,307 | 76,681 | 75,124 | |||||
|
| |||||||||
| For the Three Months Ended September 30, |
For the Nine Months Ended September 30, | ||||||||
|---|---|---|---|---|---|---|---|---|---|
| (All amounts in thousands) | (All amounts in thousands) | ||||||||
| Reconciliation of EPS to FFO per diluted share: | (UNAUDITED) | (UNAUDITED) | |||||||
| 2004 |
2003 |
2004 |
2003 | ||||||
| Earnings per share | $ 0.29 | $ 0.69 | $ 0.89 | $ 1.64 | |||||
| Per share impact of depreciation and amortization real estate | $ 0.67 | $ 0.46 | $ 1.90 | $ 1.35 | |||||
| Per share impact of gain on sale of depreciated assets | $ 0.00 | ($0.30) | ($0.01) | ($0.45) | |||||
| Per share impact of preferred stock not dilutive to EPS | ($0.01) | $0.00 | ($0.05) | $0.00 | |||||
| Fully Diluted FFO per share | $ 0.95 | $ 0.85 | $ 2.73 | $ 2.54 | |||||
| THE MACERICH COMPANY RECONCILIATION OF NET INCOME TO EBITDA |
For the Three Months Ended September 30 |
For the Nine Months Ended September 30, | |||||||
|---|---|---|---|---|---|---|---|---|---|
| (All amounts in thousands) | (All amounts in thousands) | ||||||||
| (UNAUDITED) | (UNAUDITED) | ||||||||
| 2004 |
2003 |
2004 |
2003 | ||||||
| Net income - available to common stockholders | 17,298 | 39,732 | 52,528 | 87,728 | |||||
| Interest expense | 37,507 | 31,858 | 105,595 | 98,847 | |||||
| Interest expense - unconsolidated entitites (pro rata) | 17,906 | 14,395 | 47,936 | 42,311 | |||||
| Depreciation and amortization - wholly-owned centers | 35,644 | 25,364 | 105,256 | 73,853 | |||||
| Depreciation and amortization - unconsolidated entitites (pro rata) | 15,854 | 11,240 | 40,988 | 34,180 | |||||
| Minority interest | 4,180 | 10,214 | 12,650 | 22,913 | |||||
| Loss on early extinguishment of debt | 1,237 | 126 | 1,642 | 126 | |||||
| Loss on early extinguishment of debt - unconsolidated entities (pro rata) | 161 | -- | 161 | -- | |||||
| Loss (gain) on sale of assets - wholly-owned centers | 101 | (23,015) | (994) | (34,567) | |||||
| Loss (gain) on sale of assets - unconsolidated entities (pro rata) | (498) | 41 | (2,581) | (160) | |||||
| Preferred dividends | 2,358 | 2,067 | 6,783 | 12,458 | |||||
|
| |||||||||
| EBITDA (k) | $ 131,748 | $ 112,022 | $ 369,964 | $337,689 | |||||
|
| |||||||||
| THE MACERICH COMPANY RECONCILIATION OF EBITDA TO SAME CENTERS - NET OPERATING INCOME ("NOI") |
|||||||||
|---|---|---|---|---|---|---|---|---|---|
| For the Three Months Ended September 30, |
For the Nine Months Ended September 30, | ||||||||
| (All amounts in thousands) | (All amounts in thousands) | ||||||||
| (UNAUDITED) | (UNAUDITED) | ||||||||
| 2004 |
2003 |
2004 |
2003 | ||||||
| EBITDA (k) | $ 131,748 | $ 112,022 | $ 369,964 | $ 337,689 | |||||
| Add: REIT general and administrative expenses | 2,788 | 1,687 | 8,084 | 6,742 | |||||
| Management Company expenses | (317 | ) | 2,960 | 5,280 | 7,768 | ||||
| EBITDA of non-comparable centers | (25,383 | ) | (9,135 | ) | (53,992 | ) | (29,944 | ) | |
|
| |||||||||
| SAME CENTERS - Net operating income ("NOI") (l) | $ 108,836 | $ 107,534 | $ 329,336 | $ 322,255 | |||||
|
| |||||||||
(k) EBITDA represents earnings before interest, income taxes, depreciation, amortization, minority interest, extraordinary items, gain (loss) on sale of assets, gain (loss) on early extinguishment of debt and preferred dividends and includes joint ventures at their pro rata share. Management considers EBITDA to be an appropriate supplemental measure to net income because it helps investors understand the ability of the Company to incur and service debt and make capital expenditures. 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. EBITDA, as presented, may not be comparable to similarly titled measurements reported by other companies.
(l) The Company presents same-center NOI because the Company believes it is useful for investors to evaluate the operating performance of comparable centers. Same-center NOI is calculated using total EBITDA and subtracting out EBITDA from non-comparable centers and eliminating the management companies and the Company's general and administrative expenses.