SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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FORM 8-K/A
AMENDMENT NO. 1
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND
EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported) April 21, 1999, (February
18, 1999)
THE MACERICH COMPANY
(Exact name of Registrant as Specified in Charter)
Maryland 1-12504 94-4448705
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(State or Other Jurisdiction of (Commission (IRS employer
Incorporation) file number) Identification No.)
401 Wilshire Boulevard, Suite 700, Santa Monica, CA 90401
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(Address of Principal Executive Offices)
Registrants telephone number, including area code (310) 394-6000
401 Wilshire Boulevard, Suite 700, Santa Monica, CA 90401
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(Former Name or Former Address, if Changed Since Last Report)
This Form 8-K/A, Amendment No. 1, is being filed for the purpose of filing the
financial statements and pro forma financial information required by Item 7 with
respect to the Current Report on Form 8-K filed by the Registrant on March 4,
1999 regarding the acquisition of three regional malls, the retail component of
a mixed-use development, five contiguous properties and two non-contiguous
community shopping centers from various SAFECO Corporation entities (the "SAFECO
Portfolio").
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
(a) Financial Statement of Business Acquired - SAFECO Portfolio
Report of Independent Auditors F-1
Combined Statement of Gross Income and Direct
Operating Expenses for the year
ended December 31, 1998 (audited) F-2
Notes to Combined Statement of Gross Income and
Direct Operating Expense F-3 to F-6
(b) Pro Forma Financial Information (unaudited)
Condensed Combined Statement of Operations for the year
ended December 31,1998 F-7
Condensed Combined Balance
Sheet as of December 31, 1998 F-8
(c) Exhibits
23.1 Consent of Independent Auditors F-9
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, The
Macerich Company has duly caused this report to be signed on its behalf by the
undersigned, hereunto duly authorized, in the City of Santa Monica, State of
California, on April 21, 1999.
THE MACERICH COMPANY
By: / s / Thomas E. O'Hern
Thomas E. O'Hern Executive Vice President and
Chief Financial Officer
Report of Ernst & Young LLP, Independent Auditors
The Macerich Company
We have audited the accompanying combined statement of gross income and direct
operating expenses of Washington Square, Kitsap Mall, Cascade Mall, Square Too
and Fringe Land, North Point Plaza, Kitsap Place, Cross Court, Albany Plaza,
Eastland Plaza, Redmond Town Center, and Creekside Crossing (the "SAFECO
Portfolio"), as described in Note 1, for the year ended December 31, 1998. The
combined statement is the responsibility of the SAFECO Portfolio's management.
Our responsibility is to express an opinion on the combined statement of gross
income and direct operating expenses based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the combined financial statement is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statement. An audit also includes
assessing the basis of accounting used and significant estimates made by
management, as well as evaluating the overall presentation of the SAFECO
Portfolio's combined gross income and direct operating expenses. We believe that
our audit provides a reasonable basis for our opinion.
The accompanying combined statement was prepared for the purpose of complying
with the rules and regulations of the Securities and Exchange Commission, as
described in Note 2, and is not intended to be a complete presentation of the
SAFECO Portfolio's revenue and expenses.
In our opinion, the combined financial statement referred to above presents
fairly, in all material respects, the combined gross income and direct operating
expenses described in Note 2 of the SAFECO Portfolio for the year ended December
31, 1998, in conformity with generally accepted accounting principles.
Seattle, Washington
February 24, 1999 /s/ Ernst & Young LLP
F-1
The SAFECO Portfolio
Combined Statement of Gross Income and Direct Operating Expenses
For the Year Ended December 31, 1998
Gross income:
Rental income $ 36,760,638
Tenant reimbursements 9,807,478
Percentage rent 3,324,402
Other income 1,532,288
-------------------
51,424,806
Direct operating expenses:
Operating expenses 8,921,486
Property taxes 3,149,702
General and administrative 200,165
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12,271,353
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Total combined gross income
less direct operating expenses $ 39,153,453
===================
See the accompanying notes.
F-2
The SAFECO Portfolio
Notes to Combined Statement of Gross Income and Direct
Operating Expenses
For the Year Ended December 31, 1998
1. Organization and Significant Accounting Policy
The combined statement of gross income and direct operating expenses relates to
the operations of Washington Square, Kitsap Mall, Cascade Mall, Square Too and
Fringe Land, North Point Plaza, Kitsap Place, Cross Court, Albany Plaza,
Eastland Plaza, Redmond Town Center, and Creekside Crossing (the "SAFECO
Portfolio"), which were acquired by The Macerich Partnership, L.P., a subsidiary
of The Macerich Company and the Ontario Teachers' Pension Plan Board (the
"Acquirers"), on February 18, 1999.
The SAFECO Portfolio is comprised of approximately 3.6 million square feet of
retail space and 355,000 square feet of office space located in Washington,
Oregon, and Ohio. Included are 76,000 square feet of retail space and 200,000
square feet of office space that opened at Redmond Town Center in the second
half of 1998. Accordingly, the combined statement of gross income and direct
operating expenses reflects only a partial year's operating results with respect
to Redmond Town Center. In addition, Redmond Town Center has retail and office
space under development at December 31, 1998.
As provided by the Purchase and Sale Agreement dated December 11, 1998 (the
"Agreement"), the Acquirers have elected to defer the closing of the Redmond
Town Center commercial office properties until the second quarter of 1999. This
financial statement however, includes the operations of such properties.
Use of Estimates
The preparation of the combined statement of gross income and direct operating
expenses, in conformity with generally accepted accounting principles, requires
management to make estimates and assumptions that affect the reported amounts of
gross revenue and direct operating expenses during the reporting period. Actual
results could differ from these estimates.
F-3
The SAFECO Portfolio
Notes to Combined Statement of Gross Income and Direct
Operating Expenses (continued)
For the Year Ended December 31, 1998
1. Organization and Significant Accounting Policy (continued)
Revenue Recognition
Base rental income on leases with scheduled rent increases or free rent is
recorded on a straight-line basis over the lease term. For the year ended
December 31, 1998, $529,000 of base rents in excess of amounts billed were
recognized as revenue. Certain leases provide for additional rental revenue
("Percentage Rent") to be based upon the level of sales achieved by the lessee.
These Percentage Rents are reflected on the accrual basis. The leases also
typically provide for tenant reimbursement of common area maintenance and other
operating expenses, which are included in the accompanying combined statement as
tenant reimbursements.
Repairs and Maintenance
Expenditures for repairs, maintenance, and minor renewals are charged to expense
as incurred, while those expenditures that improve or extend the estimated life
of the properties are capitalized.
Construction-in-Process
Several buildings in the SAFECO Portfolio were under construction during 1998.
Accordingly, $181,000 in real estate taxes and $472,000 of ground rent have been
excluded from direct operating expenses for the year ended December 31, 1998.
F-4
The SAFECO Portfolio
Notes to Combined Statement of Gross Income and Direct Operating Expenses
2. Basis of Presentation
The combined statement of gross revenue and direct operating expenses for the
SAFECO Portfolio has been prepared for the purpose of complying with the rules
and regulations of the Securities and Exchange Commission. Accordingly, the
combined statement has excluded the following expenses which are not comparable
with those expected to be incurred in the proposed future operations of the
SAFECO Portfolio:
Depreciation and amortization expense
Mortgage interest expense
Management fees
Interest income
Property taxes have not been adjusted to reflect the estimated reassessed value
of the SAFECO Portfolio after acquisition by the Acquirers.
3. Minimum Future Rentals
Minimum future rental revenue for the five years subsequent to December 31, 1998
under noncancelable operating lease agreements are as follows:
Year Ending December 31
1999 $ 38,862,892
2000 37,149,678
2001 35,973,004
2002 35,231,470
2003 32,888,149
Thereafter 183,308,344
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$ 363,413,537
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4. Lease Commitments
The SAFECO Portfolio leases approximately 30 acres of land pursuant to two
noncancelable ground lease agreements. Annual rent expense under these
agreements, net of amounts capitalized for construction-in-progress, was
$262,035 for the year ended December 31, 1998. The ground lease agreements
expire in 2058. Both ground leases include three additional renewal terms of ten
years each.
F-5
The SAFECO Portfolio
Notes to Combined Statement of Gross Income and Direct Operating Expenses
(continued)
4. Lease Commitments (continued)
Future minimum lease commitments for all noncancelable leases, including the
ground leases described above, are as follows:
Year Ending December 31
1999 $ 1,008,337
2000 1,008,337
2001 1,008,337
2002 1,002,985
2003 1,002,985
Thereafter 54,475,841
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$ 59,506,822
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F-6
The following unaudited pro forma condensed and combined statement of operations
has been prepared for the year ended December 31, 1998. This statement gives
effect to the acquisition of the three regional malls (Cascade Mall, Kitsap Mall
and Washington Square), the retail component of a mixed-use development (Redmond
Town Center), five contiguous properties and two non-contiguous community
shopping centers from various SAFECO Corporation entities (the "SAFECO
Portfolio") as if the acquisitions were completed on January 1, 1998. The
acquisition of the office component of Redmond Town Center is expected to occur
in the second quarter of 1999 and is subject to customary closing conditions.
These pro forma statements also give effect to such proposed acquisition as if
it occurred on January 1, 1998. This statement does not purport to be indicative
of the results of operations that actually would have resulted if The Macerich
Company (the "Company") had owned the properties throughout the period
presented. This statement should be read in conjunction with the financial
statements and notes thereto included herein.
The Macerich Company
Unaudited Pro Forma Condensed Combined
Statement of Operations (in thousands)
Pro Forma
Results
Company (including the
Results for Pro Forma SAFECO Portfolio
the Year Ended Adjustment Acquisition) for
Dec. 31, 1998 SAFECO Portfolio the Year Ended
(A) Acquisition Dec. 31, 1998
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Revenues:
Minimum rents 179,710 - 179,710
Percentage rents 12,856 - 12,856
Tenant recoveries 86,740 - 86,740
Other 4,555 - 4,555
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Total revenues 283,861 - 283,861
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Shopping center expenses 89,991 - 89,991
General and administrative expense 4,373 - 4,373
Interest expense 91,433 5,636 (B) 97,069
Depreciation and amortization 53,141 - 53,141
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238,938 5,636 244,574
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Equity in income (loss) of unconsolidated joint ventures
and the management companies 14,480 6,117 (C) 20,597
Gain on sale of assets 9 - 9
Income before minority interest and extraordinary item 59,412 481 59,893
Extraordinary loss on early extinguishment of debt (2,435) - (2,435)
Minority interest (12,902) (132) (D) (13,034)
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Net income 44,075 349 44,424
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Less preferred dividends 11,547 - 11,547
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Net income available to common stockholders 32,528 349 32,877
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Earnings per common share - basic:
Income per share before extraordinary item $1.14 $1.15
Net income per share available to common stockholders $1.06 $1.07
Weighted average number of common shares
outstanding - basic 30,805 30,805
Weighted average number of common shares
outstanding - basic, assuming full conversion of
operating units outstanding 43,016 43,016
Earnings per common share - diluted:
Income per share before extraordinary item $1.11 $1.11
Net income per share available to common stockholders $1.06 $1.06
Weighted average number of common shares
outstanding - diluted 43,628 43,628
(A) This information should be read in conjunction with the Company's Annual
Report on Form 10-K for the year ended December 31, 1998.
(B) Interest expense partially represents the increased expense and debt
incurred from the refinancings of Queens Center and South Plains Mall at their
respective interest rates. Additionally, interest expense includes the
additional borrowings under the Company's line of credit for the closing of the
acquisition. Interest is calculated at LIBOR plus 1.15, totaling 6.15% on the
portion borrowed from the Company's line of credit.
(C) Depreciation on the SAFECO Portfolio is computed on the straight-line method
over the estimated useful life of 39 years.
(D) Minority interest represents the 22% ownership interest in The Macerich
Partnership, L.P. not owned by the Company.
F-7
The Macerich Company
Unaudited Pro Forma Condensed Combined
Balance Sheet (All amounts in thousands)
Pro Forma
Company Results
Results Pro Forma (including the
as reported at Adjustment SAFECO Portfolio
Dec. 31, 1998 SAFECO Portfolio Acquisition) at
(A) Acquisition Dec. 31, 1998
--------------------- ---------------------- ---------------------
Gross property $2,213,125 $217,773 $2,430,898
Total assets $2,322,056 $167,922 $2,489,978
Mortgage, notes and debentures payable $1,507,118 $167,922 $1,675,040
Minority interest $165,524 $165,524
Preferred stock $91 $91
Common stock $338 $338
Additional paid-in-capital $576,984 $576,984
Total liabilities and shareholders' equity $2,322,056 $167,922 $2,489,978
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(A) This information should be read in conjunction with the Company's Annual
Report on Form 10-K for the year ended December 31, 1998.
F-8
Exhibit 23.1
Independent Auditors' Consent
We consent to the incorporation by reference in the registration statements on
Forms S-3 (File No.'s 333-21157 and 333-38721) and Forms S-8 (File No.'s
33-84040, 33-84038, 333-40667, 33-3584, 333-42309, 333-42303 and 333-69995) of
The Macerich Company of our report dated February 24, 1999, with respect to the
combined statement of gross income and direct operating expenses of the SAFCO
Portfolio for the year ended December 31, 1998, which report appears in the Form
8-K/A of The Macerich Company dated April 21, 1999. Such report contains a
paragraph that states that the accompanying combined statement was prepared for
the purpose of complying with the rules and regulations of the Securities and
Exchange Commission, as described in Note 2, and is not intended to be a
complete presentation of the SAFECO Portfolio's revenue and expenses.
Seattle, Washington
April 21, 1999 /s/ Ernst & Young LLP
F-9