UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
For the quarterly period ended September 30, 2024
For the transition period from ___________ to ___________
Commission File No.: 1-12504
THE MACERICH CO MPANY
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification Number) | ||||||||||||||||
| (Address of principal executive office) | (Zip Code) | ||||||||||||||||
| | |||||||||||||||||
| (Registrant's telephone number, including area code) | |||||||||||||||||
N/A (Former name, former address and former fiscal year, if changed since last report) | |||||||||||||||||
Securities registered pursuant to Section 12(b) of the Securities Act:
| Title of each class | Trading symbol | Name of each exchange on which registered | ||||||
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 ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding twelve (12) months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definitions of "large accelerated filer", "accelerated filer", "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act.
| x | Accelerated Filer | ☐ | Non-Accelerated Filer | ☐ | Smaller Reporting Company | |||||||||||||||||||||||||||
| Emerging Growth Company | ||||||||||||||||||||||||||||||||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
Number of shares outstanding as of November 5, 2024 of the registrant's common stock, par value $0.01 per share: 225,527,485 shares
THE MACERICH COMPANY
FORM 10-Q
INDEX
| Part I | Financial Information | |||||||||||||
| Part II | Other Information | |||||||||||||
2
THE MACERICH COMPANY
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except par value)
(Unaudited)
| September 30, 2024 | December 31, 2023 | ||||||||||
| ASSETS: | |||||||||||
| Property, net | $ | $ | |||||||||
| Cash and cash equivalents | |||||||||||
| Restricted cash | |||||||||||
| Tenant and other receivables, net | |||||||||||
| Right-of-use assets, net | |||||||||||
| Deferred charges and other assets, net | |||||||||||
| Due from affiliates | |||||||||||
| Investments in unconsolidated joint ventures | |||||||||||
| Total assets | $ | $ | |||||||||
| LIABILITIES AND EQUITY: | |||||||||||
| Mortgage notes payable | $ | $ | |||||||||
| Bank and other notes payable | |||||||||||
| Accounts payable and accrued expenses | |||||||||||
| Lease liabilities | |||||||||||
| Other accrued liabilities | |||||||||||
| Distributions in excess of investments in unconsolidated joint ventures | |||||||||||
| Financing arrangement obligation | |||||||||||
| Total liabilities | |||||||||||
| Commitments and contingencies | |||||||||||
| Equity: | |||||||||||
| Stockholders' equity: | |||||||||||
Common stock, $ | |||||||||||
| Additional paid-in capital | |||||||||||
| Accumulated deficit | ( | ( | |||||||||
| Accumulated other comprehensive loss | ( | ( | |||||||||
| Total stockholders' equity | |||||||||||
| Noncontrolling interests | |||||||||||
| Total equity | |||||||||||
| Total liabilities and equity | $ | $ | |||||||||
The accompanying notes are an integral part of these consolidated financial statements.
3
THE MACERICH COMPANY
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share amounts)
(Unaudited)
| For the Three Months Ended September 30, | For the Nine Months Ended September 30, | ||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||
| Revenues: | |||||||||||||||||||||||
| Leasing revenue | $ | $ | $ | $ | |||||||||||||||||||
| Other | |||||||||||||||||||||||
| Management Companies | |||||||||||||||||||||||
| Total revenues | |||||||||||||||||||||||
| Expenses: | |||||||||||||||||||||||
| Shopping center and operating expenses | |||||||||||||||||||||||
| Leasing expenses | |||||||||||||||||||||||
| Management Companies' operating expenses | |||||||||||||||||||||||
| REIT general and administrative expenses | |||||||||||||||||||||||
| Depreciation and amortization | |||||||||||||||||||||||
| Interest (income) expense: | |||||||||||||||||||||||
| Related parties | ( | ( | |||||||||||||||||||||
| Other | |||||||||||||||||||||||
| Total expenses | |||||||||||||||||||||||
| Equity in loss of unconsolidated joint ventures | ( | ( | ( | ( | |||||||||||||||||||
| Income tax (expense) benefit | ( | ( | ( | ||||||||||||||||||||
| (Loss) gain on sale or write down of assets, net | ( | ( | ( | ||||||||||||||||||||
| Net (loss) income | ( | ( | ( | ||||||||||||||||||||
| Less: net (loss) income attributable to noncontrolling interests | ( | ( | ( | ||||||||||||||||||||
| Net (loss) income attributable to the Company | $ | ( | $ | ( | $ | $ | ( | ||||||||||||||||
| (Loss) income per common share—attributable to common stockholders: | |||||||||||||||||||||||
| Basic | $ | ( | $ | ( | $ | $ | ( | ||||||||||||||||
| Diluted | $ | ( | $ | ( | $ | $ | ( | ||||||||||||||||
| Weighted average number of common shares outstanding: | |||||||||||||||||||||||
| Basic | |||||||||||||||||||||||
| Diluted | |||||||||||||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
4
THE MACERICH COMPANY
CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME
(Dollars in thousands)
(Unaudited)
| For the Three Months Ended September 30, | For the Nine Months Ended September 30, | ||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||
| Net (loss) income | $ | ( | $ | ( | $ | $ | ( | ||||||||||||||||
| Other comprehensive (loss) income: | |||||||||||||||||||||||
| Interest rate cap agreements | ( | ( | ( | ||||||||||||||||||||
| Comprehensive (loss) income | ( | ( | ( | ||||||||||||||||||||
| Less: net (loss) income attributable to noncontrolling interests | ( | ( | ( | ||||||||||||||||||||
| Comprehensive (loss) income attributable to the Company | $ | ( | $ | ( | $ | $ | ( | ||||||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
5
THE MACERICH COMPANY
CONSOLIDATED STATEMENTS OF EQUITY
(Dollars in thousands, except per share data)
(Unaudited)
Three Months Ended September 30, 2024 and 2023
| Stockholders' Equity | |||||||||||||||||||||||||||||||||||||||||||||||
| Common Stock | Additional Paid-in Capital | Accumulated Deficit | Accumulated Other Comprehensive Loss | Total Stockholders' Equity | |||||||||||||||||||||||||||||||||||||||||||
| Shares | Par Value | Noncontrolling Interests | Total Equity | ||||||||||||||||||||||||||||||||||||||||||||
| Balance at July 1, 2024 | $ | $ | $ | ( | $ | ( | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||
| Net loss | — | — | — | ( | — | ( | ( | ( | |||||||||||||||||||||||||||||||||||||||
| Interest rate cap agreements | — | — | — | — | ( | ( | — | ( | |||||||||||||||||||||||||||||||||||||||
| Amortization of share and unit-based plans | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||
| Stock offerings, net | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||
Distributions paid ($ | — | — | — | ( | — | ( | — | ( | |||||||||||||||||||||||||||||||||||||||
| Distributions to noncontrolling interests | — | — | — | — | — | — | ( | ( | |||||||||||||||||||||||||||||||||||||||
| Conversion of noncontrolling interests to common shares | — | — | ( | ||||||||||||||||||||||||||||||||||||||||||||
| Adjustment of noncontrolling interests in Operating Partnership | — | — | ( | — | — | ( | |||||||||||||||||||||||||||||||||||||||||
| Balance at September 30, 2024 | $ | $ | $ | ( | $ | ( | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||
| Stockholders' Equity | |||||||||||||||||||||||||||||||||||||||||||||||
| Common Stock | Additional Paid-in Capital | Accumulated Deficit | Accumulated Other Comprehensive Income | Total Stockholders' Equity | |||||||||||||||||||||||||||||||||||||||||||
| Shares | Par Value | Noncontrolling Interests | Total Equity | ||||||||||||||||||||||||||||||||||||||||||||
| Balance at July 1, 2023 | $ | $ | $ | ( | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||
| Net loss | — | — | — | ( | — | ( | ( | ( | |||||||||||||||||||||||||||||||||||||||
| Interest rate cap agreements | — | — | — | — | ( | ( | — | ( | |||||||||||||||||||||||||||||||||||||||
| Amortization of share and unit-based plans | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||
| Stock offerings, net | — | — | ( | — | — | ( | — | ( | |||||||||||||||||||||||||||||||||||||||
Distributions paid ($ | — | — | — | ( | — | ( | — | ( | |||||||||||||||||||||||||||||||||||||||
| Distributions to noncontrolling interests | — | — | — | — | — | — | ( | ( | |||||||||||||||||||||||||||||||||||||||
| Conversion of noncontrolling interests to common shares | — | — | — | ( | |||||||||||||||||||||||||||||||||||||||||||
| Redemption of noncontrolling interests | — | — | — | — | ( | ( | |||||||||||||||||||||||||||||||||||||||||
| Adjustment of noncontrolling interests in Operating Partnership | — | — | ( | — | — | ( | |||||||||||||||||||||||||||||||||||||||||
| Balance at September 30, 2023 | $ | $ | $ | ( | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
6
THE MACERICH COMPANY
CONSOLIDATED STATEMENTS OF EQUITY
(Dollars in thousands, except per share data)
(Unaudited)
Nine Months Ended September 30, 2024 and 2023
| Stockholders' Equity | |||||||||||||||||||||||||||||||||||||||||||||||
| Common Stock | Additional Paid-in Capital | Accumulated Deficit | Accumulated Other Comprehensive Loss | Total Stockholders' Equity | |||||||||||||||||||||||||||||||||||||||||||
| Shares | Par Value | Noncontrolling Interests | Total Equity | ||||||||||||||||||||||||||||||||||||||||||||
| Balance at January 1, 2024 | $ | $ | $ | ( | $ | ( | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||
| Net income | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||
| Interest rate cap agreements | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||
| Amortization of share and unit-based plans | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||
| Employee stock purchases | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||
| Stock offerings, net | — | — | |||||||||||||||||||||||||||||||||||||||||||||
Distributions paid ($ | — | — | — | ( | — | ( | — | ( | |||||||||||||||||||||||||||||||||||||||
| Distributions to noncontrolling interests | — | — | — | — | — | — | ( | ( | |||||||||||||||||||||||||||||||||||||||
| Conversion of noncontrolling interests to common shares | — | — | ( | ||||||||||||||||||||||||||||||||||||||||||||
| Adjustment of noncontrolling interests in Operating Partnership | — | — | ( | — | — | ( | |||||||||||||||||||||||||||||||||||||||||
| Balance at September 30, 2024 | $ | $ | $ | ( | $ | ( | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||
| Stockholders' Equity | |||||||||||||||||||||||||||||||||||||||||||||||
| Common Stock | Additional Paid-in Capital | Accumulated Deficit | Accumulated Other Comprehensive Income | Total Stockholders' Equity | |||||||||||||||||||||||||||||||||||||||||||
| Shares | Par Value | Noncontrolling Interests | Total Equity | ||||||||||||||||||||||||||||||||||||||||||||
| Balance at January 1, 2023 | $ | $ | $ | ( | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||
| Net loss | — | — | — | ( | — | ( | ( | ( | |||||||||||||||||||||||||||||||||||||||
| Interest rate cap agreements | — | — | — | — | ( | ( | — | ( | |||||||||||||||||||||||||||||||||||||||
| Amortization of share and unit-based plans | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||
| Employee stock purchases | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||
| Stock offerings, net | — | — | ( | — | — | ( | — | ( | |||||||||||||||||||||||||||||||||||||||
Distributions paid ($ | — | — | — | ( | — | ( | — | ( | |||||||||||||||||||||||||||||||||||||||
| Distributions to noncontrolling interests | — | — | — | — | — | — | ( | ( | |||||||||||||||||||||||||||||||||||||||
| Conversion of noncontrolling interests to common shares | — | — | — | ( | |||||||||||||||||||||||||||||||||||||||||||
| Redemption of noncontrolling interests | — | — | — | — | ( | ( | |||||||||||||||||||||||||||||||||||||||||
| Adjustment of noncontrolling interests in Operating Partnership | — | — | ( | — | — | ( | |||||||||||||||||||||||||||||||||||||||||
| Balance at September 30, 2023 | $ | $ | $ | ( | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
7
THE MACERICH COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
| For the Nine Months Ended September 30, | |||||||||||
| 2024 | 2023 | ||||||||||
| Cash flows from operating activities: | |||||||||||
| Net income (loss) | $ | $ | ( | ||||||||
| Adjustments to reconcile net income (loss) to net cash provided by operating activities: | |||||||||||
| (Gain) loss on sale or write down of assets, net | ( | ||||||||||
| Depreciation and amortization | |||||||||||
| Amortization of discount on mortgage notes payable | |||||||||||
| Amortization of share and unit-based plans | |||||||||||
| Straight-line rent and amortization of above and below market leases | |||||||||||
| Provision for (recovery of) doubtful accounts | ( | ||||||||||
| Income tax (benefit) expense | ( | ||||||||||
| Equity in loss of unconsolidated joint ventures | |||||||||||
| Distributions of income from unconsolidated joint ventures | |||||||||||
| Change in fair value of financing arrangement obligation | ( | ( | |||||||||
| Changes in assets and liabilities, net of dispositions: | |||||||||||
| Tenant and other receivables | |||||||||||
| Other assets | |||||||||||
| Due from affiliates | ( | ||||||||||
| Accounts payable and accrued expenses | |||||||||||
| Other accrued liabilities | ( | ( | |||||||||
| Net cash provided by operating activities | |||||||||||
| Cash flows from investing activities: | |||||||||||
| Acquisitions of property | ( | ( | |||||||||
| Development, redevelopment, expansion and renovation of properties | ( | ( | |||||||||
| Property improvements | ( | ( | |||||||||
| Deferred leasing costs | ( | ( | |||||||||
| Distributions from unconsolidated joint ventures | |||||||||||
| Contributions to unconsolidated joint ventures | ( | ( | |||||||||
| Cash acquired from acquisition of unconsolidated joint ventures | |||||||||||
| Derecognition of cash previously held by a consolidated joint venture to an unconsolidated joint venture | ( | ||||||||||
| Proceeds from sale of assets | |||||||||||
| Net cash (used in) provided by investing activities | ( | ||||||||||
8
THE MACERICH COMPANY CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued) (Dollars in thousands) (Unaudited) | |||||||||||
| For the Nine Months Ended September 30, | |||||||||||
| 2024 | 2023 | ||||||||||
| Cash flows from financing activities: | |||||||||||
| Proceeds from mortgages, bank and other notes payable | |||||||||||
| Payments on mortgages, bank and other notes payable | ( | ( | |||||||||
| Deferred financing costs | ( | ( | |||||||||
| Payments on finance leases | ( | ( | |||||||||
| Proceeds (costs) from stock offerings, net | ( | ||||||||||
| Proceeds from share and unit-based plans | |||||||||||
| Redemption of noncontrolling interests | ( | ||||||||||
| Dividends and distributions | ( | ( | |||||||||
| Net cash used in financing activities | ( | ( | |||||||||
| Net increase in cash, cash equivalents and restricted cash | |||||||||||
| Cash, cash equivalents and restricted cash, beginning of period | |||||||||||
| Cash, cash equivalents and restricted cash, end of period | $ | $ | |||||||||
| Supplemental cash flow information: | |||||||||||
| Cash payments for interest, net of amounts capitalized | $ | $ | |||||||||
| Non-cash investing and financing transactions: | |||||||||||
| Accrued development costs included in accounts payable and accrued expenses and other accrued liabilities | $ | $ | |||||||||
| Derecognition of previously consolidated property and related liabilities to investment in unconsolidated joint venture | $ | $ | |||||||||
| Conversion of Operating Partnership Units to common stock | $ | $ | |||||||||
| Assets acquired from unconsolidated joint venture | $ | $ | |||||||||
| Liabilities assumed from unconsolidated joint venture | $ | $ | |||||||||
The accompanying notes are an integral part of these consolidated financial statements.
9
THE MACERICH COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share and square foot amounts)
(Unaudited)
1. Organization:
The Macerich Company (the "Company") is involved in the acquisition, ownership, development, redevelopment, management and leasing of regional retail centers and community/power 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, 2024, the Company was the sole general partner of and held a 96
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 single member 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 in the United States ("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 an independent registered public accounting firm.
The Operating Partnership's consolidated VIEs included the following assets and liabilities:
| September 30, 2024 | December 31, 2023 | ||||||||||
| Assets: | |||||||||||
| Property, net | $ | $ | |||||||||
| Other assets | |||||||||||
| Total assets | $ | $ | |||||||||
| Liabilities: | |||||||||||
| Mortgage notes payable | $ | $ | |||||||||
| Other liabilities | |||||||||||
| Total liabilities | $ | $ | |||||||||
All intercompany accounts and transactions have been eliminated in the consolidated financial statements.
10
THE MACERICH COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share and square foot amounts)
(Unaudited)
2. Summary of Significant Accounting Policies: (Continued)
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 Annual Report on Form 10-K for the year ended December 31, 2023. 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, 2023 has been derived from the audited financial statements but does not include all disclosures required by GAAP.
The following table presents a reconciliation of the beginning of period and end of period cash, cash equivalents and restricted cash reported on the Company's consolidated balance sheets to the totals shown on its consolidated statements of cash flows:
| For the Nine Months Ended September 30, | |||||||||||
| 2024 | 2023 | ||||||||||
| Beginning of period | |||||||||||
| Cash and cash equivalents | $ | $ | |||||||||
| Restricted cash | |||||||||||
| Cash, cash equivalents and restricted cash | $ | $ | |||||||||
| End of period | |||||||||||
| Cash and cash equivalents | $ | $ | |||||||||
| Restricted cash | |||||||||||
| Cash, cash equivalents and restricted cash | $ | $ | |||||||||
Recent Accounting Pronouncements:
In November 2023, the Financial Accounting Standards Board issued Accounting Standards Update (“ASU”) No. 2023-07, Segment Reporting - Improvements to Reportable Segment Disclosures (“ASU 2023-07”), which requires incremental disclosures related to a public entity’s reportable segments. Required disclosures include, on an annual and interim basis, significant segment expenses that are regularly provided to the chief operating decision maker (“CODM”) and included within each reported measure of segment profit or loss, an amount for other segment items (which is the difference between segment revenue less segment expenses and less segment profit or loss) and a description of its composition, the title and position of the CODM, and an explanation of how the CODM uses the reported measure(s) of segment profit or loss in assessing segment performance and deciding how to allocate resources. The standard also permits disclosure of more than one measure of segment profit. ASU 2023-07 is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. The Company is finalizing its assessment of the impact of adopting ASU 2023-07 on its consolidated financial statements for the year ended December 31, 2024.
In March 2024, the SEC adopted the final rule under SEC Release No. 33-11275, The Enhancement and Standardization of Climate Related Disclosures for Investors, which requires registrants to disclose climate-related information in registration statements and annual reports. The new rules would be effective for annual reporting periods beginning in fiscal year 2025. However, in April 2024, the SEC exercised its discretion to stay these rules pending the completion of judicial review of certain consolidated petitions with the United States Court of Appeals for the Eighth Circuit in connection with these rules. The Company is evaluating the impact of this rule on its consolidated financial statements and disclosures.
11
THE MACERICH COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share and square foot amounts)
(Unaudited)
3. Earnings Per Share ("EPS"):
The following table reconciles the numerator and denominator used in the computation of EPS for the three and nine months ended September 30, 2024 and 2023 (shares in thousands):
| For the Three Months Ended September 30, | For the Nine Months Ended September 30, | ||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||
| Numerator | |||||||||||||||||||||||
| Net (loss) income | $ | ( | $ | ( | $ | $ | ( | ||||||||||||||||
| Less: net (loss) income attributable to noncontrolling interests | ( | ( | ( | ||||||||||||||||||||
| Net (loss) income attributable to the Company | ( | ( | ( | ||||||||||||||||||||
| Allocation of earnings to participating securities | ( | ( | ( | ( | |||||||||||||||||||
| Numerator for basic and diluted EPS—net (loss) income attributable to common stockholders | $ | ( | $ | ( | $ | $ | ( | ||||||||||||||||
| Denominator | |||||||||||||||||||||||
| Denominator for basic and diluted EPS—weighted average number of common shares outstanding(1) | |||||||||||||||||||||||
| EPS—net (loss) income attributable to common stockholders | |||||||||||||||||||||||
| Basic and diluted | $ | ( | $ | ( | $ | $ | ( | ||||||||||||||||
(1) Diluted EPS excludes 99,565 99,565 9,987,209 and 8,979,065 Operating Partnership units ("OP Units") for the three months ended September 30, 2024 and 2023, respectively, and 10,060,498 and 8,981,061 OP Units for the nine months ended September 30, 2024 and 2023, respectively, as their impact was antidilutive.
4. Investments in Unconsolidated Joint Ventures:
The Company has made the following recent financings or other events within its unconsolidated joint ventures:
On March 3, 2023, the Company’s joint venture in Scottsdale Fashion Square replaced the existing $403,931 mortgage loan on the property with a $700,000 loan that bears interest at a fixed rate of 6.21 %, is interest only during the entire loan term and matures on March 6, 2028.
On April 25, 2023, the Company's joint venture in Deptford Mall closed on a three-year maturity date extension for the existing loan to April 3, 2026, including extension options. The Company's joint venture repaid $10,000 ($5,100 at the Company's pro rata share) of the outstanding loan balance at closing. The interest rate on the loan remains unchanged at 3.73 %.
Effective May 9, 2023, the Company’s joint venture in Country Club Plaza defaulted on the $295,210 ($147,605 at the Company’s pro rata share) non-recourse loan on the property. The Company’s joint venture was in negotiations with the lender on the terms of this non-recourse loan. Accordingly, the joint venture shortened the holding period of the property due to the uncertainty as to the outcome of those discussions. As a result of shortening the holding period, the joint venture determined the fair value of the property was less than the carrying value and recorded an impairment loss during 2023. The Company recognized $100,997 as its share of the impairment which was limited to the extent of its investment which has been reduced to zero. As discussed below, the joint venture subsequently sold the property on June 28, 2024.
On May 18, 2023, the Company acquired Seritage Growth Properties' ("Seritage") remaining 50 % ownership interest in the MS Portfolio LLC joint venture that owns five former Sears parcels, for a total purchase price of $46,687 . These parcels are located at Chandler Fashion Center, Danbury Fair Mall, Freehold Raceway Mall, Los Cerritos Center and Washington Square. As a result of this transaction and the shortening of holding periods, an impairment loss was recorded by the joint venture. The Company's share of the impairment loss was $51,363 . Effective as of May 18, 2023, the Company now owns and has
12
THE MACERICH COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share and square foot amounts)
(Unaudited)
4. Investments in Unconsolidated Joint Ventures: (Continued)
consolidated its 100 % interest in these five former Sears parcels in its consolidated financial statements (See Note 15—Acquisitions).
On December 4, 2023, the Company's joint venture in Tysons Corner Center replaced the existing $666,465 mortgage loan on the property with a new $710,000 loan that bears interest at a fixed rate of 6.60 %, is interest only during the entire loan term and matures on December 6, 2028.
On December 27, 2023, the Company’s joint venture in One Westside sold the property, a 680,000 square foot office property in Los Angeles, California, for $700,000 . The existing $324,632 loan on the property was repaid, and $77,643 of net proceeds were generated at the Company’s 25 % ownership share, which were used to reduce the Company’s revolving loan facility. As a result of this transaction, the Company recognized its share of gain on sale of assets of $8,118 .
On January 10, 2024, the Company's joint venture in Boulevard Shops replaced the existing $23,000 mortgage loan on the property with a new $24,000 loan that bears interest at a variable rate of SOFR plus 2.50 %, is interest only during the entire loan term and matures on December 5, 2028. The new loan has a required interest rate cap throughout the term of the loan at a strike rate of 7.5 %.
The Company has a 50 /50 joint venture with Simon Property Group, which was initially formed to develop Los Angeles Premium Outlets, a premium outlet center in Carson, California. During the three months ended March 31, 2024, the Company evaluated its investment and concluded that due to certain conditions, the Company should not continue to invest capital in this development project. As a result, the Company determined the investment was impaired on an other-than-temporary basis and wrote-off its entire investment of $57,686 in the first quarter of 2024 through equity in loss of unconsolidated joint ventures.
On May 14, 2024, the Company acquired the remaining 40 % ownership interest in Arrowhead Towne Center in the New River Associates LLC joint venture that it did not previously own for a total purchase price of $36,447 and the assumption of its joint venture partner's share of debt on the property. Effective as of May 14, 2024, the Company now owns and has consolidated its 100 % interest in Arrowhead Towne Center (See Note 15—Acquisitions).
On May 14, 2024, the Company acquired the remaining 40 % ownership interest in South Plains Mall in the Pacific Premier Retail LLC joint venture that it did not previously own for no cash consideration and the assumption of its joint venture partner's share of debt on the property. Effective as of May 14, 2024, the Company now owns and has consolidated its 100 % interest in South Plains Mall (See Note 15—Acquisitions).
On June 13, 2024, the partnership agreement between the Company and its joint venture partner was amended and as a result, the Company no longer accounts for its investment in Chandler Fashion Center as a financing arrangement. Effective June 13, 2024, the Company accounts for its investment in Chandler Fashion Center under the equity method of accounting (See Note 12—Financing Arrangement and Note 16—Dispositions).
On June 27, 2024, the Company's joint venture in Chandler Fashion Center refinanced the existing $256,000 loan on the property with a $275,000 loan that bears interest at a fixed rate of 7.06 %, is interest only during the entire loan term and matures on July 1, 2029. The Company received a distribution of $17,700 in connection with this transaction.
On June 28, 2024, the Company's joint venture in Country Club Plaza sold the property for $175,600 . Concurrent with the transaction, the remaining amount owed by the joint venture under the $295,470 loan ($147,735 at the Company's pro rata share) was forgiven by the lender.
On July 31, 2024, the Company sold its 50 % interest in Biltmore Fashion Park, a 611,000 square foot regional retail center in Phoenix, Arizona, for $110,000 . The Company used the net proceeds to pay down debt. The Company recognized a gain of approximately $42,815 in connection with this transaction (See Note 6—Property, net).
During the three and nine months ending September 30, 2024, the Company shortened the holding periods on certain joint venture properties and recorded impairment losses in equity in loss of unconsolidated joint ventures of $66,953 and $120,643 , respectively, at the Company's pro rata share.
13
THE MACERICH COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share and square foot amounts)
(Unaudited)
4. Investments in Unconsolidated Joint Ventures: (Continued)
Combined and condensed balance sheets and statements of operations are presented below for all unconsolidated joint ventures.
Combined and Condensed Balance Sheets of Unconsolidated Joint Ventures:
| September 30, 2024 | December 31, 2023 | ||||||||||
| Assets(1): | |||||||||||
| Property, net | $ | $ | |||||||||
| Other assets | |||||||||||
| Total assets | $ | $ | |||||||||
| Liabilities and partners' capital(1): | |||||||||||
| Mortgage and other notes payable | $ | $ | |||||||||
| Other liabilities | |||||||||||
| Company's capital | |||||||||||
| Outside partners' capital | |||||||||||
| Total liabilities and partners' capital | $ | $ | |||||||||
| Investments in unconsolidated joint ventures: | |||||||||||
| Company's capital | $ | $ | |||||||||
| Basis adjustment(2) | ( | ||||||||||
| $ | $ | ||||||||||
| Assets—Investments in unconsolidated joint ventures | $ | $ | |||||||||
| Liabilities—Distributions in excess of investments in unconsolidated joint ventures | ( | ( | |||||||||
| $ | $ | ||||||||||
(1) These amounts include assets of $1,699,223 and $2,613,690 of Pacific Premier Retail LLC (the "PPR Portfolio") as of September 30, 2024 and December 31, 2023, respectively, and liabilities of $1,351,279 and $1,578,328 of the PPR Portfolio as of September 30, 2024 and December 31, 2023, respectively. On October 24, 2024, the Company acquired its joint venture partner's 40 % interest in the PPR Portfolio (See Note 21—Subsequent Events).
(2) The Company amortizes the difference between the cost of its investments in unconsolidated joint ventures and the book value of the underlying equity and adjusts the basis adjustment for impairment and disposition transactions that may occur, into the Company's share of net (loss) income. The amortization of this difference was $178,179 and $(2,494 ) for the three months ended September 30, 2024 and 2023, respectively, and $360,740 and $(13,942 ) for the nine months ended September 30, 2024 and 2023, respectively.
14
THE MACERICH COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share and square foot amounts)
(Unaudited)
4. Investments in Unconsolidated Joint Ventures: (Continued)
Combined and Condensed Statements of Operations of Unconsolidated Joint Ventures:
| PPR Portfolio | Other Joint Ventures | Total | |||||||||||||||
| Three Months Ended September 30, 2024 | |||||||||||||||||
| Revenues: | |||||||||||||||||
| Leasing revenue | $ | $ | $ | ||||||||||||||
| Other | |||||||||||||||||
| Total revenues | |||||||||||||||||
| Expenses: | |||||||||||||||||
| Shopping center and operating expenses | |||||||||||||||||
| Leasing expenses | |||||||||||||||||
| Interest expense | |||||||||||||||||
| Depreciation and amortization | |||||||||||||||||
| Total expenses | |||||||||||||||||
| (Loss) gain on sale or write down of assets, net | ( | ( | |||||||||||||||
| Net (loss) income | $ | ( | $ | $ | ( | ||||||||||||
| Company's equity in net loss | $ | ( | $ | ( | $ | ( | |||||||||||
| Three Months Ended September 30, 2023 | |||||||||||||||||
| Revenues: | |||||||||||||||||
| Leasing revenue | $ | $ | $ | ||||||||||||||
| Other | |||||||||||||||||
| Total revenues | |||||||||||||||||
| Expenses: | |||||||||||||||||
| Shopping center and operating expenses | |||||||||||||||||
| Leasing expenses | |||||||||||||||||
| Interest expense | |||||||||||||||||
| Depreciation and amortization | |||||||||||||||||
| Total expenses | |||||||||||||||||
| Loss on sale or write down of assets, net | ( | ( | |||||||||||||||
| Net loss | $ | ( | $ | ( | $ | ( | |||||||||||
| Company's equity in net loss | $ | ( | $ | ( | $ | ( | |||||||||||
Significant accounting policies used by the unconsolidated joint ventures are similar to those used by the Company.
15
THE MACERICH COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share and square foot amounts)
(Unaudited)
4. Investments in Unconsolidated Joint Ventures: (Continued)
Combined and Condensed Statements of Operations of Unconsolidated Joint Ventures:
| PPR Portfolio | Other Joint Ventures | Total | |||||||||||||||
| Nine Months Ended September 30, 2024 | |||||||||||||||||
| Revenues: | |||||||||||||||||
| Leasing revenue | $ | $ | $ | ||||||||||||||
| Other | |||||||||||||||||
| Total revenues | |||||||||||||||||
| Expenses: | |||||||||||||||||
| Shopping center and operating expenses | |||||||||||||||||
| Leasing expenses | |||||||||||||||||
| Interest expense | |||||||||||||||||
| Depreciation and amortization | |||||||||||||||||
| Total expenses | |||||||||||||||||
| Loss on sale or write down of assets, net | ( | ( | ( | ||||||||||||||
| Net loss | $ | ( | $ | ( | $ | ( | |||||||||||
| Company's equity in net loss | $ | ( | $ | ( | $ | ( | |||||||||||
| Nine Months Ended September 30, 2023 | |||||||||||||||||
| Revenues: | |||||||||||||||||
| Leasing revenue | $ | $ | $ | ||||||||||||||
| Other | |||||||||||||||||
| Total revenues | |||||||||||||||||
| Expenses: | |||||||||||||||||
| Shopping center and operating expenses | |||||||||||||||||
| Leasing expenses | |||||||||||||||||
| Interest expense | |||||||||||||||||
| Depreciation and amortization | |||||||||||||||||
| Total expenses | |||||||||||||||||
| Loss on sale or write down of assets, net | ( | ( | |||||||||||||||
| Net loss | $ | ( | $ | ( | $ | ( | |||||||||||
| Company's equity in net loss | $ | ( | $ | ( | $ | ( | |||||||||||
16
THE MACERICH COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share and square foot amounts)
(Unaudited)
5. Derivative Instruments and Hedging Activities:
The Company uses interest rate cap agreements to manage the interest rate risk on certain floating rate debt. The Company recorded other comprehensive (loss) income related to the marking-to-market of derivative instruments of $(147 ) and $(546 ) for the three months ended September 30, 2024 and 2023, respectively, and $773 and $(76 ) for the nine months ended September 30, 2024 and 2023, respectively. The amounts in other comprehensive income represent the Company's pro rata share of hedged derivative instruments from certain unconsolidated joint ventures.
The following derivatives were outstanding at September 30, 2024 and December 31, 2023:
| Fair Value | ||||||||||||||||||||||||||||||||||||||||||||
| Property | Designation | Notional Amount | Product | SOFR/LIBOR Rate | Maturity | September 30, 2024 | December 31, 2023 | |||||||||||||||||||||||||||||||||||||
| Santa Monica Place | Non-Hedged | $ | Cap | % | 12/9/2024 | $ | $ | |||||||||||||||||||||||||||||||||||||
| The Macerich Partnership, L.P. | Non-Hedged | $ | ( | Sold Cap | % | 12/9/2024 | $ | ( | $ | ( | ||||||||||||||||||||||||||||||||||
The above derivatives were valued with an aggregate fair value (Level 2 measurement) and were included in other assets (other accrued liabilities). The fair value of the Company's interest rate derivatives was determined using discounted cash flow analysis on the expected cash flows of the derivatives. This analysis reflects the contractual terms of the derivatives, including the period to maturity, and uses observable market-based inputs, including interest rate curves and implied volatilities. The Company incorporates credit valuation adjustments to appropriately reflect both its own nonperformance risk and the respective counterparty's nonperformance risk in the fair value measurements.
Although the Company has determined that the majority of the inputs used to value its derivatives fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with its derivatives utilize Level 3 inputs, such as estimates of current credit spreads, to evaluate the likelihood of default by the Company and its counterparties. The Company has assessed the significance of the impact of the credit valuation adjustments on the overall valuation of its derivative positions and has determined that the credit valuation adjustments are not significant to the overall valuation of its interest rate caps. As a result, the Company determined that its interest rate cap valuations in their entirety are classified in Level 2 of the fair value hierarchy.
6. Property, net:
Property, net consists of the following:
| September 30, 2024 | December 31, 2023 | ||||||||||
| Land | $ | $ | |||||||||
| Buildings and improvements | |||||||||||
| Tenant improvements | |||||||||||
| Equipment and furnishings(1) | |||||||||||
| Construction in progress | |||||||||||
| Less accumulated depreciation(1) | ( | ( | |||||||||
| $ | $ | ||||||||||
Depreciation expense was $65,352 and $66,390 for the three months ended September 30, 2024 and 2023, respectively, and $197,530 and $199,615 for the nine months ended September 30, 2024 and 2023, respectively.
17
THE MACERICH COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share and square foot amounts)
(Unaudited)
6. Property, net: (Continued)
(Loss) gain on sale or write-down of assets, net for the three and nine months ended September 30, 2024 and 2023 consist of the following:
| For the Three Months Ended September 30, | For the Nine Months Ended September 30, | |||||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||||||||||||
| Gain on property sales, net(1) | $ | $ | $ | $ | ||||||||||||||||||||||
| Loss on write-down of assets(2) | ( | ( | ( | ( | ||||||||||||||||||||||
| Gain on land sales, net(3) | ||||||||||||||||||||||||||
| $ | ( | $ | ( | $ | $ | ( | ||||||||||||||||||||
(1) This includes a gain of $334,285 for the nine months ended September 30, 2024, as a result of the Company no longer recognizing its investment in Chandler Fashion Center as a financing arrangement. Effective June 13, 2024, the Company accounts for its investment under the equity method of accounting (See Note 12—Financing Arrangement and Note 16—Dispositions). Includes a gain of $42,815
(2) Includes impairment losses of $59,340 and $108,016 for the three and nine months ended September 30, 2024, respectively, due to the reduction of the estimated holding periods of certain properties. Includes impairment losses of $144,656 7,880
(3) See Note 16—Dispositions.
The following table summarizes certain of the Company's assets that were measured on a nonrecurring basis as a result of the impairment losses recorded for the three and nine months ended September 30, 2024 and 2023, as described above:
| Total Fair Value Measurement | Quoted Prices in Active Markets for Identical Assets | Significant Other Unobservable Inputs | Significant Unobservable Inputs | |||||||||||||||||||||||
| (Level 1) | (Level 2) | (Level 3) | ||||||||||||||||||||||||
| September 30, 2023 | $ | $ | $ | $ | ||||||||||||||||||||||
| September 30, 2024 | $ | $ | $ | $ | ||||||||||||||||||||||
The fair value (Level 2 measurement) relating to a portion of the 2024 and 2023 impairments was based on sales contracts and is classified within level 2 of the hierarchy. The fair value (Level 3 measurement) related to the remaining 2024 and 2023 impairments was based upon an income approach, using an estimated terminal capitalization rate in the range of 7.3 % to 9.0 %, a discount rate in the range of 9.0 % to 11.0 % and market rents per square foot of $20 to $200 . The fair value is sensitive to these significant unobservable inputs.
7. Tenant and Other Receivables, net:
Included in tenant and other receivables, net is an allowance for doubtful accounts of $6,443 and $4,824 at September 30, 2024 and December 31, 2023, respectively. Also included in tenant and other receivables, net are accrued percentage rents of $3,533 and $15,076 at September 30, 2024 and December 31, 2023, respectively, and a deferred rent receivable due to straight-line rent adjustments of $99,821 and $105,260 at September 30, 2024 and December 31, 2023, respectively.
8. Leases:
Lessor Leases:
The Company leases its Centers under agreements that are classified as operating leases. These leases generally include minimum rents, percentage rents and recoveries of real estate taxes, insurance and other shopping center operating expenses.
18
THE MACERICH COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share and square foot amounts)
(Unaudited)
8. Leases: (Continued)
Minimum rental revenues are recognized on a straight-line basis over the terms of the related leases. Percentage rents are recognized and accrued when tenants' specified sales targets have been met. Estimated recoveries from certain tenants for their pro rata share of real estate taxes, insurance and other shopping center operating expenses are recognized as revenues in the period the applicable expenses are incurred. Other tenants pay a fixed rate and these tenant recoveries are recognized as revenues on a straight-line basis over the term of the related leases. For leasing revenues in which collectability is not considered probable, lease income is recognized on a cash basis and all previously recognized tenant accounts receivables, including straight-line rent, are fully reserved in the period in which the lease income is determined not to be probable of collection.
The following table summarizes the components of leasing revenue for the three and nine months ended September 30, 2024 and 2023:
| For the Three Months Ended September 30, | For the Nine Months Ended September 30, | ||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||
| Leasing revenue—fixed payments | $ | $ | $ | $ | |||||||||||||||||||
| Leasing revenue—variable payments | |||||||||||||||||||||||
| (Provision for) recovery of doubtful accounts | ( | ( | |||||||||||||||||||||
| $ | $ | $ | $ | ||||||||||||||||||||
The following table summarizes the future rental payments to the Company:
| Twelve months ending September 30, | ||||||||
| 2025 | $ | |||||||
| 2026 | ||||||||
| 2027 | ||||||||
| 2028 | ||||||||
| 2029 | ||||||||
| Thereafter | ||||||||
| $ | ||||||||
Lessee Leases:
The Company has certain properties that are subject to non-cancelable operating leases. The leases expire at various times through 2078, subject in some cases to options to extend the terms of the lease. Certain leases provide for contingent rent payments based on a percentage of base rental income, as defined in the lease. In addition, the Company has three finance leases that expire at various times through 2030.
19
THE MACERICH COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share and square foot amounts)
(Unaudited)
8. Leases: (Continued)
The following table summarizes the lease costs for the three and nine months ended September 30, 2024 and 2023:
| For the Three Months Ended September 30, | For the Nine Months Ended September 30, | ||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||
| Operating lease costs | $ | $ | $ | $ | |||||||||||||||||||
| Finance lease costs: | |||||||||||||||||||||||
| Amortization of ROU assets | |||||||||||||||||||||||
| Interest on lease liabilities | |||||||||||||||||||||||
| $ | $ | $ | $ | ||||||||||||||||||||
The following table summarizes the future rental payments required under the leases:
| September 30, 2024 | December 31, 2023 | |||||||||||||||||||||||||
| Year ending December 31, | Operating Leases | Finance Leases | Operating Leases | Finance Leases | ||||||||||||||||||||||
| 2024 | $ | $ | $ | $ | ||||||||||||||||||||||
| 2025 | ||||||||||||||||||||||||||
| 2026 | ||||||||||||||||||||||||||
| 2027 | ||||||||||||||||||||||||||
| 2028 | ||||||||||||||||||||||||||
| Thereafter | ||||||||||||||||||||||||||
| Total undiscounted rental payments | ||||||||||||||||||||||||||
| Less imputed interest | ( | ( | ( | ( | ||||||||||||||||||||||
| Total lease liabilities | $ | $ | $ | $ | ||||||||||||||||||||||
| Weighted average remaining term | ||||||||||||||||||||||||||
| Weighted average incremental borrowing rate | % | % | % | % | ||||||||||||||||||||||
9. Deferred Charges and Other Assets, net:
Deferred charges and other assets, net consist of the following:
| September 30, 2024 | December 31, 2023 | ||||||||||
| Leasing | $ | $ | |||||||||
| Intangible assets: | |||||||||||
| In-place lease values | |||||||||||
| Leasing commissions and legal costs | |||||||||||
| Above-market leases | |||||||||||
| Deferred tax assets | |||||||||||
| Deferred compensation plan assets | |||||||||||
| Other assets | |||||||||||
| Less accumulated amortization(1) | ( | ( | |||||||||
| $ | $ | ||||||||||
20
THE MACERICH COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share and square foot amounts)
(Unaudited)
9. Deferred Charges and Other Assets, net: (Continued)
(1) Accumulated amortization includes $38,962 and $39,540 relating to in-place lease values, leasing commissions and legal costs at September 30, 2024 and December 31, 2023, respectively. Amortization expense of in-place lease values, leasing commissions and legal costs was $6,290 and $1,880 for the three months ended September 30, 2024 and 2023, respectively, and $10,450 and $5,665 for the nine months ended September 30, 2024 and 2023, respectively.
The allocated values of above-market leases and below-market leases consist of the following:
| September 30, 2024 | December 31, 2023 | ||||||||||
| Above-Market Leases | |||||||||||
| Original allocated value | $ | $ | |||||||||
| Less accumulated amortization | ( | ( | |||||||||
| $ | $ | ||||||||||
| Below-Market Leases(1) | |||||||||||
| Original allocated value | $ | $ | |||||||||
| Less accumulated amortization | ( | ( | |||||||||
| $ | $ | ||||||||||
(1) Below-market leases are included in other accrued liabilities.
10. Mortgage Notes Payable:
Mortgage notes payable at September 30, 2024 and December 31, 2023 consist of the following:
| Carrying Amount of Mortgage Notes(1) | ||||||||||||||||||||||||||||||||
| Property Pledged as Collateral | September 30, 2024 | December 31, 2023 | Effective Interest Rate(2) | Monthly Debt Service(3) | Maturity Date(4) | |||||||||||||||||||||||||||
| Arrowhead Towne Center(5) | $ | $ | % | $ | 2028 | |||||||||||||||||||||||||||
| Chandler Fashion Center(6) | % | — | ||||||||||||||||||||||||||||||
| Danbury Fair Mall(7) | % | 2034 | ||||||||||||||||||||||||||||||
| Fashion District Philadelphia(8) | % | — | ||||||||||||||||||||||||||||||
| Fashion Outlets of Chicago | % | 2031 | ||||||||||||||||||||||||||||||
| Fashion Outlets of Niagara Falls USA(9) | % | 2026 | ||||||||||||||||||||||||||||||
| Freehold Raceway Mall(6) | % | 2029 | ||||||||||||||||||||||||||||||
| Fresno Fashion Fair | % | 2026 | ||||||||||||||||||||||||||||||
| Green Acres Mall(10) | % | 2028 | ||||||||||||||||||||||||||||||
| Kings Plaza Shopping Center | % | 2030 | ||||||||||||||||||||||||||||||
| Oaks, The(11) | % | 2026 | ||||||||||||||||||||||||||||||
| Pacific View | % | 2032 | ||||||||||||||||||||||||||||||
| Queens Center(12) | % | 2025 | ||||||||||||||||||||||||||||||
| Santa Monica Place(13) | % | 2025 | ||||||||||||||||||||||||||||||
| SanTan Village Regional Center | % | 2029 | ||||||||||||||||||||||||||||||
| South Plains Mall(14) | % | 2025 | ||||||||||||||||||||||||||||||
| Victor Valley, Mall of(15) | % | 2034 | ||||||||||||||||||||||||||||||
| Vintage Faire Mall | % | 2026 | ||||||||||||||||||||||||||||||
| $ | $ | |||||||||||||||||||||||||||||||
21
THE MACERICH COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share and square foot amounts)
(Unaudited)
10. Mortgage Notes Payable: (Continued)
(1)The mortgage notes payable balances include the unamortized debt discounts. Debt discounts represent the deficiency of the fair value of debt under the principal value of debt assumed in various acquisitions. The debt discounts are being amortized into interest expense over the term of the related debt in a manner which approximates the effective interest method. The debt discounts as of September 30, 2024 and December 31, 2023 consisted of the following:
| Property Pledged as Collateral | September 30, 2024 | December 31, 2023 | ||||||||||||
| Arrowhead Towne Center | $ | $ | ||||||||||||
| South Plains Mall | ||||||||||||||
| Total | $ | $ | ||||||||||||
The mortgage notes payable also include unamortized deferred finance costs that are amortized into interest expense over the remaining term of the related debt in a manner that approximates the effective interest method. Unamortized deferred finance costs were $21,782 and $21,148 at September 30, 2024 and December 31, 2023, respectively.
(2)The interest rate disclosed represents the effective interest rate, including the impact of debt discounts and deferred finance costs.
(3)The monthly debt service represents the payment of principal and interest.
(4)The maturity date assumes that all extension options are fully exercised and that the Company does not opt to refinance the debt prior to these dates. These extension options are at the Company's discretion, subject to certain conditions, which the Company believes will be met.
(5)On May 14, 2024, the Company acquired the remaining 40 % ownership interest in Arrowhead Towne Center that it did not previously own and has consolidated its 100 % interest (See Note 15—Acquisitions). In connection with the acquisition, the Company assumed the partner's share of the loan on the property.
(6)On November 16, 2023, the Company acquired the partner's 49.9 % interest in Freehold Raceway Mall for $5.6 million and assumed the partner's share of debt. The Company now owns 100 % of Freehold Raceway Mall (See Note 15—Acquisitions). On June 13, 2024, the partnership agreement between the Company and its partner was amended and as a result, the Company no longer accounts for its investment in Chandler Fashion Center as a financing arrangement. Effective June 13, 2024, the Company accounts for its investment in Chandler Fashion Center under the equity method of accounting and the related debt has been deconsolidated (See Note 12—Financing Arrangement and Note 16—Dispositions).
(7)On January 25, 2024, the Company replaced the existing loan with a $155,000 loan that bears interest at a fixed rate of 6.39 %, is interest only during the majority of the loan term and matures on February 6, 2034.
(8)On January 20, 2023, the Company repaid $26,107 of the outstanding loan balance and exercised its one-year extension option of the loan to January 22, 2024. The interest rate was SOFR plus 3.60 %. On January 22, 2024, the Company repaid the majority of the loan balance and the remaining $8,171 matured on April 21, 2024 and was paid in full on April 19, 2024.
(9)Effective October 6, 2023, the loan was in default and the Company was in negotiations with the lender on the terms of this non-recourse loan. On March 19, 2024, the Company closed on a three-year extension of the loan to October 6, 2026. The interest rate remained unchanged at 5.90 %.
(10)On January 3, 2023, the Company closed on a five-year $370,000 combined refinance of Green Acres Mall and Green Acres Commons. The new interest only loan bears interest at a fixed rate of 5.90 % and matures on January 6, 2028.
(11)On May 6, 2022, the Company closed on a two-year extension of the loan to June 5, 2024 at a new fixed interest rate of 5.25 %. The Company repaid $5,000 of the outstanding loan balance at closing. On June 5, 2023, the Company repaid $10,000 of the outstanding loan balance. On May 24, 2024, the Company closed on a two-year extension of the loan to June 5, 2026. The interest rate during the first year of the extended term will be 7.50 %, increasing to 8.50 % during the second year of the extended term.
(12)On October 28, 2024, the Company closed a $525,000 , five-year refinance of the loan on Queens Center. The new loan bears interest at a fixed rate of 5.37 %, is interest only during the entire loan term and matures November 6, 2029.
(13)On December 9, 2022, the Company closed on a three-year extension of the loan to December 9, 2025, including extension options. The interest rate remained unchanged at LIBOR plus 1.48 %, and has converted to 1-month Term SOFR plus 1.52 % effective July 9, 2023. The loan was covered by an interest rate cap agreement that effectively prevented LIBOR from exceeding 4.0 % during the period ending December 9, 2023. The interest rate cap agreement was converted to 1-month Term SOFR effective July 9, 2023. The interest rate cap agreement has since been
22
THE MACERICH COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share and square foot amounts)
(Unaudited)
10. Mortgage Notes Payable: (Continued)
extended with a 4 % strike rate to December 9, 2024. Effective April 9, 2024, the loan is in default and the Company is in negotiations with the lender on the terms of this non-recourse loan.
(14)On May 14, 2024, the Company acquired the remaining 40 % ownership interest in South Plains Mall that it did not previously own and has consolidated its 100 % interest (See Note 15—Acquisitions). In connection with the acquisition, the Company assumed the partner's share of the loan on the property.
Most of the mortgage loan agreements contain a prepayment penalty provision for the early extinguishment of the debt.
The Company's mortgage notes payable are secured by the properties on which they are placed and are non-recourse to the Company.
The Company expects that all loan maturities during the next twelve months will be refinanced, restructured, extended and/or paid off from the Company's revolving loan facility or with cash on hand, with the exception of Santa Monica Place as noted above.
Total interest expense capitalized was $5,834 and $5,670 for the three months ended September 30, 2024 and 2023, respectively, and $16,224 and $15,364 for the nine months ended September 30, 2024 and 2023, respectively.
The estimated fair value (Level 2 measurement) of mortgage notes payable at September 30, 2024 and December 31, 2023 was $4,197,716 and $3,863,997 , respectively, based on current interest rates for comparable loans. Fair value was determined using a present value model and an interest rate that included a credit value adjustment based on the estimated value of the property that serves as collateral for the underlying debt.
11. Bank and Other Notes Payable:
Bank and other notes payable consist of the following:
Credit Facility:
Previously, the Company had a $525,000 revolving loan facility, which was scheduled to mature on April 14, 2024. On September 11, 2023, the Company and the Operating Partnership entered into an amended and restated credit agreement, which amended and restated their prior credit agreement, and provides for an aggregate $650,000 revolving loan facility that matures on February 1, 2027, with a one-year extension option. The revolving loan facility can be expanded up to $950,000 , subject to receipt of lender commitments and other conditions. Concurrently with the entry into the amended and restated credit agreement, the Company drew $152,000 of the amount available under the revolving loan facility and used the proceeds to repay in full amounts outstanding under its prior credit facility. All obligations under the credit facility are guaranteed unconditionally by the Company and are secured in the form of mortgages on certain wholly-owned assets and pledges of equity interests held by certain of the Company’s subsidiaries. The new credit facility bears interest, at the Operating Partnership’s option, at either the base rate (as defined in the credit agreement) or adjusted term SOFR (as defined in the credit agreement) plus, in both cases, an applicable margin. The applicable margin depends on the Company’s overall leverage ratio and ranges from 1.00 % to 2.50 % over the selected index rate. Adjusted term SOFR is Term SOFR (as defined in the credit agreement) plus 0.10 % per annum. As of September 30, 2024, the borrowing rate was SOFR plus a spread of 2.35 %. As of September 30, 2024, there were no borrowings outstanding under the credit facility. Unamortized deferred finance costs were $12,617 as of September 30, 2024, which are netted against balances outstanding or as an asset when no borrowings are outstanding on the credit facility which was the case as of September 30, 2024. As of September 30, 2024, the Company’s availability under the revolving loan facility for additional borrowings was $649,777 .
As of September 30, 2024 and December 31, 2023, the Company was in compliance with all applicable financial loan covenants.
23
THE MACERICH COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share and square foot amounts)
(Unaudited)
12. Financing Arrangement:
On September 30, 2009, the Company formed a joint venture whereby a third party acquired a 49.9 % interest in Chandler Fashion Center, a 1,402,000 square foot regional shopping center in Chandler, Arizona, and Freehold Raceway Mall, a 1,546,000 square foot regional shopping center in Freehold, New Jersey (collectively referred to herein as "Chandler Freehold"). As a result of the Company having certain rights under the agreement to repurchase the assets of Chandler Freehold, the transaction did not qualify for sale treatment. The Company, however, was not obligated to repurchase the assets. The Company accounted for its investment in Chandler Freehold as a financing arrangement.
On November 16, 2023, the Company acquired the 49.9 % ownership interest in Freehold Raceway Mall (See Note 15—Acquisitions). As a result, Freehold Raceway Mall is no longer part of the financing arrangement and is 100 % owned by the Company. In connection with the acquisition of the 49.9 % ownership interest, the Company recorded the $5,587 purchase amount as a reduction to the financing arrangement obligation.
On June 13, 2024, the partnership agreement between the Company and its partner was amended, removing the specific rights that prohibited the transaction's qualification for sale treatment. As a result, the transaction qualified for sale treatment and the Company no longer accounts for its investment in Chandler Fashion Center as a financing arrangement. The financing arrangement obligation was $88,721 on June 13, 2024 and was reversed and included in gain on sale of assets (See Note 16—Dispositions). References to Chandler Freehold for the period after November 16, 2023 through June 13, 2024 shall be deemed to only refer to Chandler Fashion Center.
The fair value (Level 3 measurement) of the financing arrangement obligation at June 13, 2024 and December 31, 2023 was based upon a terminal capitalization rate of approximately 7.00 % and 6.50 %, respectively, a discount rate at June 13, 2024 and December 31, 2023 of 8.25 % and 8.00 %, respectively, and market rents per square foot of $45 240
During the three and nine months ended September 30, 2024 and 2023, the Company recognized related party interest expense (income) in the Company's consolidated statements of operations in connection with the financing arrangement as follows:
| For the Three Months Ended September 30, | For the Nine Months Ended September 30, | ||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||
| Distributions equal to the partner's share of net income | $ | $ | $ | $ | |||||||||||||||||||
| Distributions in excess of the partner's share of net income | |||||||||||||||||||||||
| Adjustment to fair value of financing arrangement obligation | ( | ( | |||||||||||||||||||||
| $ | $ | $ | ( | $ | ( | ||||||||||||||||||
13. Noncontrolling Interests:
The Company allocates net (loss) income of the Operating Partnership based on the weighted average ownership interest during the period. The net (loss) income of the Operating Partnership that is not attributable to the Company is reflected in the consolidated statements of operations as noncontrolling interests. The Company adjusts the noncontrolling interests in the Operating Partnership at the end of each period to reflect its ownership interest in the Company. The Company had a 96 4 0.01 per share, as reported on the New York Stock Exchange for the 10 trading days ending on the respective balance sheet date.
24
THE MACERICH COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share and square foot amounts)
(Unaudited)
13. Noncontrolling Interests: (Continued)
Accordingly, as of September 30, 2024 and December 31, 2023, the aggregate redemption value of the then-outstanding OP Units not owned by the Company was $172,463 and $158,157 , respectively.
The Company issued common and preferred units of MACWH, LP in April 2005 in connection with the acquisition of the Wilmorite portfolio. The common and preferred units of MACWH, LP are redeemable at the election of the holder. The Company may redeem them for cash or shares of the Company's stock at the Company's option and they are classified as permanent equity.
Included in permanent equity are outside ownership interests in various consolidated joint ventures. The joint ventures do not have rights that require the Company to redeem the ownership interests in either cash or stock.
14. Stockholders' Equity:
Stock Offerings
In connection with the commencement of an “at the market” offering program on March 26, 2021, which is referred to as the “ATM Program,” the Company entered into an equity distribution agreement with certain sales agents pursuant to which the Company may issue and sell shares of its common stock having an aggregate offering price of up to $500,000 under the ATM Program.
During the three and nine months ended September 30, 2024, the Company issued 9,401,596 151,699 148,624
Stock Buyback Program
On February 12, 2017, the Company's Board of Directors authorized the repurchase of up to $500,000 of its outstanding common shares as market conditions and the Company’s liquidity warrant. Repurchases may be made through open market purchases, privately negotiated transactions, structured or derivative transactions, including accelerated share repurchase transactions, or other methods of acquiring shares, from time to time as permitted by securities laws and other legal requirements. The program is referred to herein as the "Stock Buyback Program".
15. Acquisitions:
On May 18, 2023, the Company acquired Seritage’s remaining 50 % ownership interest in the MS Portfolio LLC joint venture that owns five former Sears parcels, for a total purchase price of $46,687 . These parcels are located at Chandler Fashion Center, Danbury Fair Mall, Freehold Raceway Mall, Los Cerritos Center and Washington Square. Effective as of May 18, 2023, the Company now owns and has consolidated its 100 % interest in these five former Sears parcels in its consolidated financial statements.
The following is a summary of the allocation of the fair value of the former Sears parcels at Chandler Fashion Center, Danbury Fair Mall, Freehold Raceway Mall, Los Cerritos Center and Washington Square:
| Land | $ | ||||
| Building and improvements | |||||
| Construction in progress | |||||
| Deferred charges | |||||
| Other accrued liabilities (below-market lease) | ( | ||||
Fair value of acquired net assets (at | $ | ||||
25
THE MACERICH COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share and square foot amounts)
(Unaudited)
15. Acquisitions: (Continued)
On November 16, 2023, the Company acquired its joint venture partner's 49.9 % ownership interest in Freehold Raceway Mall for $5,587 and assumed its joint venture partner's share of debt. The Company now owns 100 % of this property. Prior to November 16, 2023, the Company accounted for its investment in Freehold Raceway Mall as part of a financing arrangement (See Note 12—Financing Arrangement).
On December 9, 2023, the Company acquired its joint venture partner's 50 % interest in Fashion District Philadelphia for no consideration, and the Company now owns 100 % of this property. Prior to December 9, 2023, due to the Company's joint venture partner having no substantive participation rights, the Company accounted for this joint venture as a consolidated VIE in its consolidated financial statements (See Note 2—Summary of Significant Accounting Policies).
On May 14, 2024, the Company acquired the remaining 40 % ownership interest in Arrowhead Towne Center that it did not previously own for a total purchase price of $36,447 and the assumption of its joint venture partner's share of the debt on the property. Effective as of May 14, 2024, the Company now owns and has consolidated its 100 % interest in Arrowhead Towne Center.
The following is a summary of the allocation of the fair value of Arrowhead Towne Center:
| Property | $ | ||||
| Deferred charges | |||||
| Other assets | |||||
| Total assets acquired | |||||
| Mortgage note payable | |||||
| Discount on mortgage note payable | ( | ||||
| Other accrued liabilities | |||||
| Total liabilities assumed | |||||
Fair value of acquired net assets (at | $ | ||||
The net assets acquired upon consolidation of Arrowhead Towne Center were initially recorded at their relative fair values as shown in the table above. The carrying value of the property was then reduced by the remaining negative basis of $58,683 from the equity method investment previously held by the Company.
On May 14, 2024, the Company acquired the remaining 40 % ownership interest in South Plains Mall that it did not previously own for no cash consideration and the assumption of its joint venture partner's share of the debt on the property. Effective as of May 14, 2024, the Company now owns and has consolidated its 100 % interest in South Plains Mall.
The following is a summary of the allocation of the fair value of South Plains Mall:
| Property | $ | ||||
| Deferred charges | |||||
| Other assets | |||||
| Total assets acquired | |||||
| Mortgage note payable | |||||
| Discount on mortgage note payable | ( | ||||
| Other accrued liabilities | |||||
| Total liabilities assumed | |||||
Fair value of acquired net assets (at | $ | ||||
26
THE MACERICH COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share and square foot amounts)
(Unaudited)
15. Acquisitions: (Continued)
The net assets acquired upon consolidation of South Plains Mall were initially recorded at their relative fair values as shown in the table above. The carrying value of the property was then reduced by the remaining negative basis of $72,160 from the equity method investment previously held by the Company.
On May 17, 2024, the Company acquired the former Sears parcel located at Inland Center for $5,382 .
16. Dispositions:
On May 2, 2023, the Company sold The Marketplace at Flagstaff, a 268,000 square foot power center in Flagstaff, Arizona, for $23,500 , which resulted in a gain on sale of assets of $10,349 . The Company used the net proceeds to pay down debt.
On July 17, 2023, the Company sold Superstition Springs Power Center, a 204,000 square foot power center in Mesa, Arizona, for $5,634 , which resulted in a gain on sale of assets of $1,903 . The Company used the net proceeds to pay down debt.
The Company did not repay the loan on Towne Mall on its maturity date of November 1, 2022, and completed transition of the property to a receiver. On December 4, 2023, Towne Mall was sold by the receiver for $9,500 , resulting in a gain on extinguishment of debt of $8,208 .
On June 13, 2024, the partnership agreement between the Company and its partner was amended and as a result, the Company no longer accounts for its investment in Chandler Fashion Center as a financing arrangement (See Note 12—Financing Arrangement). Effective June 13, 2024, the Company accounts for its investment in Chandler Fashion Center under the equity method of accounting.
The Company recognized the following gain on sale of assets on Chandler Fashion Center:
| Fair value of investment in unconsolidated joint ventures - Chandler Fashion Center | $ | ||||
| Reversal of the financing arrangement obligation | |||||
| Deconsolidation of Chandler Fashion Center - liabilities in excess of assets | |||||
| $ | |||||
On June 28, 2024, the Company sold a former department store parcel at Valle Vista Mall in Harlingen, Texas for $7,100 , which resulted in a gain on sale of assets of $756 . The Company used the net proceeds to pay down debt.
For the three and nine months ended September 30, 2024, the Company sold various land parcels in separate transactions, resulting in gains on sale of land of $222 and $511 , respectively. For the three and nine months ended September 30, 2023, the Company sold various land parcels in separate transactions, resulting in gains on sale of land of $480 and $4,854 , respectively. The Company used its share of the proceeds from these sales to pay down debt and for other general corporate purposes.
17. Commitments and Contingencies:
As of September 30, 2024, the Company was contingently liable for $41,113 in letters of credit guaranteeing performance by the Company of certain obligations relating to the Centers. As of September 30, 2024, $40,890 of these letters of credit were secured by restricted cash. On October 30, 2024, $35,000 of these letters of credit secured by restricted cash was canceled and is no longer restricted cash. The Company does not believe that these letters of credit will result in a liability to the Company.
The Company has entered into a number of construction agreements related to its redevelopment and development activities. Obligations under these agreements are contingent upon the completion of the services within the guidelines specified in the relevant agreement. At September 30, 2024, the Company had $23,807 in outstanding obligations, which it believes will be settled in the next twelve months.
27
THE MACERICH COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share and square foot amounts)
(Unaudited)
18. Related Party Transactions:
Certain unconsolidated joint ventures have engaged the Management Companies to manage the operations of the Centers. Under these arrangements, the Management Companies are reimbursed for compensation paid to on-site employees, leasing agents and project managers at the Centers, as well as insurance costs and other administrative expenses.
The following are fees charged to unconsolidated joint ventures:
| For the Three Months Ended September 30, | For the Nine Months Ended September 30, | ||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||
| Management fees | $ | $ | $ | $ | |||||||||||||||||||
| Development and leasing fees | |||||||||||||||||||||||
| $ | $ | $ | $ | ||||||||||||||||||||
Interest (income) expense from related party transactions includes $0 and $3,418 for the three months ended September 30, 2024 and 2023, respectively, and $(11,264 ) and $(9 ) for the nine months ended September 30, 2024 and 2023, respectively, in connection with the financing arrangement (See Note 12—Financing Arrangement).
Due from affiliates includes $3,207 and $4,755 of unreimbursed costs and fees from unconsolidated joint ventures due to the Management Companies at September 30, 2024 and December 31, 2023, respectively.
19. Share and Unit-Based Plans:
Under the Long-Term Incentive Plan ("LTIP"), each award recipient is issued a form of operating partnership units ("LTIP Units") in the Operating Partnership or form of restricted stock units (together with the LTIP Units, the "LTI Units"). Upon the occurrence of specified events and subject to the satisfaction of applicable vesting conditions, LTIP Units (after conversion into OP Units) are ultimately redeemable for common stock of the Company, or cash at the Company's option, on a one -unit for one -share basis. LTI Units receive cash dividends based on the dividend amount paid on the common stock of the Company. The LTIP may include market-indexed awards, performance-based awards and service-based awards.
The market-indexed LTI Units vest over the service period of the award based on the percentile ranking of the Company in terms of total return to stockholders (the "Total Return") per share of common stock relative to the Total Return of a group of peer REITs, as measured at the end of the measurement period. The performance-based LTI Units vest over a specified period based on the Company's operational performance over that period.
During the nine months ended September 30, 2024, the Company granted the following LTI Units:
| Grant Date | Units | Type | Fair Value per LTI Unit | Vest Date | ||||||||||||||||||||||
| 2/15/2024 | Service-based | $ | 12/31/2026 | |||||||||||||||||||||||
| 2/15/2024 | Performance-based | $ | 12/31/2026 | |||||||||||||||||||||||
| 3/1/2024 | Service-based | $ | 12/31/2026 | |||||||||||||||||||||||
| 3/1/2024 | Service-based | $ | 3/1/2027 | |||||||||||||||||||||||
| 3/1/2024 | Service-based | $ | 3/1/2028 | |||||||||||||||||||||||
| 3/1/2024 | Service-based | $ | 3/1/2029 | |||||||||||||||||||||||
| 3/1/2024 | Performance-based | $ | 12/31/2026 | |||||||||||||||||||||||
The fair value of the service-based LTI Units was determined by the market price of the Company's common stock on the date of grant. The fair value (Level 3 measurement) of the performance-based LTI Units granted on February 15, 2024 was
28
THE MACERICH COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share and square foot amounts)
(Unaudited)
19. Share and Unit-Based Plans: (Continued)
estimated on the date of grant using a Monte Carlo Simulation model that assumed an approximate three-year risk-free interest rate of 4.28 % and an expected volatility of 45.04 %. The fair value (Level 3 measurement) of the performance-based LTI Units granted on March 1, 2024 was estimated on the date of grant using a Monte Carlo Simulation model that assumed an approximate three-year risk-free interest rate of 4.25 % and an expected volatility of 45.09 %.
The following table summarizes the activity of the non-vested LTI Units, phantom stock units and stock units:
| LTI Units | Phantom Stock Units | Stock Units | |||||||||||||||||||||||||||||||||
| Units | Value(1) | Units | Value(1) | Units | Value(1) | ||||||||||||||||||||||||||||||
| Balance at January 1, 2024 | $ | $ | $ | ||||||||||||||||||||||||||||||||
| Granted | |||||||||||||||||||||||||||||||||||
| Vested | ( | ( | |||||||||||||||||||||||||||||||||
| Forfeited | ( | ( | |||||||||||||||||||||||||||||||||
| Balance at September 30, 2024 | $ | $ | $ | ||||||||||||||||||||||||||||||||
(1) Value represents the weighted average grant date fair value. | |||||||||||||||||||||||||||||||||||
The following table summarizes the activity of the vested stock options outstanding:
| Stock Options | ||||||||||||||
| Units | Value(1) | |||||||||||||
| Balance at January 1, 2024 | $ | |||||||||||||
| Granted | ||||||||||||||
| Balance at September 30, 2024 | $ | |||||||||||||
| (1) Value represents the weighted average exercise price. | ||||||||||||||
The following summarizes the compensation cost under the share and unit-based plans:
| For the Three Months Ended September 30, | For the Nine Months Ended September 30, | ||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||
| LTI Units | $ | $ | $ | $ | |||||||||||||||||||
| Stock units | |||||||||||||||||||||||
| Phantom stock units | |||||||||||||||||||||||
| $ | $ | $ | $ | ||||||||||||||||||||
29
THE MACERICH COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share and square foot amounts)
(Unaudited)
20. Income Taxes:
The Company has made taxable REIT subsidiary elections for all of its corporate subsidiaries other than its qualified REIT subsidiaries. The elections, effective for the year beginning January 1, 2001 and future years, were made pursuant to Section 856(l) of the Code. The Company's taxable REIT subsidiaries ("TRSs") are subject to corporate level income taxes which are provided for in the Company's consolidated financial statements. The Company's primary TRSs include Macerich Management Company and Macerich Arizona Partners LLC.
The income tax provision of the TRSs are as follows:
| For the Three Months Ended September 30, | For the Nine Months Ended September 30, | ||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||
| Current | $ | $ | $ | $ | |||||||||||||||||||
| Deferred | ( | ( | ( | ||||||||||||||||||||
| Total (expense) benefit | $ | ( | $ | ( | $ | $ | ( | ||||||||||||||||
The net operating loss ("NOL") carryforwards generated through the 2017 tax year are scheduled to expire through 2037, beginning in 2031. Pursuant to the Tax Cuts and Jobs Act of 2017, NOLs generated in 2018 and subsequent tax years are carried forward indefinitely. The Coronavirus Aid, Relief and Economic Security Act removed the 80% of taxable income limitation, imposed by the Tax Cuts and Jobs Act, for NOLs generated in 2018, 2019 and 2020. Net deferred tax assets of $24,445 and $24,024 were included in deferred charges and other assets, net at September 30, 2024 and December 31, 2023, respectively.
The Company is required to establish a valuation allowance for any portion of the deferred tax asset that the Company concludes is more likely than not to be unrealizable. The Company’s assessment considers all evidence, both positive and negative, including the nature, frequency and severity of any current and cumulative losses, taxable income in carry back years, the scheduled reversal of deferred tax liabilities, tax planning strategies and projected future taxable income in making this assessment. As of September 30, 2024, the Company had no valuation allowance recorded.
The tax years 2020 through 2022 remain open to examination by the taxing jurisdictions to which the Company is subject. The Company does not expect that the total amount of unrecognized tax benefit will materially change within the next twelve months.
21. Subsequent Events:
On October 24, 2024, the Company acquired its joint venture partner's 40 % interest in the PPR Portfolio, which includes Lakewood Center, Los Cerritos Center and Washington Square, for a net purchase price of approximately $122,000 , which includes the assumption of the partner's share of property level indebtedness. The Company now owns and will consolidate its 100% interests in the PPR Portfolio effective October 24, 2024.
On October 31, 2024, the Company announced a dividend/distribution of $0.17 per share for common stockholders and OP Unitholders of record on November 12, 2024. All dividends/distributions will be paid 100% in cash on December 2, 2024.
30
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
IMPORTANT INFORMATION RELATED TO FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q of The Macerich Company (the "Company") contains or incorporates statements that constitute forward-looking statements within the meaning of the federal securities laws. Any statements that do not relate to historical or current facts or matters are forward-looking statements. You can identify some of the forward-looking statements by the use of forward-looking words, such as "may," "will," "could," "should," "expects," "anticipates," "intends," "projects," "predicts," "plans," "believes," "seeks," "estimates," "scheduled" and variations of these words and similar expressions. Statements concerning current conditions may also be forward-looking if they imply a continuation of current conditions. Forward-looking statements appear in a number of places in this Form 10-Q and include statements regarding, among other matters:
•expectations regarding the Company's growth;
•expectations regarding the Company's Path Forward Plan and its ability to meet the goals established under such plan;
•the Company's beliefs regarding its acquisition, redevelopment, development, leasing and operational activities and opportunities, including the performance and financial stability of its retailers;
•the Company's acquisition, disposition and other strategies;
•regulatory matters pertaining to compliance with governmental regulations;
•the Company's capital expenditure plans and expectations for obtaining capital for expenditures;
•the Company's expectations regarding income tax benefits;
•the Company's expectations regarding its financial condition or results of operations; and
•the Company's expectations for refinancing its indebtedness, entering into and servicing debt obligations and entering into joint venture arrangements.
Stockholders are cautioned that any such forward-looking statements are not guarantees of future performance and involve risks, uncertainties and other factors that may cause actual results, performance or achievements of the Company or the industry to differ materially from the Company's future results, performance or achievements, or those of the industry, expressed or implied in such forward-looking statements. Such factors include, among others, general industry, as well as global, national, regional and local 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, terms and payments; elevated interest rates and inflation and its impact on the financial condition and results of operations of the Company, including as a result of any defaults on mortgage loans, and its tenants, availability, terms 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 (including rising inflation, supply chain disruptions and construction delays), acquisitions and dispositions; adverse impacts from any future pandemic, epidemic or outbreak of any highly infectious disease on the U.S., regional and global economies and the financial condition and results of operations of the Company and its tenants; the liquidity of real estate investments, governmental actions and initiatives (including legislative and regulatory changes); environmental and safety requirements; and terrorist activities or other acts of violence which could adversely affect all of the above factors. You are urged to carefully review the disclosures we make concerning these risks and other factors that may affect our business and operating results, including those made in "Item 1A. Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2023, as well as our other reports filed with the Securities and Exchange Commission (the "SEC"), which disclosures are incorporated herein by reference. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this document. The Company does not intend, and undertakes no obligation, to update any forward-looking information to reflect events or circumstances after the date of this document or to reflect the occurrence of unanticipated events, unless required by law to do so.
Management's Overview and Summary
The Company is involved in the acquisition, ownership, development, redevelopment, management and leasing of regional and community/power shopping centers located throughout the United States. The Company is the sole general partner of, and owns a majority of the ownership interests in, The Macerich Partnership, L.P. (the "Operating Partnership"). As of September 30, 2024, the Operating Partnership owned or had an ownership interest in 41 regional retail centers (including office, hotel and residential space adjacent to these shopping centers), three community/power shopping centers and one redevelopment property. These 45 regional retail centers, community/power shopping centers and one redevelopment property consist of approximately 45 million square feet of gross leasable area ("GLA") and are referred to herein as the "Centers". The Centers consist of consolidated Centers ("Consolidated Centers") and unconsolidated joint venture Centers ("Unconsolidated
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Joint Venture Centers"), unless the context otherwise requires. The property management, leasing and redevelopment of the Company's portfolio is provided by the Company's seven management companies (collectively referred to herein as the "Management Companies"). The Company is a self-administered and self-managed real estate investment trust ("REIT") and conducts all of its operations through the Operating Partnership and the Management Companies.
The following discussion is based primarily on the consolidated financial statements of the Company for the three and nine months ended September 30, 2024 and 2023. It compares the results of operations for the three months ended September 30, 2024 to the results of operations for the three months ended September 30, 2023. It also compares the results of operations and cash flows for the nine months ended September 30, 2024 to the results of operations and cash flows for the nine months ended September 30, 2023.
This information should be read in conjunction with the accompanying consolidated financial statements and notes thereto.
Acquisitions:
On May 18, 2023, the Company acquired Seritage Growth Properties' ("Seritage") remaining 50% ownership interest in the MS Portfolio LLC joint venture that owns five former Sears parcels, for a total purchase price of approximately $46.7 million. These parcels are located at Chandler Fashion Center, Danbury Fair Mall, Freehold Raceway Mall, Los Cerritos Center and Washington Square. Effective as of May 18, 2023, the Company now owns and has consolidated its 100% interest in these five former Sears parcels in its consolidated financial statements (See Note 15—Acquisitions in the Notes to the Consolidated Financial Statements).
On November 16, 2023, the Company acquired its joint venture partner’s 49.9% ownership interest in Freehold Raceway Mall for $5.6 million and the assumption of its joint venture partner’s share of debt. The Company now owns 100% of Freehold Raceway Mall. Prior to November 16, 2023, the Company accounted for its investment in Freehold Raceway Mall as part of a financing arrangement (See Note 12 – Financing Arrangement and Note 15 – Acquisitions in the Notes to the Consolidated Financial Statements).
On December 9, 2023, the Company acquired its joint venture partner’s 50% interest in Fashion District Philadelphia for no consideration, and the Company now owns 100% of this property. Prior to December 9, 2023, due to the Company’s joint venture partner having no substantive participation rights, the Company accounted for this joint venture as a consolidated variable interest entity in its consolidated financial statements (See Note 2 – Summary of Significant Accounting Policies and Note 15 – Acquisitions in the Notes to the Consolidated Financial Statements).
On May 14, 2024, the Company acquired its joint venture partner's 40% interest in each of Arrowhead Towne Center and South Plains Mall for a purchase price of $36.4 million and the assumption of its joint venture partner's share of debt for each property. The Company now owns and has consolidated its 100% interests in Arrowhead Towne Center and South Plains Mall (See Note 15—Acquisitions in the Notes to the Consolidated Financial Statements).
On May 17, 2024, the Company acquired the former Sears parcel located at Inland Center for $5.4 million (See Note 15—Acquisitions in the Notes to the Consolidated Financial Statements).
On October 24, 2024, the Company acquired its joint venture partner's 40% interest in the Pacific Premier Retail Trust portfolio, which includes Los Cerritos Center, Washington Square and Lakewood Center, for a net purchase price of approximately $122.0 million, which includes the assumption of the partner's share of property level indebtedness. The Company now owns and will consolidate its 100% interests in these properties in its consolidated financial statements.
Dispositions:
On May 2, 2023, the Company sold The Marketplace at Flagstaff, a 268,000 square foot power center in Flagstaff, Arizona, for $23.5 million, which resulted in a gain on sale of assets of $10.3 million. The Company used the net proceeds to pay down debt (See "Liquidity and Capital Resources").
On July 17, 2023, the Company sold Superstition Springs Power Center, a 204,000 square foot power center in Mesa, Arizona, for $5.6 million, which resulted in a gain on sale of assets of $1.9 million. The Company used the net proceeds to pay down debt (See "Liquidity and Capital Resources").
The Company did not repay the loan on Towne Mall on its maturity date of November 1, 2022, and completed transition
of the property to a receiver. On December 4, 2023, Towne Mall was sold by the receiver for $9.5 million, resulting in a gain on
extinguishment of debt of $8.2 million.
On December 27, 2023, the Company’s joint venture in One Westside sold the property, a 680,000 square foot office
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property in Los Angeles, California, for $700.0 million. The existing $324.6 million loan on the property was repaid, and $77.6
million of net proceeds were generated at the Company’s 25% ownership share, which were used to reduce the Company’s
revolving loan facility. As a result of this transaction, the Company recognized its share of gain on sale of assets of $8.1
million (See "Liquidity and Capital Resources").
For the twelve months ended December 31, 2023, the Company and certain joint venture partners sold various land parcels in separate transactions, resulting in the Company’s share of the gain on sale of land of $10.8 million. The Company used its share of the proceeds from these sales of $16.4 million to pay down debt and for other general corporate purposes.
On June 13, 2024, the partnership agreement between the Company and its joint venture partner was amended and as a result, the Company no longer accounts for its investment in Chandler Fashion Center as a financing arrangement. Effective June 13, 2024, the Company accounts for its investment in Chandler Fashion Center under the equity method of accounting (See Note 12—Financing Arrangement and Note 16—Dispositions in the Notes to the Consolidated Financial Statements).
On June 28, 2024, the Company's joint venture sold Country Club Plaza, a 971,000 square foot regional retail center in Kansas City, Missouri, for $175.6 million. Concurrent with the sale, the remaining amount owed by the joint venture under the $295.5 million loan ($147.7 million at the Company's share) was forgiven by the lender.
On June 28, 2024, the Company sold a former department store parcel at Valle Vista Mall in Harlingen, Texas for $7.1 million. The Company used the net proceeds to pay down debt. The Company recognized a gain on sale of assets of $0.8 million (See "Liquidity and Capital Resources" and Note 16—Dispositions in the Notes to the Consolidated Financial Statements).
On July 31, 2024, the Company sold its 50% interest in Biltmore Fashion Park, a 611,000 square foot regional retail center in Phoenix, Arizona, for $110.0 million. The Company used the net proceeds to pay down debt. As a result of this transaction, the Company recognized a gain of $42.8 million (See "Liquidity and Capital Resources" and Note 4—Investments In Unconsolidated Joint Ventures in the Notes to the Consolidated Financial Statements).
For the three and nine months ended September 30, 2024, the Company and certain joint venture partners sold various land parcels in separate transactions, resulting in the Company’s share of the gain on sale of land of $0.3 million and $1.6 million, respectively. The Company’s proceeds from these sales in the three and nine months ended September 30, 2024 were $0.9 million and $3.4 million, respectively. The Company used its share of the proceeds from these sales to pay down debt and for other general corporate purposes.
The Company is currently under contract to sell The Oaks for $157.0 million, which is expected to close during the fourth quarter of 2024, subject to customary closing conditions.
Financing Activities:
On January 3, 2023, the Company replaced the existing $363.0 million of combined loans on Green Acres Mall and Green Acres Commons, both of which were scheduled to mature during the first quarter of 2023, with a $370.0 million loan that bears interest at a fixed rate of 5.90%, is interest only during the entire loan term and matures on January 6, 2028.
On January 20, 2023, the Company exercised its one-year extension option of the loan on Fashion District Philadelphia to January 22, 2024. The interest rate was SOFR plus 3.60% and the Company repaid $26.1 million of the outstanding loan balance at closing.
On March 3, 2023, the Company’s joint venture in Scottsdale Fashion Square replaced the existing $403.9 million mortgage loan on the property with a new $700.0 million loan that bears interest at a fixed rate of 6.21%, is interest only during the entire loan term and matures on March 6, 2028.
On March 22, 2023, the Company executed the one-year extension option on its credit facility to April 14, 2024. Effective March 13, 2023, the credit facility converted from LIBOR to 1-month Term SOFR.
On April 25, 2023, the Company's joint venture in Deptford Mall closed on a three-year maturity date extension for the existing loan of $159.9 million to April 3, 2026, including extension options. The Company's joint venture repaid $10.0 million ($5.1 million at the Company's pro rata share) of the outstanding loan balance at closing. The interest rate on the loan remains unchanged at 3.73%.
Effective May 9, 2023, the Company’s joint venture in Country Club Plaza defaulted on the $295.2 million ($147.6 million at the Company's pro rata share) non-recourse loan on the property. The Company’s joint venture subsequently sold the property on June 28, 2024.
On June 27, 2023, the Company closed on a one-year extension on the $133.5 million loan on Danbury Fair Mall to July 1, 2024. The Company repaid $10.0 million of the outstanding loan balance at closing and the amended interest rate was 7.5%
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as of July 1, 2023 and incrementally increased to 8.0% as of October 1, 2023, 8.5% as of January 1, 2024 and 9.0% as of April 1, 2024.
On September 11, 2023, the Company and Operating Partnership entered into an amended and restated credit agreement, which amended and restated their prior $525.0 million credit agreement, and provides for an aggregate $650.0 million revolving loan facility that matures on February 1, 2027, with a one-year extension option. Concurrently with the entry into the amended and restated credit agreement, the Company drew $152.0 million of the amount available under the revolving loan facility and used the proceeds to repay in full amounts outstanding under the Company’s prior credit facility. (See “Liquidity and Capital Resources”).
Effective October 6, 2023, the Company's $86.5 million loan on Fashion Outlets of Niagara Falls was in default. On March 19, 2024, the Company closed a three-year extension of the $84.7 million loan on Fashion Outlets of Niagara Falls. The scheduled outstanding $1.8 million principal payments were applied at closing. The extended loan bears the same fixed interest rate of 5.90%, and matures on October 6, 2026.
On December 4, 2023, the Company's joint venture in Tysons Corner Center replaced the existing $666.5 million mortgage loan on the property with a new $710.0 million loan that bears interest at a fixed rate of 6.60%, is interest only during the entire loan term and matures on December 6, 2028.
On January 10, 2024, the Company's joint venture in Boulevard Shops replaced the existing $23.0 million mortgage loan on the property with a new $24.0 million loan that bears interest at a variable rate of SOFR plus 2.50%, is interest only during the entire loan term and matures on December 5, 2028. The new loan has a required interest rate cap throughout the term of the loan at a strike rate of 7.5%.
On January 22, 2024, the Company repaid the majority of the mortgage loan on Fashion District Philadelphia. The remaining $8.2 million was scheduled to mature on April 21, 2024 and was paid in full prior to maturity.
On January 25, 2024, the Company replaced the existing $116.9 million mortgage loan on Danbury Fair Mall with a new $155.0 million loan that bears interest at a fixed rate of 6.39%, is interest only during the majority of the loan term and matures on February 6, 2034.
On April 9, 2024, the Company defaulted on the $300.0 million loan on Santa Monica Place. The Company is in negotiations with the lender on the terms of this non-recourse loan.
On April 19, 2024, the Company repaid in full the remaining $8.2 million loan on Fashion District Philadelphia.
On May 24, 2024, the Company closed a two-year extension of the $149.9 million loan on The Oaks, which now matures on June 5, 2026. The interest rate during the first year of the extended term will be 7.5% and will increase to 8.5% during the second year of the extended term.
On June 27, 2024, the Company's joint venture in Chandler Fashion Center replaced the existing $256.0 million loan on the property with a new $275.0 million loan that bears interest at 7.06%, is interest only during the entire loan term and matures on July 1, 2029. The Company received a distribution of $17.7 million in connection with the refinancing.
On August 22, 2024, the Company closed an $85.0 million, ten-year refinance of the loan on The Mall of Victor Valley. The new loan bears interest at a fixed rate of 6.72%, is interest only during the entire loan term and matures on September 6, 2034.
On October 28, 2024, the Company closed a $525.0 million, five-year refinance of the loan on Queens Center, which matures on November 6, 2029. The new loan replaced the existing $600.0 million loan, bears interest at a fixed rate of 5.37% and is interest only during the entire loan term.
Redevelopment and Development Activities:
The Company has a 50/50 joint venture with Simon Property Group, which was initially formed to develop Los Angeles Premium Outlets, a premium outlet center in Carson, California. During the first quarter of 2024, the Company evaluated its investment and concluded that due to certain conditions, the Company should not continue to invest capital in this development project. As a result, the Company wrote-off its share of the investment in the three months ended March 31, 2024. At the time of the write-off, the Company had funded $39.5 million of the total $78.9 million incurred by the joint venture (See Note 4 – Investments in Unconsolidated Joint Ventures in the Notes to the Consolidated Financial Statements).
The Company’s joint venture in Scottsdale Fashion Square, a 2,117,000 square foot regional retail center in Scottsdale, Arizona, is redeveloping a two-level Nordstrom wing with luxury-focused retail and restaurant uses. The total cost of the project is estimated to be between $84.0 million and $90.0 million, with $42.0 million to $45.0 million estimated to be the
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Company’s pro rata share. The Company has incurred $24.5 million of the total $49.0 million incurred by the joint venture as of September 30, 2024. The anticipated opening will be in phases beginning in 2024, with completion in 2025.
The Company is redeveloping the northeast quadrant of Green Acres Mall, a 2,062,000 square foot regional retail center in Valley Stream, New York. The project will include new exterior shops and facade totaling approximately 385,000 square feet of leasing, including new grocery use, redevelopment of a vacant anchor building and demolition of another vacant anchor building. The total cost of the project is estimated to be between $120.0 million and $140.0 million. The Company has incurred approximately $17.1 million as of September 30, 2024. The anticipated opening is in 2026.
The Company’s joint venture in FlatIron Crossing, a 1,391,000 square foot regional retail center in Broomfield, Colorado, is developing luxury, multi-family residential units, new/repurposed retail and food and beverage uses, and a community plaza, in addition to the redevelopment of the vacant former Nordstrom store located on the property. The Company's ownership percentage is expected to be 43.4% in the residential portion of the development and 51% in the remainder of the property. The total cost of the project is estimated to be between $240.0 million and $260.0 million, with $120.0 million to $130.0 million estimated to be the Company’s pro rata share. The Company has incurred $7.8 million of the total $15.3 million incurred by the joint venture as of September 30, 2024. The anticipated opening is in 2027.
Other Transactions and Events:
The Company declared a cash dividend of $0.17 per share of its common stock for each quarter of 2023 and the first three quarters of 2024. On October 31, 2024, the Company announced a fourth quarter cash dividend of $0.17 per share of its common stock, which will be paid on December 2, 2024 to stockholders of record on November 12, 2024. The dividend amount will be reviewed by the Board on a quarterly basis.
In connection with the commencement of an “at the market” offering program on March 26, 2021, which is referred to as the “ATM Program,” the Company entered into an equity distribution agreement with certain sales agents pursuant to which the Company may issue and sell shares of its common stock having an aggregate offering price of up to $500 million. The ATM Program was fully utilized as of September 30, 2024 and is no longer active.
See “—Liquidity and Capital Resources” for a further discussion of the Company’s anticipated liquidity needs, and the measures taken by the Company to meet those needs.
Inflation:
Most of the leases at the Centers have rent adjustments periodically throughout the lease term. These rent increases are either in fixed increments or based on using an annual multiple of increases in the Consumer Price Index. In addition, the routine expiration of leases for spaces 10,000 square feet and under each year enables the Company to replace existing leases with new leases at higher base rents if the rents of the existing leases are below the then existing market rate. The Company has generally entered into leases that require tenants to pay a stated amount for operating expenses, generally excluding property taxes, regardless of the expenses actually incurred at any Center, which places the burden of cost control on the Company. Additionally, most leases require the tenants to pay their pro rata share of property taxes and utilities. Inflation has had a negative impact on the Company's costs in 2024.
Critical Accounting Policies and Estimates
The preparation of financial statements in conformity with generally accepted accounting principles ("GAAP") in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Some of these estimates and assumptions include judgments on revenue recognition, estimates for common area maintenance and real estate tax accruals, provisions for uncollectible accounts, impairment of long-lived assets, the allocation of purchase price between tangible and intangible assets, capitalization of costs and fair value measurements. The Company's significant accounting policies and estimates are described in more detail in Note 2—Summary of Significant Accounting Policies in the Company's Notes to the Consolidated Financial Statements. However, the following policies are deemed to be critical.
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Acquisitions:
Upon the acquisition of real estate properties, the Company evaluates whether the acquisition is a business combination or asset acquisition. For both business combinations and asset acquisitions, the Company allocates the purchase price of properties to acquired tangible assets and intangible assets and liabilities. For asset acquisitions, the Company capitalizes transaction costs and allocates the purchase price using a relative fair value method allocating all accumulated costs. For business combinations, the Company expenses transaction costs incurred and allocates purchase price based on the estimated fair value of each separately identified asset and liability. The Company allocates the estimated fair value of acquisitions to land, building, tenant improvements and identified intangible assets and liabilities, based on their estimated fair values. In addition, any assumed mortgage notes payable are recorded at their estimated fair values. The estimated fair value of the land and buildings is determined utilizing an “as if vacant” methodology. Tenant improvements represent the tangible assets associated with the existing leases valued on a fair value basis at the acquisition date prorated over the remaining lease terms. The tenant improvements are classified as an asset under property and are depreciated over the remaining lease terms. Identifiable intangible assets and liabilities relate to the value of in-place operating leases which come in three forms: (i) leasing commissions and legal costs, which represent the value associated with “cost avoidance” of acquiring in-place leases, such as lease commissions paid under terms generally experienced in the Company's markets; (ii) value of in-place leases, which represents the estimated loss of revenue and of costs incurred for the period required to lease the “assumed vacant” property to the occupancy level when purchased; and (iii) above or below-market value of in-place leases, which represents the difference between the contractual rents and market rents at the time of the acquisition, discounted for tenant credit risks. Leasing commissions and legal costs are recorded in deferred charges and other assets and are amortized over the remaining lease terms. The value of in-place leases are recorded in deferred charges and other assets and amortized over the remaining lease terms plus any below-market fixed rate renewal options. Above or below-market leases are classified in deferred charges and other assets or in other accrued liabilities, depending on whether the contractual terms are above or below-market, and the asset or liability is amortized to minimum rents over the remaining terms of the leases. The remaining lease terms of below-market leases may include certain below-market fixed-rate renewal periods. In considering whether or not a lessee will execute a below-market fixed-rate lease renewal option, the Company evaluates economic factors and certain qualitative factors at the time of acquisition such as tenant mix in the Center, the Company's relationship with the tenant and the availability of competing tenant space.
Remeasurement gains are recognized when the Company becomes the primary beneficiary of an existing equity method investment that is a variable interest entity to the extent that the fair value of the existing equity investment exceeds the carrying value of the investment, and remeasurement losses are recognized to the extent the carrying value of the investment exceeds the fair value. The fair value is determined based on a discounted cash flow model, with the significant unobservable inputs including discount rate, terminal capitalization rate and market rents.
Asset Impairment:
The Company assesses whether an indicator of impairment in the value of its properties exists by considering expected future operating income, trends and prospects, as well as the effects of demand, competition and other economic factors. Such factors include projected rental revenue, operating costs and capital expenditures as well as capitalization rates and estimated holding periods. The Company generally holds and operates its properties long-term, which decreases the likelihood of their carrying values not being recoverable. Changes in events or changes in circumstances may alter the expected hold period of an asset or asset group, which may result in an impairment loss and such loss could be material to the Company’s financial condition or operating performance. If the carrying value of the property exceeds the estimated undiscounted cash flows, an impairment loss is recognized equal to the excess of carrying value over its estimated fair value. Properties classified as held for sale are measured at the lower of the carrying amount or fair value less cost to sell.
The estimated fair value of a property is typically determined through a discounted cash flow analysis or based upon a contracted sales price. The discounted cash flow method includes significant unobservable inputs including the discount rate, terminal capitalization rate and market rents. Cash flow projections and rates are subject to management’s judgment and changes in those assumptions could impact the estimation of fair value.
The Company’s investments in unconsolidated joint ventures apply the same accounting model for property level impairment as described above. Further, the Company reviews its investments in unconsolidated joint ventures for a series of operating losses and other factors that may indicate that a decrease in the value of its investments has occurred which is other-than-temporary. The investment in each unconsolidated joint venture is evaluated periodically, and as deemed necessary, for recoverability and valuation declines that are other-than-temporary. The Company records any such impairment up to the extent of its investment.
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Fair Value of Financial Instruments:
The fair value hierarchy distinguishes between market participant assumptions based on market data obtained from sources independent of the reporting entity and the reporting entity's own assumptions about market participant assumptions. Level 1 inputs utilize quoted prices in active markets for identical assets or liabilities that the Company has the ability to access. Level 2 inputs are inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 inputs may include quoted prices for similar assets and liabilities in active markets, as well as inputs that are observable for the asset or liability (other than quoted prices), such as interest rates, foreign exchange rates and yield curves that are observable at commonly quoted intervals. Level 3 inputs are unobservable inputs for the asset or liability, which are typically based on an entity's own assumptions, as there is little, if any, related market activity. In instances where the determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level input that is significant to the fair value measurement in its entirety. The Company's assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the asset or liability.
The Company calculates the fair value of financial instruments and includes this additional information in the Notes to the Consolidated Financial Statements when the fair value is different than the carrying value of those financial instruments. When the fair value reasonably approximates the carrying value, no additional disclosure is made.
The Company recorded its financing arrangement (See Note 12—Financing Arrangement in the Company's Notes to the Consolidated Financial Statements) obligation at fair value on a recurring basis with changes in fair value being recorded as interest expense in the Company’s consolidated statements of operations. The fair value was determined based on a discounted cash flow model, with the significant unobservable inputs including discount rate, terminal capitalization rate, and market rents. The fair value of the financing arrangement obligation was sensitive to these significant unobservable inputs and a change in these inputs may result in a significantly higher or lower fair value measurement.
Results of Operations
Many of the variations in the results of operations, discussed below, occurred because of the transactions affecting the Company’s properties described in Management’s Overview and Summary above, including the Redevelopment Properties, the JV Transition Centers and the Disposition Properties (as defined below).
For purposes of the discussion below, the Company defines “Same Centers” as those Centers that are substantially complete and in operation for the entirety of both periods of the comparison. Non-Same Centers for comparison purposes include those Centers or properties that are going through a substantial redevelopment often resulting in the closing of a portion of the Center (“Redevelopment Properties”), those properties that have recently transitioned to or from equity method joint ventures to or from consolidated assets ("JV Transition Centers") and properties that have been disposed of (“Disposition Properties”). The Company moves a Center in and out of Same Centers based on whether the Center is substantially complete and in operation for the entirety of both periods of the comparison. Accordingly, the Same Centers consist of all Consolidated Centers, excluding the Redevelopment Properties, the JV Transition Centers, Santa Monica Place and the Disposition Properties, for the periods of comparison. Santa Monica Place is excluded from Same Centers due to the Company's default on the non-recourse loan on April 9, 2024.
For the comparison of the three and nine months ended September 30, 2024 to the three and nine months ended September 30, 2023, the JV Transition Centers are Arrowhead Towne Center, Chandler Fashion Center, South Plains Mall and the five former Sears parcels located at Chandler Fashion Center, Danbury Fair Mall, Freehold Raceway Mall, Los Cerritos Center and Washington Square (See “Acquisitions” in Management’s Overview and Summary). The Disposition Properties are The Marketplace at Flagstaff, Superstition Springs Power Center, Towne Mall and a former department store parcel at Valle Vista Mall (See "Dispositions" in Management’s Overview and Summary). For the comparison of the three and nine months ended September 30, 2024 to the three and nine months ended September 30, 2023, the Redevelopment Properties are Green Acres Mall and Fashion District Philadelphia.
Unconsolidated joint ventures are reflected using the equity method of accounting. The Company’s pro rata share of the results from these Centers is reflected in the Consolidated Statements of Operations as equity in loss of unconsolidated joint ventures.
The Company considers tenant annual sales, occupancy rates (excluding large retail stores or “Anchors”) and releasing spreads (i.e., a comparison of initial average base rent per square foot on leases executed during the trailing twelve months to average base rent per square foot at expiration for the leases expiring during the trailing twelve months based on the spaces 10,000 square feet and under) to be key performance indicators of the Company’s internal growth.
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During the trailing twelve months ended September 30, 2024, comparable tenant sales for spaces less than 10,000 square feet across the portfolio decreased by 1.0% relative to the third quarter of 2023. The leased occupancy rate of 93.7% at September 30, 2024 represented a 0.3% increase from 93.4% at September 30, 2023 and a 0.4% sequential increase compared to the 93.3% occupancy rate at June 30, 2024. Releasing spreads increased as the Company executed leases at an average rent of $66.98 for new and renewal leases executed compared to $59.86 on leases expiring, resulting in a releasing spread increase of $7.13 per square foot, or 11.9%, for the trailing twelve months ended September 30, 2024. This was the Company’s twelfth consecutive quarter of positive base rent leasing spreads.
The Company continues to renew or replace leases that are scheduled to expire in 2024, however, due to a variety of factors, the Company cannot be certain of its ability to sign, renew or replace leases expiring in 2024 or beyond. As of September 30, 2024, the Company has executed renewal leases or commitments on 84% of its square footage expiring in 2024, which leases are expected to commence throughout 2024 and another 13% of such expiring space is in the letter of intent stage. Excluding those leases, the remaining leases expiring in 2024, which represent approximately 96,000 square feet of the Centers, are in the prospecting stage.
The Company has entered into 225 leases for new stores totaling approximately 1.6 million square feet that have opened or are planned for opening in 2024, and another 79 leases for new stores totaling approximately 1.2 million square feet opening throughout 2025 and 2026. In total, through 2027, new store leases are expected to produce incremental rent of approximately $79.8 million (at the Company’s pro rata share) in excess of the rent generated from prior uses in the same spaces. While there may be additional new space openings in 2024, any such leases are not yet executed.
During the quarter ended September 30, 2024, the Company signed 70 new leases and 150 renewal leases comprising approximately 831,000 square feet of GLA. The average tenant allowance was $24.31 per square foot.
Outlook
During March 2024, the Company celebrated its 30th anniversary as a public company and also welcomed Jackson Hsieh as its Chief Executive Officer and President. Following the appointment of Mr. Hsieh, the Company’s leadership team has spent considerable time refining the Company's strategy and unveiled the Path Forward Plan during the second quarter of 2024.
The Path Forward Plan is a multi-pronged strategy to improve the Company's balance sheet, while also making inward-facing enhancements to both bolster company culture and improve key business processes to gain operating efficiencies. Essential goals of the Path Forward Plan include:
•Deleverage the capital structure, with a focus on reducing the Company's Net Debt to Adjusted EBITDA leverage ratio over the next three to four years;
•Invest in and fortify the Company's key assets in the portfolio;
•Proactively consolidate selected joint venture assets over time that are core to the Company's overall strategy;
•Deliver a post-deleveraging Funds From Operations ("FFO") launch point goal over the next three to four years;
•Achieve outstanding operational results through rigorous internal process improvements; and
•Position the Company to take an offensive stance on acquisitions, reinvestment and selected development.
The Company may achieve these goals through a variety of methods and the timing, extent and impact of any transactions that the Company has or will undertake while implementing the Path Forward Plan are indeterminable at this time. In order to deleverage its capital structure, the Company may pursue asset dispositions and acquisitions, experience organic growth in EBITDA as tenants in its lease pipeline open for business, be selective about undertaking new development and redevelopment projects, and/or issue common stock. Asset sales will focus on whether a property is core to the Company’s strategy and may include defaulting on certain mortgage debts on the Company’s properties and giving possession of such secured properties to the lender.
Further, the Company has a long-term four-pronged business strategy that focuses on the acquisition, leasing and management, redevelopment and development of regional retail centers. Although the majority of the key performance indicators at the Centers continued to improve during the first three quarters of 2024, operating results in 2024 have been and are expected to continue to be negatively impacted by certain external factors, including any increase in inflation and elevated interest rates, as well as the impact from the recent bankruptcy of Express and any future tenant bankruptcies.
Traffic levels at the Company’s Centers for the first three quarters of 2024 increased by 1.6% from 2023 levels for the same time period. Portfolio tenant sales per square foot from spaces less than 10,000 square feet for the trailing twelve months ended September 30, 2024 were $834 compared to $836 for the year ended December 31, 2023. Comparable tenant sales from
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spaces less than 10,000 square feet across the portfolio for the quarter ended September 30, 2024 decreased by 1.8% compared to the same period in 2023.
During 2023, the Company signed 839 new and renewal leases for approximately 4.2 million square feet, compared to 963 leases and 3.8 million square feet signed during 2022. This leasing volume represented a 13% decrease in the number of leases and a 12% increase in the amount of square footage leased compared to the same period in 2022 on a comparable basis, and was the highest volume leasing year in the Company’s history. During the third quarter of 2024, the Company signed 220 leases for approximately 831,000 square feet, compared to 194 leases and 719,000 square feet leased during the third quarter of 2023, representing a 15.5% increase in the amount of square footage leased and a 13.4% increase in the number of leases signed on a comparable center basis.
The Company believes that diversity of use within its tenant base has been, and will continue to be, a prominent internal growth catalyst at its Centers going forward, as new uses enhance the productivity and diversity of the tenant mix and have the potential to significantly increase customer traffic at the applicable Centers. During the quarter ended September 30, 2024, the Company signed leases for new stores with new-to-Macerich portfolio uses for 71,000 square feet, with another 273,000 square feet of such new-to-Macerich portfolio leases currently in negotiation as of the date of this Quarterly Report on Form 10-Q. During the year ended December 31, 2023, the Company signed leases for new stores with new-to-Macerich portfolio uses totaling over 600,000 square feet.
As of September 30, 2024, the leased occupancy rate was 93.7%, a 0.3% increase compared to the leased occupancy rate at September 30, 2023 of 93.4% and a 0.4% sequential increase compared to the 93.3% occupancy rate at June 30, 2024.
Many of the Company’s leases contain co-tenancy clauses. Certain Anchor or small tenant closures have become permanent, whether caused by the pandemic or otherwise, and co-tenancy clauses within certain leases may be triggered as a result. The Company does not anticipate that the negative impact of such clauses on lease revenue will be significant.
The pace of bankruptcy filings involving the Company’s tenants decreased substantially in 2023 and in 2022 compared to 2021. For the year ended December 31, 2023, there were ten bankruptcy filings involving the Company’s tenants totaling fifteen leases and representing approximately 111,000 square feet of leased space and $3.6 million of annual leasing revenue at the Company’s share. Year-to-date in 2024, there have been nine bankruptcy filings involving the Company’s tenants, including the bankruptcy of Express announced on April 22, 2024, totaling 45 leases and representing approximately 312,000 square feet of leased space and $18.4 million of annual leasing revenue at the Company’s share.
During 2024, the Company expects to generate positive cash flow from operations after recurring operating capital expenditures, leasing capital expenditures and payment of dividends. This assumption does not include any potential capital generated from dispositions, refinancings or issuances of common stock. To the extent available, this expected surplus will be used to fund the Company’s development and redevelopment pipeline and de-lever the Company’s balance sheet.
The Company continues to actively address its near-term, non-recourse loan maturities, with eight completed transactions year-to-date in 2024 totaling approximately $1.3 billion, or approximately $1.1 billion at the Company’s pro rata share. The Company has no remaining maturities in 2024. For additional information on the Company’s financing transactions in the year ended 2023 through the date of this Quarterly Report on Form 10-Q, see “Financing Activities” in Management’s Overview and Summary.
On April 9, 2024, the Company defaulted on the $300.0 million loan on Santa Monica Place and the Company is in negotiations with the lender on the terms of this non-recourse loan.
Elevated interest rates have increased, and may continue to increase, the cost of the Company’s borrowings due to its outstanding floating-rate debt and have led, and may continue to lead, to higher interest rates on new fixed-rate debt. While interest rates have begun to decrease, they remain elevated and the Company expects to incur increased interest expense from the refinancing or extension of loans that may currently carry below-market interest rates. In certain cases, the Company has limited, and may continue to limit, its exposure to interest rate fluctuations related to a portion of its floating-rate debt by using interest rate cap and swap agreements. Such agreements, subject to current market conditions, allow the Company to replace floating-rate debt with fixed-rate debt in order to achieve its desired ratio of floating-rate to fixed-rate debt. However, any interest rate cap or swap agreements that the Company enters into may not be effective in reducing its exposure to interest rate changes.
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Comparison of Three Months Ended September 30, 2024 and 2023
Revenues:
Leasing revenue increased by $6.1 million, or 3.1%, from 2023 to 2024. The increase in leasing revenue is attributed to increases of $7.7 million from the JV Transition Centers offset in part by decreases of $1.4 million from the Disposition Properties and $0.2 million from the Redevelopment Properties. Leasing revenue includes the amortization of above and below-market leases, the amortization of straight-line rents, lease termination income, percentage rent and the recovery of bad debts. The amortization of above and below-market leases increased from $0.5 million in 2023 to $0.7 million in 2024. The amortization of straight-line rents increased from $(0.6) million in 2023 to $1.1 million in 2024. Lease termination income increased from $0.1 million in 2023 to $0.2 million in 2024. Percentage rent decreased from $8.2 million in 2023 to $6.2 million in 2024. Recovery of (provisions for) bad debts decreased from $0.2 million in 2023 to $(0.1) million in 2024.
Other revenue decreased from $13.4 million in 2023 to $9.7 million in 2024. This decrease is primarily due to other income related to the Same Centers.
Management Companies' revenue decreased from $7.4 million in 2023 to $7.1 million in 2024 primarily due to a decrease in leasing and development fees.
Shopping Center and Operating Expenses:
Shopping center and operating expenses decreased $1.2 million, or 1.6%, from 2023 to 2024. The decrease in shopping center and operating expenses is attributed to decreases of $0.8 million from the Redevelopment Properties and $1.9 million from the Disposition Properties offset in part by increases of $0.9 million from the JV Transition Centers and $0.6 million from the Same Centers.
Leasing Expenses:
Leasing expenses increased from $8.8 million in 2023 to $9.9 million in 2024 primarily due to an increase in compensation expense.
Management Companies' Operating Expenses:
Management Companies' operating expenses increased $2.3 million from 2023 to 2024 due to an increase in compensation expense.
Depreciation and Amortization:
Depreciation and amortization increased $2.5 million from 2023 to 2024. The increase in depreciation and amortization is attributed to an increase of $4.8 million from the JV Transition Centers and $0.1 million from the Redevelopment Properties offset in part by decreases of $2.8 million from the Same Centers and $0.3 million from the Disposition Properties. Additionally, $0.7 million of the increase is attributable to Santa Monica Place.
Interest Expense:
Interest expense increased $3.7 million from 2023 to 2024. The increase in interest expense is attributed to increases of $7.1 million from the JV Transition Centers and $1.0 million from the Same Centers offset in part by decreases of $3.4 million from the financing arrangement (See Note 12—Financing Arrangement in the Company's Notes to the Consolidated Financial Statements), $2.1 million from the Redevelopment Properties, $0.9 million from the Disposition Properties and $1.4 million from lower outstanding balances and interest rates on the Company's revolving loan facility. Additionally, $3.4 million of the increase is attributable to Santa Monica Place, which includes default interest expense of $3.1 million. The decrease in interest expense from the financing arrangement is primarily due to Chandler Freehold no longer being accounted for as a financing arrangement (See Note 12—Financing Arrangement in the Notes to the Consolidated Financial Statements).
Equity in Loss of Unconsolidated Joint Ventures:
Equity in loss of unconsolidated joint ventures decreased $32.5 million from 2023 to 2024. The decrease in equity in loss of unconsolidated joint ventures is primarily due to an impairment loss of $107.7 million at Country Club Plaza in 2023 offset in part in 2024 by $67.0 million of impairment losses recognized as a result of the reduction in the estimated holding period of properties held by certain unconsolidated joint ventures.
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Loss on Sale or Write Down of Assets, net:
The loss on sale or write down of assets, net decreased $132.7 million from 2023 to 2024 primarily due to the loss of $144.7 million as a result of the reduction in the estimated holding period of Fashion Outlets of Niagara Falls in 2023 and gain of $42.8 million from the sale of the Company's ownership interest in Biltmore Fashion Park in 2024 offset in part by $59.3 million of impairment losses recognized as a result of the reduction in the estimated holding period of certain properties.
Net Loss:
Net loss decreased $159.9 million from 2023 to 2024. The decrease in net loss is primarily due to the 2023 impairment losses of $107.7 million at Country Club Plaza and $144.7 million at Fashion Outlets of Niagara Falls and $42.8 million gain from the sale of the Company's ownership interest in Biltmore Fashion Park in 2024 offset in part by 2024 impairment losses of $67.0 million recognized as a result of the reduction in the estimated holding period of properties held by certain unconsolidated joint ventures and $59.3 million recognized as a result of the reduction in the estimated holding period of certain properties.
Funds From Operations ("FFO"):
Primarily as a result of the factors mentioned above, FFO attributable to common stockholders and unit holders—diluted, excluding financing expense in connection with Chandler Freehold, accrued default interest expense and loss on non-real estate investments decreased 14.5% from $100.6 million in 2023 to $86.0 million in 2024. For a reconciliation of net loss (income) attributable to the Company, the most directly comparable GAAP financial measure, to FFO attributable to common stockholders and unit holders—diluted, and FFO attributable to common stockholders and unit holders, excluding financing expense in connection with Chandler Freehold, accrued default interest expense and loss on non-real estate investments—diluted, see "Funds From Operations ("FFO")" below.
Comparison of Nine Months Ended September 30, 2024 and 2023
Revenues:
Leasing revenue increased by $4.1 million, or 0.7%, from 2023 to 2024. The increase in leasing revenue is attributed to an increase of $16.3 million from the JV Transition Centers offset in part by decreases of $3.3 million from the Same Centers, $4.4 million from the Disposition Properties and $4.5 million from the Redevelopment Properties. Leasing revenue includes the amortization of above and below-market leases, the amortization of straight-line rents, lease termination income, percentage rent and the recovery of bad debts. The amortization of above and below-market leases increased from $2.1 million in 2023 to $3.2 million in 2024. Straight-line rents increased from $(3.2) million in 2023 to $(2.6) million in 2024. Lease termination income decreased from $1.8 million in 2023 to $1.4 million in 2024. Percentage rent decreased from $18.2 million in 2023 to $11.7 million in 2024. (Provisions for) recovery of bad debts increased from $1.9 million in 2023 to $(4.6) million in 2024.
Other revenue decreased from $34.1 million in 2023 to $29.4 million in 2024. This decrease is primarily due to other income related to the Same Centers.
Shopping Center and Operating Expenses:
Shopping center and operating expenses increased $3.0 million, or 1.4%, from 2023 to 2024. The increase in shopping center and operating expenses is attributed to an increase of $4.8 million from the Same Centers, which is primarily due to increased insurance, utilities and snow removal costs, and $2.4 million from the JV Transition Centers offset in part by decreases of $2.2 million from the Redevelopment Properties and $3.3 million from the Disposition Properties. Additionally, $1.3 million of the increase is attributable to Santa Monica Place.
Leasing Expenses:
Leasing expenses increased from $26.9 million in 2023 to $30.0 million in 2024 due primarily to an increase in compensation expense.
Management Companies' Operating Expenses:
Management Companies' operating expenses increased $4.6 million from 2023 to 2024 due primarily to an increase in compensation expense.
REIT General and Administrative Expenses:
REIT general and administrative expenses decreased $1.0 million from 2023 to 2024 due primarily to a decrease in compensation expense.
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Depreciation and Amortization:
Depreciation and amortization increased $0.7 million from 2023 to 2024. The increase in depreciation and amortization is attributed to increases of $8.3 million from the JV Transition Centers and $1.0 million from the Redevelopment Properties offset in part by decreases of $10.3 million from the Same Centers and $1.2 million from the Disposition Properties. Additionally, $2.9 million of the offset is attributable to Santa Monica Place.
Interest Expense:
Interest expense increased $1.5 million from 2023 to 2024. The increase in interest expense is attributed to increases of $10.3 million from the JV Transition Centers, $2.0 million from the Same Centers and $0.6 million from higher interest rates and outstanding balances on the Company's revolving loan facility, offset in part by decreases of $11.3 million from the financing arrangement discussed in Note 12 in the Company's Notes to the Consolidated Financial Statements, $5.0 million from the Redevelopment Properties and $1.3 million from the Disposition Properties. Additionally, $6.2 million of the increase is attributable to Santa Monica Place, which includes default interest expense of $5.8 million. The decrease in interest expense from the financing arrangement is primarily due to the change in fair value of the underlying properties and the mortgage notes payable on the underlying properties and Chandler Freehold no longer being accounted for as a financing arrangement (See Note 12—Financing Arrangement in the Notes to the Consolidated Financial Statements).
Equity in Loss of Unconsolidated Joint Ventures:
Equity in loss of unconsolidated joint ventures increased $28.8 million from 2023 to 2024. The increase in equity in loss of unconsolidated joint ventures is primarily due to the write-down of the Company's investment in Los Angeles Premium Outlets of $57.7 million in 2024 and impairment losses of $120.6 million as a result of the reduction in the estimated holding period of properties held by certain unconsolidated joint ventures offset in part by the impairment losses in 2023 of $51.4 million at MS Portfolio LLC and $107.7 million at Country Club Plaza, as a result of the reduction in the estimated holding period (See Note 4 – Investments in Unconsolidated Joint Ventures in the Company’s Notes to the Consolidated Financial Statements).
Gain (loss) on Sale or Write Down of Assets, net:
Gain (loss) on sale or write down of assets, net increased $407.5 million from 2023 to 2024. The increase is primarily due to the gains recognized in 2024 of $334.3 million relating to the Company no longer accounting for its investment in Chandler Fashion Center as a financing arrangement (See Note 12 – Financing Arrangement and Note 16 – Dispositions in the Company’s Notes to the Consolidated Financial Statements) and $42.8 million from the sale of the Company's ownership interest in Biltmore Fashion Park and an impairment loss of $144.7 million recognized in 2023 as a result of the reduction in the estimated holding period of Fashion Outlets of Niagara Falls offset in part by impairment losses in 2024 of $108.0 million recognized as a result of the reduction in the estimated holding period of certain properties.
Net Income (Loss):
Net income (loss) increased $366.5 million from 2023 to 2024. The increase in net income (loss) is primarily due to the gain on sale of assets discussed above offset in part by impairment losses recognized as a result of the reduction in the estimated holding period of certain unconsolidated joint ventures, 2024 impairment losses at Santa Monica Place and Los Angeles Premium Outlets and by the 2023 write-down of assets as a result of the reduction in the estimated holding period at MS Portfolio LLC, and Country Club Plaza along with the other variances noted above.
Funds From Operations ("FFO"):
Primarily as a result of the factors mentioned above, FFO attributable to common stockholders and unit holders—diluted, excluding financing expense in connection with Chandler Freehold, accrued default interest expense and loss on non-real estate investments decreased 12.9% from $285.5 million in 2023 to $248.7 million in 2024. For a reconciliation of net income (loss) attributable to the Company, the most directly comparable GAAP financial measure, to FFO attributable to common stockholders and unit holders—diluted, and FFO attributable to common stockholders and unit holders, excluding financing expense in connection with Chandler Freehold, accrued default interest expense and loss on non-real estate investments—diluted, see "Funds From Operations ("FFO")" below.
Operating Activities:
Cash provided by operating activities decreased $17.5 million from 2023 to 2024. The decrease is primarily due to the changes in assets and liabilities and the results, as discussed above.
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Investing Activities:
Cash used in investing activities was $17.4 million in 2024 compared to cash provided by investing activities of $32.3 million in 2023. The increase in cash used in investing activities is primarily attributed to decreases in distributions from unconsolidated joint ventures of $142.8 million and increases in development, redevelopment and renovation of $26.7 million offset in part by increases in proceeds from the sale of assets of $87.7 million, decreases in contributions to unconsolidated joint ventures of $18.6 million and decreases in property improvements of $6.4 million and acquisitions of property of $4.8 million. The decrease in distributions from unconsolidated joint ventures is primarily due to the distribution of net loan proceeds from the Scottsdale Fashion Square refinance in 2023 (See “Financing Activities” in Management’s Overview and Summary).
Financing Activities:
Cash used in financing activities decreased $79.9 million from 2023 to 2024. The decrease in cash used in financing activities is primarily due to a decrease in payments on mortgages, bank and other notes payable of $196.4 million, an increase in proceeds from stock offerings under the ATM Program of $149.0 million and a decrease in deferred financing costs of $22.6 million offset in part by a decrease in proceeds from mortgages, bank and other notes payable of $284.0 million.
Liquidity and Capital Resources
The Company anticipates meeting its liquidity needs for its operating expenses, debt service and dividend requirements for the next twelve months and beyond through cash generated from operations, distributions from unconsolidated joint ventures, working capital reserves and/or borrowings under its revolving loan facility.
Additionally, the Company is focused on implementing the Path Forward Plan, including its goal to reduce its Net Debt to Adjusted EBITDA leverage ratio to a lower level over the next three to four years. The Company may achieve this goal, and other goals set in connection with the Path Forward Plan, through a variety of methods and the timing, extent and impact of any transactions that the Company has or will undertake while implementing the Path Forward Plan are indeterminable at this time. In order to de-leverage its capital structure, the Company may pursue asset dispositions and acquisitions, experience organic growth in EBITDA as tenants in its lease pipeline open for business, be selective about undertaking new development and redevelopment projects, and/or issue common stock. Asset sales will focus on whether a property is core to the Company’s strategy and may include defaulting on certain mortgage debts on the Company's properties and giving possession of such secured properties to the lender.
Uses of Capital
The following tables summarize capital expenditures incurred at the Centers (at the Company's pro rata share):
| For the Nine Months Ended September 30, | |||||||||||
| (Dollars in thousands) | 2024 | 2023 | |||||||||
| Consolidated Centers: | |||||||||||
| Acquisitions of property, building improvement and equipment(1) | $ | 69,605 | $ | 69,255 | |||||||
| Development, redevelopment, expansions and renovations of Centers | 66,924 | 56,575 | |||||||||
| Tenant allowances | 12,655 | 22,530 | |||||||||
| Deferred leasing charges | 3,308 | 4,836 | |||||||||
| $ | 152,492 | $ | 153,196 | ||||||||
| Unconsolidated Joint Venture Centers: | |||||||||||
| Acquisitions of property, building improvement and equipment | $ | 9,814 | $ | 8,765 | |||||||
| Development, redevelopment, expansions and renovations of Centers | 27,433 | 51,944 | |||||||||
| Tenant allowances | 12,841 | 11,075 | |||||||||
| Deferred leasing charges | 3,753 | 3,444 | |||||||||
| $ | 53,841 | $ | 75,228 | ||||||||
(1)For the nine months ended September 30, 2024, this includes the cash paid of $36.4 million on May 14, 2024, for the Company’s acquisition of its joint venture partner’s 40% interest in Arrowhead Towne Center and South Plains Mall. For the nine months ended September 30, 2023, this includes $46.7 million relating to the acquisition of five former Sears parcels in the MS Portfolio LLC joint venture (See “Acquisitions” in Management’s Overview and Summary).
The Company expects amounts to be incurred during the next twelve months for tenant allowances and deferred leasing charges to be comparable to 2024. The Company expects to incur approximately $35.0 million to $45.0 million during the remainder of 2024 for development, redevelopment, expansion and renovations. Capital for these expenditures, developments
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and/or redevelopments has been, and is expected to continue to be, obtained from a combination of cash on hand, debt or equity financings, which are expected to include borrowings under the Company's revolving loan facility and sales of common stock, from property financings and construction loans, each to the extent available. The Company will be very selective in undertaking any future development or redevelopment projects and may choose to pause existing projects if the Company believes they are no longer economically viable.
Sources of Capital
The Company has also generated liquidity in the past, and may continue to do so in the future, through equity offerings and issuances, property refinancings, joint venture transactions and the sale of non-core assets. Asset sales will focus on whether a property is core to the Company's strategy and may include defaulting on certain mortgage debts on the Company's properties and giving possession of such secured properties to the lender. For example, the Company sold The Marketplace at Flagstaff in Flagstaff, Arizona on May 2, 2023, Superstition Springs Power Center in Mesa, Arizona on July 17, 2023, and the Company's joint venture sold One Westside in Los Angeles, California on December 27, 2023. Since implementing the Path Forward Plan, the Company's joint venture sold Country Club Plaza in Kansas City, Missouri on June 28, 2024 and the Company sold its 50% interest in Biltmore Fashion Park in Phoenix, Arizona on July 31, 2024. The Company used its share of proceeds from these transactions to pay down its revolving loan facility and other debt obligations. In addition, the Company is under contract to sell The Oaks, which is expected to close during the fourth quarter of 2024, subject to customary closing conditions. During the year ended December 31, 2023 and nine months ended September 30, 2024, the Company and certain joint venture partners sold various land parcels in separate transactions for aggregate proceeds of $16.4 million and $3.4 million, respectively (at the Company's share), which the Company used to pay down debt and for other general corporate purposes. Furthermore, the Company has filed a shelf registration statement, which registered an unspecified amount of common stock, preferred stock, depositary shares, debt securities, warrants, rights, stock purchase contracts and units that may be sold from time to time by the Company.
On March 26, 2021, the Company registered an "at the market" offering program, pursuant to which the Company may issue and sell shares of its common stock having an aggregate offering price of up to $500 million under the ATM Program, in amounts and at times to be determined by the Company. During the three months ended September 30, 2024, 9.4 million shares of common stock were issued under the ATM Program for gross proceeds of $151.7 million at a weighted average share price of $16.14. The ATM Program was fully utilized as of September 30, 2024 and is no longer active.
The following table sets forth certain information with respect to issuances under the ATM Program as of September 30, 2024.
| (Dollars and shares in thousands) | ||||||||||||||
| ATM Program | ||||||||||||||
| For the Three Months Ended: | Number of Shares Issued | Net Proceeds | Sales Commissions | |||||||||||
| March 31, 2024 | — | $ | — | $ | — | |||||||||
| June 30, 2024 | — | $ | — | $ | — | |||||||||
| September 30, 2024 | 9,402 | $ | 148,624 | $ | 3,030 | |||||||||
The capital and credit markets can fluctuate and, at times, limit access to debt and equity financing for companies. The Company has been able to access capital; however, there is no assurance the Company will be able to do so in future periods or on similar terms and conditions. Many factors impact the Company's ability to access capital, such as its overall debt level, interest rates, interest coverage ratios and prevailing market conditions, including periods of economic slowdown or recession.
For example, the credit markets have experienced and may continue to experience a slowdown stemming from broader market issues pertaining to various factors, including among others, the health of regional banks, prevailing market sentiment regarding various commercial real estate sectors and interest rate increases imposed by the Federal Reserve. While interest rates have begun to decrease, they remain elevated and the Company expects to incur increased interest expense from the refinancing or extension of loans that may carry below-market interest rates. In addition, increases in the Company's proportion of floating rate debt will cause it to be subject to interest rate fluctuations in the future.
The Company's total outstanding loan indebtedness, which includes mortgages and other notes payable, at September 30, 2024 was $6.78 billion (consisting of $4.34 billion of consolidated debt, less $0.03 billion of noncontrolling interests, plus $2.47 billion of its pro rata share of unconsolidated joint venture debt). The Company has no remaining maturities in 2024. The
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majority of the Company's debt consists of fixed-rate conventional mortgage notes collateralized by individual properties. The Company expects that all of the maturities during the next twelve months will be refinanced, restructured, extended and/or paid off from the Company's revolving loan facility or cash on hand, with the exception of Santa Monica Place (See “—Financing Activities” in Management’s Overview and Summary).
The Company believes that the pro rata debt provides useful information to investors regarding its financial condition because it includes the Company’s share of debt from unconsolidated joint ventures and, for consolidated debt, excludes the Company’s partners’ share from consolidated joint ventures, in each case presented on the same basis. The Company has several significant joint ventures and presenting its pro rata share of debt in this manner can help investors better understand the Company’s financial condition after taking into account the Company's economic interest in these joint ventures. The Company’s pro rata share of debt should not be considered as a substitute for the Company’s total consolidated debt determined in accordance with GAAP or any other GAAP financial measures and should only be considered together with and as a supplement to the Company’s financial information prepared in accordance with GAAP.
The Company accounts for its investments in joint ventures that it does not have a controlling interest or is not the primary beneficiary using the equity method of accounting and those investments are reflected on the consolidated balance sheets of the Company as investments in unconsolidated joint ventures.
Additionally, as of September 30, 2024, the Company was contingently liable for $41.1 million in letters of credit guaranteeing performance by the Company of certain obligations relating to the Centers. As of September 30, 2024, $40.9 million of these letters of credit were secured by restricted cash. On October 30, 2024, $35.0 million of these letters of credit secured by restricted cash was canceled and is no longer restricted cash. The Company does not believe that these letters of credit will result in a liability to the Company.
The Company continues to actively address its near-term, non-recourse loan maturities, with eight completed transactions year-to-date in 2024 totaling approximately $1.3 billion, or approximately $1.1 billion at the Company’s pro rata share. For additional information on the Company’s financing transactions in the year ended 2023 through the date of this Quarterly Report on Form 10-Q, see “Financing Activities” in Management’s Overview and Summary.
Previously, the Company had a $525.0 million revolving loan facility, which was scheduled to mature on April 14, 2024. On September 11, 2023, the Company and the Operating Partnership entered into an amended and restated credit agreement, which amended and restated their prior credit agreement, and provides for an aggregate $650.0 million revolving loan facility that matures on February 1, 2027, with a one-year extension option. The revolving loan facility can be expanded up to $950.0 million, subject to receipt of lender commitments and other conditions. Concurrently with the entry into the amended and restated credit agreement, the Company drew $152.0 million of the amount available under the revolving loan facility and used the proceeds to repay in full amounts outstanding under its prior credit facility. All obligations under the credit facility are guaranteed unconditionally by the Company and are secured in the form of mortgages on certain wholly-owned assets and pledges of equity interests held by certain of the Company’s subsidiaries. The new credit facility bears interest, at the Operating Partnership’s option, at either the base rate (as defined in the credit agreement) or adjusted term SOFR (as defined in the credit agreement) plus, in both cases, an applicable margin. The applicable margin depends on the Company’s overall leverage ratio and ranges from 1.00% to 2.50% over the selected index rate. As of September 30, 2024, the borrowing rate was SOFR plus a spread of 2.35%. As of September 30, 2024, there were no borrowings outstanding under the credit facility. Unamortized deferred finance costs were $12.6 million as of September 30, 2024, which are netted against balances outstanding or as an asset when no borrowings are outstanding on the credit facility which was the case as of September 30, 2024. As of September 30, 2024, the Company’s availability under the revolving loan facility for additional borrowings was $649.8 million.
Cash dividends and distributions for the nine months ended September 30, 2024 were $120.1 million (including distributions from consolidated joint ventures of $1.1 million), which were funded by operations.
At September 30, 2024, the Company was in compliance with all applicable loan covenants under its agreements.
At September 30, 2024, the Company had cash and cash equivalents of $116.5 million.
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Material Cash Commitments:
The following is a schedule of material cash commitments as of September 30, 2024 for the Consolidated Centers over the periods in which they are expected to be paid (in thousands):
| Payment Due by Period | |||||||||||||||||||||||||||||
| Cash Commitments | Total | Less than 1 year | 1 - 3 years | 3 - 5 years | More than five years | ||||||||||||||||||||||||
| Long-term debt obligations (includes expected interest payments)(1) | $ | 5,134,697 | $ | 820,829 | $ | 1,539,992 | $ | 1,130,437 | $ | 1,643,439 | |||||||||||||||||||
| Lease obligations(2) | 126,739 | 14,000 | 15,430 | 20,905 | 76,404 | ||||||||||||||||||||||||
| $ | 5,261,436 | $ | 834,829 | $ | 1,555,422 | $ | 1,151,342 | $ | 1,719,843 | ||||||||||||||||||||
__________________________________________________________
(1)Interest payments on floating rate debt were based on rates in effect at September 30, 2024.
(2)See Note 8—Leases in the Company's Notes to the Consolidated Financial Statements.
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Funds From Operations ("FFO")
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 GAAP measures. The National Association of Real Estate Investment Trusts defines FFO as net income (loss) (computed in accordance with GAAP), excluding gains (or losses) from sales of properties, plus real estate related depreciation and amortization, impairment write-downs of real estate and write-downs of investments in an affiliate where the write-downs have been driven by a decrease in the value of real estate held by the affiliate and after adjustments for unconsolidated joint ventures. Adjustments for unconsolidated joint ventures are calculated to reflect FFO on the same basis.
Prior to June 13, 2024, the Company accounted for its joint venture in Chandler Freehold as a financing arrangement. In connection with this treatment, the Company recognized financing expense on (i) the changes in fair value of the financing arrangement obligation, (ii) any payments to the joint venture partner equal to their pro rata share of net income and (iii) any payments to the joint venture partner less than or in excess of their pro rata share of net income. The Company excludes from its definition of FFO the noted expenses related to the changes in fair value and for the payments to the joint venture partner less than or in excess of their pro rata share of net income. On November 16, 2023, the Company acquired its joint venture partner’s 49.9% ownership interest in Freehold Raceway Mall and as a result, this property is no longer part of the financing arrangement and is 100% owned by the Company. On June 13, 2024, the partnership agreement between the Company and its partner was amended. As a result, the Company no longer accounts for its investment in Chandler Fashion Center as a financing arrangement. Effective June 13, 2024, the Company accounts for its investment in Chandler Fashion Center under the equity method of accounting (See Note 12 – Financing Arrangement and Note 16 – Dispositions in the Notes to the Consolidated Financial Statements). References to Chandler Freehold for the period November 16, 2023 through June 13, 2024 shall be deemed to only refer to Chandler Fashion Center.
The Company also presents FFO excluding financing expense in connection with Chandler Freehold, gain or loss on extinguishment of debt, accrued default interest expense and gain or loss on non-real estate investments.
FFO and FFO on a 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. The Company believes that such a presentation also provides investors with a more meaningful measure of its operating results in comparison to the operating results of other REITs. In addition, the Company believes that FFO excluding financing expense in connection with Chandler Freehold, impact associated with extinguishment of debt, accrued default interest expense and impact of non-cash changes in the market value of non-real estate investments provides useful supplemental information regarding the Company’s performance as it shows a more meaningful and consistent comparison of the Company’s operating performance and allows investors to more easily compare the Company’s results. On March 19, 2024, the Company closed on a three-year extension of the Fashion Outlets of Niagara Falls non-recourse loan and all default interest expense was reversed. Effective April 9, 2024, default interest expense has been accrued on the non-recourse loan on Santa Monica Place. GAAP requires that the Company accrue default interest expense, which is not expected to be paid and is expected to be reversed once a loan is modified or once title to the mortgaged loan collateral is transferred. The Company believes that the accrual of default interest on non-recourse loans, and the related reversal thereof should be excluded. The Company holds certain non-real estate investments that are subject to mark to market changes every quarter. These investments are not core to the Company's business, and the changes to market value and the related gain or loss are entirely non-cash in nature. As a result, the Company believes that the gain or loss on non-real estate investments should be excluded. In the first quarter of 2024, the Company updated its presentation to exclude gain or loss on non-real estate investments for the reasons noted above. The Company recast the presentation for prior periods to reflect this change.
The Company believes that FFO does not represent cash flow from operations as defined by GAAP, should not be considered as an alternative to net income (loss) as defined by GAAP, and is not indicative of cash available to fund all cash flow needs. The Company also cautions that FFO, as presented, may not be comparable to similarly titled measures reported by other real estate investment trusts.
Management compensates for the limitations of FFO by providing investors with financial statements prepared according to GAAP, along with this detailed discussion of FFO and a reconciliation of net (loss) income to FFO and FFO—diluted. Management believes that to further understand the Company's performance, FFO should be compared with the Company's reported net income (loss) and considered in addition to cash flows in accordance with GAAP, as presented in the Company's consolidated financial statements. The following reconciles net income (loss) attributable to the Company to FFO and FFO—diluted attributable to common stockholders and unit holders-basic and diluted, excluding financing expense in connection with Chandler Freehold, accrued default interest expense and loss on non-real estate investments for the three and nine months ended September 30, 2024 and 2023 (dollars and shares in thousands):
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| For the Three Months Ended September 30, | For the Nine Months Ended September 30, | |||||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||||||||||||
| Net (loss) income attributable to the Company | $ | (108,189) | $ | (262,547) | $ | 17,090 | $ | (336,244) | ||||||||||||||||||
| Adjustments to reconcile net (loss) income attributable to the Company to FFO attributable to common stockholders and unit holders—basic and diluted: | ||||||||||||||||||||||||||
| Noncontrolling interests in the Operating Partnership | (5,056) | (10,939) | 791 | (14,009) | ||||||||||||||||||||||
| Loss (gain) on sale or write down of assets, net—consolidated assets | 16,605 | 149,287 | (272,306) | 135,229 | ||||||||||||||||||||||
| Add: noncontrolling interests share of gain on sale or write down of assets—consolidated assets | — | 338 | 330 | 2,224 | ||||||||||||||||||||||
| Add: gain on sale of undepreciated assets—consolidated assets | 222 | 480 | 455 | 4,854 | ||||||||||||||||||||||
| Less: noncontrolling interests share of gain of undepreciated assets—consolidated assets | — | — | — | (1,886) | ||||||||||||||||||||||
| Loss on sale or write down of assets—unconsolidated joint ventures, net(1) | 66,969 | 101,048 | 176,150 | 152,396 | ||||||||||||||||||||||
| Add: gain on sale of undepreciated assets—unconsolidated joint ventures(1) | 53 | 6,636 | 1,129 | 6,740 | ||||||||||||||||||||||
| Depreciation and amortization—consolidated assets | 73,299 | 70,755 | 213,326 | 212,596 | ||||||||||||||||||||||
| Less: noncontrolling interests in depreciation and amortization—consolidated assets | (561) | (3,660) | (3,817) | (10,927) | ||||||||||||||||||||||
| Depreciation and amortization—unconsolidated joint ventures(1) | 39,524 | 42,464 | 119,531 | 127,801 | ||||||||||||||||||||||
| Less: depreciation on personal property | (1,641) | (1,905) | (5,209) | (6,053) | ||||||||||||||||||||||
| FFO attributable to common stockholders and unit holders—basic and diluted | 81,225 | 91,957 | 247,470 | 272,721 | ||||||||||||||||||||||
| Financing expense in connection with Chandler Freehold | — | 3,089 | (12,829) | (259) | ||||||||||||||||||||||
| FFO attributable to common stockholders and unit holders, excluding financing expense in connection with Chandler Freehold—basic and diluted | $ | 81,225 | $ | 95,046 | $ | 234,641 | $ | 272,462 | ||||||||||||||||||
| Accrued default interest expense | 3,067 | 4,050 | 4,789 | 4,050 | ||||||||||||||||||||||
| Loss on non-real estate investments | 1,676 | 1,457 | 9,235 | 9,014 | ||||||||||||||||||||||
| FFO attributable to common stockholders and unit holders, excluding financing expense in connection with Chandler Freehold, accrued default interest expense and loss on non-real estate investments —basic and diluted | $ | 85,968 | $ | 100,553 | $ | 248,665 | $ | 285,526 | ||||||||||||||||||
| Weighted average number of FFO shares outstanding for: | ||||||||||||||||||||||||||
| FFO attributable to common stockholders and unit holders—basic(2) | 228,409 | 224,611 | 226,945 | 224,441 | ||||||||||||||||||||||
| Adjustments for impact of dilutive securities in computing FFO—diluted: | ||||||||||||||||||||||||||
| Share and unit based compensation plans | — | — | — | — | ||||||||||||||||||||||
| Weighted average number of FFO shares outstanding for FFO attributable to common stockholders and unit holders—basic and diluted(2) | 228,409 | 224,611 | 226,945 | 224,441 | ||||||||||||||||||||||
(1) Unconsolidated joint ventures are presented at the Company's pro rata share.
(2) Calculated based upon basic net income as adjusted to reach basic FFO. Includes 10.0 million and 9.0 million of OP Units outstanding for the three months ended September 30, 2024 and 2023, respectively, and 10.1 million and 9.0 million of OP Units outstanding for the nine months ended September 30, 2024 and 2023, respectively.
The computation of FFO—diluted shares outstanding includes the effect of share and unit-based compensation plans using the treasury stock method. It also assumes the conversion of MACWH, LP common and preferred units to the extent that they are dilutive to the FFO—diluted computation.
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Item 3. Quantitative and Qualitative Disclosures About Market Risk
The Company's primary market risk exposure is interest rate risk. The Company has managed and will continue to manage interest rate risk by (1) maintaining a ratio of fixed rate, long-term debt to total debt such that floating rate exposure is kept at an acceptable level, (2) reducing interest rate exposure on certain long-term floating rate debt through the use of interest rate caps and/or swaps with matching maturities where appropriate, (3) using treasury rate locks where appropriate to fix rates on anticipated debt transactions, and (4) taking advantage of favorable market conditions for long-term debt and/or equity.
The following table sets forth information as of September 30, 2024 concerning the Company's long-term debt obligations, including principal cash flows by scheduled maturity, weighted average interest rates and estimated fair value (dollars in thousands):
| Expected Maturity Date | |||||||||||||||||||||||||||||||||||||||||||||||
| For the twelve months ending September 30, | |||||||||||||||||||||||||||||||||||||||||||||||
| 2025 | 2026 | 2027 | 2028 | 2029 | Thereafter | Total | Fair Value | ||||||||||||||||||||||||||||||||||||||||
| CONSOLIDATED CENTERS: | |||||||||||||||||||||||||||||||||||||||||||||||
| Long-term debt: | |||||||||||||||||||||||||||||||||||||||||||||||
| Fixed rate(1) | $ | 633,535 | $ | 562,882 | $ | 409,347 | $ | 734,219 | $ | 228,606 | $ | 1,532,938 | $ | 4,101,527 | $ | 3,897,043 | |||||||||||||||||||||||||||||||
| Average interest rate | 3.60 | % | 4.74 | % | 4.02 | % | 4.98 | % | 4.29 | % | 4.40 | % | 4.38 | % | |||||||||||||||||||||||||||||||||
| Floating rate | — | 300,000 | — | — | — | — | 300,000 | 300,673 | |||||||||||||||||||||||||||||||||||||||
| Average interest rate | — | % | 6.62 | % | — | % | — | % | — | % | — | % | 6.62 | % | |||||||||||||||||||||||||||||||||
| Total debt—Consolidated Centers | $ | 633,535 | $ | 862,882 | $ | 409,347 | $ | 734,219 | $ | 228,606 | $ | 1,532,938 | $ | 4,401,527 | $ | 4,197,716 | |||||||||||||||||||||||||||||||
| UNCONSOLIDATED JOINT VENTURE CENTERS: | |||||||||||||||||||||||||||||||||||||||||||||||
| Long-term debt (at Company's pro rata share): | |||||||||||||||||||||||||||||||||||||||||||||||
| Fixed rate | $ | 118,822 | $ | 352,868 | $ | 391,289 | $ | 735,746 | $ | 498,357 | $ | 343,202 | $ | 2,440,284 | $ | 2,387,206 | |||||||||||||||||||||||||||||||
| Average interest rate | 7.59 | % | 3.67 | % | 6.92 | % | 4.99 | % | 6.70 | % | 3.84 | % | 5.42 | % | |||||||||||||||||||||||||||||||||
| Floating rate | — | — | 33,028 | — | 12,000 | — | 45,028 | 47,297 | |||||||||||||||||||||||||||||||||||||||
| Average interest rate | — | % | — | % | 9.36 | % | — | % | 7.62 | % | — | % | 8.90 | % | |||||||||||||||||||||||||||||||||
| Total debt—Unconsolidated Joint Venture Centers | $ | 118,822 | $ | 352,868 | $ | 424,317 | $ | 735,746 | $ | 510,357 | $ | 343,202 | $ | 2,485,312 | $ | 2,434,503 | |||||||||||||||||||||||||||||||
(1) On October 28, 2024, the Company replaced the existing $600.0 million loan on Queens Center with a new $525.0 million, five-year fixed rate loan (See "Financing Activity" in Management Overview and Summary).
The Consolidated Centers' total fixed rate debt at September 30, 2024 and December 31, 2023 was $4.1 billion and $3.8 billion, respectively. The average interest rate on the fixed rate debt at September 30, 2024 and December 31, 2023 was 4.38% and 4.29%, respectively. The Consolidated Centers' total floating rate debt at September 30, 2024 and December 31, 2023 was $300.0 million and $475.8 million, respectively. The average interest rate on the floating rate debt at September 30, 2024 and December 31, 2023 was 6.62% and 7.43%, respectively.
The Company's pro rata share of the Unconsolidated Joint Venture Centers' fixed rate debt at September 30, 2024 and December 31, 2023 was $2.4 billion and $2.8 billion, respectively. The average interest rate on the fixed rate debt at September 30, 2024 and December 31, 2023 was 5.42% and 5.06%, respectively. The Company's pro rata share of the Unconsolidated Joint Venture Centers' floating rate debt at September 30, 2024 and December 31, 2023 was $45.0 million and $45.2 million, respectively. The average interest rate on the floating rate debt at September 30, 2024 and December 31, 2023 was 8.90% and 9.00%, respectively.
The Company uses derivative financial instruments in the normal course of business to manage or hedge interest rate risk and records all derivatives on the balance sheet at fair value. Interest rate cap agreements offer protection against floating rates on the notional amount from exceeding the rates noted in the above schedule, and interest rate swap agreements effectively replace a floating rate on the notional amount with a fixed rate as noted above. As of September 30, 2024, the Company has interest rate cap agreements in place (See Note 4—Investments in Unconsolidated Joint Ventures and Note 5—Derivative Instruments and Hedging Activities in the Company's Notes to the Consolidated Financial Statements). The respective loans each require an interest rate cap agreement to be in place at all times, which limits how high the prevailing floating loan rate index (i.e., SOFR) for the loans can rise. As of the date of this Quarterly Report on Form 10-Q, SOFR for each of these loans exceeded the strike interest rate (the "Strike Rate") within the required interest rate cap agreement. If SOFR does exceed the
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Strike Rate, each of these loans would then be considered fixed rate debt. If SOFR for these respective loans thereafter no longer exceeds the Strike Rate, then these loans would once again be considered floating rate debt.
In addition, the Company has assessed the market risk for its floating rate debt and believes that a 1% increase in interest rates would decrease future earnings and cash flows by approximately $3.5 million per year based on $345.0 million of floating rate debt outstanding at September 30, 2024.
The fair value of the Company's long-term debt is estimated based on a present value model utilizing interest rates that reflect the risks associated with long-term debt of similar risk and duration. In addition, the method of computing fair value for mortgage notes payable included a credit value adjustment based on the estimated value of the property that serves as collateral for the underlying debt (See Note 10—Mortgage Notes Payable and Note 11—Bank and Other Notes Payable in the Company's Notes to the Consolidated Financial Statements).
Item 4. Controls and Procedures
As required by Rule 13a-15(b) under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), management carried out an evaluation, under the supervision and with the participation of the Company's Chief Executive Officer and Chief Financial Officer, of the effectiveness of the Company's disclosure controls and procedures as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on their evaluation as of September 30, 2024, the Company's Chief Executive Officer and Chief Financial Officer have concluded that the Company's disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Exchange Act) were effective to ensure that the information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is (a) recorded, processed, summarized, and reported within the time periods specified in the SEC's rules and forms and (b) accumulated and communicated to the Company's management, including its Chief Executive Officer and Chief Financial Officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
In addition, there has been no change in the Company's internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15(d)-15(f) under the Exchange Act) that occurred during the Company's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting.
PART II OTHER INFORMATION
Item 1. Legal Proceedings
None of the Company, the Operating Partnership, the Management Companies or their respective affiliates are currently involved in any material legal proceedings, although from time-to-time they are involved in various legal proceedings that arise in the ordinary course of business.
Item 1A. Risk Factors
There have been no material changes to the risk factors relating to the Company set forth under the caption "Item 1A. Risk Factors" in the Company's Annual Report on Form 10-K for the year ended December 31, 2023.
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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
(a) On August 5, 2024, September 18, 2024 and September 18, 2024, the Company, as general partner of the Operating Partnership, issued 6,558, 50,005 and 77,984 shares of common stock of the Company, respectively, upon the redemption of an aggregate of 134,547 common partnership units of the Operating Partnership. These shares of common stock were issued in private placements to three limited partners of the Operating Partnership, each an accredited investor, pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended.
(b) Not applicable.
(c) Issuer Purchases of Equity Securities
| Period | Total Number of Shares Purchased | Average Price Paid per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | Approximate Dollar Value of Shares That May Yet Be Purchased Under the Plans or Programs (1) | |||||||||||||||||||||||||||||||
| July 1, 2024 to July 31, 2024 | — | $ | — | — | $ | 278,707,048 | |||||||||||||||||||||||||||||
| August 1, 2024 to August 31, 2024 | — | — | — | $ | 278,707,048 | ||||||||||||||||||||||||||||||
| September 1, 2024 to September 30, 2024 | — | — | — | $ | 278,707,048 | ||||||||||||||||||||||||||||||
| Total | — | $ | — | — | |||||||||||||||||||||||||||||||
(1)On February 12, 2017, the Company's Board of Directors authorized the repurchase of up to $500.0 million of the Company's outstanding common shares from time to time as market conditions warrant.
Item 3. Defaults Upon Senior Securities
Not Applicable.
Item 4. Mine Safety Disclosures
Not Applicable.
Item 5. Other Information
During the three months ended September 30, 2024, none of the Company’s directors or officers (as defined in Rule 16a-1(f) of the Exchange Act) adopted, terminated
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Item 6. Exhibits
| 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)) (Filed in paper - hyperlink is not required pursuant to Rule 105 of Regulation S-T). | |||||||
| 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) (Filed in paper - hyperlink is not required pursuant to Rule 105 of Regulation S-T). | |||||||
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| Exhibit Number | Description | |||||||
| 101.SCH | Inline XBRL Taxonomy Extension Schema Document | |||||||
| 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document | |||||||
| 101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document | |||||||
| 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document | |||||||
| 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document | |||||||
| 104 | Cover Page Interactive Data File (formatted as Inline XBRL with applicable taxonomy extension information contained in Exhibits 101.*). | |||||||
+ Represents a management contract, or compensatory plan, contract or arrangement required to be filed pursuant to Regulation S-K.
** Furnished herewith.
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Signature
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| THE MACERICH COMPANY | ||||||||||||||
| By: | /s/ SCOTT W. KINGSMORE | |||||||||||||
| Scott W. Kingsmore | ||||||||||||||
| Senior Executive Vice President, Treasurer and Chief Financial Officer | ||||||||||||||
| Date: | November 7, 2024 | (Principal Financial Officer) | ||||||||||||
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Exhibit 10.1
THE MACERICH COMPANY
AMENDED AND RESTATED SEVERANCE PAY PLAN
AMENDED AND RESTATED SEVERANCE PAY PLAN
The Macerich Company Change in Control Severance Pay Plan for Executive Vice Presidents and the Macerich Company Change in Control Severance Pay Plan for Senior Executives are each hereby amended and restated by the Company (as defined below), effective as of March 1, 2024 (the “Effective Date”) into a single combined plan, and such plan, as amended and restated herein and renamed, the “Plan”). The Plan is intended to be a top hat welfare benefit plan under ERISA for the benefit of a select group of management or highly compensated employees.
SECTION 1.PURPOSE
The Board of Directors of the Company believes that it is in the best interests of the Company to encourage the continued dedication to the Company of certain of the Company’s and its Subsidiaries’ employees in the face of potentially distracting circumstances arising from the possibility or occurrence of a termination of employment, whether or not in connection with a change in control of the Company, and the Board (defined below) has established the Plan for this purpose. The purpose of the Plan is to provide severance benefits in the event certain employees incur a Qualified Termination.
SECTION 2.DEFINITIONS
(a)“Accrued Obligations” means, with respect to an Eligible Employee, the sum of the Eligible Employee’s (i) Base Salary through the Date of Termination to the extent earned and not theretofore paid, (ii) accrued vacation pay and/or personal days to the extent earned and payable in connection with the termination of employment pursuant to the Company’s policy, (iii) accrued annual incentive bonus for the fiscal year immediately preceding the year in which the Date of Termination occurs, to the extent such bonus is determined to otherwise have been earned based on the Company’s achievement of applicable performance targets and employee service requirements, but not theretofore paid, and (iv) vested rights under any equity, compensation or benefit plan, policy, practice or program of or any other contract or agreement with the Company or the Employer including, without limitation, any acceleration of vesting of equity awards that shall occur upon a Qualifying Termination as set forth in the applicable equity award agreement and/or equity incentive plan pursuant to which such awards have been granted (“Double Trigger Equity Vesting”). Accrued Obligations described in clauses (i) and (ii) shall be paid in a lump sum in cash within the time required by law but in no event more than 30 days after the Date of Termination. Accrued Obligations described in clause (iii) shall be paid at such time as annual incentive bonuses for such fiscal year are otherwise paid pursuant to the terms of the applicable plan, but in no event later than 75 days after the end of such fiscal year. Accrued Obligations described in clause (iv) (including without limitation the Double Trigger Equity Vesting) shall be paid at such time(s) as required under the terms of the applicable plan or program.
(b)“Base Salary” means the annual base rate of compensation payable as salary to the Eligible Employee by the Employer as of the Eligible Employee’s Date of Termination or as of immediately prior to the first day of the Change in Control Period, whichever is higher, before deductions of voluntary deferrals authorized by the Eligible Employee or required by law to be withheld
from the Eligible Employee by the Employer, and excludes all other extra pay such as overtime, pensions, severance payments, bonuses, stock incentives, living or other allowances, and other benefits and perquisites.
(c)“Board” means the Board of Directors of the Company.
(d)“Bonus” means, with respect to an Eligible Employee, the average of the annual incentive bonuses awarded to the Eligible Employee in respect of the immediately preceding three years (including, for the avoidance of doubt, the grant date fair value of any annual incentive bonuses awarded in the form of cash and/or equity, but excluding for the avoidance of doubt, any equity incentive awards granted as part of the Company’s long-term equity incentive award program, which exists separate and apart from the Company’s annual short-term incentive bonus program); provided, however, that if an Eligible Employee’s employment with the Company is terminated prior to the first payment date for the first Company bonus the Eligible Employee was eligible to earn following the Eligible Employee’s date of hire, the Eligible Employee’s target annual bonus alone will be deemed the “average” hereunder and, provided further, that if an Eligible Employee has received an annual incentive bonus but has been employed by the Company for less than three years prior to the date of termination, the average of the annual incentive bonuses awarded to the Eligible Employee prior to the date of termination will be deemed the “average” hereunder.
(e)“Cause” means, with respect to an Eligible Employee, the occurrence of any of the following events, as reasonably determined by the Plan Administrator in its sole discretion: (i) the Eligible Employee’s willful misconduct or gross negligence in the performance of the Eligible Employee’s duties to the Company or any of its subsidiaries; (ii) the Eligible Employee’s repeated failure to perform the Eligible Employee’s lawful duties to the Company or any of its subsidiaries or follow the lawful written directives of the Board (other than as a result of death or physical or mental incapacity); (iii) the Eligible Employee’s conviction of, or pleading of guilty or nolo contendere to, a felony or any crime involving moral turpitude; (iv) the Eligible Employee’s performance of any material act of theft, embezzlement, fraud, malfeasance, dishonesty or misappropriation of the property of the Company or any of its subsidiaries; (v) the Eligible Employee’s use of alcohol or illegal drugs that materially impairs the Employee’s ability to perform the Employee’s duties contemplated hereunder; (vi) the Eligible Employee’s material breach of any fiduciary duty owed to the Company or any of its subsidiaries (including, without limitation, the duty of care and the duty of loyalty); or (vii) the Eligible Employee’s material breach of any employment agreement between the Eligible Employee and the Company, or a material violation of the Company’s (or any of its subsidiaries’) code of conduct or other written policy pursuant to which the Eligible Employee would be subject to immediate dismissal.
A termination for Cause shall be deemed to occur on the date on which the Employer first delivers written notice to the Eligible Employee of a finding of termination for Cause; provided, however, that such termination shall only occur following the Eligible Employee’s failure to cure, within ten days after receiving notice from the Company of an allegation of an act or failure to act of the kind described above, to the extent the Company determines such act or failure to act is curable.
(f)“Change in Control” means any of the following:
-2-
(i)the acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) (such individual, entity or group, a “Person”) of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 33% or more of either (A) the then- outstanding shares of common stock of the Company (the “Outstanding Company Common Stock”) or (B) the combined voting power of the then-outstanding voting securities of the Company entitled to vote generally in the election of directors (the “Outstanding Company Voting Securities”); provided, however, that, for purposes of this definition, the following acquisitions shall not constitute a Change in Control: (i) any acquisition directly from the Company, (ii) any acquisition by the Company, (iii) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any affiliate of the Company or successor or (iv) any acquisition by any entity pursuant to a transaction that complies with (f)(iii)(1), (f)(iii)(2) or (f)(iii) (3) below;
(ii)individuals who, as of the Effective Date, constitute the Board (the “Incumbent Board”) cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the date hereof whose election, or nomination for election by the Company’s stockholders, was approved by a vote of at least two- thirds of the directors then comprising the Incumbent Board (including for these purposes, the new members whose election or nomination was so approved, without counting the member and her/his predecessor twice) shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board;
(iii)consummation of a reorganization, merger, statutory share exchange or consolidation or similar corporate transaction involving the Company or any of its Subsidiaries, a sale or other disposition of all or substantially all of the assets of the Company, or the acquisition of assets or stock of another entity by the Company or any of its Subsidiaries (each, a “Business Combination”), in each case unless, following such Business Combination, (1) all or substantially all of the individuals and entities that were the beneficial owners of the Outstanding Company Common Stock and the Outstanding Company Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than 60% of the then-outstanding shares of common stock and the combined voting power of the then-outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the entity resulting from such Business Combination (including, without limitation, an entity that, as a result of such transaction, owns the Company or all or substantially all of the Company’s assets directly or through one or more subsidiaries (“Parent”)) in substantially the same proportions as their ownership immediately prior to such Business Combination of the Outstanding Company Common Stock and the Outstanding Company Voting Securities, as the case may be, (2) no Person (excluding any entity resulting from such Business Combination or a Parent or any employee benefit plan (or related trust) of the Company or such entity resulting from such Business Combination or Parent) beneficially owns, directly or indirectly, 20% or more of, respectively, the then-outstanding shares of common stock of the entity resulting from such Business Combination or the combined voting power of the then-outstanding voting securities of such entity, except to the extent that the ownership in excess of 20% existed prior to the Business Combination, and (3) at least a majority of the members of the board of directors or trustees of the entity resulting from such Business
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Combination were members of the Incumbent Board at the time of the execution of the initial agreement or of the action of the Board providing for such Business Combination; or
(iv)approval by the stockholders of the Company of a complete liquidation or dissolution of the Company.
Notwithstanding anything to the contrary in the Plan, to the extent required by Section 409A, an event shall constitute a Change in Control under the Plan only to the extent such event is a permissible payment event under Section 409A of the Code and Treas. Reg. § 1.409A-3(i)(5).
(g)“Change in Control Period” means the period commencing upon the consummation of a Change in Control and ending 24 months after such Change in Control.
(h)“Code” means Internal Revenue Code of 1986, as amended.
(i)“Company” means The Macerich Company, a Maryland corporation, or, from and after a Change in Control, the successor to the Company in any such Change in Control.
(j)“Date of Termination” means, with respect to an Eligible Employee, the effective date of termination of the Eligible Employee’s employment with the Employer.
(k)“Disability” means a “disability”, as determined under the Company’s long-term disability plan in effect on the Date of Termination, entitling the Eligible Employee to benefits under such long-term disability plan.
(l)“Eligible Employee” means a Tier 1 Executive, a Tier 2 Executive and a Tier 3 Executive, provided that such executive is not a party to an individual agreement with the Employer that provides for greater severance payments and benefits, in the aggregate.
(m)“Employer” means Macerich Management Company or other Subsidiary that employs one or more Eligible Employees, or, from and after the Change in Control, any other subsidiaries of the successor to the Company that employ the Eligible Employees.
(n)“ERISA” means the Employee Retirement Income Security Act of 1974, as amended.
(o)“Good Reason” means an action taken by the Employer, without the Eligible Employee’s written consent thereto, resulting in a material negative change in the employment relationship. For these purposes, a “material negative change in the employment relationship” shall include, without limitation, any one or more of the following reasons, to the extent not remedied by the Employer within 30 days after receipt by the Employer of written notice from the Eligible Employee provided to the Company within 90 days (the “Cure Period”) of the Eligible Employee’s knowledge of the occurrence of an event or circumstance set forth in clauses (i) through (vi) below specifying in reasonable detail such occurrence:
(i)the assignment to the Eligible Employee of any duties materially inconsistent in any respect with the Eligible Employee’s position (including status, offices, titles and
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reporting requirements), authority, duties or responsibilities, or any other material diminution in such position, authority, duties or responsibilities (whether or not occurring solely as a result of the Company’s ceasing to be a publicly traded entity);
(ii)a change in the Eligible Employee’s principal office location to a location further away from the Eligible Employee’s home which is more than 30 miles from the Eligible Employee’s current principal office;
(iii)any one or more material reductions (individually or in the aggregate) in the Eligible Employee’s Base Salary, Target Bonus and/or the formula for determining the amount of cash severance for which the Eligible Employee is eligible under this Plan;
(iv)any material breach by the Employer of the Eligible Employee’s service agreement (if one exists); or
(v)solely in the event of a Change in Control, the taking of any action following the Change in Control by the Employer to eliminate long-term incentive compensation or benefit plans in which the Eligible Employee participated in or was eligible to participate in immediately prior to such Change in Control without providing substitutes therefor, to materially reduce benefits thereunder or to substantially diminish other fringe benefits; provided that if neither a surviving entity nor its parent following a Change in Control is a publicly-held company, the failure to provide stock-based incentive compensation or benefits shall not be deemed Good Reason if compensation or benefits of comparable value, using a recognized valuation methodology, are substituted therefor; and provided further that a reduction or elimination in the aggregate of not more than 10% in aggregate employee benefits in connection with across the board reductions or modifications affecting similarly situated persons of comparable rank in the Employer or a combined organization shall not constitute Good Reason.
In the event that the Employer fails to remedy the condition constituting Good Reason during the applicable Cure Period, the Eligible Employee’s “termination of employment” must occur, if at all, within 120 days of the end of the Cure Period; provided, however, if an event giving rise to a claim of Good Reason in connection with a Change in Control first occurs within 120 days prior to the last day of the Change in Control Period, the Eligible Employee’s termination of employment must occur not later than the last day of the Change in Control Period. Accordingly, notwithstanding anything to the contrary herein, the Eligible Employee may resign for Good Reason prior to the expiration of the 30-day notice and/or applicable Cure Period if an event giving rise to a claim of Good Reason in connection with a Change in Control first occurs within 120 days prior to the last day of the Change in Control Period.
(p)“Plan Administrator” means the Board, or such committee of the Board as appointed by the Board. As of the Effective Date, the Plan Administrator is the Compensation Committee of the Board.
(q)“Pro-Rata Bonus” means a pro-rated annual incentive bonus otherwise payable under the Company’s applicable annual incentive bonus plan pursuant to which the Eligible Employee was eligible to earn a bonus for the year of termination, determined by multiplying the Eligible
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Employee’s Target Bonus by a fraction, the numerator of which is the number of days the Eligible Employee is employed in the year of termination and the denominator of which is 365.
(r)“Qualified Termination” means, on or after the Effective Date, (i) any termination of employment of an Eligible Employee by the Employer (other than for Cause or because of the Eligible Employee’s death or Disability), and (ii) any termination of employment by an Eligible Employee for Good Reason.
(s)“Sponsoring Employer” means the Company.
(t)“Subsidiary” means any direct or indirect subsidiary of the Company or The Macerich Partnership, L.P., or, from and after the Change in Control, any other subsidiaries of the successor to the Company or The Macerich Partnership, L.P.
(u)“Target Bonus” means an Eligible Employee’s target annual incentive bonus that the Eligible Employee was eligible to earn under the Company’s applicable annual incentive bonus plan for the year of termination (or the immediately prior year, if such a target annual incentive bonus has not been determined for the year of termination).
(v)“Tier 1 Executive” means an employee of the Employer with the title of Chief Executive Officer.
(w)“Tier 2 Executive” means an employee of the Employer with the title of President, or Senior Executive Vice President.
(x)“Tier 3 Executive” means an employee of the Employer with the title of Executive Vice President.
SECTION 3.ELIGIBILITY
The Plan Administrator shall determine the eligibility of each Eligible Employee for participation in this Plan based upon any information to which it has access and such other information furnished by the Eligible Employee. The determination shall be conclusive and binding upon all persons. In determining eligibility for participation, the Plan Administrator shall make such determination in accordance with ERISA and this Plan, including Section 11(c) hereof. For the avoidance of doubt, an Eligible Employee holding more than one title shall be eligible for benefits at the highest tier of benefits, but shall not be eligible for benefits at more than one tier.
SECTION 4.TERMINATION BENEFITS GENERALLY
In the event an Eligible Employee’s employment with the Company is terminated for any reason, the Company shall pay or provide to the Eligible Employee the Accrued Obligations, within the time required by law but in no event more than sixty (60) days after the Date of Termination.
SECTION 5.TERMINATION NOT IN CONNECTION WITH A CHANGE IN CONTROL
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In the event a Qualified Termination occurs at any time other than during the Change in Control Period, with respect to such Eligible Employee, in addition to the Accrued Obligations, subject to the Eligible Employee’s execution and non-revocation of a Release Agreement, substantially in the form set forth in Schedule A, within the time period set forth in the Release Agreement but in no event more than sixty (60) days after the Date of Termination, and subject to the Eligible Employee complying with the Release Agreement, the Company shall:
(a)pay the Eligible Employee an amount equal to the sum of (i) the Eligible Employee’s Base Salary and (ii) Eligible Employee’s Bonus, times a multiple equal to 2 for a Tier 1 Executive, 1.5 for a Tier 2 Executive, and 1 for a Tier 3 Executive,
(b)pay the Eligible Employee an amount equal to the Pro-Rata Bonus;
(c)if the Eligible Employee was participating in the Company’s group health plan immediately prior to the Date of Termination and timely elects COBRA health continuation, then the Company shall pay to the Eligible Employee (i) the total amount of the COBRA continuation (medical, vision and dental) monthly premium rate that would otherwise be payable by the Eligible Employee for such COBRA continuation for the Eligible Employee and any eligible dependents, as applicable, based on the premium rate as of the Date of Termination, multiplied by (ii) twenty-four (24) for the Tier 1 Executive, eighteen (18) for the Tier 2 Executive, and twelve (12) for a Tier 3 Executive ; and
(d)pay, on behalf of the Eligible Employee, for the highest level of outplacement benefits pursuant to the Company’s outplacement services plan for senior executives in effect immediately prior to the Date of Termination, for a period of 12 months following the Date of Termination.
The amounts payable under Sections 5(a), (b) and (c) shall be paid out in a lump sum within sixty (60) days after the Date of Termination; provided, however, that if the 60-day period begins in one calendar year and ends in a second calendar year, such payments, to the extent they qualify as “non-qualified deferred compensation” within the meaning of Section 409A of the Code, shall, begin to be paid in the second calendar year no later than the last day of such 60-day period (except as otherwise required to be further delayed pursuant to Section 19(a)); provided further, that the initial payment shall include a catch-up payment to cover amounts retroactive to the day immediately following the Date of Termination. Notwithstanding anything to the contrary in the foregoing, the Eligible Employee’s entitlement to the benefits under Section 5(d) shall commence immediately following the Date of Termination; provided, however, that such entitlement shall immediately cease if the Release Agreement does not become fully effective within the time period set forth in the Release Agreement.
The treatment of any outstanding and unvested equity awards (the “Unvested Equity Awards”) held by the Eligible Employee on the Date of Termination under this Section 5 shall be governed by the terms of the applicable Long-Term Incentive Plan award agreement between the Company and the Eligible Employee; provided, however, that if the Date of Termination occurs for any reason other than for Cause, death or Disability for any Tier 1, Tier 2 or Tier 3 Executive, then, subject to the Eligible Employee’s execution and non-revocation of the Release Agreement within the time period set forth in the Release Agreement, but in no event more than sixty (60) days after the Date of Termination, and subject to the Eligible Employee complying with the Release Agreement, and notwithstanding anything
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to the contrary in the appliable Long-Term Incentive Plan award agreement or any other applicable option or other stock-based award agreement, the Company shall cause 100% of the Unvested Equity Awards subject to time-based vesting conditions to immediately become fully vested, exercisable and/or nonforfeitable as of the later of (i) the Date of Termination or (ii) the effective date of the Release Agreement (the “Accelerated Vesting Date”). In order to effectuate the accelerated vesting contemplated by this Section, the termination or forfeiture of the unvested portion of the Eligible Employee’s Unvested Equity Awards that would otherwise terminate or be forfeited on the Date of Termination will be delayed until the earlier of (A) the effective date of the Release Agreement (at which time acceleration will occur), or (B) the date that the Release Agreement can no longer become fully effective (at which time the Eligible Employee’s Unvested Equity Awards will terminate or be forfeited). For purposes of clarity, no additional vesting of the Unvested Equity Awards shall occur during the period between the Date of Termination and the Accelerated Vesting Date.
SECTION 6.TERMINATION IN CONNECTION WITH A CHANGE IN CONTROL
In the event a Qualified Termination occurs within the Change in Control Period, then with respect to such Eligible Employee, in addition to the Accrued Obligations, subject to the Eligible Employee’s execution and non-revocation of the Release Agreement within the time period set forth in the Release Agreement, but in no event more than sixty (60) days after the Date of Termination, the Company shall:
(a)pay the Eligible Employee an amount equal to three (3) multiplied by the sum of (i) the Eligible Employee’s Base Salary, and (ii) the Eligible Employee’s Bonus;
(b)pay the Eligible Employee an amount equal to the Pro-Rata Bonus;
(c)pay the Eligible Employee an amount equal to the product of (x) the total amount of the COBRA continuation (medical, vision and dental) monthly premium rate that would otherwise be payable by the Eligible Employee for such COBRA continuation for the Eligible Employee and any eligible dependents, as applicable, based on the premium rate as of the Date of Termination and (y) 36; and
(d)pay, on behalf of the Eligible Employee, for the highest level of outplacement benefits pursuant to the Company’s outplacement services plan for senior executives in effect immediately prior to the Date of Termination, for a period of 12 months following the Date of Termination.
The amounts payable under Sections 6(a), (b) and (c) shall be paid in a lump sum within sixty (60) days after the Date of Termination; provided, however, that if the 60-day period begins in one calendar year and ends in a second calendar year, such payments, to the extent they qualify as “non-qualified deferred compensation” within the meaning of Section 409A of the Code, shall be paid or begin to be paid, as applicable, in the second calendar year no later than the last day of the 60-day period (except as otherwise required to be further delayed pursuant to Section 19(a)); provided further, that if applicable, the initial payment shall include a catch-up payment to cover amounts retroactive to the day immediately following the Date of Termination. For the avoidance of doubt, the severance pay and benefits provided in this Section 6 shall apply in lieu of, and expressly supersede, the provisions of
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Section 5 and no Eligible Employee shall be entitled to the severance pay and benefits under both Section 5 and 6 hereof. Notwithstanding anything to the contrary in the foregoing, the Eligible Employee’s entitlement to the benefits under Section 6(d) shall commence immediately following the Date of Termination; provided, however, that such entitlement shall immediately cease if the Release Agreement does not become fully effective within the time period set forth in the Release Agreement.
Notwithstanding anything herein to the contrary, the treatment of any Unvested Equity Awards held by the Eligible Employee on the Date of Termination under this Section 6 shall be governed by the terms of the applicable Long-Term Incentive Plan award agreement between the Company and the Eligible Employee.
For the avoidance of doubt, the mere occurrence of a Change in Control shall not be treated as a termination of an Eligible Employee’s employment under this Plan, nor shall the mere transfer of an Eligible Employee’s employment to and between the Employer and/or any Subsidiary be treated as a termination under this Plan.
SECTION 7.REDUCTION OF CERTAIN BENEFITS
(a)Reduction in Benefits. Anything in this Plan to the contrary notwithstanding, in the event that the receipt of all payments or distributions by the Company or the Employer in the nature of compensation to or for the Eligible Employee’s benefit, whether paid or payable pursuant to this Plan or otherwise (a “Payment”), would subject the Eligible Employee to the excise tax under Section 4999 of the Code, the accounting firm which audited the Company prior to the corporate transaction which results in the application of such excise tax, or another nationally known accounting or employee benefits consulting firm selected by the Company prior to such corporate transaction, in consultation with the Tier 1 Executive (the “Accounting Firm”), shall determine whether to reduce any of the Payments to the Reduced Amount (as defined below). The Payments shall be reduced to the Reduced Amount only if the Accounting Firm determines that the Eligible Employee would have a greater Net After-Tax Receipt (as defined below) of aggregate Payments if the Eligible Employee’s Payments were reduced to the Reduced Amount. If such a determination is not made by the Accounting Firm, the Eligible Employee shall receive all Payments to which Eligible Employee is entitled to receive.
(b)Order of Reduction. If the Accounting Firm determines that aggregate Payments should be reduced to the Reduced Amount, the Company shall promptly give the Eligible Employee notice to that effect and a copy of the detailed calculation thereof. All determinations made by the Accounting Firm under this Section 7 shall be made as soon as reasonably practicable and in no event later than 60 days following the date of termination of employment or such earlier date as requested by the Company and the Eligible Employee. All fees and expenses of the Accounting Firm shall be borne solely by the Company. Any determination by the Accounting Firm shall be binding on the Company, its Subsidiaries and the Eligible Employee. For purposes of reducing the Payments to the Reduced Amount, the Payments shall be reduced in the following order, in each case, in reverse chronological order beginning with the Payments that are to be paid or become vested the furthest in time from consummation of the Change in Control: (1) cash payments not subject to Section 409A of the Code; (2) cash payments subject to Section 409A of the Code; (3) equity-based payments and acceleration; and (4) non-cash forms of benefits; provided that all amounts or payments that are not subject to calculation
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under Treas. Reg. § 1.280G-1, Q&A-24(b) or (c) shall be reduced before any amounts that are subject to calculation under Treas. Reg. § 1.280G-1, Q&A-24(b) or (c).
(c)Underpayment or Overpayment. As a result of the uncertainty in the application of Section 4999 of the Code at the time of the initial determination by the Accounting Firm hereunder, it is possible that amounts will have been paid or distributed by the Company to or for the benefit of the Eligible Employee pursuant to this Plan which should not have been so paid or distributed (the “Overpayment”) or that additional amounts which will have not been paid or distributed by the Company to or for the benefit of the Eligible Employee pursuant to this Plan could have been so paid or distributed (the “Underpayment”), in each case, consistent with the calculation of the Reduced Amount hereunder. In the event that the Accounting Firm, based upon the assertion of a deficiency by the Internal Revenue Service against either the Company or a Subsidiary or the Eligible Employee which the Accounting Firm believes has a high probability of success, determines that an Overpayment has been made, the Eligible Employee shall pay any such Overpayment to the Company together with interest at the applicable federal rate provided for in Section 7872(f)(2) of the Code; provided, however, that no amount shall be payable by the Eligible Employee to the Company if and to the extent such payment would not either reduce the amount on which the Eligible Employee is subject to tax under Section 1 and Section 4999 of the Code or generate a refund of such taxes. In the event that the Accounting Firm, based upon controlling precedent or substantial authority, determines that an Underpayment has occurred, any such Underpayment shall be paid promptly (and in no event later than 60 days following the date on which the Underpayment is determined) by the Company to or for the benefit of the Eligible Employee together with interest at the applicable federal rate provided for in Section 7872(f)(2) of the Code.
(d)Reduced Amount and After-Tax Receipt. For purposes hereof, the following terms have the meanings set forth below: (i) “Reduced Amount” shall mean the greatest amount of Payments that can be paid that would not result in the imposition of the excise tax under Section 4999 of the Code if the Accounting Firm determines to reduce Payments pursuant to this Section 12 and (ii) “Net After-Tax Receipt” shall mean the present value (as determined in accordance with Sections 280G(b)(2)(A)(ii) and 280G(d)(4) of the Code) of a Payment net of all taxes imposed on the Eligible Employee with respect thereto under Sections 1 and 4999 of the Code and under applicable state and local laws, determined by applying the highest marginal rate under Section 1 of the Code and under state and local laws which applied to the Eligible Employee’s taxable income for the immediately preceding taxable year, or such other rate(s) as the Eligible Employee certifies, in the Eligible Employee’s sole discretion, as likely to apply to her/him in the relevant tax year(s).
SECTION 8.WITHHOLDING
Notwithstanding anything in this Plan to the contrary, all payments required to be made by the Employer hereunder to an Eligible Employee or her/his estate or beneficiaries shall be subject to the withholding of such amounts relating to taxes as the Employer reasonably may determine it should withhold pursuant to any applicable law or regulation. In lieu of withholding such amounts, in whole or in part, the Employer may, in its sole discretion, accept other provisions for the payment of taxes and any withholdings as required by law, provided that the Employer is satisfied that all requirements of law affecting its responsibilities to withhold compensation have been satisfied.
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SECTION 9.NO DUTY TO MITIGATE
An Eligible Employee’s payments received hereunder shall be considered severance pay in consideration of past service, and entitlement thereto shall not be governed by any duty to mitigate damages by seeking further employment. In addition, no payments received hereunder shall be offset by any payments or benefits an Eligible Employee may receive from any future employer.
SECTION 10.AMENDMENT, SUSPENSION OR TERMINATION
Prior to a Change in Control, this Plan may be amended, suspended or terminated at any time by the Plan Administrator; provided, however, that, any amendment, suspension or termination that reduces benefits, changes the definition of Eligible Employees or otherwise adversely impairs an Eligible Employee’s ability to receive any of the severance payments or benefits that could be provided under this Plan will not be effective until 12 months after notice of any such change is provided to the Eligible Employees. No such amendment, suspension or termination will be effective if a Change in Control occurs during the 12-month notice period and no such amendment, suspension or termination may occur after a Change in Control. This Plan may otherwise be amended, suspended or terminated by the Plan Administrator following the expiration of the Change in Control Period and the satisfaction of all obligations the Company may have to any Eligible Employee under the Plan.
SECTION 11.ADMINISTRATION
(a)The Plan Administrator and any representative whom it chooses to assist it to carry out its responsibilities under the Plan shall have the maximum discretionary authority permitted by law to interpret, construe, and administer the Plan, to make determinations regarding Plan participation, enrollment and eligibility for benefits, to evaluate and determine the validity of benefit claims, and to resolve any and all claims and disputes regarding the rights and entitlements of individuals to participate in the Plan and to receive benefits and payments pursuant to the Plan. The decisions of the Plan Administrator and its representatives shall be given the maximum deference permitted by law.
(b)The Plan Administrator shall have such powers as are necessary for the proper handling of claims for benefits under the Plan, including, but not limited to, the following:
(i)To prescribe procedures to be followed by Eligible Employees in filing applications for benefits and for furnishing evidence necessary to establish their rights to benefits under the Plan;
(ii)To find facts as to the rights of any Eligible Employee applying for or receiving benefits under the Plan and to notify any such Employee dissatisfied with any such finding of his right to appeal as set forth in Section 12(b). Final determination of benefits covered under this Plan shall be made by the Plan Administrator;
(iii)To make benefit payments directly to Eligible Employees entitled to benefits under the Plan or to their authorized assignees;
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(iv)To obtain from the Eligible Employee such information as shall be necessary for the proper administration of claims under the Plan;
(v)To keep records regarding the administration of claims under the Plan; and
(vi)To collect, evaluate, analyze and prepare statistical and other data with respect to the administration of the Plan.
(c)The Sponsoring Employer shall have the sole and absolute discretion to determine the termination dates for all Eligible Employees, and to determine whether an Eligible Employee suffered a Qualifying Termination. The Sponsoring Employer’s exercise of its discretion pursuant to this Section 11(c) shall be a matter of business judgment and not the subject of fiduciary responsibility.
SECTION 12.CLAIMS PROCEDURE AND PAYMENT OF BENEFITS
(a)Application for Benefits.
(i)Definitions. The following terms shall have the meaning described below for purposes of Sections 12(a) through 12(d):
(A)The term “Adverse Benefit Determination” means any of the following: a denial, reduction, or termination of, or a failure to provide or make payment (in whole or in part) for, a benefit, including any such denial, reduction, termination, or failure to provide or make payment that is based on a determination of an Eligible Employee’s or beneficiary’s eligibility to participate in a Plan.
(B)The term “Notice” or “Notification” means the delivery or furnishing of information to an individual in a manner that is reasonably calculated to ensure actual receipt by the individual.
(ii)All applications for benefits under the Plan shall be submitted to the Plan Administrator at such location as shall be designated by the Plan Administrator from time to time. Applications for benefits must be in writing on forms acceptable to the Plan Administrator and must be signed by the Eligible Employee. The Plan Administrator reserves the right to require the Eligible Employee to furnish such other information and documents as the Plan Administrator determines are necessary or appropriate. Each application shall be acted upon and approved or disapproved by the Plan Administrator within ninety (90) days following its receipt by the Plan Administrator.
(iii)The Plan Administrator shall provide a claimant with written or electronic Notification of any Adverse Benefit Determination. Any electronic Notification shall comply with the standards imposed by 29 CFR 2520.104b-l(c)(l)(i), (iii), and (iv). The Notification shall set forth, in a manner calculated to be understood by the claimant:
(A)The specific reason or reasons for the adverse determination;
(B)Reference to the specific Plan provisions on which the determination is based.
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(C)A description of any additional material or information necessary for the claimant to perfect the claim and an explanation of why such material or information is necessary; and
(D)A description of the Plan’s review procedures and the time limits applicable to such procedures, including a statement of the claimant’s right to bring a civil action under Section 502(a) of ERISA following an Adverse Benefit Determination on review.
(b)Review of Benefit Denials
(i)Appeal. A claimant shall have a reasonable opportunity to appeal an Adverse Benefit Determination to the Board and under which there will be a full and fair review of the claim and the Adverse Benefit Determination. The Board shall be identified in the Notification described in Section 12(a)(ii) and may be the Plan Administrator. Such full and fair review shall:
(A)Provide claimants at least ninety (90) days following receipt of a Notification of an Adverse Benefit Determination within which to appeal the determination;
(B)Provide claimants the opportunity to submit written comments, documents, records, and other information relating to the claim for benefits;
(C)Provide that a claimant shall be provided, upon request and free of charge, reasonable access to, and copies of, all documents, records, and other information relevant to the claimant’s claim for benefits;
(D)Provide for a review that takes into account all comments, documents, records, and other information submitted by the claimant relating to the claim, without regard to whether such information was submitted or considered in the initial benefit determination; and
(E)Provide for a review that does not afford deference to the initial Adverse Benefit Determination and that is conducted by an appropriate person who is neither the individual who made the Adverse Benefit Determination that is the subject of the appeal, nor the subordinate of such individual.
(ii)Timing of Benefit Determination on Review. The [Board] shall notify the Eligible Employee, in accordance with Section 12(b)(iv), of the Plan’s benefit determination on review within a reasonable period of time. Such Notification shall be provided not later than sixty (60) days after receipt by the Plan of the Eligible Employee’s request for review of the adverse determination.
(iii)Furnishing Documents. In the case of an Adverse Benefit Determination on review, the [Board] shall provide such access to, and copies of, documents, records, and other information described in Section 12(b)(iv) as is appropriate.
(iv)Content of Notification on Review. The [Board] shall provide a claimant with written or electronic Notification of a Plan's benefit determination following an appeal described in Section 12(b)(i). Any electronic Notification shall comply with the standards imposed by 29 CFR
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2520.104b-l(c)(l)(i), (iii), and (iv). In the case of an Adverse Benefit Determination on review, the Notification shall set forth, in a manner calculated to be understood by the claimant:
(A)The specific reason or reasons for the adverse determination;
(B)Reference to the specific Plan provisions on which the benefit determination is based;
(C)A statement that the claimant is entitled to receive, upon request and free of charge, reasonable access to, and copies of, all documents, records, and other information relevant to the claimant's claim for benefits; and
(D)A statement of the claimant’s right to bring an action under Section 502(a) of ERISA.
(c)Calculating Time Periods. The period of time within which a benefit determination (including a benefit determination on review) is required to be made shall begin at the time a claim (or appeal) is filed in accordance with the reasonable procedures of the Plan, without regard to whether all the information necessary to make a benefit determination accompanies the filing. In the event that a period of time is extended due to a claimant's failure to submit information necessary to decide a claim, the period for making the benefit determination shall be tolled from the date on which the Notification of the extension is sent to the claimant until the date on which the claimant responds to the request for additional information.
(d)Extension of Notice Period. The ninety (90) day and sixty (60) day periods applicable to notice furnished by the Plan Administrator in Sections 12(a) and 12(b) above may be extended at the discretion of the Plan Administrator for a second ninety (90) or sixty (60) day period, as the case may be, provided that written notice of the extension is furnished to the claimant prior to the termination of the initial period, indicating the special circumstances requiring such extension of time and the date by which a final decision is expected.
(e)Assignment. Plan benefits shall be reduced to the extent an Eligible Employee owes money to the Company with the exception of any Company provided housing assistance loan to an Eligible Employee which loan will be payable in accordance with the terms of the loan. Except as set forth in the preceding sentence, no benefit payable under the Plan shall be subject in any way to alienation, sale, transfer, assignment, pledge, attachment, garnishment, execution, or encumbrance of any kind, and any attempt to accomplish the same shall be void. No Eligible Employee entitled to benefits under the Plan shall have power to transfer, assign, mortgage or otherwise encumber any interest he may have herein, or to anticipate in any manner by assignment, agreement (including, but not limited to, any agreement to pay alimony, separate maintenance or child support, whether or not said agreement is pursuant to, or embodied in, a court order), or otherwise, the payment of any benefit or any other sum to be provided for the Eligible Employee hereunder; nor shall the interest of any Eligible Employee under this Plan or in any benefit provided hereunder be subject to attachment, garnishment, seizure or sequestration for the payment of any debts, judgments, decrees or obligations of any kind owed by such person (including, but not limited to, any obligation to pay alimony, separate maintenance or child support for which said person shall be obligated by virtue of a court order or decree of any court
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of any jurisdiction or by virtue of any agreement whether or not embodied in such a court order or decree), or be transferable by operation of law in event of bankruptcy, insolvency or otherwise.
(f)Facility of Payment. Whenever and as often as any person entitled to payments hereunder shall be determined to be a minor or under other legal disability or otherwise incapacitated in any way so as to be unable to manage the person’s financial affairs, the Sponsoring Employer, in its discretion, may direct that all or any portion of the benefit payments be made: (a) to such person; (b) to such person’s legal guardian or conservator; or (c) to such person’s spouse or to any other person. The decision of the Sponsoring Employer shall, in each case, be final and binding upon all persons. Any payment made pursuant to the authority herein conferred shall operate as a complete discharge of the obligations of the Sponsoring Employer under the Plan in respect thereof.
(g)Responsibility for Payment. The Sponsoring Employer shall be liable for the payment of benefits in accordance with the terms of the Plan. The benefits under the Plan shall be payable solely by the Sponsoring Employer and each Eligible Employee who shall claim the right to any payment under the Plan shall be entitled to look only to the Sponsoring Employer for such payment.
(h)Limitation on Benefits. The Sponsoring Employer shall have no obligation to set aside, earmark, or entrust any fund, policy, or money with which to pay its obligations under this Plan. The Eligible Employee, or any successor in interest, shall be and remain simply a general, unsecured creditor of the Sponsoring Employer with respect to the benefits under this Plan in the same manner as any other creditor who has a general claim for an unpaid liability.
SECTION 13.GOVERNING LAW
The validity of this Plan or of any of its provisions shall be determined under, and it shall be construed and administered according to, the laws of the State of California (without regard to its choice of law principles), except to the extent preempted by ERISA, or any other applicable laws of the United States of America; provided that if any provision is susceptible to more than one interpretation, such interpretation shall be given thereto as is consistent with the Plan being an unfunded top hat employee welfare benefit plan maintained by an employer within the meaning of ERISA.
SECTION 14.SEVERABILITY
If any part of any provision of this Plan shall be invalid or unenforceable under applicable law, such part shall be ineffective to the extent of such invalidity or unenforceability only, without in any way affecting the remaining parts of such provision or the remaining provisions of this Plan.
SECTION 15.DISCLAIMER OF RIGHTS
No provision in this Plan shall be construed to confer upon any individual the right to remain in the employ or service of the Employer, or to interfere in any way with any contractual or other right or authority of the Employer either to increase or decrease the compensation or other payments to any individual at any time, to terminate any employment or other relationship between any individual and the Employer or to require the Employer to pay severance for any termination of employment prior to a Change in Control. The obligation of the Employer to pay any benefits pursuant to this Plan shall be
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interpreted as a contractual obligation to pay only those amounts described herein, in the manner and under the conditions prescribed herein. The Plan shall in no way be interpreted to require the Employer to transfer any amounts to a third party trustee or otherwise hold any amounts in trust or escrow for payment to any participant or beneficiary under the terms of the Plan.
SECTION 16.CAPTIONS
The use of captions in this Plan is for the convenience of reference only and shall not affect the meaning of any provision of this Plan.
SECTION 17.NUMBER AND GENDER
With respect to words used in this Plan, the singular form shall include the plural form, the masculine gender shall include the feminine gender, etc., as the context requires.
SECTION 18.INDEMNIFICATION
To the extent permitted by law, the Sponsoring Employer shall indemnify and hold harmless the Plan Administrator (if not the Sponsoring Employer) and the Board from and against any and all liabilities, costs and expenses incurred by any such person as a result of any act, or omission to act, in connection with the performance of such person’s duties, responsibilities and obligations under the Plan and under ERISA, other than such liabilities, costs and expenses as may result from the gross negligence or willful misconduct of any such person. The foregoing right of indemnification shall be in addition to any other right to which any such person may be entitled as a matter of law or otherwise. The Sponsoring Employer may obtain, pay for and keep current a policy or policies of insurance, insuring the Plan Administrator and the Board from and against any and all liabilities, costs and expenses incurred by any such person as a result of any act, or omission to act, in connection with the performance of his duties, responsibilities and obligations under the Plan.
SECTION 19.SECTION 409A
(a)Anything in this Plan to the contrary notwithstanding, if at the time of the Eligible Employee’s “separation from service” within the meaning of Section 409A of the Code, the Company determines that the Eligible Employee is a “specified employee” within the meaning of Section 409A(a)(2)(B)(i) of the Code, then to the extent any payment or benefit that the Eligible Employee becomes entitled to under this Plan on account of the Eligible Employee’s separation from service would be considered “nonqualified deferred compensation” subject to Section 409A(a) of the Code, such payment shall not be payable and such benefit shall not be provided until the date that is the earlier of (A) six months and one day after the Eligible Employee’s separation from service, or (B) the Eligible Employee’s death. Each payment under this Plan constitutes a separate payment for purposes of Section 409A of the Code.
(b)The parties intend that this Plan will be administered in accordance with Section 409A of the Code. To the extent that any provision of this Plan is ambiguous as to its compliance with Section 409A of the Code, the provision shall be read in such a manner so that all payments hereunder comply with Section 409A of the Code. The parties agree that this Plan may be
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amended, as reasonably requested by either party, and as may be necessary to fully comply with Section 409A of the Code and all related rules and regulations in order to preserve the payments and benefits provided hereunder without additional cost to either party.
(c)All in-kind benefits provided and expenses eligible for reimbursement under this Plan shall be provided by the Employer or incurred by the Eligible Employee during the time periods set forth in this Plan. All reimbursements shall be paid as soon as administratively practicable, but in no event shall any reimbursement be paid after the last day of the taxable year following the taxable year in which the expense was incurred. The amount of in-kind benefits provided or reimbursable expenses incurred in one taxable year shall not affect the in-kind benefits to be provided or the expenses eligible for reimbursement in any other taxable year. Such right to reimbursement or in-kind benefits is not subject to liquidation or exchange for another benefit.
(d)To the extent that any payment or benefit described in this Plan constitutes “non-qualified deferred compensation” under Section 409A of the Code, and to the extent that such payment or benefit is payable upon the Eligible Employee’s termination of employment, then such payments or benefits shall be payable only upon the Eligible Employee’s “separation from service.” All references to an Eligible Employee’s termination of employment under this Plan shall only occur if the same also constitutes a “separation from service” as defined under Section 409A of the Code. The determination of whether and when a separation from service has occurred shall be made in accordance with the presumptions set forth in Treasury Regulation Section 1.409A-1(h).
(e)The Company makes no representation or warranty and shall have no liability to the Eligible Employee or any other person if any provisions of this Plan are determined to constitute deferred compensation subject to Section 409A of the Code but do not satisfy an exemption from, or the conditions of, such Section.
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Schedule A
Release Agreement
THIS RELEASE AGREEMENT is entered into by ____________ (the “Employee”) as a condition of and as consideration for the promise to provide the severance payments and other consideration (collectively, the “Severance Benefits”) to the Employee by The Macerich Company (the “Company”) pursuant to The Macerich Company Amended and Restated Severance Pay Plan (the “Plan”). All capitalized terms used in this Release Agreement and not otherwise defined shall be as defined in the Plan.
1.Waiver and Release. The Employee, on her/his own behalf and on behalf of her/his heirs, executors, administrators, attorneys and assigns, hereby unconditionally and irrevocably releases, waives and forever discharges Company and each of its affiliates, parents, successors, predecessors, and the subsidiaries, directors, owners, members, shareholders, officers, agents, and employees of the Company, and its affiliates, parents, successors, predecessors, and subsidiaries (collectively, all of the foregoing are referred to as the “Employer”), from any and all causes of action, claims and damages, including attorneys’ fees, whether known or unknown, foreseen or unforeseen, presently asserted or otherwise arising through the date of her/his signing of this Release Agreement, concerning her/his employment or separation from employment. This release includes, but is not limited to, any claim or entitlement to salary, bonuses, any other payments, benefits or damages arising under any federal law (including, but not limited to, Title VII of the Civil Rights Act of 1964, the Age Discrimination in Employment Act, the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), the Americans with Disabilities Act, Executive Order 11246, the Family and Medical Leave Act, and the Worker Adjustment and Retraining Notification Act, each as amended) and any other federal, state, local or foreign law relating to notice of employment termination or to severance pay; any claim arising under any state or local laws, ordinances or regulations (including, but not limited to, any state or local laws, ordinances or regulations requiring that advance notice be given of certain workforce reductions); and any claim arising under any common law principle or public policy, including, but not limited to, all suits in tort or contract, such as wrongful termination, defamation, emotional distress, invasion of privacy or loss of consortium. Notwithstanding the foregoing, the release of directors, owners, members, shareholders, officers, agents, and employees of the Company shall not apply to causes of action, claims and damages that arise from facts and circumstances that are wholly unrelated to facts and circumstances relating to such persons’ relationship with the Company or any affiliate, parent, successor, predecessor or subsidiary of the Company.
The Employee understands that this Release Agreement, does not limit or interfere with the Employee’s rights, without notice to or authorization of the Employer, (i) to file a charge or complaint with the Equal Employment Opportunity Commission, the National Labor Relations Board, the Occupational Safety and Health Administration, the U.S. Securities and Exchange Commission (the “SEC”), the Financial Industry Regulatory Authority, or any other self-regulatory organization or any other federal, state or local governmental agency or commission (each a “Governmental Agency”), (ii) to testify, assist or participate in any investigation, hearing or proceeding conducted by a Governmental Agency, whether or not initiated by the Employee, any other person or the Government Agency, or (iii) otherwise communicate with any Governmental Agency and provide documents or other information to
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a Governmental Agency without notice to the Company; provided that any communications or provision of documents shall not include the disclosure of information that was obtained through a communication that was subject to the attorney-client privilege (unless disclosure of that information would otherwise be permitted consistent with such privilege or applicable law). In the event the Employee files a charge or complaint with a Governmental Agency, or a Governmental Agency asserts a claim on the Employee’s behalf, the Employee agrees that the Employee’s release of claims in this Release Agreement shall nevertheless bar the Employee’s right (if any) to any monetary or other recovery (including reinstatement) with respect to released claims, except that the Employee does not waive: (i) the Employee’s right to receive an award from the SEC pursuant to Section 21-F of the Securities Exchange Act of 1934 or under any other whistleblower provisions of any applicable law or regulation for providing information to any other Governmental Agency, and (ii) the right to recover any other award which cannot be waived by law.
Notwithstanding anything in this Release Agreement to the contrary, the Employee is not waiving (i) any right to the Accrued Obligations or the Severance Benefits; (ii) any rights or claims that may arise after the date that the Employee signs and returns this Release Agreement; (iii) any claim for workers’ compensation benefits (but it does apply to, waive and affect claims of discrimination and/or retaliation on the basis of having made a workers’ compensation claim); (iv) claims for unemployment benefits or any other claims or rights that by law cannot be waived in a private agreement between an employer and employee; (v) the Employee’s rights to any vested benefits to which the Employee is entitled under the terms of the applicable employee benefit plan (as defined in Section 3(3) of ERISA, 29 U.S.C. § 1002(3)); (vi) any claim relating to directors’ and officers’ liability insurance coverage or any right of indemnification under the Company’s, or any of its affiliate’s, organizational documents or any other individual agreement between the Employee and the Company; or (vii) any of the Employee’s rights as an equity holder of the Company or any of its affiliates.
The Employee expressly waives the benefits of Section 1542 of the California Civil Code which provides that:
“A general release does not extend to claims that the creditor or releasing party does not know or suspect to exist in his or her favor at the time of executing the release and that, if known by him or her, would have materially affected his or her settlement with the debtor or released party.”
The Employee, being aware of said code section, understands and acknowledges the significance and consequences of such specific waiver of Section 1542 and expressly waives any rights the Employee may have thereunder, as well as under any other statute or common law principles of similar effect. The Employee hereby assumes full responsibility for any injuries, damages or losses that the Employee may incur as a result of such waiver.
2.Acknowledgments. The Employee is signing this Release Agreement knowingly and voluntarily. She/he acknowledges that:
(a)He or she is hereby advised by the Company to discuss all aspects of this Release Agreement with an attorney before signing this Release Agreement;
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(b)He or she has relied solely on her/his own judgment and/or that of her/his attorney regarding the consideration for and the terms of this Release Agreement and is signing this Release Agreement knowingly and voluntarily of her/his own free will;
(c)He or she is not entitled to the Severance Benefits unless she/he agrees to and fully complies with the terms of this Release Agreement;
(d)He or she has been given at least [twenty-one (21)] [forty-five (45)] calendar days to consider this Release Agreement (the “Consideration Period”). If she/he signs this Release Agreement before the end of the Consideration Period, she/he acknowledges by signing this Release Agreement that such decision was entirely voluntary and that she/he had the opportunity to consider this Release Agreement for the entire Consideration Period;
(e)He or she may revoke this Release Agreement within seven (7) calendar days after signing it by submitting a written notice of revocation to the Company. She/he further understands that this Release Agreement is not fully effective until the next business day after the seven (7) day period of revocation has expired without revocation, and that if she/he revokes this Release Agreement within the seven (7) day revocation period, she/he will not receive the Severance Benefits;
(f)He or she has read and understands this Release Agreement and further understands that it includes a general release of any and all known and unknown, foreseen or unforeseen claims presently asserted or otherwise arising through the date of her/his signing of this Release Agreement that she/he may have against the Employer;
(g)No statements made or conduct by the Employer has in any way coerced or unduly influenced her/him to execute this Release Agreement; and
(h)Except for the Severance Benefits, she/he has been paid all wages, bonuses, compensation, benefits and other amounts that the Employer ever owed to him or her. Further she/he acknowledges and agrees that she/he is not entitled to any other severance pay or benefits including without limitation, pursuant to any other severance plan, or program or arrangement.
3.No Admission of Liability. This Release Agreement does not constitute an admission of liability or wrongdoing on the part of the Employer, the Employer does not admit there has been any wrongdoing whatsoever against the Employee, and the Employer expressly denies that any wrongdoing has occurred.
4.Entire Agreement. There are no other agreements of any nature between the Employer and the Employee with respect to the matters discussed in this Release Agreement, except as expressly stated herein, and in signing this Release Agreement, the Employee is not relying on any agreements or representations, except those expressly contained in this Release Agreement.
5.Execution. It is not necessary that the Employer sign this Release Agreement following the Employee’s full and complete execution of it for it to become fully effective and enforceable.
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6.Severability. If any provision of this Release Agreement is found, held or deemed by a court of competent jurisdiction to be void, unlawful or unenforceable under any applicable statute or controlling law, the remainder of this Release Agreement shall continue in full force and effect.
7.Governing Law. This Release Agreement shall be governed by the laws of the State of [_________], excluding the choice of law rules thereof.
8.Headings. Section and subsection headings contained in this Release Agreement are inserted for the convenience of reference only. Section and subsection headings shall not be deemed to be a part of this Release Agreement for any purpose, and they shall not in any way define or affect the meaning, construction or scope of any of the provisions hereof.
[Remainder of page intentionally blank.]
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IN WITNESS WHEREOF, the undersigned has duly executed this Release Agreement on the date set forth below.
EMPLOYEE:
_______________________________ ________________________________
[Name] Date
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Exhibit 31.1
THE MACERICH COMPANY
SECTION 302 CERTIFICATION
I, Jackson Hsieh, certify that:
1.I have reviewed this report on Form 10-Q for the quarter ended September 30, 2024 of The Macerich Company;
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5.The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
| /s/ JACKSON HSIEH | |||||||||||
| Date: | November 7, 2024 | Chief Executive Officer | |||||||||
Exhibit 31.2
THE MACERICH COMPANY
SECTION 302 CERTIFICATION
I, Scott W. Kingsmore, certify that:
1.I have reviewed this report on Form 10-Q for the quarter ended September 30, 2024 of The Macerich Company;
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5.The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
| /s/ SCOTT W. KINGSMORE | |||||||||||
| Date: | November 7, 2024 | Senior Executive Vice President and Chief Financial Officer | |||||||||
Exhibit 32.1
THE MACERICH COMPANY
WRITTEN STATEMENT
PURSUANT TO
18 U.S.C. SECTION 1350
The undersigned, Jackson Hsieh and Scott W. Kingsmore, the Chief Executive Officer and Chief Financial Officer, respectively, of The Macerich Company (the "Company"), pursuant to 18 U.S.C. §1350, each hereby certifies that, to the best of his knowledge:
(i)the Quarterly Report on Form 10-Q for the quarter ended September 30, 2024 of the Company (the "Report") fully complies with the requirements of Section 13(a) and 15(d) of the Securities Exchange Act of 1934, as amended; and
(ii)the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Date: November 7, 2024
| /s/ JACKSON HSIEH | ||||||||
| Chief Executive Officer | ||||||||
| /s/ SCOTT W. KINGSMORE | ||||||||
| Senior Executive Vice President and Chief Financial Officer | ||||||||