Edgar Filing: MACERICH CO

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended September 30, 2007

Commission File No. 1-12504

THE MACERICH COMPANY

(Exact name of registrant as specified in its charter)

MARYLAND		95-4448705
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification Number)

401 Wilshire Boulevard, Suite 700, Santa Monica, California 90401

(Address of principal executive office, including zip code)

(310) 394-6000

(Registrant’s telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

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

YES x NO o

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

Large accelerated filer x

Accelerated filer o

Non-accelerated filer o

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

YES o NO x

Number of shares outstanding of the registrant’s common stock, as of November 1, 2007 Common Stock, par value $.01 per share: 72,518,069 shares

THE MACERICH COMPANY

FORM 10-Q

INDEX

		Page
Part I	Financial Information
Item 1.	Financial Statements
	Consolidated Balance Sheets of the Company as of September 30, 2007 and December 31, 2006	3
	Consolidated Statements of Operations of the Company for the three and nine months ended September 30, 2007 and 2006	4
	Consolidated Statement of Common Stockholders’ Equity of the Company for the nine months ended September 30, 2007	5
	Consolidated Statements of Cash Flows of the Company for the nine months ended September 30, 2007 and 2006	6
	Notes to Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	32
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	46
Item 4.	Controls and Procedures	47
Item 4T.	Controls and Procedures	48
Part II	Other Information	49
Item 1.	Legal Proceedings	49
Item 1A.	Risk Factors	49
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	49
Item 3.	Defaults Upon Senior Securities	49
Item 4.	Submission of Matters to a Vote of Security Holders	49
Item 5.	Other Information	49
Item 6.	Exhibits	49
Signature		51

THE MACERICH COMPANY

CONSOLIDATED BALANCE SHEETS

(Dollars in thousands, except share amounts)

	September 30,				December 31,
	2007				2006
	(Unaudited)
ASSETS:
Property, net		$	6,045,958			$	5,755,283
Cash and cash equivalents		42,850				269,435
Restricted cash		69,209				66,376
Marketable securities		29,368				30,019
Tenant receivables, net		127,868				117,855
Deferred charges and other assets, net		323,233				307,825
Loans to unconsolidated joint ventures		488				708
Due from affiliates		2,263				4,282
Investments in unconsolidated joint ventures		818,723				1,010,380
Total assets		$	7,459,960			$	7,562,163
LIABILITIES, PREFERRED STOCK AND COMMON STOCKHOLDERS’ EQUITY:
Mortgage notes payable:
Related parties		$	226,745			$	151,311
Others		3,073,368				3,179,787
Total		3,300,113				3,331,098
Bank and other notes payable		1,824,366				1,662,781
Accounts payable and accrued expenses		92,523				86,127
Other accrued liabilities		250,464				212,249
Preferred stock dividends payable		6,804				6,199
Total liabilities		5,474,270				5,298,454
Minority interest		330,573				387,183
Commitments and contingencies
Class A participating convertible preferred units		213,786				213,786
Class A non-participating convertible preferred units		16,459				21,501
Series A cumulative convertible redeemable preferred stock, $.01 par value, 3,627,131 shares authorized, issued and outstanding at September 30, 2007 and December 31, 2006, respectively		98,934				98,934
Common stockholders’ equity:
Common stock, $.01 par value, 145,000,000 shares authorized, 71,712,556 and 71,567,908 shares issued and outstanding at September 30, 2007 and December 31, 2006, respectively		716				716
Additional paid-in capital		1,630,093				1,717,498
Accumulated deficit		(298,095		)		(178,249		)
Accumulated other comprehensive (loss) income		(6,776		)		2,340
Total common stockholders’ equity		1,325,938				1,542,305
Total liabilities, preferred stock and common stockholders’ equity		$	7,459,960			$	7,562,163

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

THE MACERICH COMPANY
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share amounts)
(Unaudited)

	For the Three Months						For the Nine Months
	Ended September 30,						Ended September 30,
	2007			2006			2007			2006
Revenues:
Minimum rents	$	130,371		$	115,877		$	380,256		$	354,555
Percentage rents	4,992			4,702			11,620			9,618
Tenant recoveries	70,623			64,250			206,416			187,219
Management Companies	9,242			8,023			27,595			22,650
Other	8,756			9,225			25,554			21,814
Total revenues	223,984			202,077			651,441			595,856
Expenses:
Shopping center and operating expenses	73,831			67,478			211,224			193,321
Management Companies’ operating expenses	17,908			14,455			54,182			41,295
REIT general and administrative expenses	1,992			2,551			11,777			9,540
Depreciation and amortization	60,171			53,542			177,665			168,965
	153,902			138,026			454,848			413,121
Interest expense:
Related parties	3,772			2,730			9,634			8,142
Other	56,210			64,623			180,165			196,141
	59,982			67,353			189,799			204,283
Total expenses	213,884			205,379			644,647			617,404
Minority interest in consolidated joint ventures	(721		)	(870		)	(2,237		)	(1,872		)
Equity in income of unconsolidated joint ventures	18,648			18,490			52,128			57,367
Income tax (provision) benefit	(429		)	(535		)	478			(219		)
Gain on sale of assets	147			538			4,181			37
Loss on early extinguishment of debt	—			(29		)	(877		)	(1,811		)
Income from continuing operations	27,745			14,292			60,467			31,954
Discontinued operations:
(Loss) gain on sale of assets	(905		)	46,214			(2,325		)	72,167
Income from discontinued operations	237			1,562			60			9,241
Total (loss) income from discontinued operations	(668		)	47,776			(2,265		)	81,408
Income before minority interest and preferred dividends	27,077			62,068			58,202			113,362
Less: minority interest in Operating Partnership	3,070			8,901			5,935			15,131
Net income	24,007			53,167			52,267			98,231
Less: preferred dividends	6,727			6,199			18,971			18,139
Net income available to common stockholders	$	17,280		$	46,968		$	33,296		$	80,092
Earnings per common share—basic:
Income from continuing operations	$	0.25		$	0.10		$	0.49		$	0.16
Discontinued operations	(0.01		)	0.56			(0.03		)	0.97
Net income	$	0.24		$	0.66		$	0.46		$	1.13
Earnings per common share—diluted:
Income from continuing operations	$	0.25		$	0.10		$	0.49		$	0.16
Discontinued operations	(0.01		)	0.56			(0.03		)	0.97
Net income	$	0.24		$	0.66		$	0.46		$	1.13
Weighted average number of common shares outstanding:
Basic	71,674,000			71,479,000			71,625,000			70,587,000
Diluted	84,529,000			85,021,000			84,706,000			84,216,000

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

THE MACERICH COMPANY
CONSOLIDATED STATEMENT OF COMMON STOCKHOLDERS’ EQUITY
(Dollars in thousands, except per share data)
(Unaudited)

														Accumulated				Total
	Common Stock						Additional							Other				Common
			Par				Paid-in			Accumulated				Comprehensive				Stockholders’
	Shares		Value				Capital			Deficit				(Loss) income				Equity
Balance January 1, 2007	71,567,908			$	716		$	1,717,498			$	(178,249	)		$	2,340			$	1,542,305
Comprehensive income:
Net income	—			—			—				52,267				—				52,267
Reclassification of deferred losses	—			—			—				—				723				723
Interest rate swap/cap agreements	—			—			—				—				(9,839		)		(9,839		)
Total comprehensive income	—			—			—				52,267				(9,116		)		43,151
Amortization of share and unit-based plans	213,996			2			15,859				—				—				15,861
Exercise of stock options	13,500			—			387				—				—				387
Employee stock purchases	8,113			—			557				—				—				557
Distributions paid ($2.13) per share	—			—			—				(153,142		)		—				(153,142		)
Preferred dividends	—			—			—				(18,971		)		—				(18,971		)
Conversion of partnership units and Class A non-participating convertible preferred units	716,039			6			19,322				—				—				19,328
Repurchase of common shares	(807,000	)		(8		)	(74,962		)		—				—				(74,970		)
Purchase of capped calls on convertible senior notes	—			—			(59,850		)		—				—				(59,850		)
Change in accounting principle due to adoption of FIN 48	—			—			(1,574		)		—				—				(1,574		)
Adjustment to reflect minority interest on a pro rata basis for period end ownership percentage of Operating Partnership units	—			—			12,856				—				—				12,856
Balance September 30, 2007	71,712,556			$	716		$	1,630,093			$	(298,095	)		$	(6,776	)		$	1,325,938

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

THE MACERICH COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)

	For the Nine Months Ended September 30,
	2007			2006
Cash flows from operating activities:
Net income available to common stockholders	$	33,296		$	80,092
Preferred dividends		18,971			18,139
Net income		52,267			98,231
Adjustments to reconcile net income to net cash provided by operating activities:
Loss on early extinguishment of debt		877			1,811
Gain on sale of assets		(4,181	)		(37	)
Loss (gain) on sale of assets of discontinued operations		2,325			(72,167	)
Depreciation and amortization		177,665			179,070
Amortization of net premium on mortgage and bank and other notes payable		(7,668	)		(9,014	)
Amortization of share and unit-based plans		11,119			6,533
Minority interest in Operating Partnership		5,935			15,131
Minority interest in consolidated joint ventures		2,237			2,284
Equity in income of unconsolidated joint ventures		(52,128	)		(57,367	)
Distributions of income from unconsolidated joint ventures		4,118			3,213
Changes in assets and liabilities, net of acquisitions:
Tenant receivables, net		(10,371	)		(5,982	)
Other assets		(16,867	)		(466	)
Accounts payable and accrued expenses		8,925			(5,653	)
Due from affiliates		1,989			(260	)
Other accrued liabilities		31,829			(16,422	)
Net cash provided by operating activities		208,071			138,905
Cash flows from investing activities:
Acquisitions of property, development, redevelopment and property improvements		(434,133	)		(492,578	)
Issuance of note receivable		—			(10,000	)
Purchase of marketable securities		—			(30,307	)
Maturities of marketable securities		912			184
Deferred leasing costs		(24,359	)		(20,359	)
Distributions from unconsolidated joint ventures		248,176			162,519
Contributions to unconsolidated joint ventures		(18,532	)		(24,681	)
Repayments of loans to unconsolidated joint ventures		220			600
Proceeds from sale of assets		15,814			237,938
Restricted cash		(2,833	)		(7,769	)
Net cash used in investing activities		(214,735	)		(184,453	)
Cash flows from financing activities:
Proceeds from mortgages and bank and other notes payable		1,648,068			1,451,321
Payments on mortgages and bank and other notes payable		(1,527,438	)		(2,013,456	)
Deferred financing costs		(1,919	)		(6,559	)
Purchase of Capped Calls		(59,850	)		—
Repurchase of common stock		(74,970	)		—
Proceeds from share and unit-based plans		944			408
Net proceeds from stock offering		—			746,804
Dividends and distributions		(186,390	)		(208,126	)
Dividends to preferred stockholders / preferred unit holders		(18,366	)		(17,910	)
Net cash used in financing activities		(219,921	)		(47,518	)
Net decrease in cash		(226,585	)		(93,066	)
Cash and cash equivalents, beginning of period		269,435			155,113
Cash and cash equivalents, end of period	$	42,850		$	62,047
Supplemental cash flow information:
Cash payments for interest, net of amounts capitalized	$	210,803		$	230,547
Non-cash transactions:
Increase in other accrued liabilities and additional paid-in capital recorded upon adoption of FIN 48	$	1,574		$	—
Acquisition of property by assumption of mortgage note payable	$	4,300		$	—
Reclassification from other accrued liabilities to additional paid-in capital recorded upon adoption of SFAS No. 123(R)	$	—		$	6,000
Accrued development costs included in accounts payable and accrued expenses and other accrued liabilities	$	30,259		$	7,334

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

THE MACERICH COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)
(Unaudited)

1. Organization:

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

The Company commenced operations effective with the completion of its initial public offering on March 16, 1994. As of September 30, 2007, the Company is the sole general partner of and holds an 85% ownership interest in The Macerich Partnership, L.P. (the “Operating Partnership”). The interests in the Operating Partnership are known as OP Units. OP Units not held by the Company are redeemable, subject to certain restrictions, on a one-for-one basis for the Company’s common stock or cash at the Company’s option.

The Company is organized to qualify as a real estate investment trust (“REIT”) under the Internal Revenue Code of 1986, as amended. The 15% limited partnership interest of the Operating Partnership not owned by the Company is reflected in these financial statements as minority interest in the Operating Partnership.

The property management, leasing and redevelopment of the Company’s portfolio is provided by the Company’s management companies, Macerich Property Management Company, LLC, (“MPMC, LLC”) a single member Delaware limited liability company, Macerich Management Company (“MMC”), a California corporation, Westcor Partners, L.L.C., a single member Arizona limited liability company, Macerich Westcor Management LLC, a single member Delaware limited liability company, Westcor Partners of Colorado, LLC, a Colorado limited liability company, MACW Mall Management, Inc., a New York corporation and MACW Property Management, LLC, a single member New York limited liability company. The two MACW management companies are collectively referred to herein as the “Wilmorite Management Companies.” The three Westcor management companies are collectively referred to herein as the “Westcor Management Companies.” All seven of the management companies are collectively referred to herein as the “Management Companies.”

2. Basis of Presentation:

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

The accompanying consolidated financial statements include the accounts of the Company and the Operating Partnership. Investments in entities that are controlled by the Company or meet the definition of a variable interest entity in which an enterprise absorbs the majority of the entity’s expected losses, receives a majority of the entity’s expected residual returns, or both, as a result of ownership, contractual or other financial interests in the entity are consolidated; otherwise they are accounted for under the equity method and are reflected as “Investments in unconsolidated joint ventures.”

The unaudited interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements and related notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2006. In the opinion of management, all adjustments

THE MACERICH COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share amounts)
(Unaudited)

2. Basis of Presentation: (Continued)

(consisting of normal recurring adjustments) necessary for a fair presentation of the financial statements for the interim periods have been made. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The accompanying consolidated balance sheet as of December 31, 2006 has been derived from the audited financial statements, but does not include all disclosures required by GAAP.

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

Recent Accounting Pronouncements:

In February 2006, the Financial Accounting Standards Board (“FASB”) issued Statement on Financial Accounting Standards (“SFAS”) No. 155, “Accounting for Certain Hybrid Financial Instruments—An Amendment of FASB Statements No. 133 and 140.” This statement amended SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities,” and SFAS No. 140, “Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities.” SFAS No. 155 permits fair value remeasurement for any hybrid financial instrument that contains an embedded derivative that otherwise would require bifurcation. This statement also established a requirement to evaluate interests in securitized financial assets to identify interests that are freestanding derivatives or that are hybrid financial instruments that contain an embedded derivative requiring bifurcation. The adoption of this statement on January 1, 2007 did not have a material effect on the Company’s results of operations or financial condition.

In June 2006, the FASB issued Interpretation No. 48, “Accounting for Uncertainty in Income Taxes—an interpretation of FASB Statement No. 109” (“FIN 48”). This interpretation clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements in accordance with SFAS No. 109, “Accounting for Income Taxes.” This Interpretation prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. This Interpretation also provides guidance on derecognition of previously recognized income tax benefits, classification, interest and penalties, accounting in interim periods, disclosure, and transition. The Company adopted this statement on January 1, 2007. See Note 18—Income Taxes for the impact of the adoption of FIN 48 on the Company’s results of operations or financial condition.

In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements.” SFAS No. 157 defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. The Company is required to adopt SFAS No. 157 for the year 2008 and does not expect its adoption to have a material effect on the Company’s results of operations or financial condition.

In September 2006, the Securities and Exchange Commission issued Staff Accounting Bulletin (“SAB”) No. 108. SAB No. 108 establishes a framework for quantifying materiality of financial statement

THE MACERICH COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share amounts)
(Unaudited)

2. Basis of Presentation: (Continued)

misstatements. The adoption of SAB No. 108 on January 1, 2007 did not have a material impact on the Company’s consolidated results of operations or financial condition.

In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities—including an amendment of FASB Statement No. 115.” SFAS No. 159 allows for the measurement of many financial instruments and certain other items at fair value. The Company is required to adopt SFAS No. 159 for the year 2008. The Company is currently evaluating the impact of adoption of this statement on its results of operations or financial condition.

Fair Value of Financial Instruments

The Company calculates the fair value of financial instruments and includes this additional information in the notes to consolidated financial statements when the fair value is different than the carrying value of those financial instruments. When the fair value reasonably approximates the carrying value, no additional disclosure is made. The estimated fair value amounts have been determined by the Company using available market information and appropriate valuation methodologies. However, considerable judgment is required in interpreting market data to develop the estimates of fair value. Accordingly, the estimates presented herein are not necessarily indicative of the amounts that the Company could realize in a current market exchange. The use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair value amounts.

3. Earnings per Share:

The computation of basic earnings per share (“EPS”) is based on net income available to common stockholders and the weighted average number of common shares outstanding for the three and nine months ended September 30, 2007 and 2006. The computation of diluted earnings per share includes the effect of dilutive securities using the “if-converted” method and dilutive effect of employee stock options calculated using the treasury stock method. The OP Units and MACWH, LP common units not held by the Company have been included in the diluted EPS since they may be redeemed on a one-for-one basis for common stock or cash, at the Company’s option. The following table computes the basic and diluted earnings per share calculation (dollars and shares in thousands):

	For the Three Months Ended September 30,
	2007					2006
	Net Income		Shares	Per Share		Net Income		Shares	Per Share
Net income	$	24,007				$	53,167
Less: preferred dividends(1)	6,727					6,199
Basic EPS:
Net income available to common stockholders	17,280		71,674	$	0.24	46,968		71,479	$	0.66
Diluted EPS:
Conversion of partnership units	3,070		12,546			8,901		13,247
Employee stock options	—		309			—		295
Net income available to common stockholders	$	20,350	84,529	$	0.24	$	55,869	85,021	$	0.66

THE MACERICH COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share amounts)
(Unaudited)

3. Earnings per Share: (Continued)

	For the Nine Months Ended September 30,
	2007					2006
	Net Income		Shares	Per Share		Net Income		Shares	Per Share
Net income	$	52,267				$	98,231
Less: preferred dividends(1)	18,971					18,139
Basic EPS:
Net income available to common stockholders	33,296		71,625	$	0.46	80,092		70,587	$	1.13
Diluted EPS:
Conversion of partnership units	5,935		12,775			15,131		13,337
Employee stock options	—		306			—		292
Net income available to common stockholders	$	39,231	84,706	$	0.46	$	95,223	84,216	$	1.13

(1) Preferred dividends include convertible preferred unit dividends of $3,825 and $3,624 for the three months ended September 30, 2007 and 2006, and $10,919 and $10,631 for the nine months ended September 30, 2007 and 2006, respectively.

The minority interest in the Operating Partnership as reflected in the Company’s consolidated statements of operations has been allocated for EPS calculations as follows:

	For the Three Months Ended					For the Nine Months Ended
	September 30,					September 30,
	2007			2006		2007			2006
Income from continuing operations	$	3,170		$	1,429	$	6,278		$	2,196
Discontinued operations:
(Loss) gain on sale of assets	(135		)	7,228		(352		)	11,467
Income from discontinued operations	35			244		9			1,468
Total	$	3,070		$	8,901	$	5,935		$	15,131

THE MACERICH COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share amounts)
(Unaudited)

4. Investments in Unconsolidated Joint Ventures:

The following are the Company’s investments in unconsolidated joint ventures. The Operating Partnership’s interest in each joint venture property as of September 30, 2007 was as follows:

	Partnership’s
Joint Venture	Ownership % (1)
Biltmore Shopping Center Partners LLC		50.0	%
Camelback Colonnade SPE LLC		75.0	%
Chandler Festival SPE, LLC		50.0	%
Chandler Gateway SPE LLC		50.0	%
Chandler Village Center, LLC		50.0	%
Coolidge Holding LLC		37.5	%
Corte Madera Village, LLC		50.1	%
Desert Sky Mall—Tenants in Common		50.0	%
East Mesa Land, L.L.C.		50.0	%
East Mesa Mall, L.L.C.—Superstition Springs Center		33.3	%
Jaren Associates #4		12.5	%
Kierland Tower Lofts, LLC		15.0	%
Macerich Northwestern Associates		50.0	%
MetroRising AMS Holding LLC		15.0	%
New River Associates—Arrowhead Towne Center		33.3	%
NorthPark Land Partners, LP		50.0	%
NorthPark Partners, LP		50.0	%
Pacific Premier Retail Trust		51.0	%
PHXAZ/Kierland Commons, L.L.C.		24.5	%
Propcor Associates		25.0	%
Propcor II Associates, LLC—Boulevard Shops		50.0	%
SanTan Village Phase 2 LLC		34.9	%
Scottsdale Fashion Square Partnership		50.0	%
SDG Macerich Properties, L.P.		50.0	%
The Market at Estrella Falls LLC		35.1	%
Tysons Corner Holdings LLC		50.0	%
Tysons Corner LLC		50.0	%
Tysons Corner Property Holdings II LLC		50.0	%
Tysons Corner Property Holdings LLC		50.0	%
Tysons Corner Property LLC		50.0	%
W.M. Inland, L.L.C.		50.0	%
West Acres Development, LLP		19.0	%
Westcor/Gilbert, L.L.C.		50.0	%
Westcor/Goodyear, L.L.C.		50.0	%
Westcor/Queen Creek Commercial LLC		37.6	%
Westcor/Queen Creek LLC		37.6	%
Westcor/Queen Creek Medical LLC		37.6	%

THE MACERICH COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share amounts)
(Unaudited)

4. Investments in Unconsolidated Joint Ventures: (Continued)

	Partnership’s
Joint Venture	Ownership % (1)
Westcor/Queen Creek Residential LLC		37.6	%
Westcor/Surprise Auto Park LLC		33.3	%
Westcor/Surprise LLC		33.3	%
Westpen Associates		50.0	%
WM Ridgmar, L.P.		50.0	%

(1) The Operating Partnership’s ownership interest in this table reflects its legal ownership interest but may not reflect its economic interest since each joint venture has various agreements regarding cash flow, profits and losses, allocations, capital requirements and other matters.

The Company generally accounts for its investments in joint ventures using the equity method of accounting unless the Company has a controlling interest in the joint venture or is the primary beneficiary in a variable interest entity. Although the Company has a greater than 50% interest in Pacific Premier Retail Trust, Camelback Colonnade SPE LLC and Corte Madera Village, LLC, the Company shares management control with the partners in these joint ventures and accounts for these joint ventures using the equity method of accounting.

THE MACERICH COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share amounts)
(Unaudited)

4. Investments in Unconsolidated Joint Ventures: (Continued)

Combined and Condensed Balance Sheets of Unconsolidated Joint Ventures:

	September 30,			December 31,
	2007			2006
Assets(1):
Properties, net		$	4,249,548		$	4,251,765
Other assets		440,670			429,028
Total assets		$	4,690,218		$	4,680,793
Liabilities and partners’ capital(1):
Mortgage notes payable(2)		$	3,859,229		$	3,515,154
Other liabilities		175,032			140,889
The Company’s capital(3)		379,758			559,172
Outside partners’ capital		276,199			465,578
Total liabilities and partners’ capital		$	4,690,218		$	4,680,793

(1) These amounts include the assets and liabilities of the following significant joint ventures:

				Pacific
	SDG			Premier		Tysons
	Macerich			Retail		Corner
	Properties, L.P.			Trust		LLC
As of September 30, 2007:
Total Assets		$	901,080	$	1,021,317	$	637,255
Total Liabilities		$	822,213	$	850,050	$	364,316
As of December 31, 2006:
Total Assets		$	924,720	$	1,027,132	$	644,545
Total Liabilities		$	823,327	$	848,070	$	371,360

(2) Certain joint ventures have debt that could become recourse debt to the Company should the joint venture be unable to discharge the obligations of the related debt. As of September 30, 2007 and December 31, 2006, the total amount of debt that could become recourse to the Company was $8,602 and $8,570, respectively.

(3) The Company’s investment in unconsolidated joint ventures was $438,965 and $451,208 more than the underlying equity as reflected in the joint ventures’ financial statements as of September 30, 2007 and December 31, 2006, respectively. This represents the difference between the cost of the investment and the book value of the underlying equity of the joint venture. The Company is amortizing this difference into income on a straight-line basis, consistent with the depreciable lives on property. The amortization of this difference was $2,407 and $5,024 for the three months ended September 30, 2007 and 2006, and $8,859 and $12,039 for the nine months ended September 30, 2007 and 2006, respectively.

THE MACERICH COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share amounts)
(Unaudited)

4. Investments in Unconsolidated Joint Ventures: (Continued)

Combined and Condensed Statements of Operations of Unconsolidated Joint Ventures:

	SDG			Pacific			Tysons		Other
	Macerich			Premier			Corner		Joint
	Properties, L.P.			Retail Trust			LLC		Ventures			Total
Three Months Ended September 30, 2007
Revenues:
Minimum rents		$	23,189		$	30,894	$	17,157	$	60,695		$	131,935
Percentage rents		1,166			1,546		560		4,019			7,291
Tenant recoveries		12,591			13,411		7,808		30,069			63,879
Other		1,017			1,033		495		8,804			11,349
Total revenues		37,963			46,884		26,020		103,587			214,454
Expenses:
Shopping center and operating expenses		14,506			14,019		6,833		37,423			72,781
Interest expense		11,716			12,367		4,129		28,125			56,337
Depreciation and amortization		7,987			8,184		5,036		20,424			41,631
Total operating expenses		34,209			34,570		15,998		85,972			170,749
Loss on sale of assets		—			—		—		(9		)	(9		)
Net income		$	3,754		$	12,314	$	10,022	$	17,606		$	43,696
Company’s equity in net income		$	1,877		$	6,267	$	5,011	$	5,493		$	18,648
Three Months Ended September 30, 2006
Revenues:
Minimum rents		$	23,063		$	30,482	$	14,752	$	63,275		$	131,572
Percentage rents		796			1,429		540		4,538			7,303
Tenant recoveries		12,732			12,532		7,228		29,520			62,012
Other		1,218			1,047		487		5,791			8,543
Total revenues		37,809			45,490		23,007		103,124			209,430
Expenses:
Shopping center and operating expenses		14,149			13,896		6,228		36,879			71,152
Interest expense		11,869			12,742		4,310		24,711			53,632
Depreciation and amortization		7,195			7,385		4,728		22,936			42,244
Total operating expenses		33,213			34,023		15,266		84,526			167,028
Gain (loss) on sale of assets		2			—		—		(4		)	(2		)
Net income		$	4,598		$	11,467	$	7,741	$	18,594		$	42,400
Company’s equity in net income		$	2,300		$	5,838	$	3,870	$	6,482		$	18,490

THE MACERICH COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share amounts)
(Unaudited)

4. Investments in Unconsolidated Joint Ventures: (Continued)

	SDG				Pacific			Tysons		Other
	Macerich				Premier			Corner		Joint
	Properties, L.P.				Retail Trust			LLC		Ventures		Total
Nine Months Ended September 30, 2007
Revenues:
Minimum rents		$	69,116			$	92,602	$	47,857	$	181,731	$	391,306
Percentage rents		2,892				4,003		646		8,655		16,196
Tenant recoveries		36,308				38,213		23,424		88,257		186,202
Other		2,805				2,981		1,412		17,315		24,513
Total revenues		111,121				137,799		73,339		295,958		618,217
Expenses:
Shopping center and operating expenses		43,647				39,490		19,435		105,357		207,929
Interest expense		34,775				36,984		12,498		78,334		162,591
Depreciation and amortization		22,707				23,504		15,401		67,691		129,303
Total operating expenses		101,129				99,978		47,334		251,382		499,823
(Loss) gain on sale of assets		(4,751		)		—		—		763		(3,988		)
Net income		$	5,241			$	37,821	$	26,005	$	45,339	$	114,406
Company’s equity in net income		$	2,621			$	19,254	$	13,002	$	17,251	$	52,128
Nine Months Ended September 30, 2006
Revenues:
Minimum rents		$	70,296			$	92,376	$	43,252	$	165,355	$	371,279
Percentage rents		2,405				4,085		780		9,386		16,656
Tenant recoveries		35,371				36,598		21,742		81,211		174,922
Other		2,830				2,915		1,454		15,552		22,751
Total revenues		110,902				135,974		67,228		271,504		585,608
Expenses:
Shopping center and operating expenses		43,179				38,146		18,646		97,865		197,836
Interest expense		32,312				38,426		12,816		62,714		146,268
Depreciation and amortization		21,719				21,876		15,016		56,262		114,873
Total operating expenses		97,210				98,448		46,478		216,841		458,977
Gain on sale of assets		2				—		—		901		903
Net income		$	13,694			$	37,526	$	20,750	$	55,564	$	127,534
Company’s equity in net income		$	6,847			$	19,030	$	10,375	$	21,115	$	57,367

Significant accounting policies used by the unconsolidated joint ventures are similar to those used by the Company.

Included in mortgage notes payable are amounts due to affiliates of Northwestern Mutual Life (“NML”) of $127,576 and $132,170 as of September 30, 2007 and December 31, 2006, respectively. NM