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 |
|
(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
(Registrants 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 |
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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 registrants common stock, as of November 1, 2007 Common Stock, par value $.01 per share: 72,518,069 shares
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Page |
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Part I |
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Financial Information |
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Item 1. |
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Financial Statements |
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Consolidated Balance Sheets of the Company as of September 30, 2007 and December 31, 2006 |
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3 |
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4 |
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5 |
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6 |
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7 |
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Managements Discussion and Analysis of Financial Condition and Results of Operations |
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32 |
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46 |
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47 |
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48 |
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49 |
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49 |
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49 |
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49 |
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49 |
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49 |
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49 |
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49 |
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51 |
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2
(Dollars in thousands, except share amounts)
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September 30, |
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December 31, |
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2007 |
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2006 |
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(Unaudited) |
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ASSETS: |
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Property, net |
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$ |
6,045,958 |
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|
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$ |
5,755,283 |
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Cash and cash equivalents |
|
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42,850 |
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269,435 |
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Restricted cash |
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69,209 |
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66,376 |
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Marketable securities |
|
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29,368 |
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30,019 |
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Tenant receivables, net |
|
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127,868 |
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117,855 |
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Deferred charges and other assets, net |
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323,233 |
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307,825 |
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Loans to unconsolidated joint ventures |
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488 |
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708 |
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Due from affiliates |
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2,263 |
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4,282 |
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Investments in unconsolidated joint ventures |
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818,723 |
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1,010,380 |
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Total assets |
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$ |
7,459,960 |
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$ |
7,562,163 |
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LIABILITIES, PREFERRED STOCK AND COMMON STOCKHOLDERS EQUITY: |
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Mortgage notes payable: |
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Related parties |
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$ |
226,745 |
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$ |
151,311 |
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Others |
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3,073,368 |
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3,179,787 |
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Total |
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3,300,113 |
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3,331,098 |
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Bank and other notes payable |
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|
1,824,366 |
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1,662,781 |
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Accounts payable and accrued expenses |
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92,523 |
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86,127 |
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Other accrued liabilities |
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250,464 |
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212,249 |
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Preferred stock dividends payable |
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6,804 |
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6,199 |
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Total liabilities |
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5,474,270 |
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5,298,454 |
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Minority interest |
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330,573 |
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387,183 |
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Commitments and contingencies |
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Class A participating convertible preferred units |
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213,786 |
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213,786 |
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Class A non-participating convertible preferred units |
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16,459 |
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21,501 |
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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 |
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98,934 |
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98,934 |
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Common stockholders equity: |
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Common stock, $.01 par value, 145,000,000 shares authorized, 71,712,556 and 71,567,908 shares issued and outstanding at September 30, 2007 and December 31, 2006, respectively |
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716 |
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|
716 |
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Additional paid-in capital |
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1,630,093 |
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1,717,498 |
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Accumulated deficit |
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(298,095 |
) |
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(178,249 |
) |
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Accumulated other comprehensive (loss) income |
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(6,776 |
) |
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2,340 |
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Total common stockholders equity |
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1,325,938 |
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1,542,305 |
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Total liabilities, preferred stock and common stockholders equity |
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$ |
7,459,960 |
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$ |
7,562,163 |
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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)
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For the Three Months |
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For the Nine Months |
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Ended September 30, |
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Ended September 30, |
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2007 |
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2006 |
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2007 |
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2006 |
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Revenues: |
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Minimum rents |
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$ |
130,371 |
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$ |
115,877 |
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$ |
380,256 |
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$ |
354,555 |
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Percentage rents |
|
4,992 |
|
4,702 |
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11,620 |
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9,618 |
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Tenant recoveries |
|
70,623 |
|
64,250 |
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206,416 |
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187,219 |
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Management Companies |
|
9,242 |
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8,023 |
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27,595 |
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22,650 |
|
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Other |
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8,756 |
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9,225 |
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25,554 |
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21,814 |
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Total revenues |
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223,984 |
|
202,077 |
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651,441 |
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595,856 |
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Expenses: |
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Shopping center and operating expenses |
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73,831 |
|
67,478 |
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211,224 |
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193,321 |
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Management Companies operating expenses |
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17,908 |
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14,455 |
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54,182 |
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41,295 |
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REIT general and administrative expenses |
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1,992 |
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2,551 |
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11,777 |
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9,540 |
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Depreciation and amortization |
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60,171 |
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53,542 |
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177,665 |
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168,965 |
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153,902 |
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138,026 |
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454,848 |
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413,121 |
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Interest expense: |
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Related parties |
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3,772 |
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2,730 |
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9,634 |
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8,142 |
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Other |
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56,210 |
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64,623 |
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180,165 |
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196,141 |
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59,982 |
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67,353 |
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189,799 |
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204,283 |
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Total expenses |
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213,884 |
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205,379 |
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644,647 |
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617,404 |
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Minority interest in consolidated joint ventures |
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(721 |
) |
(870 |
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(2,237 |
) |
(1,872 |
) |
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Equity in income of unconsolidated joint ventures |
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18,648 |
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18,490 |
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52,128 |
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57,367 |
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Income tax (provision) benefit |
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(429 |
) |
(535 |
) |
478 |
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(219 |
) |
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Gain on sale of assets |
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147 |
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538 |
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4,181 |
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37 |
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Loss on early extinguishment of debt |
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(29 |
) |
(877 |
) |
(1,811 |
) |
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Income from continuing operations |
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27,745 |
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14,292 |
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60,467 |
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31,954 |
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Discontinued operations: |
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(Loss) gain on sale of assets |
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(905 |
) |
46,214 |
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(2,325 |
) |
72,167 |
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Income from discontinued operations |
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237 |
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1,562 |
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60 |
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9,241 |
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Total (loss) income from discontinued operations |
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(668 |
) |
47,776 |
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(2,265 |
) |
81,408 |
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Income before minority interest and preferred dividends |
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27,077 |
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62,068 |
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58,202 |
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113,362 |
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Less: minority interest in Operating Partnership |
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3,070 |
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8,901 |
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5,935 |
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15,131 |
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Net income |
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24,007 |
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53,167 |
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52,267 |
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98,231 |
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Less: preferred dividends |
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6,727 |
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6,199 |
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18,971 |
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18,139 |
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Net income available to common stockholders |
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$ |
17,280 |
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$ |
46,968 |
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$ |
33,296 |
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$ |
80,092 |
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Earnings per common sharebasic: |
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Income from continuing operations |
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$ |
0.25 |
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$ |
0.10 |
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$ |
0.49 |
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$ |
0.16 |
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Discontinued operations |
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(0.01 |
) |
0.56 |
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(0.03 |
) |
0.97 |
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Net income |
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$ |
0.24 |
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$ |
0.66 |
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$ |
0.46 |
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$ |
1.13 |
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Earnings per common sharediluted: |
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Income from continuing operations |
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$ |
0.25 |
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$ |
0.10 |
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$ |
0.49 |
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$ |
0.16 |
|
Discontinued operations |
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(0.01 |
) |
0.56 |
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(0.03 |
) |
0.97 |
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Net income |
|
$ |
0.24 |
|
$ |
0.66 |
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$ |
0.46 |
|
$ |
1.13 |
|
Weighted average number of common shares outstanding: |
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|
|
|
|
|
|
|
|
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Basic |
|
71,674,000 |
|
71,479,000 |
|
71,625,000 |
|
70,587,000 |
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Diluted |
|
84,529,000 |
|
85,021,000 |
|
84,706,000 |
|
84,216,000 |
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The accompanying notes are an integral part of these consolidated financial statements.
4
THE MACERICH
COMPANY
CONSOLIDATED STATEMENT OF COMMON STOCKHOLDERS EQUITY
(Dollars in thousands, except per share data)
(Unaudited)
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Accumulated |
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Total |
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|
|||||||||||||||
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Common Stock |
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Additional |
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Other |
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Common |
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|||||||||||||||||
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Par |
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Paid-in |
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Accumulated |
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Comprehensive |
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Stockholders |
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|
|||||||||||||||
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Shares |
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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 |
|
|
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Reclassification of deferred |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
723 |
|
|
|
723 |
|
|
||||||||
Interest rate swap/cap |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(9,839 |
) |
|
|
(9,839 |
) |
|
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Total comprehensive income |
|
|
|
|
|
|
|
|
|
|
52,267 |
|
|
|
(9,116 |
) |
|
|
43,151 |
|
|
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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 |
|
|
|
|
|
|
|
|
|
|
(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.
5
THE MACERICH COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
|
|
For the Nine Months |
|
||||
|
|
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 |
|
$ |
|
|
$ |
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.
6
THE MACERICH COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)
(Unaudited)
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 Companys common stock or cash at the Companys 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 Companys portfolio is provided by the Companys 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.
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 entitys expected losses, receives a majority of the entitys 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 Companys Annual Report on Form 10-K for the year ended December 31, 2006. In the opinion of management, all adjustments
7
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 InstrumentsAn 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 Companys results of operations or financial condition.
In June 2006, the FASB issued Interpretation No. 48, Accounting for Uncertainty in Income Taxesan interpretation of FASB Statement No. 109 (FIN 48). This interpretation clarifies the accounting for uncertainty in income taxes recognized in an enterprises 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 18Income Taxes for the impact of the adoption of FIN 48 on the Companys 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 Companys 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
8
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 Companys 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 Liabilitiesincluding 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.
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 Companys 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 |
|
Shares |
|
Per |
|
Net |
|
Shares |
|
Per |
|
||||
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 |
|
9
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 |
|
Shares |
|
Per |
|
Net |
|
Shares |
|
Per |
|
||||
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 Companys consolidated statements of operations has been allocated for EPS calculations as follows:
|
|
For the Three |
|
For the Nine |
|
||||||||
|
|
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 |
|
10
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 Companys investments in unconsolidated joint ventures. The Operating Partnerships interest in each joint venture property as of September 30, 2007 was as follows:
|
|
Partnerships |
|
||||
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 MallTenants 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 AssociatesArrowhead 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, LLCBoulevard 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 |
% |
|
||
11
THE MACERICH COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share amounts)
(Unaudited)
4. Investments in Unconsolidated Joint Ventures: (Continued)
|
|
Partnerships |
|
||||
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 Partnerships 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.
12
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 Companys 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 Companys 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.
13
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 |
|
Companys 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 |
|
Companys equity in net income |
|
|
$ |
2,300 |
|
|
|
$ |
5,838 |
|
|
$ |
3,870 |
|
$ |
6,482 |
|
$ |
18,490 |
|
14
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 |
|
Companys 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 |
|
Companys 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