MAC - 6.30.2014- 10Q
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 June 30, 2014
Commission File No. 1-12504
THE MACERICH COMPANY
(Exact name of registrant as specified in its charter)
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| | |
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 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 x NO o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding twelve (12) months (or for such shorter period that the registrant was required to submit and post such files).
YES x NO o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act.
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Large accelerated filer x | | Accelerated filer o | | Non-accelerated filer o (Do not check if a smaller reporting company) | | Smaller reporting company 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 as of July 31, 2014 of the registrant's common stock, par value $0.01 per share: 140,714,194 shares
THE MACERICH COMPANY
FORM 10-Q
INDEX
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Part I | | Financial Information | | |
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Part II | | Other Information | | |
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THE MACERICH COMPANY
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except share data)
(Unaudited)
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| | | | | | | |
| June 30, 2014 | | December 31, 2013 |
ASSETS: | | | |
Property, net | $ | 7,556,064 |
| | $ | 7,621,766 |
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Cash and cash equivalents | 56,500 |
| | 69,715 |
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Restricted cash | 15,423 |
| | 16,843 |
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Tenant and other receivables, net | 97,900 |
| | 99,497 |
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Deferred charges and other assets, net | 506,778 |
| | 533,058 |
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Loans to unconsolidated joint ventures | 3,396 |
| | 2,756 |
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Due from affiliates | 29,192 |
| | 30,132 |
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Investments in unconsolidated joint ventures | 797,010 |
| | 701,483 |
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Total assets | $ | 9,062,263 |
| | $ | 9,075,250 |
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LIABILITIES AND EQUITY: | | | |
Mortgage notes payable: | | | |
Related parties | $ | 266,658 |
| | $ | 269,381 |
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Others | 4,106,731 |
| | 4,145,809 |
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Total | 4,373,389 |
| | 4,415,190 |
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Bank and other notes payable | 386,718 |
| | 167,537 |
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Accounts payable and accrued expenses | 66,652 |
| | 76,941 |
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Other accrued liabilities | 306,899 |
| | 363,158 |
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Distributions in excess of investments in unconsolidated joint ventures | 261,073 |
| | 252,192 |
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Co-venture obligation | 76,854 |
| | 81,515 |
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Total liabilities | 5,471,585 |
| | 5,356,533 |
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Commitments and contingencies |
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Equity: | | | |
Stockholders' equity: | | | |
Common stock, $0.01 par value, 250,000,000 shares authorized, 140,907,420 and 140,733,683 shares issued and outstanding at June 30, 2014 and December 31, 2013, respectively | 1,409 |
| | 1,407 |
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Additional paid-in capital | 3,925,713 |
| | 3,906,148 |
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Accumulated deficit | (689,497 | ) | | (548,806 | ) |
Total stockholders' equity | 3,237,625 |
| | 3,358,749 |
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Noncontrolling interests | 353,053 |
| | 359,968 |
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Total equity | 3,590,678 |
| | 3,718,717 |
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Total liabilities and equity | $ | 9,062,263 |
| | $ | 9,075,250 |
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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)
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| | | | | | | | | | | | | | | |
| For the Three Months Ended June 30, | | For the Six Months Ended June 30, |
| 2014 | | 2013 | | 2014 | | 2013 |
Revenues: | | | | | | | |
Minimum rents | $ | 149,220 |
| | $ | 140,214 |
| | $ | 300,852 |
| | $ | 277,241 |
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Percentage rents | 2,372 |
| | 2,516 |
| | 5,222 |
| | 6,498 |
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Tenant recoveries | 83,375 |
| | 81,674 |
| | 174,850 |
| | 160,632 |
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Management Companies | 8,776 |
| | 10,301 |
| | 16,897 |
| | 20,451 |
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Other | 10,594 |
| | 11,173 |
| | 21,024 |
| | 24,361 |
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Total revenues | 254,337 |
| | 245,878 |
| | 518,845 |
| | 489,183 |
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Expenses: | | | | | | | |
Shopping center and operating expenses | 81,865 |
| | 78,682 |
| | 172,225 |
| | 157,290 |
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Management Companies' operating expenses | 20,896 |
| | 22,816 |
| | 43,677 |
| | 45,965 |
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REIT general and administrative expenses | 5,123 |
| | 6,693 |
| | 12,006 |
| | 12,717 |
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Depreciation and amortization | 87,801 |
| | 88,579 |
| | 176,457 |
| | 175,596 |
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| 195,685 |
| | 196,770 |
| | 404,365 |
| | 391,568 |
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Interest expense: | | | | | | | |
Related parties | 3,690 |
| | 3,764 |
| | 7,398 |
| | 7,544 |
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Other | 42,110 |
| | 46,611 |
| | 84,740 |
| | 92,513 |
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| 45,800 |
| | 50,375 |
| | 92,138 |
| | 100,057 |
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(Gain) loss on extinguishment of debt, net | — |
| | (1,943 | ) | | 358 |
| | (1,943 | ) |
Total expenses | 241,485 |
| | 245,202 |
| | 496,861 |
| | 489,682 |
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Equity in income of unconsolidated joint ventures | 13,903 |
| | 92,201 |
| | 27,672 |
| | 110,316 |
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Co-venture expense | (2,212 | ) | | (2,138 | ) | | (4,032 | ) | | (4,179 | ) |
Income tax benefit | 2,898 |
| | 1,477 |
| | 3,070 |
| | 1,721 |
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(Loss) gain on remeasurement, sale or write down of assets, net | (9,455 | ) | | (798 | ) | | (11,065 | ) | | 4,030 |
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Income from continuing operations | 17,986 |
| | 91,418 |
| | 37,629 |
| | 111,389 |
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Discontinued operations: | | | | | | | |
Gain on the disposition of assets, net | — |
| | 141,906 |
| | — |
| | 141,912 |
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Income from discontinued operations | — |
| | 1,492 |
| | — |
| | 4,044 |
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Total income from discontinued operations | — |
| | 143,398 |
| | — |
| | 145,956 |
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Net income | 17,986 |
| | 234,816 |
| | 37,629 |
| | 257,345 |
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Less net income attributable to noncontrolling interests | 1,898 |
| | 15,819 |
| | 3,722 |
| | 20,256 |
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Net income attributable to the Company | $ | 16,088 |
| | $ | 218,997 |
| | $ | 33,907 |
| | $ | 237,089 |
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Earnings per common share attributable to Company—basic: | | | | | | | |
Income from continuing operations | $ | 0.11 |
| | $ | 0.61 |
| | $ | 0.24 |
| | $ | 0.73 |
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Discontinued operations | — |
| | 0.96 |
| | — |
| | 0.98 |
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Net income attributable to common stockholders | $ | 0.11 |
| | $ | 1.57 |
| | $ | 0.24 |
| | $ | 1.71 |
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Earnings per common share attributable to Company—diluted: | | | | | | | |
Income from continuing operations | $ | 0.11 |
| | $ | 0.61 |
| | $ | 0.24 |
| | $ | 0.73 |
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Discontinued operations | — |
| | 0.96 |
| | — |
| | 0.98 |
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Net income attributable to common stockholders | $ | 0.11 |
| | $ | 1.57 |
| | $ | 0.24 |
| | $ | 1.71 |
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Weighted average number of common shares outstanding: | | | | | | | |
Basic | 140,894,000 |
| | 139,372,000 |
| | 140,831,000 |
| | 138,460,000 |
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Diluted | 141,036,000 |
| | 139,526,000 |
| | 140,929,000 |
| | 138,581,000 |
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The accompanying notes are an integral part of these consolidated financial statements.
THE MACERICH COMPANY
CONSOLIDATED STATEMENT OF EQUITY
(Dollars in thousands, except per share data)
(Unaudited)
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| Stockholders' Equity | | | | |
| Common Stock | | | | | | | | | | |
| Shares | | Par Value | | Additional Paid-in Capital | | Accumulated Deficit | | Total Stockholders' Equity | | Noncontrolling Interests | | Total Equity |
Balance at January 1, 2014 | 140,733,683 |
| | $ | 1,407 |
| | $ | 3,906,148 |
| | $ | (548,806 | ) | | $ | 3,358,749 |
| | $ | 359,968 |
| | $ | 3,718,717 |
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Net income | — |
| | — |
| | — |
| | 33,907 |
| | 33,907 |
| | 3,722 |
| | 37,629 |
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Amortization of share and unit-based compensation plans | 88,447 |
| | 1 |
| | 25,199 |
| | — |
| | 25,200 |
| | — |
| | 25,200 |
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Employee stock purchases | 13,957 |
| | — |
| | 645 |
| | — |
| | 645 |
| | — |
| | 645 |
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Distributions paid ($1.24) per share | — |
| | — |
| | — |
| | (174,598 | ) | | (174,598 | ) | | — |
| | (174,598 | ) |
Distributions to noncontrolling interests | — |
| | — |
| | — |
| | — |
| | — |
| | (16,602 | ) | | (16,602 | ) |
Other | — |
| | — |
| | (92 | ) | | — |
| | (92 | ) | | — |
| | (92 | ) |
Conversion of noncontrolling interests to common shares | 71,333 |
| | 1 |
| | 983 |
| | — |
| | 984 |
| | (984 | ) | | — |
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Redemption of noncontrolling interests | — |
| | — |
| | (147 | ) | | — |
| | (147 | ) | | (74 | ) | | (221 | ) |
Adjustment of noncontrolling interest in Operating Partnership | — |
| | — |
| | (7,023 | ) | | — |
| | (7,023 | ) | | 7,023 |
| | — |
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Balance at June 30, 2014 | 140,907,420 |
| | $ | 1,409 |
| | $ | 3,925,713 |
| | $ | (689,497 | ) | | $ | 3,237,625 |
| | $ | 353,053 |
| | $ | 3,590,678 |
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The accompanying notes are an integral part of these consolidated financial statements.
THE MACERICH COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited) |
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| For the Six Months Ended June 30, |
| 2014 | | 2013 |
Cash flows from operating activities: | | | |
Net income | $ | 37,629 |
| | $ | 257,345 |
|
Adjustments to reconcile net income to net cash provided by operating activities: | | | |
Loss (gain) on extinguishment of debt | 358 |
| | (1,943 | ) |
Loss (gain) on remeasurement, sale or write down of assets, net | 11,065 |
| | (4,030 | ) |
Gain on the disposition of assets, net from discontinued operations | — |
| | (141,912 | ) |
Depreciation and amortization | 180,374 |
| | 191,431 |
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Amortization of net premium on mortgage notes payable | (2,704 | ) | | (4,464 | ) |
Amortization of share and unit-based plans | 20,839 |
| | 8,780 |
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Straight-line rent adjustment | (3,098 | ) | | (3,851 | ) |
Amortization of above and below-market leases | (2,719 | ) | | (3,042 | ) |
Provision for doubtful accounts | 3,430 |
| | 2,583 |
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Income tax benefit | (3,070 | ) | | (1,721 | ) |
Equity in income of unconsolidated joint ventures | (27,672 | ) | | (110,316 | ) |
Distributions of income from unconsolidated joint ventures | 177 |
| | 8,022 |
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Co-venture expense | 4,032 |
| | 4,179 |
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Changes in assets and liabilities, net of acquisitions and dispositions: | | | |
Tenant and other receivables | 10,966 |
| | 8,624 |
|
Other assets | 487 |
| | 10,774 |
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Due from affiliates | 940 |
| | (349 | ) |
Accounts payable and accrued expenses | (15,085 | ) | | (3,653 | ) |
Other accrued liabilities | (25,377 | ) | | (33,670 | ) |
Net cash provided by operating activities | 190,572 |
| | 182,787 |
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Cash flows from investing activities: | | | |
Acquisitions of property | (15,233 | ) | | (492,577 | ) |
Development, redevelopment, expansion and renovation of properties | (82,457 | ) | | (86,982 | ) |
Property improvements | (14,597 | ) | | (11,049 | ) |
Issuance of notes receivable | — |
| | (13,330 | ) |
Proceeds from maturities of marketable securities | — |
| | 689 |
|
Deferred leasing costs | (13,772 | ) | | (16,769 | ) |
Distributions from unconsolidated joint ventures | 33,382 |
| | 220,102 |
|
Contributions to unconsolidated joint ventures | (108,316 | ) | | (42,616 | ) |
Collection of/loans to unconsolidated joint ventures, net | (640 | ) | | 596 |
|
Proceeds from sale of assets | 25,414 |
| | 315,059 |
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Restricted cash | 1,420 |
| | 6,398 |
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Net cash used in investing activities | (174,799 | ) | | (120,479 | ) |
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THE MACERICH COMPANY CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued) (Dollars in thousands) (Unaudited) |
| For the Six Months Ended June 30, |
| 2014 | | 2013 |
Cash flows from financing activities: | | | |
Proceeds from mortgages, bank and other notes payable | 301,655 |
| | 2,093,503 |
|
Payments on mortgages, bank and other notes payable | (121,571 | ) | | (2,156,635 | ) |
Deferred financing costs | (603 | ) | | (5,503 | ) |
Net proceeds from stock offerings | — |
| | 171,174 |
|
Proceeds from share and unit-based plans | 645 |
| | 459 |
|
Redemption of noncontrolling interests | (221 | ) | | (1,022 | ) |
Contingent consideration paid | (9,000 | ) | | — |
|
Dividends and distributions | (191,200 | ) | | (173,417 | ) |
Distributions to co-venture partner | (8,693 | ) | | (9,717 | ) |
Net cash used in financing activities | (28,988 | ) | | (81,158 | ) |
Net decrease in cash and cash equivalents | (13,215 | ) | | (18,850 | ) |
Cash and cash equivalents, beginning of period | 69,715 |
| | 65,793 |
|
Cash and cash equivalents, end of period | $ | 56,500 |
| | $ | 46,943 |
|
Supplemental cash flow information: | | | |
Cash payments for interest, net of amounts capitalized | $ | 97,083 |
| | $ | 113,201 |
|
Non-cash transactions: | | | |
Accrued development costs included in accounts payable and accrued expenses and other accrued liabilities | $ | 24,933 |
| | $ | 23,063 |
|
Acquisition of property in exchange for investment in unconsolidated joint venture | $ | 15,767 |
| | $ | — |
|
Notes receivable issued in connection with sale of property | $ | 9,603 |
| | $ | — |
|
Application of deposit to acquire property | $ | — |
| | $ | 30,000 |
|
Conversion of noncontrolling interests to common shares | $ | 984 |
| | $ | 12,984 |
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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)
The Macerich Company (the "Company") is involved in the acquisition, ownership, development, redevelopment, management and leasing of regional 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 June 30, 2014, the Company was the sole general partner of, and held a 93% ownership interest in, The Macerich Partnership, L.P. (the "Operating Partnership"). The Company was organized to qualify as a real estate investment trust ("REIT") under the Internal Revenue Code of 1986, as amended (the "Code").
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 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.
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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 independent public accountants.
The accompanying consolidated financial statements include the accounts of the Company and the Operating Partnership. Investments in entities in which the Company has a controlling financial interest or entities that meet the definition of a variable interest entity in which the Company has, as a result of ownership, contractual or other financial interests, both the power to direct activities that most significantly impact the economic performance of the variable interest entity and the obligation to absorb losses or the right to receive benefits that could potentially be significant to the variable interest entity are consolidated; otherwise they are accounted for under the equity method of accounting and are reflected as investments in unconsolidated joint ventures.
All intercompany accounts and transactions have been eliminated in the consolidated financial statements.
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, 2013. 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, 2013 has been derived from the audited financial statements, but does not include all disclosures required by GAAP.
THE MACERICH COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share amounts)
(Unaudited)
2. Summary of Significant Accounting Policies: (Continued)
Recent Accounting Pronouncements:
On April 10, 2014, the Financial Accounting Standards Board issued Accounting Standards Update ("ASU") 2014-08, which amends the definition of discontinued operations and requires additional disclosures for disposal transactions that do not meet the revised discontinued operations criteria. ASU 2014-08 is required to be adopted for fiscal years beginning after December 15, 2014, with early adoption permitted. The Company's early adoption of this pronouncement on January 1, 2014 did not have a material impact on the Company's consolidated financial statements.
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3. | Earnings per Share ("EPS"): |
The following table reconciles the numerator and denominator used in the computation of earnings per share for the three and six months ended June 30, 2014 and 2013 (shares in thousands):
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| | | | | | | | | | | | | | | |
| For the Three Months Ended June 30, | | For the Six Months Ended June 30, |
| 2014 | | 2013 | | 2014 | | 2013 |
Numerator | | | | | | | |
Income from continuing operations | $ | 17,986 |
| | $ | 91,418 |
| | $ | 37,629 |
| | $ | 111,389 |
|
Income from discontinued operations | — |
| | 143,398 |
| | — |
| | 145,956 |
|
Net income attributable to noncontrolling interests | (1,898 | ) | | (15,819 | ) | | (3,722 | ) | | (20,256 | ) |
Net income attributable to the Company | 16,088 |
| | 218,997 |
| | 33,907 |
| | 237,089 |
|
Allocation of earnings to participating securities | (120 | ) | | (217 | ) | | (248 | ) | | (216 | ) |
Numerator for basic and diluted earnings per share—net income attributable to common stockholders | $ | 15,968 |
| | $ | 218,780 |
| | $ | 33,659 |
| | $ | 236,873 |
|
Denominator | | | | | | | |
Denominator for basic earnings per share—weighted average number of common shares outstanding | 140,894 |
| | 139,372 |
| | 140,831 |
| | 138,460 |
|
Effect of dilutive securities:(1) | | | | | | | |
Share and unit-based compensation plans | 142 |
| | 154 |
| | 98 |
| | 121 |
|
Denominator for diluted earnings per share—weighted average number of common shares outstanding | 141,036 |
| | 139,526 |
| | 140,929 |
| | 138,581 |
|
Earnings per common share—basic: | | | | | | | |
Income from continuing operations | $ | 0.11 |
| | $ | 0.61 |
| | $ | 0.24 |
| | $ | 0.73 |
|
Discontinued operations | — |
| | 0.96 |
| | — |
| | 0.98 |
|
Net income attributable to common stockholders | $ | 0.11 |
| | $ | 1.57 |
| | $ | 0.24 |
| | $ | 1.71 |
|
Earnings per common share—diluted: | | | | | | | |
Income from continuing operations | $ | 0.11 |
| | $ | 0.61 |
| | $ | 0.24 |
| | $ | 0.73 |
|
Discontinued operations | — |
| | 0.96 |
| | — |
| | 0.98 |
|
Net income attributable to common stockholders | $ | 0.11 |
| | $ | 1.57 |
| | $ | 0.24 |
| | $ | 1.71 |
|
| |
(1) | Diluted EPS excludes 184,304 convertible preferred units for the three and six months ended June 30, 2014 and 2013 as their impact was antidilutive. |
Diluted EPS excludes 10,113,486 and 9,938,795 Operating Partnership units ("OP Units") for the three months ended June 30, 2014 and 2013, respectively, and 10,052,805 and 10,072,120 OP Units for the six months ended June 30, 2014 and 2013, respectively, as their impact was antidilutive.
THE MACERICH COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share amounts)
(Unaudited)
| |
4. | Investments in Unconsolidated Joint Ventures: |
The Company has made the following recent investments and dispositions relating to its unconsolidated joint ventures:
On May 29, 2013, the Company's joint venture in Pacific Premier Retail LP sold Redmond Town Center Office, a 582,000 square foot office building in Redmond, Washington, for $185,000, resulting in a gain on the sale of assets of $89,157 to the joint venture. The Company's share of the gain was $44,424, which was included in equity in income of unconsolidated joint ventures. The Company used its share of the proceeds from the sale to pay down its line of credit and for general corporate purposes.
On June 12, 2013, the Company's joint venture in Pacific Premier Retail LP sold Kitsap Mall, an 846,000 square foot regional shopping center in Silverdale, Washington, for $127,000, resulting in a gain on the sale of assets of $55,150 to the joint venture. The Company's share of the gain was $28,127, which was included in equity in income of unconsolidated joint ventures. The Company used its share of the proceeds from the sale to pay down its line of credit and for general corporate purposes.
On August 1, 2013, the Company's joint venture in Pacific Premier Retail LP sold Redmond Town Center, a 695,000 square foot community center in Redmond, Washington, for $127,000, resulting in a gain on the sale of assets of $38,447 to the joint venture. The Company's share of the gain was $18,251, which was included in equity in income of unconsolidated joint ventures. The Company used its share of the proceeds from the sale to pay down its line of credit and for general corporate purposes.
On September 17, 2013, the Company’s joint venture in Camelback Colonnade, a 619,000 square foot community center in Phoenix, Arizona, was restructured. As a result of the restructuring, the Company’s ownership interest in Camelback Colonnade decreased from 73.2% to 67.5%. Prior to the restructuring, the Company had accounted for its investment in Camelback Colonnade under the equity method of accounting due to substantive participation rights held by the outside partners. Upon completion of the restructuring, these substantive participation rights were terminated and the Company obtained voting control of the joint venture. This transaction is referred to herein as the "Camelback Colonnade Restructuring." Since the date of the restructuring, the Company has included Camelback Colonnade in its consolidated financial statements (See Note 13—Acquisitions).
On October 8, 2013, the Company's joint venture in Ridgmar Mall, a 1,273,000 square foot regional shopping center in Fort Worth, Texas, sold the property for $60,900, resulting in a gain on the sale of assets of $6,243 to the joint venture. The Company's share of the gain was $3,121, which was included in equity in income from joint ventures. The cash proceeds from the sale were used to pay off the $51,657 mortgage loan on the property and the remaining $9,243, net of closing costs, was distributed to the partners. The Company used its share of the proceeds from the sale to pay down its line of credit and for general corporate purposes.
On October 24, 2013, the Company acquired the remaining 33.3% ownership interest in Superstition Springs Center, a 1,082,000 square foot regional shopping center in Mesa, Arizona, that it did not own for $46,162. The purchase price was funded by a cash payment of $23,662 and the assumption of the third party's pro rata share of the mortgage note payable on the property of $22,500. Prior to the acquisition, the Company had accounted for its investment in Superstition Springs Center under the equity method. Since the date of acquisition, the Company has included Superstition Springs Center in its consolidated financial statements (See Note 13—Acquisitions).
On June 4, 2014, the Company acquired the remaining 49.0% ownership interest in Cascade Mall, a 593,000 square foot regional shopping center in Burlington, Washington, that it did not own for a cash payment of $15,233. The Company purchased Cascade Mall from its joint venture in Pacific Premier Retail LP. Prior to the acquisition, the Company had accounted for its investment in Cascade Mall under the equity method. Since the date of acquisition, the Company has included Cascade Mall in its consolidated financial statements (See Note 13—Acquisitions).
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 and statements of operations are presented below for all unconsolidated joint ventures.
Combined and Condensed Balance Sheets of Unconsolidated Joint Ventures:
|
| | | | | | | |
| June 30, 2014 | | December 31, 2013 |
Assets(1): | | | |
Properties, net | $ | 3,546,003 |
| | $ | 3,435,737 |
|
Other assets | 351,692 |
| | 295,719 |
|
Total assets | $ | 3,897,695 |
| | $ | 3,731,456 |
|
Liabilities and partners' capital(1): | | | |
Mortgage notes payable(2) | $ | 3,495,673 |
| | $ | 3,518,215 |
|
Other liabilities | 213,190 |
| | 202,444 |
|
Company's capital (deficit) | 62,527 |
| | (25,367 | ) |
Outside partners' capital | 126,305 |
| | 36,164 |
|
Total liabilities and partners' capital | $ | 3,897,695 |
| | $ | 3,731,456 |
|
Investments in unconsolidated joint ventures: | | | |
Company's capital (deficit) | $ | 62,527 |
| | $ | (25,367 | ) |
Basis adjustment(3) | 473,410 |
| | 474,658 |
|
| $ | 535,937 |
| | $ | 449,291 |
|
| | | |
Assets—Investments in unconsolidated joint ventures | $ | 797,010 |
| | $ | 701,483 |
|
Liabilities—Distributions in excess of investments in unconsolidated joint ventures | (261,073 | ) | | (252,192 | ) |
| $ | 535,937 |
| | $ | 449,291 |
|
THE MACERICH COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share amounts)
(Unaudited)
4. Investments in Unconsolidated Joint Ventures: (Continued)
| |
(1) | These amounts include the assets and liabilities of the following joint ventures as of June 30, 2014 and December 31, 2013: |
|
| | | | | | | |
| Pacific Premier Retail LP | | Tysons Corner LLC |
As of June 30, 2014: | | | |
Total Assets | $ | 728,501 |
| | $ | 382,035 |
|
Total Liabilities | $ | 804,884 |
| | $ | 878,571 |
|
As of December 31, 2013: | | | |
Total Assets | $ | 775,012 |
| | $ | 356,871 |
|
Total Liabilities | $ | 812,725 |
| | $ | 887,413 |
|
| |
(2) | Certain mortgage notes payable could become recourse debt to the Company should the joint venture be unable to discharge the obligations of the related debt. As of June 30, 2014 and December 31, 2013, a total of $33,540 could become recourse debt to the Company. As of June 30, 2014 and December 31, 2013, the Company had an indemnity agreement from a joint venture partner for $16,770 of the guaranteed amount. |
Included in mortgage notes payable are amounts due to affiliates of Northwestern Mutual Life ("NML") of $706,584 and $712,455 as of June 30, 2014 and December 31, 2013, respectively. NML is considered a related party because it is a joint venture partner with the Company in Macerich Northwestern Associates—Broadway Plaza. Interest expense on these borrowings was $9,623 and $6,854 for the three months ended June 30, 2014 and 2013, respectively, and $19,347 and $13,797 for the six months ended June 30, 2014 and 2013, respectively.
| |
(3) | The Company amortizes the difference between the cost of its investments in unconsolidated joint ventures and the book value of the underlying equity into income on a straight-line basis consistent with the lives of the underlying assets. The amortization of this difference was $855 and $2,334 for the three months ended June 30, 2014 and 2013, respectively, and $2,279 and $3,259 for the six months ended June 30, 2014 and 2013, 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:
|
| | | | | | | | | | | | | | | |
| Pacific Premier Retail LP | | Tysons Corner LLC | | Other Joint Ventures | | Total |
Three Months Ended June 30, 2014 | | | | | | | |
Revenues: | | | | | | | |
Minimum rents | $ | 25,654 |
| | $ | 15,696 |
| | $ | 56,289 |
| | $ | 97,639 |
|
Percentage rents | 550 |
| | 180 |
| | 3,264 |
| | 3,994 |
|
Tenant recoveries | 11,379 |
| | 11,489 |
| | 24,260 |
| | 47,128 |
|
Other | 1,613 |
| | 929 |
| | 8,443 |
| | 10,985 |
|
Total revenues | 39,196 |
| | 28,294 |
| | 92,256 |
| | 159,746 |
|
Expenses: | | | | | | | |
Shopping center and operating expenses | 10,682 |
| | 9,521 |
| | 30,258 |
| | 50,461 |
|
Interest expense | 9,831 |
| | 7,653 |
| | 19,495 |
| | 36,979 |
|
Depreciation and amortization | 8,750 |
| | 4,756 |
| | 21,239 |
| | 34,745 |
|
Total operating expenses | 29,263 |
| | 21,930 |
| | 70,992 |
| | 122,185 |
|
Loss on remeasurement, sale or write down of assets, net | (6,226 | ) | | — |
| | (42 | ) | | (6,268 | ) |
Net income | $ | 3,707 |
| | $ | 6,364 |
| | $ | 21,222 |
| | $ | 31,293 |
|
Company's equity in net income | $ | 1,218 |
| | $ | 1,611 |
| | $ | 11,074 |
| | $ | 13,903 |
|
Three Months Ended June 30, 2013 | | | | | | | |
Revenues: | | | | | | | |
Minimum rents | $ | 31,221 |
| | $ | 15,685 |
| | $ | 59,969 |
| | $ | 106,875 |
|
Percentage rents | 594 |
| | 180 |
| | 2,936 |
| | 3,710 |
|
Tenant recoveries | 14,486 |
| | 11,697 |
| | 26,688 |
| | 52,871 |
|
Other | 1,643 |
| | 652 |
| | 11,367 |
| | 13,662 |
|
Total revenues | 47,944 |
| | 28,214 |
| | 100,960 |
| | 177,118 |
|
Expenses: | | | | | | | |
Shopping center and operating expenses | 14,269 |
| | 8,519 |
| | 34,790 |
| | 57,578 |
|
Interest expense | 11,293 |
| | 1,784 |
| | 20,929 |
| | 34,006 |
|
Depreciation and amortization | 10,720 |
| | 4,501 |
| | 23,299 |
| | 38,520 |
|
Total operating expenses | 36,282 |
| | 14,804 |
| | 79,018 |
| | 130,104 |
|
Gain on remeasurement, sale or write down of assets, net | 144,349 |
| | — |
| | 891 |
| | 145,240 |
|
Net income | $ | 156,011 |
| | $ | 13,410 |
| | $ | 22,833 |
| | $ | 192,254 |
|
Company's equity in net income | $ | 78,426 |
| | $ | 5,161 |
| | $ | 8,614 |
| | $ | 92,201 |
|
THE MACERICH COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share amounts)
(Unaudited)
4. Investments in Unconsolidated Joint Ventures: (Continued)
|
| | | | | | | | | | | | | | | |
| Pacific Premier Retail LP | | Tysons Corner LLC | | Other Joint Ventures | | Total |
Six Months Ended June 30, 2014 | | | | | | | |
Revenues: | | | | | | | |
Minimum rents | $ | 51,734 |
| | $ | 31,974 |
| | $ | 112,188 |
| | $ | 195,896 |
|
Percentage rents | 1,209 |
| | 604 |
| | 4,232 |
| | 6,045 |
|
Tenant recoveries | 23,119 |
| | 23,383 |
| | 49,371 |
| | 95,873 |
|
Other | 2,690 |
| | 1,616 |
| | 16,298 |
| | 20,604 |
|
Total revenues | 78,752 |
| | 57,577 |
| | 182,089 |
| | 318,418 |
|
Expenses: | | | | | | | |
Shopping center and operating expenses | 21,813 |
| | 19,680 |
| | 64,138 |
| | 105,631 |
|
Interest expense | 19,929 |
| | 15,483 |
| | 39,066 |
| | 74,478 |
|
Depreciation and amortization | 17,548 |
| | 9,358 |
| | 42,762 |
| | 69,668 |
|
Total operating expenses | 59,290 |
| | 44,521 |
| | 145,966 |
| | 249,777 |
|
Loss on remeasurement, sale or write down of assets, net | (6,312 | ) | | — |
| | (60 | ) | | (6,372 | ) |
Net income | $ | 13,150 |
| | $ | 13,056 |
| | $ | 36,063 |
| | $ | 62,269 |
|
Company's equity in net income | $ | 5,486 |
| | $ | 3,369 |
| | $ | 18,817 |
| | $ | 27,672 |
|
Six Months Ended June 30, 2013 | | | | | | | |
Revenues: | | | | | | | |
Minimum rents | $ | 64,353 |
| | $ | 31,182 |
| | $ | 120,930 |
| | $ | 216,465 |
|
Percentage rents | 1,583 |
| | 746 |
| | 4,238 |
| | 6,567 |
|
Tenant recoveries | 28,440 |
| | 22,721 |
| | 53,900 |
| | 105,061 |
|
Other | 2,894 |
| | 1,570 |
| | 18,780 |
| | 23,244 |
|
Total revenues | 97,270 |
| | 56,219 |
| | 197,848 |
| | 351,337 |
|
Expenses: | | | | | | | |
Shopping center and operating expenses | 28,717 |
| | 17,001 |
| | 70,961 |
| | 116,679 |
|
Interest expense | 22,867 |
| | 4,024 |
| | 45,046 |
| | 71,937 |
|
Depreciation and amortization | 21,630 |
| | 8,931 |
| | 45,120 |
| | 75,681 |
|
Total operating expenses | 73,214 |
| | 29,956 |
| | 161,127 |
| | 264,297 |
|
Gain on remeasurement, sale or write down of assets, net | 144,349 |
| | — |
| | 701 |
| | 145,050 |
|
Net income | $ | 168,405 |
| | $ | 26,263 |
| | $ | 37,422 |
| | $ | 232,090 |
|
Company's equity in net income | $ | 84,117 |
| | $ | 10,038 |
| | $ | 16,161 |
| | $ | 110,316 |
|
Significant accounting policies used by the unconsolidated joint ventures are similar to those used by the Company.
THE MACERICH COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share amounts)
(Unaudited)
Property consists of the following:
|
| | | | | | | |
| June 30, 2014 | | December 31, 2013 |
Land | $ | 1,716,154 |
| | $ | 1,707,005 |
|
Buildings and improvements | 6,508,046 |
| | 6,555,212 |
|
Tenant improvements | 539,313 |
| | 537,754 |
|
Equipment and furnishings | 155,094 |
| | 152,198 |
|
Construction in progress | 285,816 |
| | 229,169 |
|
| 9,204,423 |
| | 9,181,338 |
|
Less accumulated depreciation | (1,648,359 | ) | | (1,559,572 | ) |
| $ | 7,556,064 |
| | $ | 7,621,766 |
|
Depreciation expense was $68,017 and $65,737 for the three months ended June 30, 2014 and 2013, respectively, and $136,495 and $131,633 for the six months ended June 30, 2014 and 2013, respectively.
The (loss) gain on remeasurement, sale or write down of assets, net, for the three and six months ended June 30, 2014 includes an impairment loss of $8,516 due to the reduction of the estimated holding periods of three freestanding stores.
The (loss) gain on remeasurement, sale or write down of assets, net, for the six months ended June 30, 2014 includes the loss of $1,685 on the sales of Rotterdam Square, a 585,000 square foot regional shopping center in Schenectady, New York; Somersville Towne Center, a 348,000 square foot regional shopping center in Antioch, California; and Lake Square Mall, a 559,000 square foot regional shopping center in Leesburg, Florida. The (loss) gain on remeasurement, sale or write down of assets, net, includes the gains on the sale of land of $238 for the three and six months ended June 30, 2014 and $5,401 for the six months ended June 30, 2013.
In addition, the (loss) gain on remeasurement, sale or write down of assets, net, includes the write-off of development costs of $1,177 and $798 for the three months ended June 30, 2014 and 2013, respectively, and $1,102 and $1,371 for the six months ended June 30, 2014 and 2013, respectively.
| |
6. | Tenant and Other Receivables, net: |
Included in tenant and other receivables, net, is an allowance for doubtful accounts of $5,178 and $2,878 at June 30, 2014 and December 31, 2013, respectively. Also included in tenant and other receivables, net, are accrued percentage rents of $1,758 and $9,824 at June 30, 2014 and December 31, 2013, respectively, and a deferred rent receivable due to straight-line rent adjustments of $55,902 and $53,380 at June 30, 2014 and December 31, 2013, respectively.
On March 17, 2014, in connection with the sale of Lake Square Mall (See Note 5—Property), the Company issued a note receivable for $6,500 that bears interest at an effective rate of 6.5% and matures on March 17, 2018 and a note receivable for $3,103 that bears interest at 5.0% and matures on December 31, 2014. The balance of each of these notes receivable at June 30, 2014 was $6,484 and $2,879, respectively. The notes are collateralized by a trust deed on Lake Square Mall.
THE MACERICH COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share amounts)
(Unaudited)
| |
7. | Deferred Charges and Other Assets, net: |
Deferred charges and other assets, net, consist of the following:
|
| | | | | | | |
| June 30, 2014 | | December 31, 2013 |
Leasing | $ | 221,671 |
| | $ | 223,038 |
|
Financing | 50,372 |
| | 51,695 |
|
Intangible assets: | | | |
In-place lease values | 190,390 |
| | 205,651 |
|
Leasing commissions and legal costs | 47,754 |
| | 50,594 |
|
Above-market leases | 114,493 |
| | 118,770 |
|
Deferred tax assets | 34,426 |
| | 31,356 |
|
Deferred compensation plan assets | 34,265 |
| | 30,932 |
|
Other assets | 61,916 |
| | 65,793 |
|
| 755,287 |
| | 777,829 |
|
Less accumulated amortization(1) | (248,509 | ) | | (244,771 | ) |
| $ | 506,778 |
| | $ | 533,058 |
|
| |
(1) | Accumulated amortization includes $88,752 and $89,141 relating to in-place lease values, leasing commissions and legal costs at June 30, 2014 and December 31, 2013, respectively. Amortization expense of in-place lease values, leasing commissions and legal costs was $11,360 and $14,424 for the three months ended June 30, 2014 and 2013, respectively, and $24,098 and $28,090 for the six months ended June 30, 2014 and 2013, respectively. |
The allocated values of above-market leases and below-market leases consist of the following:
|
| | | | | | | |
| June 30, 2014 | | December 31, 2013 |
Above-Market Leases | | | |
Original allocated value | $ | 114,493 |
| | $ | 118,770 |
|
Less accumulated amortization | (51,628 | ) | | (46,912 | ) |
| $ | 62,865 |
| | $ | 71,858 |
|
Below-Market Leases(1) | | | |
Original allocated value | $ | 186,398 |
| | $ | 187,537 |
|
Less accumulated amortization | (85,325 | ) | | (79,271 | ) |
| $ | 101,073 |
| | $ | 108,266 |
|
| |
(1) | Below-market leases are included in other accrued liabilities. |
THE MACERICH COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share amounts)
(Unaudited)
| |
8. | Mortgage Notes Payable: |
Mortgage notes payable at June 30, 2014 and December 31, 2013 consist of the following:
|
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | Carrying Amount of Mortgage Notes(1) | | | | | | |
| | June 30, 2014 | | December 31, 2013 | | | | | | |
Property Pledged as Collateral | | Related Party | | Other | | Related Party | | Other | | Effective Interest Rate(2) | | Monthly Debt Service(3) | | Maturity Date(4) |
Arrowhead Towne Center | | $ | — |
| | $ | 232,388 |
| | $ | — |
| | $ | 236,028 |
| | 2.76 | % | | $ | 1,131 |
| | 2018 |
Camelback Colonnade | | — |
| | 48,529 |
| | — |
| | 49,120 |
| | 2.16 | % | | 178 |
| | 2015 |
Chandler Fashion Center(5) | | — |
| | 200,000 |
| | — |
| | 200,000 |
| | 3.77 | % | | 625 |
| | 2019 |
Danbury Fair Mall | | 115,712 |
| | 115,712 |
| | 117,120 |
| | 117,120 |
| | 5.53 | % | | 1,538 |
| | 2020 |
Deptford Mall | | — |
| | 199,726 |
| | — |
| | 201,622 |
| | 3.76 | % | | 947 |
| | 2023 |
Deptford Mall | | — |
| | 14,419 |
| | — |
| | 14,551 |
| | 6.46 | % | | 101 |
| | 2016 |
Eastland Mall | | — |
| | 168,000 |
| | — |
| | 168,000 |
| | 5.79 | % | | 811 |
| | 2016 |
Fashion Outlets of Chicago(6) | | — |
| | 113,040 |
| | — |
| | 91,383 |
| | 2.95 | % | | 233 |
| | 2017 |
Fashion Outlets of Niagara Falls USA | | — |
| | 122,706 |
| | — |
| | 124,030 |
| | 4.89 | % | | 727 |
| | 2020 |
Flagstaff Mall | | — |
| | 37,000 |
| | — |
| | 37,000 |
| | 5.03 | % | | 151 |
| | 2015 |
FlatIron Crossing | | — |
| | 264,778 |
| | — |
| | 268,000 |
| | 3.90 | % | | 1,393 |
| | 2021 |
Freehold Raceway Mall(5) | | — |
| | 231,255 |
| | — |
| | 232,900 |
| | 4.20 | % | | 805 |
| | 2018 |
Fresno Fashion Fair | | 78,754 |
| | 78,753 |
| | 79,391 |
| | 79,390 |
| | 6.76 | % | | 1,104 |
| | 2015 |
Great Northern Mall(7) | | — |
| | 34,993 |
| | — |
| | 35,484 |
| | 6.54 | % | | 234 |
| | 2015 |
Green Acres Mall | | — |
| | 316,694 |
| | — |
| | 319,850 |
| | 3.61 | % | | 1,447 |
| | 2021 |
Kings Plaza Shopping Center | | — |
| | 485,674 |
| | — |
| | 490,548 |
| | 3.67 | % | | 2,229 |
| | 2019 |
Northgate Mall(8) | | — |
| | 64,000 |
| | — |
| | 64,000 |
| | 3.03 | % | | 128 |
| | 2017 |
Oaks, The | | — |
| | 212,239 |
| | — |
| | 214,239 |
| | 4.14 | % | | 1,064 |
| | 2022 |
Pacific View | | — |
| | 134,531 |
| | — |
| | 135,835 |
| | 4.08 | % | | 668 |
| | 2022 |
Santa Monica Place | | — |
| | 232,904 |
| | — |
| | 235,445 |
| | 2.99 | % | | 1,004 |
| | 2018 |
SanTan Village Regional Center | | — |
| | 135,222 |
| | — |
| | 136,629 |
| | 3.14 | % | | 589 |
| | 2019 |
South Plains Mall(9) | | — |
| | 72,089 |
| | — |
| | 99,833 |
| | 4.78 | % | | 383 |
| | 2015 |
Superstition Springs Center | | — |
| | 68,237 |
| | — |
| | 68,395 |
| | 1.98 | % | | 138 |
| | 2016 |
Towne Mall | | — |
| | 22,802 |
| | — |
| | 22,996 |
| | 4.48 | % | | 117 |
| | 2022 |
Tucson La Encantada | | 72,192 |
| | — |
| | 72,870 |
| | — |
| | 4.23 | % | | 368 |
| | 2022 |
Valley Mall | | — |
| | 41,765 |
| | — |
| | 42,155 |
| | 5.85 | % | | 280 |
| | 2016 |
Valley River Center | | — |
| | 120,000 |
| | — |
| | 120,000 |
| | 5.59 | % | | 558 |
| | 2016 |
Victor Valley, Mall of(10) | | — |
| | 90,000 |
| | — |
| | 90,000 |
| | 2.71 | % | | 180 |
| | 2014 |
Vintage Faire Mall | | — |
| | 98,370 |
| | — |
| | 99,083 |
| | 5.81 | % | | 586 |
| | 2015 |
Westside Pavilion | | — |
| | 150,905 |
| | — |
| | 152,173 |
| | 4.49 | % | | 783 |
| | 2022 |
| | $ | 266,658 |
| | $ | 4,106,731 |
| | $ | 269,381 |
| | $ | 4,145,809 |
| | |
| | |
| | |
THE MACERICH COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share amounts)
(Unaudited)
8. Mortgage Notes Payable: (Continued)
| |
(1) | The mortgage notes payable balances include the unamortized debt premiums (discounts). Debt premiums (discounts) represent the excess (deficiency) of the fair value of debt over (under) the principal value of debt assumed in various acquisitions and are amortized into interest expense over the remaining term of the related debt in a manner that approximates the effective interest method. |
Debt premiums (discounts) consist of the following:
|
| | | | | | | |
Property Pledged as Collateral | June 30, 2014 | | December 31, 2013 |
Arrowhead Towne Center | $ | 13,105 |
| | $ | 14,642 |
|
Camelback Colonnade | 1,528 |
| | 2,120 |
|
Deptford Mall | (11 | ) | | (14 | ) |
Fashion Outlets of Niagara Falls USA | 5,878 |
| | 6,342 |
|
Superstition Springs Center | 737 |
| | 895 |
|
Valley Mall | (175 | ) | | (219 | ) |
| $ | 21,062 |
| | $ | 23,766 |
|
| |
(2) | The interest rate disclosed represents the effective interest rate, including the debt premiums (discounts) and deferred finance costs. |
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(3) | The monthly debt service represents the payment of principal and interest. |
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(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. |
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(5) | A 49.9% interest in the loan has been assumed by a third party in connection with a co-venture arrangement (See Note 10—Co-Venture Arrangement). |
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(6) | The construction loan on the property allows for borrowings of up to $140,000, bears interest at LIBOR plus 2.50% and matures on March 5, 2017, including extension options. At June 30, 2014 and December 31, 2013, the total interest rate was 2.95% and 2.96%, respectively. |
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(7) | On March 24, 2014, the loan was extended to January 1, 2015. |
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(8) | The loan bears interest at LIBOR plus 2.25% and matures on March 1, 2017. At June 30, 2014 and December 31, 2013, the total interest rate was 3.03% and 3.04%, respectively. |
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(9) | On February 7, 2014, the Company paid off in full one of the two loans on the property, which resulted in a loss of $358 on the early extinguishment of debt. |
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(10) | The loan bears interest at LIBOR plus 2.25% and matures on November 6, 2014. At June 30, 2014 and December 31, 2013, the total interest rate was 2.71% and 2.73%, respectively. |
Most of the mortgage loan agreements contain a prepayment penalty provision for the early extinguishment of the debt.
Most of the Company's mortgage notes payable are secured by the properties on which they are placed and are non-recourse to the Company. As of June 30, 2014 and December 31, 2013, a total of $88,019 and $77,192, respectively, of the mortgage notes payable could become 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 line of credit or with cash on hand.
Total interest expense capitalized was $3,098 and $2,874 for the three months ended June 30, 2014 and 2013, respectively, and $5,583 and $5,342 during the six months ended June 30, 2014 and 2013, respectively.
Related party mortgage notes payable are amounts due to affiliates of NML. See Note 16—Related Party Transactions for interest expense associated with loans from NML.
THE MACERICH COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share amounts)
(Unaudited)
8. Mortgage Notes Payable: (Continued)
The estimated fair value (Level 2 measurement) of mortgage notes payable at June 30, 2014 and December 31, 2013 was $4,450,277 and $4,500,177, respectively, based on current interest rates for comparable loans. The method for computing 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.
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9. | Bank and Other Notes Payable: |
Bank and other notes payable consist of the following:
Line of Credit:
The Company has a $1,500,000 revolving line of credit that initially bore interest at LIBOR plus a spread of 1.75% to 3.0%, depending on the Company's overall leverage levels, and was to mature on May 2, 2015 with a one-year extension option. The line of credit had the ability to be expanded, depending on certain conditions, up to a total facility of $2,000,000 less the outstanding balance of the $125,000 unsecured term loan as described below.
On August 6, 2013, the Company's line of credit was amended and extended. The amended facility provides for an interest rate of LIBOR plus a spread of 1.38% to 2.0%, depending on the Company's overall leverage levels, and matures on August 6, 2018. Based on the Company's leverage level as of June 30, 2014, the borrowing rate on the facility was LIBOR plus 1.38%. In addition, the line of credit can be expanded, depending on certain conditions, up to a total facility of $2,000,000 (without giving effect to the $125,000 unsecured term loan described below).
As of June 30, 2014 and December 31, 2013, borrowings under the line of credit were $250,000 and $30,000, respectively, at an average interest rate of 2.17% and 1.85%, respectively. The estimated fair value (Level 2 measurement) of the line of credit at June 30, 2014 and December 31, 2013 was $239,362 and $28,214, respectively, based on a present value model using a credit interest rate spread offered to the Company for comparable debt.
Term Loan:
On December 8, 2011, the Company obtained a $125,000 unsecured term loan under the line of credit that bears interest at LIBOR plus a spread of 1.95% to 3.20%, depending on the Company's overall leverage level, and matures on December 8, 2018. Based on the Company's current leverage level as of June 30, 2014, the borrowing rate was LIBOR plus 1.95%. As of June 30, 2014 and December 31, 2013, the total interest rate was 2.25% and 2.51%, respectively. The estimated fair value (Level 2 measurement) of the term loan at June 30, 2014 and December 31, 2013 was $119,688 and $120,802, respectively, based on a present value model using a credit interest rate spread offered to the Company for comparable debt.
Prasada Note:
On March 29, 2013, the Company issued a $13,330 note payable that bears interest at 5.25% and matures on March 29, 2016. The note payable is collateralized by a portion of a development reimbursement agreement with the City of Surprise, Arizona. At June 30, 2014 and December 31, 2013, the note had a balance of $11,718 and $12,537, respectively. The estimated fair value (Level 2 measurement) of the note at June 30, 2014 and December 31, 2013 was $12,189 and $13,114, respectively, based on current interest rates for comparable notes. The method for computing 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 collateral for the underlying debt.
As of June 30, 2014 and December 31, 2013, the Company was in compliance with all applicable financial loan covenants.
THE MACERICH COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share amounts)
(Unaudited)
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10. | Co-Venture Arrangement: |
On September 30, 2009, the Company formed a joint venture, whereby a third party acquired a 49.9% interest in Freehold Raceway Mall and Chandler Fashion Center.
As a result of the Company having certain rights under the agreement to repurchase the assets after the seventh year of the venture formation, the transaction did not qualify for sale treatment. The Company, however, is not obligated to repurchase the assets. The transaction has been accounted for as a profit-sharing arrangement, and accordingly the assets, liabilities and operations of the properties remain on the books of the Company and a co-venture obligation was established for the amount of $168,154, representing the net cash proceeds received from the third party. The co-venture obligation is increased for the allocation of income to the co-venture partner and decreased for distributions to the co-venture partner. The co-venture obligation was $76,854 and $81,515 at June 30, 2014 and December 31, 2013, respectively.
11. Noncontrolling Interests:
The Company allocates net income of the Operating Partnership based on the weighted average ownership interest during the period. The net 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 93% ownership interest in the Operating Partnership as of June 30, 2014 and December 31, 2013. The remaining 7% limited partnership interest as of June 30, 2014 and December 31, 2013 was owned by certain of the Company's executive officers and directors, certain of their affiliates, and other third party investors in the form of OP Units. The OP Units may be redeemed for shares of stock or cash, at the Company's option. The redemption value for each OP Unit as of any balance sheet date is the amount equal to the average of the closing price per share of the Company's common stock, par value $0.01 per share, as reported on the New York Stock Exchange for the 10 trading days ending on the respective balance sheet date. Accordingly, as of June 30, 2014 and December 31, 2013, the aggregate redemption value of the then-outstanding OP Units not owned by the Company was $672,472 and $587,917, 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.
On August 17, 2012, the Company entered into an equity distribution agreement ("Distribution Agreement") with a number of sales agents to issue and sell, from time to time, shares of common stock, par value $0.01 per share, having an aggregate offering price of up to $500,000 (the “Shares”). Sales of the Shares, if any, may be made in privately negotiated transactions and/or any other method permitted by law, including sales deemed to be an “at the market” offering, which includes sales made directly on the New York Stock Exchange or sales made to or through a market maker other than on an exchange. The Company will pay each sales agent a commission that will not exceed, but may be lower than, 2% of the gross proceeds of the Shares sold through such sales agent under the Distribution Agreement.
During the year ended December 31, 2012, the Company sold 2,961,903 shares of common stock under the ATM Program in exchange for aggregate gross proceeds of $177,896 and net proceeds of $175,649 after commissions and other transaction costs. During the year ended December 31, 2013, the Company sold 2,456,956 shares of common stock under the ATM Program in exchange for aggregate gross proceeds of $173,011 and net proceeds of $171,102 after commissions and other transaction costs. The proceeds from the sales were used to pay down the Company's line of credit. The Company did not sell any shares under the ATM Program during the three or six months ended June 30, 2014.
THE MACERICH COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share amounts)
(Unaudited)
12. Stockholders' Equity: (Continued)
As of June 30, 2014, $149,093 of the Shares remained available to be sold under the ATM Program. Actual future sales will depend upon a variety of factors including but not limited to market conditions, the trading price of the Company's common stock and the Company's capital needs. The Company has no obligation to sell the remaining Shares available for sale under the ATM Program.
Green Acres Mall:
On January 24, 2013, the Company acquired Green Acres Mall, a 1,793,000 square foot regional shopping center in Valley Stream, New York, for a purchase price of $500,000. A purchase deposit of $30,000 was funded during the year ended December 31, 2012, and the remaining $470,000 was funded upon closing of the acquisition. The cash payment made at the time of closing was provided by the placement of a mortgage note payable on the property that allowed for borrowings of up to $325,000 and from borrowings under the Company's line of credit. Concurrent with the acquisition, the Company borrowed $100,000 on the loan. On January 31, 2013, the Company exercised its option to borrow the remaining $225,000 on the loan. The acquisition was completed to acquire another prominent shopping center in the New York metropolitan area.
The following is a summary of the allocation of the fair value of Green Acres Mall:
|
| | | |
Property | $ | 477,673 |
|
Deferred charges | 45,130 |
|
Other assets | 19,125 |
|
Total assets acquired | 541,928 |
|
Other accrued liabilities | 41,928 |
|
Total liabilities assumed | 41,928 |
|
Fair value of acquired net assets | $ | 500,000 |
|
The Company determined that the purchase price represented the fair value of the assets acquired and liabilities assumed.
Since the date of acquisition, the Company has included Green Acres Mall in its consolidated financial statements.
Green Acres Adjacent:
On April 25, 2013, the Company acquired a 19 acre parcel of land adjacent to Green Acres Mall for $22,577. The payment was provided by borrowings from the Company's line of credit. The acquisition was completed to allow for future expansion of Green Acres Mall.
THE MACERICH COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share amounts)
(Unaudited)
13. Acquisitions: (Continued)
Camelback Colonnade Restructuring:
On September 17, 2013, the Company’s joint venture in Camelback Colonnade was restructured. As a result of the restructuring, the Company’s ownership interest in Camelback Colonnade decreased from 73.2% to 67.5%. Prior to the restructuring, the Company had accounted for its investment in Camelback Colonnade under the equity method of accounting due to substantive participation rights held by the outside partners. Upon completion of the restructuring, these substantive participation rights were terminated and the Company obtained voting control of the joint venture (See Note 4—Investments in Unconsolidated Joint Ventures).
The following is a summary of the allocation of the fair value of Camelback Colonnade:
|
| | | |
Property | $ | 98,160 |
|
Deferred charges | 8,284 |
|
Cash and cash equivalents | 1,280 |
|
Restricted cash | 1,139 |
|
Tenant receivables | 615 |
|
Other assets | 380 |
|
Total assets acquired | 109,858 |
|
Mortgage note payable | 49,465 |
|
Accounts payable | 54 |
|
Other accrued liabilities | 4,752 |
|
Total liabilities assumed | 54,271 |
|
Fair value of acquired net assets (at 100% ownership) | $ | 55,587 |
|
The Company recognized the following remeasurement gain on the Camelback Colonnade Restructuring:
|
| | | |
Fair value of existing ownership interest (at 73.2% ownership) | $ | 41,690 |
|
Carrying value of investment | (5,349 | ) |
Gain on remeasurement | $ | 36,341 |
|
Since the date of the restructuring, the Company has included Camelback Colonnade in its consolidated financial statements.
Superstition Springs Center:
On October 24, 2013, the Company acquired the remaining 33.3% ownership interest in Superstition Springs Center that it did not own for $46,162. The purchase price was funded by a cash payment of $23,662 and the assumption of the third party's pro rata share of the mortgage note payable on the property of $22,500. Prior to the acquisition, the Company had accounted for its investment under the equity method (See Note 4—Investments in Unconsolidated Joint Ventures). As a result of this transaction, the Company obtained 100% ownership of Superstition Springs Center. The acquisition was completed in order to gain 100% ownership and control over this asset.
THE MACERICH COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share amounts)
(Unaudited)
13. Acquisitions: (Continued)
The following is a summary of the allocation of the fair value of Superstition Springs Center:
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| | | |
Property | $ | 114,373 |
|
Deferred charges | 12,353 |
|
Cash and cash equivalents | 8,894 |
|
Tenant receivables | 51 |
|
Other assets | 11,535 |
|
Total assets acquired | 147,206 |
|
Mortgage note payable | 68,448 |
|
Accounts payable | 119 |
|
Other accrued liabilities | 7,637 |
|
Total liabilities assumed | 76,204 |
|
Fair value of acquired net assets (at 100% ownership) | $ | 71,002 |
|
The Company determined that the purchase price represented the fair value of the additional ownership interest in Superstition Springs Center that was acquired.
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| | | |
Fair value of existing ownership interest (at 66.7% ownership) | $ | 47,340 |
|
Carrying value of investment | (32,476 | |