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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2008

Commission File No. 1-12504

THE MACERICH COMPANY
(Exact name of registrant as specified in its charter)

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

401 Wilshire Boulevard, Suite 700, Santa Monica, California 90401
(Address of principal executive office, including zip code)

Registrant's telephone number, including area code (310) 394-6000

Securities registered pursuant to Section 12(b) of the Act

Title of each class   Name of each exchange on which registered
Common Stock, $0.01 Par Value   New York Stock Exchange
Preferred Share Purchase Rights   New York Stock Exchange

         Indicate by check mark if the registrant is well-known seasoned issuer, as defined in Rule 405 of the Securities Act

YES ý     NO o

         Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act

YES o     NO ý

         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 12 months (or for such shorter period that the registrant was required to file such report) and (2) has been subject to such filing requirements for the past 90 days.

YES ý     NO o

         Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment on to this Form 10-K. 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. (Check one):

Large accelerated filer  ý   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 ý

         The aggregate market value of voting and non-voting common equity held by non-affiliates of the registrant was approximately $4.5 billion as of the last business day of the registrant's most recent completed second fiscal quarter based upon the price at which the common shares were last sold on that day.

         Number of shares outstanding of the registrant's common stock, as of February 13, 2009: 77,033,475 shares

DOCUMENTS INCORPORATED BY REFERENCE

         Portions of the proxy statement for the annual stockholders meeting to be held in 2009 are incorporated by reference into Part III of this Form 10-K


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THE MACERICH COMPANY
ANNUAL REPORT ON FORM 10-K
FOR THE YEAR ENDED DECEMBER 31, 2008
INDEX

 
   
  Page

Part I

       

Item 1.

 

Business

  1

Item 1A.

 

Risk Factors

  15

Item 1B.

 

Unresolved Staff Comments

  23

Item 2.

 

Properties

  24

Item 3.

 

Legal Proceedings

  33

Item 4.

 

Submission of Matters to a Vote of Security Holders

  33

Part II

       

Item 5.

 

Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

  34

Item 6.

 

Selected Financial Data

  36

Item 7.

 

Management's Discussion and Analysis of Financial Condition and Results of Operations

  41

Item 7A.

 

Quantitative and Qualitative Disclosures About Market Risk

  59

Item 8.

 

Financial Statements and Supplementary Data

  60

Item 9.

 

Changes in and Disagreements With Accountants on Accounting and Financial Disclosure

  60

Item 9A.

 

Controls and Procedures

  61

Item 9B.

 

Other Information

  63

Part III

       

Item 10.

 

Directors and Executive Officers and Corporate Governance

  63

Item 11.

 

Executive Compensation

  63

Item 12.

 

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

  63

Item 13.

 

Certain Relationships and Related Transactions, and Director Independence

  63

Item 14.

 

Principal Accountant Fees and Services

  63

Part IV

       

Item 15.

 

Exhibits and Financial Statement Schedules

  64

Signatures

  132

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PART I

IMPORTANT FACTORS RELATED TO FORWARD-LOOKING STATEMENTS

        This Annual Report on Form 10-K of The Macerich Company (the "Company") contains or incorporates by reference statements that constitute forward-looking statements within the meaning of the federal securities laws. Any statements that do not relate to historical or current facts or matters are forward-looking statements. You can identify some of the forward-looking statements by the use of forward-looking words, such as "may," "will," "could," "should," "expects," "anticipates," "intends," "projects," "predicts," "plans," "believes," "seeks," and "estimates" and variations of these words and similar expressions. Statements concerning current conditions may also be forward-looking if they imply a continuation of current conditions. Forward-looking statements appear in a number of places in this Form 10-K and include statements regarding, among other matters:

        Stockholders are cautioned that any such forward-looking statements are not guarantees of future performance and involve risks, uncertainties and other factors that may cause actual results, performance or achievements of the Company or the industry to differ materially from the Company's future results, performance or achievements, or those of the industry, expressed or implied in such forward-looking statements. You are urged to carefully review the disclosures we make concerning risks and other factors that may affect our business and operating results, including those made in "Item 1A. Risk Factors" of this Annual Report on Form 10-K, as well as our other reports filed with the Securities and Exchange Commission ("SEC"). You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this document. The Company does not intend, and undertakes no obligation, to update any forward-looking information to reflect events or circumstances after the date of this document or to reflect the occurrence of unanticipated events, unless required by law to do so.

ITEM 1.    BUSINESS

General

        The Company is involved in the acquisition, ownership, development, redevelopment, management and leasing of regional and community shopping centers located throughout the United States. The Company is the sole general partner of, and owns a majority of the ownership interests in, The Macerich Partnership, L.P., a Delaware limited partnership (the "Operating Partnership"). As of December 31, 2008, the Operating Partnership owned or had an ownership interest in 72 regional shopping centers and 20 community shopping centers totaling approximately 76 million square feet of gross leasable area ("GLA"). These 92 regional and community shopping centers are referred to hereinafter as the "Centers", unless the context otherwise requires. The Company is a self-administered and self-managed real estate investment trust ("REIT") and conducts all of its operations through the Operating Partnership and the Company's management companies, Macerich Property Management Company, LLC, a single member Delaware limited liability company, Macerich Management Company,

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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. All seven of the management companies are collectively referred to herein as the "Management Companies."

        The Company was organized as a Maryland corporation in September 1993 to continue and expand the shopping center operations of Mace Siegel, Arthur M. Coppola, Dana K. Anderson and Edward C. Coppola (the "principals") and certain of their business associates.

        All references to the Company in this Annual Report on Form 10-K include the Company, those entities owned or controlled by the Company and predecessors of the Company, unless the context indicates otherwise.

        Financial information regarding the Company for each of the last three fiscal years is contained in the Company's Consolidated Financial Statements included in Item 15. Exhibits and Financial Statement Schedules.

Recent Developments

    Acquisitions and Dispositions:

        On January 1, 2008, a subsidiary of the Operating Partnership, at the election of the holders, redeemed its 3.4 million Class A participating convertible preferred units ("PCPUs"). As a result of the redemption, the Company received the 16.32% minority interest in the portion of the Wilmorite portfolio acquired on April 25, 2005 that included Danbury Fair Mall, Freehold Raceway Mall, Great Northern Mall, Rotterdam Square, Shoppingtown Mall, Towne Mall, Tysons Corner Center and Wilton Mall, collectively, referred to as the "Non-Rochester Properties," for a total consideration of $224.4 million, in exchange for the Company's ownership interest in the portion of the Wilmorite portfolio that consisted of Eastview Mall, Eastview Commons, Greece Ridge Center, Marketplace Mall and Pittsford Plaza, collectively referred to as the "Rochester Properties." Included in the redemption consideration was the assumption of the remaining 16.32% interest in the indebtedness of the Non-Rochester Properties, which had an estimated fair value of $106.0 million. In addition, the Company also received additional consideration of $11.8 million, in the form of a note, for certain working capital adjustments, extraordinary capital expenditures, leasing commissions, tenant allowances, and decreases in indebtedness during the Company's period of ownership of the Rochester Properties. The Company recognized a gain of $99.1 million on the exchange. This exchange is referred to herein as the "Rochester Redemption."

        On January 10, 2008, the Company, in a 50/50 joint venture, acquired The Shops at North Bridge, a 680,933 square foot urban shopping center in Chicago, Illinois, for a total purchase price of $515.0 million. The Company's share of the purchase price was funded by the assumption of a pro rata share of the $205.0 million fixed rate mortgage on the Center and by borrowings under the Company's line of credit.

        On January 31, 2008, the Company purchased a ground leasehold interest in a freestanding Mervyn's store located in Hayward, California. The purchase price of $13.2 million was funded by cash and borrowings under the Company's line of credit.

        On February 29, 2008, the Company purchased a fee simple interest in a freestanding Mervyn's store located in Monrovia, California. The purchase price of $19.3 million was funded by cash and borrowings under the Company's line of credit.

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        On May 20, 2008, the Company purchased fee simple interests in a 161,350 square foot Boscov's department store at Deptford Mall in Deptford, New Jersey. The total purchase price of $23.5 million was funded by the assumption of the existing $15.2 million mortgage note on the property and by borrowings under the Company's line of credit.

        On June 11, 2008, the Company became a 50% owner in a joint venture that acquired One Scottsdale, which plans to develop a luxury retail and mixed-use property in Scottsdale, Arizona. The Company's share of the purchase price was $52.5 million, which was funded by borrowings under the Company's line of credit.

        On December 19, 2008, the Company sold a fee and/or ground leasehold interest in three freestanding Mervyn's department stores to Pacific Premier Retail Trust, one of the Company's joint ventures, for $43.4 million, resulting in a gain on sale of assets of $1.5 million. The Company's pro rata share of the proceeds were used to pay down the Company's line of credit.

    Financing Activity:

        On March 1, 2008, the Company paid off the existing loan on Mall of Victor Valley. Subsequently, on May 6, 2008, the Company placed a new $100.0 million loan on the property that bears interest at LIBOR plus 1.60% and matures on May 6, 2011, with two one-year extension options. The loan proceeds from the new loan were used to pay down the Company's line of credit and for general corporate purposes.

        On March 14, 2008, the Company placed a construction loan on Cactus Power Center that provides for borrowings of up to $101.0 million and bears interest at LIBOR plus a spread of 1.10% to 1.35%, depending on certain conditions. The loan matures on March 14, 2011, with two one-year extension options. The loan proceeds were used to fund development activities on the property.

        On May 14, 2008, the Company's joint venture in The Market at Estrella Falls placed a construction loan on the property that allows for total borrowings of up to $80.0 million. The loan bears interest at LIBOR plus a spread of 1.50% to 1.60%, depending on certain conditions, and matures on June 1, 2011, with two one-year extension options. The loan proceeds were used to fund development activities on the property.

        On May 20, 2008, concurrent with the acquisition of the fee simple interest in a freestanding Boscov's department store at Deptford Mall, the Company assumed the existing $15.8 million loan on the property. The loan bears interest at 6.46% and matures on June 1, 2016. See "Recent Developments—Acquisitions and Dispositions."

        On June 5, 2008, the Company replaced the existing loan on Westside Pavilion with a new $175.0 million loan that bears interest at LIBOR plus 2.00% and matures on June 5, 2011, with two one-year extension options. The loan proceeds were used to pay down the Company's line of credit and for general corporate purposes.

        On June 13, 2008, the Company placed a construction loan on SanTan Regional Center that allows for total borrowings of up to $150.0 million. The loan bears interest at LIBOR plus a spread of 2.10% to 2.25%, depending on certain conditions. The loan matures on June 13, 2011, with two one-year extension options. The net loan proceeds were used to fund development activities on the property and pay down the Company's line of credit.

        On July 10, 2008, the Company placed a $165.0 million loan on The Oaks that bears interest at LIBOR plus 1.75% and matures on July 10, 2011, with two one-year extension options. Concurrently, the Company placed a construction loan on the property that allows for total borrowings of up to $135.0 million, bears interest at LIBOR plus a spread of 1.75% to 2.10%, depending on certain conditions, and matures on July 10, 2011, with two one-year extension options. The loan proceeds from

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the new loans were used to fund development activities at the property, pay down the Company's line of credit and for general corporate purposes.

        On July 10, 2008, the Company replaced the existing loan on Fresno Fashion Fair with a new $170.0 million loan that bears interest at 6.76% and matures on August 1, 2015. The net loan proceeds were used to pay down the Company's line of credit and for general corporate purposes.

        On July 31, 2008, the Company's joint venture in Broadway Plaza replaced the existing loan on the property with a new $150.0 million loan that bears interest at 6.12% and matures on August 15, 2015. The Company used its pro rata share of the net loan proceeds to pay down the Company's line of credit and for general corporate purposes.

        On August 11, 2008, the Company paid off the existing loan on South Towne Center. Subsequently, on October 16, 2008, the Company placed a new $90.0 million loan on the property that bears interest at 6.75% and matures on November 5, 2015. The net loan proceeds were used to pay down the Company's line of credit and for general corporate purposes.

        On October 1, 2008, the Company's joint venture in Chandler Festival replaced the existing loan on the property with a new $29.7 million loan that bears interest at 6.39% and matures on November 1, 2015. The Company used its pro rata share of the net loan proceeds to pay down the Company's line of credit and for general corporate purposes.

        On October 1, 2008, the Company's joint venture in Chandler Gateway replaced the existing loan on the property with a new $18.9 million loan that bears interest at 6.37% and matures on November 1, 2015. The Company used its pro rata share of the net loan proceeds to pay down the Company's line of credit and for general corporate purposes.

        On December 10, 2008, Pacific Premier Retail Trust, one of the Company's joint ventures, replaced an existing loan on Washington Square with a new $250.0 million loan that bears interest at 6.04% and matures on January 1, 2016. The Company used its pro rata share of the net loan proceeds to fund its share of the purchase of fee simple and/or ground leasehold interests in three freestanding Mervyn's stores and to pay down the Company's line of credit and for general corporate purposes.

        During the period of October 21, 2008 to December 29, 2008, the Company repurchased and retired $222.8 million of convertible senior notes ("Senior Notes") for $122.7 million. This early retirement of debt resulted in a $95.3 million gain on early extinguishment of debt. The repurchases were funded through additional borrowings under the Company's line of credit.

        On February 2, 2009, the Company replaced an existing loan on Queens Center with a new $130.0 million loan that bears interest at 7.50% and matures on March 1, 2013. The net loan proceeds were used to pay down the Company's line of credit and for general corporate purposes.

        In addition, the Company's joint venture has obtained a commitment for a $62.0 million, five year financing of Redmond Town Center's office buildings at a fixed interest rate of 7.50%. After the closing of the Redmond transaction, the Company will have $406.0 million of 2009 debt maturities remaining (excluding loans with extensions). The Company also obtained a commitment for a three year loan extension on the existing $115.0 million loan on Twenty Ninth Street, a Center in Boulder, Colorado at an interest rate of LIBOR plus 3.40%.

    Redevelopment and Development Activity:

        Construction continues on Santa Monica Place, a regional shopping center under development in Santa Monica, California. In September, the Company announced that Bloomingdale's will join Nordstrom. Bloomingdale's will open the first of the store's SoHo concept outside of Manhattan. In addition, the Company has announced deals with 11 retailers and restaurants slated to join the new Santa Monica Place—Ed Hardy, Arthur, R.O.C. Republic of Couture, Ilori, Love Culture, Michael

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Brandon, Shuz, restaurants La Sandia, Zengo and Pizza Antica, and gallery Artevo. These 11 strong brands join previously announced restaurants XINO and Osumo Sushi and fashion retailers Kitson LA, BCBG Max Azria, Coach, Lacoste, Joe's Jeans and True Religion, all of which are slated to open in 2010 alongside Bloomingdale's SoHo concept and Nordstrom.

        At Scottsdale Fashion Square, construction on an approximately 160,000 square foot expansion continues on schedule toward a Fall 2009 opening. The expansion will be anchored by a 60,000 square foot Barneys New York. In addition, recently signed fashion retailer Ed Hardy, French luxury homewear retailer Arthur and Forever 21 will join previously announced True Religion and restaurants Marcella's and Modern Steak, in the new wing. Recent additions to the Center's interior merchandise mix include Cartier and Bvlgari.

        In December 2008, the Company wrote off $8.7 million of development costs on development projects the Company has determined it will not pursue. In addition, the Company recorded an $18.8 million impairment charge to reduce its pro rata share of the carrying value of land held for development at a consolidated joint venture.

The Shopping Center Industry

    General

        There are several types of retail shopping centers, which are differentiated primarily based on size and marketing strategy. Regional shopping centers generally contain in excess of 400,000 square feet of GLA and are typically anchored by two or more department or large retail stores ("Anchors") and are referred to as "Regional Shopping Centers" or "Malls." Regional Shopping Centers also typically contain numerous diversified retail stores ("Mall Stores"), most of which are national or regional retailers typically located along corridors connecting the Anchors. Community Shopping Centers, also referred to as "strip centers" or "urban villages" or "specialty centers", are retail shopping centers that are designed to attract local or neighborhood customers and are typically anchored by one or more supermarkets, discount department stores and/or drug stores. Community Shopping Centers typically contain 100,000 square feet to 400,000 square feet of GLA. In addition, freestanding retail stores are located along the perimeter of the shopping centers ("Freestanding Stores"). Anchors, Mall and Freestanding Stores and other tenants typically contribute funds for the maintenance of the common areas, property taxes, insurance, advertising and other expenditures related to the operation of the shopping center.

    Regional Shopping Centers

        A Regional Shopping Center draws from its trade area by offering a variety of fashion merchandise, hard goods and services and entertainment, often in an enclosed, climate controlled environment with convenient parking. Regional Shopping Centers provide an array of retail shops and entertainment facilities and often serve as the town center and the preferred gathering place for community, charity, and promotional events.

        Regional Shopping Centers have generally provided owners with relatively stable income despite the cyclical nature of the retail business. This stability is due both to the diversity of tenants and to the typical dominance of Regional Shopping Centers in their trade areas.

        Regional Shopping Centers have different strategies with regard to price, merchandise offered and tenant mix, and are generally tailored to meet the needs of their trade areas. Anchor tenants are located along common areas in a configuration designed to maximize consumer traffic for the benefit of the Mall Stores. Mall GLA, which generally refers to GLA contiguous to the Anchors for tenants other than Anchors, is leased to a wide variety of smaller retailers. Mall Stores typically account for the majority of the revenues of a Regional Shopping Center.

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Business of the Company

    Strategy:

        The Company has a four-pronged business strategy which focuses on the acquisition, leasing and management, redevelopment and development of Regional Shopping Centers.

        Acquisitions.     The Company focuses on well-located, quality regional shopping centers that are, or it believes can be, dominant in their trade area and have strong revenue enhancement potential. The Company subsequently seeks to improve operating performance and returns from these properties through leasing, management and redevelopment. Since its initial public offering, the Company has acquired interests in shopping centers nationwide. The Company believes that it is geographically well positioned to cultivate and maintain ongoing relationships with potential sellers and financial institutions and to act quickly when acquisition opportunities arise. (See "Recent Developments—Acquisitions and Dispositions").

        Leasing and Management.     The Company believes that the shopping center business requires specialized skills across a broad array of disciplines for effective and profitable operations. For this reason, the Company has developed a fully integrated real estate organization with in-house acquisition, accounting, development, finance, leasing, legal, marketing, property management and redevelopment expertise. In addition, the Company emphasizes a philosophy of decentralized property management, leasing and marketing performed by on-site professionals. The Company believes that this strategy results in the optimal operation, tenant mix and drawing power of each Center as well as the ability to quickly respond to changing competitive conditions of the Center's trade area.

        The Company believes that on-site property managers can most effectively operate the Centers. Each Center's property manager is responsible for overseeing the operations, marketing, maintenance and security functions at the Center. Property managers focus special attention on controlling operating costs, a key element in the profitability of the Centers, and seek to develop strong relationships with and to be responsive to the needs of retailers.

        Similarly, the Company generally utilizes on-site and regionally located leasing managers to better understand the market and the community in which a Center is located. The Company continually assesses and fine tunes each Center's tenant mix, identifies and replaces underperforming tenants and seeks to optimize existing tenant sizes and configurations.

        On a selective basis, the Company provides property management and leasing services for third parties. The Company currently manages four malls for third party owners on a fee basis. In addition, the Company manages three community centers for a related party.

        Redevelopment.     One of the major components of the Company's growth strategy is its ability to redevelop acquired properties. For this reason, the Company has built a staff of redevelopment professionals who have primary responsibility for identifying redevelopment opportunities that will result in enhanced long-term financial returns and market position for the Centers. The redevelopment professionals oversee the design and construction of the projects in addition to obtaining required governmental approvals. (See "Recent Developments—Redevelopment and Development Activity").

        Development.     The Company pursues ground-up development projects on a selective basis. The Company has supplemented its strong acquisition, operations and redevelopment skills with its ground-up development expertise to further increase growth opportunities. (See "Recent Developments—Redevelopment and Development Activity").

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    The Centers

        As of December 31, 2008, the Centers consist of 72 Regional Shopping Centers and 20 Community Shopping Centers totaling approximately 76.0 million square feet of GLA. The 72 Regional Shopping Centers in the Company's portfolio average approximately 952,000 square feet of GLA and range in size from 2.2 million square feet of GLA at Tysons Corner Center to 323,505 square feet of GLA at Panorama Mall. The Company's 20 Community Shopping Centers have an average of approximately 238,000 square feet of GLA. As of December 31, 2008, the Centers included 311 Anchors totaling approximately 40.3 million square feet of GLA and approximately 9,000 Mall and Freestanding Stores totaling approximately 35.6 million square feet of GLA.

    Competition

        There are numerous owners and developers of real estate that compete with the Company in its trade areas. There are six other publicly traded mall companies and several large private mall companies, any of which under certain circumstances could compete against the Company for an acquisition, an Anchor or a tenant. In addition, private equity firms compete with the Company in terms of acquisitions. This results in competition for both acquisition of centers and for tenants or Anchors to occupy space. The existence of competing shopping centers could have a material adverse impact on the Company's ability to lease space and on the level of rent that can be achieved. There is also increasing competition from other retail formats and technologies, such as lifestyle centers, power centers, internet shopping and home shopping networks, factory outlet centers, discount shopping clubs and mail-order services that could adversely affect the Company's revenues.

        In making leasing decisions, the Company believes that retailers consider the following material factors relating to a center: quality, design and location, including consumer demographics; rental rates; type and quality of Anchors and retailers at the center; and management and operational experience and strategy of the center. The Company believes it is able to compete effectively for retail tenants in its local markets based on these criteria in light of the overall size, quality and diversity of its portfolio of Centers.

    Major Tenants

        The Centers derived approximately 91.7% of their total minimum rents for the year ended December 31, 2008 from Mall and Freestanding Stores. One tenant accounted for approximately 2.4% of minimum rents of the Company, and no other single tenant accounted for more than 2.3% of minimum rents as of December 31, 2008.

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        The following tenants (including their subsidiaries) represent the 10 largest tenants in the Company's portfolio (including joint ventures) based upon minimum rents in place as of December 31, 2008:

Tenant
  Primary DBA's   Number of
Locations
in the
Portfolio
  % of Total
Minimum
Rents(1)
 

Gap Inc. 

  Gap, Banana Republic, Old Navy     97     2.4 %

Limited Brands, Inc. 

  Victoria Secret, Bath and Body     137     2.3 %

Foot Locker, Inc. 

  Footlocker, Champs Sports, Lady Footlocker     145     1.8 %

Forever 21, Inc. 

  Forever 21, XXI Forever     43     1.6 %

Abercrombie & Fitch Co. 

  Abercrombie & Fitch, Abercrombie, Hollister     78     1.6 %

AT&T Mobility LLC(1)

  AT&T Wireless, Cingular Wireless     32     1.4 %

Luxottica Group

  Lenscrafters, Sunglass Hut     165     1.3 %

American Eagle Outfitters, Inc. 

  American Eagle Outfitters     66     1.2 %

Zale Corporation

  Zales, Piercing Pagoda, Gordon's Jewelers     112     1.1 %

Signet Group PLC

  Kay Jewelers, Weisfield Jewelers     74     1.0 %

(1)
Includes AT&T Mobility office headquarters located at Redmond Town Center.

    Mall and Freestanding Stores

        Mall and Freestanding Store leases generally provide for tenants to pay rent comprised of a base (or "minimum") rent and a percentage rent based on sales. In some cases, tenants pay only minimum rent, and in some cases, tenants pay only percentage rent. Historically, most leases for Mall and Freestanding Stores contain provisions that allow the Centers to recover their costs for maintenance of the common areas, property taxes, insurance, advertising and other expenditures related to the operations of the Center. Since January 2005, the Company generally began entering into leases which require tenants to pay a stated amount for such operating expenses, generally excluding property taxes, regardless of the expenses the Company actually incurs at any Center.

        Tenant space of 10,000 square feet and under in the portfolio at December 31, 2008 comprises 69.1% of all Mall and Freestanding Store space. The Company uses tenant spaces of 10,000 square feet and under for comparing rental rate activity. The Company believes that to include space over 10,000 square feet would provide a less meaningful comparison.

        When an existing lease expires, the Company is often able to enter into a new lease with a higher base rent component. The average base rent for new Mall and Freestanding Store leases at the consolidated Centers, 10,000 square feet and under, commencing during 2008 was $42.70 per square foot, or 21.5% higher than the average base rent for all Mall and Freestanding Stores at the consolidated Centers, 10,000 square feet and under, expiring during 2008 of $35.14 per square foot.

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        The following table sets forth for the Centers, the average base rent per square foot of Mall and Freestanding GLA, for tenants 10,000 square feet and under, as of December 31 for each of the past three years:

For the Years Ended December 31,
  Average Base Rent
Per Square Foot(1)
  Avg. Base Rent Per Sq.Ft.
on Leases Commencing
During the Year(2)
  Avg. Base Rent Per Sq. Ft.
on Leases Expiring
During the Year(3)
 

Consolidated Centers:

                   

2008

  $ 41.39   $ 42.70   $ 35.14  

2007

  $ 38.49   $ 43.23   $ 34.21  

2006

  $ 37.55   $ 38.40   $ 31.92  

Joint Venture Centers:

                   

2008

  $ 42.14   $ 49.74   $ 37.61  

2007

  $ 38.72   $ 47.12   $ 34.87  

2006

  $ 37.94   $ 41.43   $ 36.19  

(1)
Average base rent per square foot is based on Mall and Freestanding Store GLA for spaces, 10,000 square feet and under, occupied as of December 31 for each of the Centers owned by the Company. The leases for Promenade at Casa Grande, SanTan Village Power Center and SanTan Village Regional Center were excluded for 2007 and 2008 due to the Centers being under redevelopment. The leases for The Market at Estrella Falls and Santa Monica Place were excluded for 2008 due to the Centers being under redevelopment.

(2)
The average base rent per square foot on lease signings commencing during the year represents the actual rent to be paid on a per square foot basis during the first twelve months, for tenants 10,000 square feet and under. The leases for Promenade at Casa Grande, SanTan Village Power Center and SanTan Village Regional Center were excluded for 2007 and 2008 due to the Centers being under redevelopment. The leases for The Market at Estrella Falls and Santa Monica Place were excluded for 2008 due to the Centers being under redevelopment.

(3)
The average base rent per square foot on leases expiring during the year represents the final year minimum rent, on a cash basis, for all tenant leases 10,000 square feet and under expiring during the year. The leases for Promenade at Casa Grande, SanTan Village Power Center and SanTan Village Regional Center were excluded for 2007 and 2008 due to the Centers being under redevelopment. The leases for The Market at Estrella Falls and Santa Monica Place were excluded for 2008 due to the Centers being under redevelopment.

    Cost of Occupancy

        The Company's management believes that in order to maximize the Company's operating cash flow, the Centers' Mall Store tenants must be able to operate profitably. A major factor contributing to

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tenant profitability is cost of occupancy. The following table summarizes occupancy costs for Mall Store tenants in the Centers as a percentage of total Mall Store sales for the last three years:

 
  For Years ended December 31,  
 
  2008   2007   2006  

Consolidated Centers:

                   

Minimum Rents

    8.9 %   8.0 %   8.1 %

Percentage Rents

    0.4 %   0.4 %   0.4 %

Expense Recoveries(1)

    4.4 %   3.8 %   3.7 %
               

    13.7 %   12.2 %   12.2 %
               

Joint Venture Centers:

                   

Minimum Rents

    8.2 %   7.3 %   7.2 %

Percentage Rents

    0.4 %   0.5 %   0.6 %

Expense Recoveries(1)

    3.9 %   3.2 %   3.1 %
               

    12.5 %   11.0 %   10.9 %
               

      (1)
      Represents real estate tax and common area maintenance charges.

    Lease Expirations

        The following tables show scheduled lease expirations (for Centers owned as of December 31, 2008) of Mall and Freestanding Stores (10,000 square feet and under) for the next ten years, assuming that none of the tenants exercise renewal options:

Consolidated Centers:

Year Ending December 31,
  Number of
Leases
Expiring
  Approximate
GLA of Leases
Expiring(1)
  % of Total Leased
GLA Represented
by Expiring
Leases(1)
  Ending Base Rent
per Square Foot of
Expiring Leases(1)
 

2009

    480     959,995     12.31 % $ 35.49  

2010

    435     834,841     10.70 % $ 41.08  

2011

    433     1,058,341     13.57 % $ 38.56  

2012

    328     830,663     10.65 % $ 38.17  

2013

    244     531,060     6.81 % $ 42.66  

2014

    245     565,878     7.25 % $ 50.43  

2015

    251     647,709     8.30 % $ 50.18  

2016

    248     661,310     8.48 % $ 41.69  

2017

    279     807,575     10.35 % $ 40.93  

2018

    207     531,293     6.81 % $ 43.69  

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Joint Venture Centers (at pro rata share):

Year Ending December 31,
  Number of
Leases
Expiring
  Approximate
GLA of Leases
Expiring(1)
  % of Total Leased
GLA Represented
by Expiring
Leases(1)
  Ending Base Rent
per Square Foot of
Expiring Leases(1)
 

2009

    504     520,156     13.0 % $ 36.65  

2010

    441     452,190     11.3 % $ 40.59  

2011

    393     449,891     11.2 % $ 39.79  

2012

    309     319,854     8.0 % $ 42.28  

2013

    281     325,495     8.1 % $ 43.16  

2014

    232     283,266     7.1 % $ 44.65  

2015

    238     295,462     7.4 % $ 45.66  

2016

    279     340,179     8.5 % $ 48.21  

2017

    291     444,352     11.1 % $ 43.89  

2018

    233     394,563     9.8 % $ 45.29  

      (1)
      The ending base rent per square foot on leases expiring during the period represents the final year minimum rent, on a cash basis, for all tenant leases 10,000 square feet and under expiring during the year. Currently, 53% of leases have provisions for future consumer price increases which are not reflected in ending base rent. Leases for Promenade at Casa Grande, SanTan Village Power Center, SanTan Village Regional Center, Market at Estrella Falls and Santa Monica Place are currently under redevelopment and have been excluded.

    Anchors

        Anchors have traditionally been a major factor in the public's identification with Regional Shopping Centers. Anchors are generally department stores whose merchandise appeals to a broad range of shoppers. Although the Centers receive a smaller percentage of their operating income from Anchors than from Mall and Freestanding Stores, strong Anchors play an important part in maintaining customer traffic and making the Centers desirable locations for Mall and Freestanding Store tenants.

        Anchors either own their stores, the land under them and in some cases adjacent parking areas, or enter into long-term leases with an owner at rates that are lower than the rents charged to tenants of Mall and Freestanding Stores. Each Anchor, which owns its own store, and certain Anchors which lease their stores, enter into reciprocal easement agreements with the owner of the Center covering among other things, operational matters, initial construction and future expansion.

        Anchors accounted for approximately 8.3% of the Company's total minimum rent for the year ended December 31, 2008.

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        The following table identifies each Anchor, each parent company that owns multiple Anchors and the number of square feet owned or leased by each such Anchor or parent company in the Company's portfolio at December 31, 2008:

Name
  Number of
Anchor
Stores
  GLA Owned
by Anchor
  GLA Leased
by Anchor
  Total GLA
Occupied by
Anchor
 

Macy's Inc.(1)

                         
 

Macy's

    54     5,605,572     3,180,401     8,785,973  
 

Bloomingdale's

    1         255,888     255,888  
                   
   

Total

    55     5,605,572     3,436,289     9,041,861  

Sears Holdings Corporation

                         
 

Sears

    48     4,462,305     2,079,671     6,541,976  
 

Great Indoors, The

    1         131,051     131,051  
 

K-Mart

    1         86,479     86,479  
                   
   

Total

    50     4,462,305     2,297,201     6,759,506  

J.C. Penney

    45     2,353,168     3,661,962     6,015,130  

Dillard's

    24     3,272,584     808,302     4,080,886  

Nordstrom(2)

    14     699,127     1,648,287     2,347,414  

Target

    12     1,023,482     564,279     1,587,761  

The Bon-Ton Stores, Inc.

                         
 

Younkers

    6         609,177     609,177  
 

Bon-Ton, The

    1         71,222     71,222  
 

Herberger's

    4     188,000     214,573     402,573  
                   
   

Total

    11     188,000     894,972     1,082,972  

Gottschalks(3)

    7     252,638     633,242     885,880  

Forever 21(4)

    7         615,073     615,073  

Kohl's(4)

    6     239,902     276,664     516,566  

Boscov's

    3     140,000     336,067     476,067  

Wal-Mart

    3     371,527     100,709     472,236  

Neiman Marcus

    3     120,000     321,450     441,450  

Home Depot

    3         394,932     394,932  

Lord & Taylor

    3     120,635     199,372     320,007  

Burlington Coat Factory

    3     186,570     74,585     261,155  

Von Maur

    3     186,686     59,563     246,249  

Dick's Sporting Goods

    3         257,241     257,241  

Belk, Inc.

                         
 

Belk

    3         200,925     200,925  

La Curacao

    1     164,656         164,656  

Costco(5)

    1         147,652     147,652  

Barneys New York(6)

    2         141,398     141,398  

Lowe's

    1     135,197         135,197  

Best Buy

    2     129,441         129,441  

Saks Fifth Avenue

    1         92,000     92,000  

L.L. Bean

    1         75,778     75,778  

Richman Gordman 1 / 2 Price

    1         60,000     60,000  

Sports Authority

    1         52,250     52,250  

Bealls

    1         40,000     40,000  

Vacant Anchors(7)

    11         925,153     925,153  
                   
 

Total

    281     19,651,490     18,315,346     37,966,836  

Forever 21 at centers not owned by Macerich(4)

   
5
   
   
395,858
   
395,858
 

Kohl's at centers not owned by Macerich(4)

    8         653,580     653,580  

Vacant Anchors at centers not owned by Macerich(4)

    17         1,324,451     1,324,451  
                   

Total

    311     19,651,490     20,689,235     40,340,725  
                   

(1)
Macy's is scheduled to open a 120,000 square foot store at SanTan Village Regional Mall in March 2009. Macy's at Santa Monica Place plans to convert to a Bloomingdale's in 2010.

(2)
Nordstrom is scheduled to open a 122,000 square foot store at Santa Monica Place in 2010.

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(3)
Gottschalks filed Chapter 11 bankruptcy in January 2009. All stores are currently open and operating.

(4)
Mervyn's filed bankruptcy on July 29, 2008. One of the Mervyn's locations owned by the Company closed in July 2008, six closed in November 2008 and the remaining Mervyn's locations closed in December 2008. Of the 45 former Mervyn's in the Company's portfolio, 12 are now leased to Forever 21 and 11 to Kohl's. The Forever 21 stores are scheduled to open in Spring 2009. The Kohl's stores are scheduled to open in Fall 2009. The Company also had three other Kohl's opened and operating at December 31, 2008.

(5)
Costco opened a 160,000 square foot store at Lakewood Center in February 2009.

(6)
Barneys New York is scheduled to open a 60,000 square foot store at Scottsdale Fashion Square in Fall 2009.

(7)
The Company is contemplating various replacement tenants and/or redevelopment opportunities for these vacant sites.

Environmental Matters

        Each of the Centers has been subjected to an Environmental Site Assessment—Phase I (which involves review of publicly available information and general property inspections, but does not involve soil sampling or ground water analysis) completed by an environmental consultant.

        Based on these assessments, and on other information, the Company is aware of the following environmental issues that may reasonably result in costs associated with future investigation or remediation, or in environmental liability:

    Asbestos.   The Company has conducted asbestos-containing materials ("ACM") surveys at various locations within the Centers. The surveys indicate that ACMs are present or suspected in certain areas, primarily vinyl floor tiles, mastics, roofing materials, drywall tape and joint compounds. The identified ACMs are generally non-friable, in good condition, and possess low probabilities for disturbance. At certain Centers where ACMs are present or suspected, however, some ACMs have been or may be classified as "friable," and ultimately may require removal under certain conditions. The Company has developed and implemented an operations and maintenance ("O&M") plan to manage ACMs in place.

    Underground Storage Tanks.   Underground storage tanks ("USTs") are or were present at certain of the Centers, often in connection with tenant operations at gasoline stations or automotive tire, battery and accessory service centers located at such Centers. USTs also may be or have been present at properties neighboring certain Centers. Some of these tanks have either leaked or are suspected to have leaked. Where leakage has occurred, investigation, remediation, and monitoring costs may be incurred by the Company if responsible current or former tenants, or other responsible parties, are unavailable to pay such costs.

    Chlorinated Hydrocarbons.   The presence of chlorinated hydrocarbons such as perchloroethylene ("PCE") and its degradation byproducts have been detected at certain of the Centers, often in connection with tenant dry cleaning operations. Where PCE has been detected, the Company may incur investigation, remediation and monitoring costs if responsible current or former tenants, or other responsible parties, are unavailable to pay such costs.

        See "Risk Factors—Possible environmental liabilities could adversely affect us."

Insurance

        Each of the Centers has comprehensive liability, fire, extended coverage and rental loss insurance with insured limits customarily carried for similar properties. The Company does not insure certain types of losses (such as losses from wars) because they are either uninsurable or not economically insurable. In addition, while the Company or the relevant joint venture, as applicable, further carries specific earthquake insurance on the Centers located in California, the policies are subject to a deductible equal to 5% of the total insured value of each Center, a $100,000 per occurrence minimum and a combined annual aggregate loss limit of $150 million on these Centers. The Company or the

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relevant joint venture, as applicable, carries specific earthquake insurance on the Centers located in the Pacific Northwest. However, the policies are subject to a deductible equal to 2% of the total insured value of each Center, a $50,000 per occurrence minimum and a combined annual aggregate loss limit of $200 million on these Centers. While the Company or the relevant joint venture also carries terrorism insurance on the Centers, the policies are subject to a $50,000 deductible and a combined annual aggregate loss of $800 million. Each Center has environmental insurance covering eligible third-party losses, remediation and non-owned disposal sites, subject to a $100,000 deductible and a $20 million five-year aggregate limit. Some environmental losses are not covered by this insurance because they are uninsurable or not economically insurable. Furthermore, the Company carries title insurance on substantially all of the Centers for less than their full value.

Qualification as a Real Estate Investment Trust

        The Company elected to be taxed as a REIT under the Internal Revenue Code of 1986, as amended (the "Code"), commencing with its first taxable year ended December 31, 1994, and intends to conduct its operations so as to continue to qualify as a REIT under the Code. As a REIT, the Company generally will not be subject to federal and state income taxes on its net taxable income that it currently distributes to stockholders. Qualification and taxation as a REIT depends on the Company's ability to meet certain dividend distribution tests, share ownership requirements and various qualification tests prescribed in the Code.

Employees

        As of December 31, 2008, the Company and the Management Companies had approximately 3,000 regular and temporary employees, including executive officers (10), personnel in the areas of acquisitions and business development (44), property management/marketing (506), leasing (203), redevelopment/development (92), financial services (302) and legal affairs (66). In addition, in an effort to minimize operating costs, the Company generally maintains its own security and guest services staff (1,760) and in some cases maintenance staff (17). Unions represent twenty-two of these employees. The Company primarily engages a third party to handle maintenance at the Centers. The Company believes that relations with its employees are good.

Seasonality

        For a discussion of the extent to which the Company's business may be seasonal, see "Item 7—Management's Discussion and Analysis of Financial Condition and Results of Operations—Management's Overview and Summary—Seasonality."

Available Information; Website Disclosure; Corporate Governance Documents

        The Company's corporate website address is www.macerich.com . The Company makes available free-of-charge through this website its reports on Forms 10-K, 10-Q and 8-K and all amendments thereto, as soon as reasonably practicable after the reports have been filed with, or furnished to, the Securities and Exchange Commission. These reports are available under the heading "Investing—SEC Filings", through a free hyperlink to a third-party service. Information provided on our website is not incorporated by reference into this Form 10-K.

        The following documents relating to Corporate Governance are available on the Company's website at www.macerich.com under "Investing—Corporate Governance":

      Guidelines on Corporate Governance
      Code of Business Conduct and Ethics
      Code of Ethics for CEO and Senior Financial Officers
      Audit Committee Charter
      Compensation Committee Charter
      Executive Committee Charter
      Nominating and Corporate Governance Committee Charter

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        You may also request copies of any of these documents by writing to:

      Attention: Corporate Secretary
      The Macerich Company
      401 Wilshire Blvd., Suite 700
      Santa Monica, CA 90401

Certifications

        The Company submitted a Section 303A.12(a) CEO Certification to the New York Stock Exchange last year. In addition, the Company filed with the Securities and Exchange Commission the CEO/CFO certification required under Section 302 of the Sarbanes-Oxley Act and it is included as Exhibit 31 hereto.

ITEM 1A.    RISK FACTORS

         The following factors, among others, could cause our actual results to differ materially from those contained in forward-looking statements made in this Annual Report on Form 10-K and presented elsewhere by our management from time to time. These factors, among others, may have a material adverse effect on our business, financial condition, operating results and cash flows, and you should carefully consider them. It is not possible to predict or identify all such factors. You should not consider this list to be a complete statement of all potential risks or uncertainties and we may update them in our future periodic reports.

We invest primarily in shopping centers, which are subject to a number of significant risks that are beyond our control.

        Real property investments are subject to varying degrees of risk that may affect the ability of our Centers to generate sufficient revenues to meet operating and other expenses, including debt service, lease payments, capital expenditures and tenant improvements, and to make distributions to us and our stockholders. Centers wholly owned by us are referred to as "Wholly Owned Centers" and Centers that are partly but not wholly owned by us are referred to as "Joint Venture Centers." A number of factors may decrease the income generated by the Centers, including:

        Income from shopping center properties and shopping center values are also affected by applicable laws and regulations, including tax, environmental, safety and zoning laws.

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Current economic conditions, including recent volatility in the capital and credit markets, could harm our business, results of operations and financial condition.

        The United States is in the midst of an economic recession with the capital and credit markets experiencing extreme volatility and disruption. The current economic environment has been affected by dramatic declines in the stock and housing markets, increases in foreclosures, unemployment and living costs as well as limited access to credit. This deteriorating economic situation has impacted and is expected to continue to impact consumer spending levels, which adversely impacts the operating results of our tenants. If current levels of market volatility continue or worsen, our tenants may also have difficulties obtaining capital at adequate or historical levels to finance their ongoing business and operations. These events could impact our tenants' ability to meet their lease obligations due to poor operating results, lack of liquidity, bankruptcy or other reasons. Our ability to lease space and negotiate rents at advantageous rates could also be adversely affected in this type of economic environment and more tenants may seek rent relief. Any of these events could harm our business, results of operations and financial condition.

Some of our Centers are geographically concentrated and, as a result, are sensitive to local economic and real estate conditions.

        A significant percentage of our Centers are located in California and Arizona and eight Centers in the aggregate are located in New York, New Jersey and Connecticut. Many of these states have been more adversely affected by weak economic and real estate conditions. To the extent that weak economic or real estate conditions, including as a result of the factors described in the preceding risk factors, or other factors continue to affect or affect California, Arizona, New York, New Jersey or Connecticut (or their respective regions) more severely than other areas of the country, our financial performance could be negatively impacted.

We are in a competitive business.

        There are numerous owners and developers of real estate that compete with us in our trade areas. There are six other publicly traded mall companies and several large private mall companies, any of which under certain circumstances could compete against us for an acquisition of an Anchor or a tenant. In addition, private equity firms compete with us in terms of acquisitions. This results in competition for both acquisition of centers and for tenants or Anchors to occupy space. The existence of competing shopping centers could have a material adverse impact on our ability to lease space and on the level of rents that can be achieved. There is also increasing competition from other retail formats and technologies, such as lifestyle centers, power centers, internet shopping and home shopping networks, factory outlet centers, discount shopping clubs and mail-order services that could adversely affect our revenues.

Our Centers depend on tenants to generate rental revenues.

        Our revenues and funds available for distribution will be reduced if:

        A decision by an Anchor, or other significant tenant to cease operations at a Center could also have an adverse effect on our financial condition. The closing of an Anchor or other significant tenant may allow other Anchors and/or other tenants to terminate their leases, seek rent relief and/or cease

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operating their stores at the Center or otherwise adversely affect occupancy at the Center. In addition, Anchors and/or tenants at one or more Centers might terminate their leases as a result of mergers, acquisitions, consolidations, dispositions or bankruptcies in the retail industry. The bankruptcy and/or closure of retail stores, or sale of an Anchor or store to a less desirable retailer, may reduce occupancy levels, customer traffic and rental income, or otherwise adversely affect our financial performance. Furthermore, if the store sales of retailers operating in the Centers decline sufficiently, tenants might be unable to pay their minimum rents or expense recovery charges. In the event of a default by a lessee, the affected Center may experience delays and costs in enforcing its rights as lessor.

        Given current economic conditions, we believe there is an increased risk that store sales of Anchors and/or tenants operating in our Centers may decrease in future periods, which may negatively affect our Anchors' and/or tenants' ability to satisfy their lease obligations and may increase the possibility of consolidations, dispositions or bankruptcies of our tenants and/or closure of their stores. By way of example, in July 2008, Mervyn's filed for bankruptcy protection and announced in October its plans to liquidate all merchandise, auction its store leases and wind down its business. We have 45 Mervyn's stores in our portfolio. We own the ground leasehold and/or fee simple interest in 44 of those stores and the remaining store is owned by a third party but is located at one of our Centers. (See "Management's Discussion and Analysis of Financial Condition and Results of Operations—Management's Overview and Summary—Mervyn's").

Our acquisition and real estate development strategies may not be successful.

        Our historical growth in revenues, net income and funds from operations has been closely tied to the acquisition and redevelopment of shopping centers. Many factors, including the availability and cost of capital, our total amount of debt outstanding, our ability to obtain financing on attractive terms, if at all, interest rates and the availability of attractive acquisition targets, among others, will affect our ability to acquire and redevelop additional properties in the future. We may not be successful in pursuing acquisition opportunities, and newly acquired properties may not perform as well as expected. Expenses arising from our efforts to complete acquisitions, redevelop properties or increase our market penetration may have a material adverse effect on our business, financial condition and results of operations. We face competition for acquisitions primarily from other REITs, as well as from private real estate companies and financial buyers. Some of our competitors have greater financial and other resources. Increased competition for shopping center acquisitions may impact adversely our ability to acquire additional properties on favorable terms. We cannot guarantee that we will be able to implement our growth strategy successfully or manage our expanded operations effectively and profitably.

        We may not be able to achieve the anticipated financial and operating results from newly acquired assets. Some of the factors that could affect anticipated results are:

        Our business strategy also includes the selective development and construction of retail properties. Any development, redevelopment and construction activities that we may undertake will be subject to the risks of real estate development, including lack of financing, construction delays, environmental requirements, budget overruns, sunk costs and lease-up. Furthermore, occupancy rates and rents at a newly completed property may not be sufficient to make the property profitable. Real estate development activities are also subject to risks relating to the inability to obtain, or delays in obtaining, all necessary zoning, land-use, building, and occupancy and other required governmental permits and

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authorizations. If any of the above events occur, our ability to pay dividends to our stockholders and service our indebtedness could be adversely affected.

We may be unable to sell properties quickly because real estate investments are relatively illiquid.

        Investments in real estate are relatively illiquid, which limits our ability to adjust our portfolio in response to changes in economic or other conditions. Moreover, there are some limitations under federal income tax laws applicable to REITs that limit our ability to sell assets. In addition, because our properties are generally mortgaged to secure our debts, we may not be able to obtain a release of a lien on a mortgaged property without the payment of the associated debt and/or a substantial prepayment penalty, which restricts our ability to dispose of a property, even though the sale might otherwise be desirable. Furthermore, the number of prospective buyers interested in purchasing shopping centers is limited. Therefore, if we want to sell one or more of our Centers, we may not be able to dispose of it in the desired time period and may receive less consideration than we originally invested in the Center.

We have substantial debt that could affect our future operations.

        Our total outstanding loan indebtedness at December 31, 2008 was $8.0 billion (which includes $2.3 billion of unsecured debt and $2.0 billion of our pro rata share of joint venture debt). Assuming the closing of our current loan commitment, approximately $406 millon of such indebtedness matures in 2009 (excluding loans with extensions). As a result of this substantial indebtedness, we are required to use a material portion of our cash flow to service principal and interest on our debt, which limits the cash flow available for other business opportunities. In addition, we are subject to the risks normally associated with debt financing, including the risk that our cash flow from operations will be insufficient to meet required debt service and that rising interest rates could adversely affect our debt service costs. A majority of our Centers are mortgaged to secure payment of indebtedness, and if income from the Center is insufficient to pay that indebtedness, the Center could be foreclosed upon by the mortgagee resulting in a loss of income and a decline in our total asset value.

We are obligated to comply with financial and other covenants that could affect our operating activities.

        Our unsecured credit facilities contain financial covenants, including interest coverage requirements, as well as limitations on our ability to incur debt, make dividend payments and make certain acquisitions. These covenants may restrict our ability to pursue certain business initiatives or certain transactions that might otherwise be advantageous. In addition, failure to meet certain of these financial covenants could cause an event of default under and/or accelerate some or all of such indebtedness which could have a material adverse effect on us.

We depend on external financings for our growth and ongoing debt service requirements.

        We depend primarily on external financings, principally debt financings, to fund the growth of our business and to ensure that we can meet ongoing maturities of our outstanding debt. Our access to financing depends on the willingness of banks, lenders and other institutions to lend to us and conditions in the capital markets in general. Current turmoil in the capital and credit markets has significantly limited access to debt and equity financing for many companies. We cannot assure you that we will be able to obtain the financing we need for future growth or to meet our debt service as obligations mature, or that the financing will be available to us on acceptable terms, or at all. Any such refinancing could also impose more restrictive terms.

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Inflation may adversely affect our financial condition and results of operations.

        If inflation increases in the future, we may experience any or all of the following:

Certain individuals have substantial influence over the management of both us and the Operating Partnership, which may create conflicts of interest.

        Under the limited partnership agreement of the Operating Partnership, we, as the sole general partner, are responsible for the management of the Operating Partnership's business and affairs. Three of the principals serve as an executive officer and each principal is a member of our board of directors. Accordingly, these principals have substantial influence over our management and the management of the Operating Partnership.

The tax consequences of the sale of some of the Centers and certain holdings of the principals may create conflicts of interest.

        The principals will experience negative tax consequences if some of the Centers are sold. As a result, the principals may not favor a sale of these Centers even though such a sale may benefit our other stockholders. In addition, the principals may have different interests than our stockholders because they are significant holders of the Operating Partnership.

If we were to fail to qualify as a REIT, we will have reduced funds available for distributions to our stockholders.

        We believe that we currently qualify as a REIT. No assurance can be given that we will remain qualified as a REIT. Qualification as a REIT involves the application of highly technical and complex Internal Revenue Code provisions for which there are only limited judicial or administrative interpretations. The complexity of these provisions and of the applicable income tax regulations is greater in the case of a REIT structure like ours that holds assets in partnership form. The determination of various factual matters and circumstances not entirely within our control, including determinations by our partners in the Joint Venture Centers, may affect our continued qualification as a REIT. In addition, legislation, new regulations, administrative interpretations or court decisions could significantly change the tax laws with respect to our qualification as a REIT or the U.S. federal income tax consequences of that qualification.

        If in any taxable year we were to fail to qualify as a REIT, we will suffer the following negative results:

        In addition, if we were to lose our REIT status, we will be prohibited from qualifying as a REIT for the four taxable years following the year during which the qualification was lost, absent relief under statutory provisions. As a result, net income and the funds available for distributions to our stockholders would be reduced for at least five years and the fair market value of our shares could be

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materially adversely affected. Furthermore, the Internal Revenue Service could challenge our REIT status for past periods, which if successful could result in us owing a material amount of tax for prior periods. It is possible that future economic, market, legal, tax or other considerations might cause our board of directors to revoke our REIT election.

        Even if we remain qualified as a REIT, we might face other tax liabilities that reduce our cash flow. Further, we might be subject to federal, state and local taxes on our income and property. Any of these taxes would decrease cash available for distributions to stockholders.

Complying with REIT requirements might cause us to forego otherwise attractive opportunities.

        In order to qualify as a REIT for U.S. federal income tax purposes, we must satisfy tests concerning, among other things, our sources of income, the nature of our assets, the amounts we distribute to our stockholders and the ownership of our stock. We may also be required to make distributions to our stockholders at disadvantageous times or when we do not have funds readily available for distribution. Thus, compliance with REIT requirements may cause us to forego opportunities we would otherwise pursue.

        In addition, the REIT provisions of the Internal Revenue Code impose a 100% tax on income from "prohibited transactions." Prohibited transactions generally include sales of assets that constitute inventory or other property held for sale in the ordinary course of business, other than foreclosure property. This 100% tax could impact our desire to sell assets and other investments at otherwise opportune times if we believe such sales could be considered a prohibited transaction.

Complying with REIT requirements may force us to borrow or take other measures to make distributions to our stockholders.

        As a REIT, we generally must distribute 90% of our annual taxable income (subject to certain adjustments) to our stockholders. From time to time, we might generate taxable income greater than our net income for financial reporting purposes, or our taxable income might be greater than our cash flow available for distributions to our stockholders. If we do not have other funds available in these situations, we might be unable to distribute 90% of our taxable income as required by the REIT rules. In that case, we would need to borrow funds, sell a portion of our investments (potentially at disadvantageous prices), in certain limited cases distribute a combination of cash and stock, (at our stockholders' election but subject to an aggregate cash limit established by the Company) or find another alternative source of funds. These alternatives could increase our costs or reduce our equity and reduce amounts for investments.

Outside partners in Joint Venture Centers result in additional risks to our stockholders.

        We own partial interests in property partnerships that own 44 Joint Venture Centers as well as fee title to a site that is ground leased to a property partnership that owns a Joint Venture Center and several development sites. We may acquire partial interests in additional properties through joint venture arrangements. Investments in Centers that are not Wholly Owned Centers involve risks different from those of investments in Wholly Owned Centers.

        We may have fiduciary responsibilities to our partners that could affect decisions concerning the Joint Venture Centers. Third parties may share control of major decisions relating to the Joint Venture Centers, including decisions with respect to sales, refinancings and the timing and amount of additional capital contributions, as well as decisions that could have an adverse impact on our status. For example, we may lose our management and other rights relating to the Joint Venture Centers if:

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Table of Contents

        In addition, some of our outside partners control the day-to-day operations of eight Joint Venture Centers (NorthPark Center, West Acres Center, Eastland Mall, Granite Run Mall, Lake Square Mall, NorthPark Mall, South Park Mall and Valley Mall). We, therefore, do not control cash distributions from these Centers, and the lack of cash distributions from these Centers could jeopardize our ability to maintain our qualification as a REIT. Furthermore, certain Joint Venture Centers have debt that could become recourse debt to us if the Joint Venture Center is unable to discharge such debt obligation.

Our holding company structure makes us dependent on distributions from the Operating Partnership.

        Because we conduct our operations through the Operating Partnership, our ability to service our debt obligations and pay dividends to our stockholders is strictly dependent upon the earnings and cash flows of the Operating Partnership and the ability of the Operating Partnership to make distributions to us. Under the Delaware Revised Uniform Limited Partnership Act, the Operating Partnership is prohibited from making any distribution to us to the extent that at the time of the distribution, after giving effect to the distribution, all liabilities of the Operating Partnership (other than some non-recourse liabilities and some liabilities to the partners) exceed the fair value of the assets of the Operating Partnership. An inability to make cash distributions from the Operating Partnership could jeopardize our ability to maintain qualification as a REIT.

Possible environmental liabilities could adversely affect us.

        Under various federal, state and local environmental laws, ordinances and regulations, a current or previous owner or operator of real property may be liable for the costs of removal or remediation of hazardous or toxic substances on, under or in that real property. These laws often impose liability whether or not the owner or operator knew of, or was responsible for, the presence of hazardous or toxic substances. The costs of investigation, removal or remediation of hazardous or toxic substances may be substantial. In addition, the presence of hazardous or toxic substances, or the failure to remedy environmental hazards properly, may adversely affect the owner's or operator's ability to sell or rent affected real property or to borrow money using affected real property as collateral.

        Persons or entities that arrange for the disposal or treatment of hazardous or toxic substances may also be liable for the costs of removal or remediation of hazardous or toxic substances at the disposal or treatment facility, whether or not that facility is owned or operated by the person or entity arranging for the disposal or treatment of hazardous or toxic substances. Laws exist that impose liability for release of ACMs into the air, and third parties may seek recovery from owners or operators of real property for personal injury associated with exposure to ACMs. In connection with our ownership, operation, management, development and redevelopment of the Centers, or any other centers or properties we acquire in the future, we may be potentially liable under these laws and may incur costs in responding to these liabilities.

Uninsured losses could adversely affect our financial condition.

        Each of our Centers has comprehensive liability, fire, extended coverage and rental loss insurance with insured limits customarily carried for similar properties. We do not insure certain types of losses (such as losses from wars), because they are either uninsurable or not economically insurable. In addition, while we or the relevant joint venture, as applicable, carries specific earthquake insurance on the Centers located in California, the policies are subject to a deductible equal to 5% of the total

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insured value of each Center, a $100,000 per occurrence minimum and a combined annual aggregate loss limit of $150 million on these Centers. We or the relevant joint venture, as applicable, carries specific earthquake insurance on the Centers located in the Pacific Northwest. However, the policies are subject to a deductible equal to 2% of the total insured value of each Center, a $50,000 per occurrence minimum and a combined annual aggregate loss limit of $200 million on these Centers. While we or the relevant joint venture also carries terrorism insurance on the Centers, the policies are subject to a $50,000 deductible and a combined annual aggregate loss of $800 million. Each Center has environmental insurance covering eligible third-party losses, remediation and non-owned disposal sites, subject to a $100,000 deductible and a $20 million five-year aggregate limit. Some environmental losses are not covered by this insurance because they are uninsurable or not economically insurable. Furthermore, we carry title insurance on substantially all of the Centers for less than their full value.

An ownership limit and certain anti-takeover defenses could inhibit a change of control or reduce the value of our common stock.

        The Ownership Limit.     In order for us to maintain our qualification as a REIT, not more than 50% in value of our outstanding stock (after taking into account options to acquire stock) may be owned, directly or indirectly, by five or fewer individuals (as defined in the Internal Revenue Code to include some entities that would not ordinarily be considered "individuals") during the last half of a taxable year. Our Charter restricts ownership of more than 5% (the "Ownership Limit") of the lesser of the number or value of our outstanding shares of stock by any single stockholder or a group of stockholders (with limited exceptions for some holders of limited partnership interests in the Operating Partnership, and their respective families and affiliated entities, including all four principals). In addition to enhancing preservation of our status as a REIT, the Ownership Limit may:

        Our board of directors, in its sole discretion, may waive or modify (subject to limitations) the Ownership Limit with respect to one or more of our stockholders, if it is satisfied that ownership in excess of this limit will not jeopardize our status as a REIT.

        Selected Provisions of our Charter and Bylaws.     Some of the provisions of our Charter and bylaws may have the effect of delaying, deferring or preventing a third party from making an acquisition proposal for us and may inhibit a change in control that some, or a majority, of our stockholders might believe to be in their best interest or that could give our stockholders the opportunity to realize a premium over the then-prevailing market prices for our shares. These provisions include the following:

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        Selected Provisions of Maryland Law.     The Maryland General Corporation Law prohibits business combinations between a Maryland corporation and an interested stockholder (which includes any person who beneficially holds 10% or more of the voting power of the corporation's outstanding voting stock) or its affiliates for five years following the most recent date on which the interested stockholder became an interested stockholder and, after the five-year period, requires the recommendation of the board of directors and two super-majority stockholder votes to approve a business combination unless the stockholders receive a minimum price determined by the statute. As permitted by Maryland law, our Charter exempts from these provisions any business combination between us and the principals and their respective affiliates and related persons. Maryland law also allows the board of directors to exempt particular business combinations before the interested stockholder becomes an interested stockholder. Furthermore, a person is not an interested stockholder if the transaction by which he or she would otherwise have become an interested stockholder is approved in advance by the board of directors.

        The Maryland General Corporation Law also provides that the acquirer of certain levels of voting power in electing directors of a Maryland corporation (one-tenth or more but less than one-third, one-third or more but less than a majority and a majority or more) is not entitled to vote the shares in excess of the applicable threshold, unless voting rights for the shares are approved by holders of two thirds of the disinterested shares or unless the acquisition of the shares has been specifically or generally approved or exempted from the statute by a provision in our Charter or bylaws adopted before the acquisition of the shares. Our Charter exempts from these provisions voting rights of shares owned or acquired by the principals and their respective affiliates and related persons. Our bylaws also contain a provision exempting from this statute any acquisition by any person of shares of our common stock. There can be no assurance that this bylaw will not be amended or eliminated in the future. The Maryland General Corporation Law and our Charter also contain supermajority voting requirements with respect to our ability to amend our Charter, dissolve, merge, or sell all or substantially all of our assets.

ITEM 1B.    UNRESOLVED STAFF COMMENTS

        None

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Table of Contents

ITEM 2.    PROPERTIES

        The following table sets forth certain information regarding the Centers and other locations that are wholly-owned or partly owned by the Company:

Company's
Ownership(1)
  Name of
Center/Location(2)
  Year of
Original
Construction/
Acquisition
  Year of Most
Recent
Expansion/
Renovation
  Total
GLA(3)
  Mall and
Freestanding
GLA
  Percentage
of Mall and
Freestanding
GLA Leased
  Anchors   Sales Per
Square
Foot(4)
 

WHOLLY OWNED:

 

100%

 

Capitola Mall(5)
Capitola, California

   
1977/1995
   
1988
   
586,174
   
196,457
   
86.0

%

Gottschalks(6), Macy's, Kohl's(7), Sears

 
$

329
 

100%

 

Chandler Fashion Center
Chandler, Arizona

    2001/2002         1,325,379     640,219     96.4 %

Dillard's, Macy's, Nordstrom, Sears

    517  

100%

 

Chesterfield Towne Center(8)
Richmond, Virginia

    1975/1994     2000     1,033,277     424,542     82.7 %

J.C. Penney, Macy's, Sears

    333  

100%

 

Danbury Fair Mall(8)
Danbury, Connecticut

    1986/2005     1991     1,295,259     499,051     97.7 %

J.C. Penney, Lord & Taylor, Macy's, Sears

    543  

100%

 

Deptford Mall
Deptford, New Jersey

    1975/2006     1990     1,039,911     343,469     96.0 %

Boscov's, J.C. Penney, Macy's, Sears

    528  

100%

 

Fiesta Mall
Mesa, Arizona

    1979/2004     2007     926,273     408,082     96.1 %

Dillard's, Macy's, Sears

    260  

100%

 

Flagstaff Mall
Flagstaff, Arizona

    1979/2002     2007     353,557     149,545     95.2 %

Dillard's, J.C. Penney, Sears

    330  

100%

 

FlatIron Crossing
Broomfield, Colorado

    2000/2002         1,366,596     722,855     90.9 %

Dick's Sporting Goods, Dillard's, Macy's, Nordstrom

    443  

100%

 

Freehold Raceway Mall
Freehold, New Jersey

    1990/2005     2007     1,666,812     875,188     94.8 %

J.C. Penney, Lord & Taylor, Macy's, Nordstrom, Sears

    497  

100%

 

Fresno Fashion Fair
Fresno, California

    1970/1996     2006     956,122     395,241     98.3 %

Gottschalks(6), J.C. Penney, Macy's (two)

    556  

100%

 

Great Northern Mall(8)
Clay, New York

    1988/2005         893,845     563,857     89.7 %

Macy's, Sears

    281  

100%

 

Green Tree Mall
Clarksville, Indiana

    1968/1975     2005     805,939     300,354     84.1 %

Burlington Coat Factory, Dillard's, J.C. Penney, Sears

    377  

100%

 

La Cumbre Plaza(5)
Santa Barbara, California

    1967/2004     1989     492,816     175,816     89.1 %

Macy's, Sears

    444  

100%

 

Northridge Mall
Salinas, California

    1972/2003     1994     892,951     355,971     94.6 %

J.C. Penney, Macy's, Forever 21(7), Sears

    317  

100%

 

Pacific View
Ventura, California

    1965/1996     2001     969,666     320,852     94.5 %

J.C. Penney, Macy's, Sears, Target

    408  

100%

 

Panorama Mall
Panorama, California

    1955/1979     2005     323,505     158,505     92.4 %

Wal-Mart

    311  

100%

 

Paradise Valley Mall
Phoenix, Arizona

    1979/2002     1990     998,646     373,218     91.2 %

Dillard's, J.C. Penney, Macy's, Sears

    311  

100%

 

Prescott Gateway
Prescott, Arizona

    2002/2002     2004     588,869     344,681     78.2 %

Dillard's, J.C. Penney, Sears

    224  

100%

 

Queens Center(5)
Queens, New York

    1973/1995     2004     966,499     409,775     97.5 %

J.C. Penney, Macy's

    876  

100%

 

Rimrock Mall
Billings, Montana

    1978/1996     1999     603,908     292,238     90.1 %

Dillard's (two), Herberger's, J.C. Penney

    369  

100%

 

Rotterdam Square
Schenectady, New York

    1980/2005     1990     583,258     273,483     89.5 %

K-Mart, Macy's, Sears

    245  

100%

 

Salisbury, Centre at
Salisbury, Maryland

    1990/1995     2005     857,321     359,905     93.0 %

Boscov's, J.C. Penney, Macy's, Sears

    310  

100%

 

Somersville Towne Center
Antioch, California

    1966/1986     2004     429,681     176,496     90.8 %

Gottschalks(6), Macy's, Sears

    307  

100%

 

South Plains Mall(5)(8) Lubbock, Texas

    1972/1998     1995     1,166,462     424,675     85.4 %

Bealls, Dillard's (two), J.C. Penney, Sears

    400  

100%

 

South Towne Center
Sandy, Utah

    1987/1997     1997     1,277,945     501,433     93.9 %

Dillard's, Forever 21(7), J.C. Penney, Macy's, Target

    408  

100%

 

Towne Mall
Elizabethtown, Kentucky

    1985/2005     1989     351,998     181,126     70.9 %

Belk, J.C. Penney, Sears

    305  

100%

 

Twenty Ninth Street(5)
Boulder, Colorado

    1963/1979     2007     824,897     533,243     82.7 %

Home Depot, Macy's

    424  

100%

 

Valley River Center
Eugene, Oregon

    1969/2006     2007     915,656     339,592     93.1 %

Gottschalks(6), J.C. Penney, Macy's, Sports Authority

    422  

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Table of Contents

Company's
Ownership(1)
  Name of
Center/Location(2)
  Year of
Original
Construction/
Acquisition
  Year of Most
Recent
Expansion/
Renovation
  Total
GLA(3)
  Mall and
Freestanding
GLA
  Percentage
of Mall and
Freestanding
GLA Leased
  Anchors   Sales Per
Square
Foot(4)
 

100%

 

Valley View Center
Dallas, Texas

    1973/1996     2004     1,032,855     577,422     88.1 %

J.C. Penney, Sears

  $ 234  

100%

 

Victor Valley, Mall of
Victorville, California

    1986/2004     2001     545,984     272,135     96.9 %

Gottschalks(6), J.C. Penney, Forever 21(7), Sears

    442  

100%

 

Vintage Faire Mall
Modesto, California

    1977/1996     2001     1,115,876     415,957     99.0 %

Gottschalks(6), J.C. Penney, Macy's (two), Sears

    484  

100%

 

Westside Pavilion
Los Angeles, California

    1985/1998     2007     740,237     382,109     94.5 %

Nordstrom, Macy's

    451  

100%

 

Wilton Mall(8)
Saratoga Springs, New York

    1990/2005     1998     741,779     456,175     93.9 %

The Bon-Ton, J.C. Penney, Sears

    292  
                                       

 

Total/Average Wholly Owned

    28,669,953     12,843,667     91.6 %     $ 420  
                                       

JOINT VENTURES (VARIOUS PARTNERS):

 

33.3%

 

Arrowhead Towne Center
Glendale, Arizona

   
1993/2002
   
2004
   
1,197,113
   
389,336
   
96.2

%

Dick's Sporting Goods, Dillard's, J.C. Penney, Macy's, Forever 21(7) Sears

 
$

537
 

50%

 

Biltmore Fashion Park
Phoenix, Arizona

    1963/2003     2006     567,074     262,074     85.2 %

Macy's, Saks Fifth Avenue

    837  

50%

 

Broadway Plaza(5)
Walnut Creek, California

    1951/1985     1994     662,986     217,489     97.7 %

Macy's (two), Nordstrom

    696  

50.1%

 

Corte Madera, Village at
Corte Madera, California

    1985/1998     2005     437,886     219,886     94.9 %

Macy's, Nordstrom

    788  

50%

 

Desert Sky Mall(8)
Phoenix, Arizona

    1981/2002     2007     890,681     280,186     87.6 %

Burlington Coat Factory, Dillard's, La Curacao, Sears

    278  

50%

 

Inland Center(5)
San Bernardino, California

    1966/2004     2004     988,535     204,861     96.8 %

Gottschalks(6), Macy's, Forever 21(7), Sears

    411  

15%

 

Metrocenter Mall(5)
Phoenix, Arizona

    1973/2005     2006     1,121,699     594,450     84.9 %

Dillard's, Macy's, Sears

    274  

50%

 

North Bridge, The Shops at(5)(10)
Chicago, Illinois

    1998/2008         680,933     420,933     99.2 %

Nordstrom

    817  

50%

 

NorthPark Center(5)
Dallas, Texas

    1965/2004     2005     1,953,326     901,006     97.4 %

Barneys New York, Dillard's, Macy's, Neiman Marcus, Nordstrom

    691  

50%

 

Ridgmar
Fort Worth, Texas

    1976/2005     2000     1,276,587     402,614     84.8 %

Dillard's, J.C. Penney, Macy's, Neiman Marcus, Sears

    311  

50%

 

Scottsdale Fashion Square(10)
Scottsdale, Arizona

    1961/2002     2007     1,858,371     876,091     95.4 %

Barneys New York(11), Dillard's, Macy's, Neiman Marcus, Nordstrom

    618  

33.3%

 

Superstition Springs Center(5)
Mesa, Arizona

    1990/2002     2002     1,204,987     441,693     96.7 %

Best Buy, Burlington Coat Factory, Dillard's, , J.C. Penney, Macy's, Sears

    353  

50%

 

Tysons Corner Center(5)
McLean, Virginia

    1968/2005     2005     2,200,128     1,311,886     96.5 %

Bloomingdale's, L.L. Bean, Lord & Taylor, Macy's, Nordstrom

    701  

19%

 

West Acres
Fargo, North Dakota

    1972/1986     2001     970,371     417,816     98.4 %

Herberger's, J.C. Penney, Macy's, Sears

    483  
                                       

 

Total/Average Joint Ventures (Various Partners)

    16,010,677     6,940,321     94.4 %     $ 560  
                                       

PACIFIC PREMIER RETAIL TRUST PROPERTIES:

 

51%

 

Cascade Mall
Burlington, Washington

   
1989/1999
   
1998
   
588,130
   
263,894
   
92.7

%

J.C. Penney, Macy's (two), Sears, Target

 
$

320
 

51%

 

Kitsap Mall(5)
Silverdale, Washington

    1985/1999     1997     847,615     387,632     93.1 %

J.C. Penney, Kohl's, Macy's, Sears

    378  

51%

 

Lakewood Mall(5)
Lakewood, California

    1953/1975     2001     2,017,461     970,492     94.3 %

Home Depot, J.C. Penney, Macy's, Forever 21(7), Target, Costco(9)

    421  

51%

 

Los Cerritos Center(5)
Cerritos, California

    1971/1999     1998     1,130,439     474,836     96.7 %

Macy's, Forever 21(7), Nordstrom, Sears

    508  

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Table of Contents

Company's
Ownership(1)
  Name of
Center/Location(2)
  Year of
Original
Construction/
Acquisition
  Year of Most
Recent
Expansion/
Renovation
  Total
GLA(3)
  Mall and
Freestanding
GLA
  Percentage
of Mall and
Freestanding
GLA Leased
  Anchors   Sales Per
Square
Foot(4)
 

51%

 

Redmond Town Center(5)(10)
Redmond, Washington

    1997/1999     2004     1,278,542     1,168,542     95.8 %

Macy's

  $ 359  

51%

 

Stonewood Mall(5)
Downey, California

    1953/1997     1991     930,355     359,608     97.1 %

J.C. Penney, Macy's, Kohl's(7) Sears

    420  

51%

 

Washington Square
Portland, Oregon

    1974/1999     2005     1,458,840     523,813     85.6 %

Dick's Sporting Goods, J.C. Penney, Macy's, Nordstrom, Sears

    648  
                                       

 

Total/Average Pacific Premier Retail Trust Properties

    8,251,382     4,148,817     93.9 %     $ 456  
                                       

SDG MACERICH PROPERTIES, L.P. PROPERTIES:

 

50%

 

Eastland Mall(5)
Evansville, Indiana

   
1978/1998
   
1996
   
1,040,106
   
550,962
   
95.8

%

Dillard's, J.C. Penney, Macy's

 
$

355
 

50%

 

Empire Mall(5)
Sioux Falls, South Dakota

    1975/1998     2000     1,362,551     617,029     94.5 %

J.C. Penney, Kohl's, Macy's, Richman Gormons, 1 / 2 Price, Sears, Target, Younkers

    395  

50%

 

Granite Run Mall
Media, Pennsylvania

    1974/1998     1993     1,036,698     535,889     88.7 %

Boscov's, J.C. Penney, Sears

    250  

50%

 

Lake Square Mall
Leesburg, Florida

    1980/1998     1995     558,324     262,287     76.0 %

Belk, J.C. Penney, Sears, Target

    229  

50%

 

Lindale Mall
Cedar Rapids, Iowa

    1963/1998     1997     688,747     383,184     92.2 %

Sears, Von Maur, Younkers

    318  

50%

 

Mesa Mall(8)
Grand Junction, Colorado

    1980/1998     2003     841,520     400,312     94.0 %

Herberger's, J.C. Penney, Sears, Target

    395  

50%

 

NorthPark Mall
Davenport, Iowa

    1973/1998     2001     1,072,788     422,332     86.6 %

Dillard's, J.C. Penney, Sears, Von Maur, Younkers

    290  

50%

 

Rushmore Mall
Rapid City, South Dakota

    1978/1998     1992     730,236     427,135     93.3 %

Herberger's, J.C. Penney, Sears

    358  

50%

 

Southern Hills Mall
Sioux City, Iowa

    1980/1998     2003     797,055     483,478     88.8 %

J.C. Penney, Sears, Younkers

    327  

50%

 

SouthPark Mall
Moline, Illinois

    1974/1998     1990     1,019,124     441,068     86.1 %

Dillard's, J.C. Penney, Sears, Younkers, Von Maur

    225  

50%

 

SouthRidge Mall
Des Moines, Iowa

    1975/1998     1998     863,271     474,519     84.0 %

J.C. Penney, Sears, Target, Younkers

    168  

50%

 

Valley Mall(8)
Harrisonburg, Virginia

    1978/1998     1992     505,426     190,348     85.9 %

Belk, J.C. Penney, Target

    252  
                                       

 

Total/Average SDG Macerich Properties, L.P. Properties

    10,515,846     5,188,543     89.7 %     $ 311  
                                       

 

Total/Average Joint Ventures

    34,777,905     16,277,681     92.8 %     $ 460  
                                       

 

Total/Average before Community Centers

    63,447,858     29,121,348     92.3 %     $ 441  
                                       

COMMUNITY / SPECIALTY CENTERS:

 

100%

 

Borgata, The
Scottsdale, Arizona

   
1981/2002
   
2006
   
93,706
   
93,706
   
77.7

%

 
$

358
 

50%

 

Boulevard Shops
Chandler, Arizona

    2001/2002     2004     184,823     184,823     99.0 %

    386  

75%

 

Camelback Colonnade(8)
Phoenix, Arizona

    1961/2002     1994     619,101     539,101     99.6 %

    307  

100%

 

Carmel Plaza
Carmel, California

    1974/1998     2006     111,138     111,138     77.4 %

    489  

50%

 

Chandler Festival
Chandler, Arizona

    2001/2002         503,586     368,389     80.7 %

Lowe's

    269  

50%

 

Chandler Gateway
Chandler, Arizona

    2001/2002         255,289     124,238     97.7 %

The Great Indoors

    338  

50%

 

Chandler Village Center
Chandler, Arizona

    2004/2002     2006     281,487     138,354     100.0 %

Target

    194  

100%

 

Flagstaff Mall, The Marketplace at(5)
Flagstaff, Arizona

    2007/—         267,527     146,997     89.6 %

Home Depot

    N/A  

100%

 

Hilton Village(5)(10)
Scottsdale, Arizona

    1982/2002         96,985     96,985     91.3 %

    477  

24.5%

 

Kierland Commons
Scottsdale, Arizona

    1999/2005     2003     436,776     436,776     98.8 %

    650  

26


Table of Contents

Company's
Ownership(1)
  Name of
Center/Location(2)
  Year of
Original
Construction/
Acquisition
  Year of Most
Recent
Expansion/
Renovation
  Total
GLA(3)
  Mall and
Freestanding
GLA
  Percentage
of Mall and
Freestanding
GLA Leased
  Anchors   Sales Per
Square
Foot(4)
 

100%

 

Paradise Village Office Park II
Phoenix, Arizona

    1982/2002         46,834     46,834     100 %

    N/A  

34.9%

 

SanTan Village Power Center
Gilbert, Arizona

    2004/2004     2007     491,037     284,510     97.6 %

Wal-Mart

  $ 267  

100%

 

Tucson La Encantada
Tucson, Arizona

    2002/2002     2005     249,890     249,890     88.6 %

    607  

100%

 

Village Center
Phoenix, Arizona

    1985/2002         170,801     59,055     57.7 %

Target

    333  

100%

 

Village Crossroads
Phoenix, Arizona

    1993/2002         191,955     91,246     86.1 %

Wal-Mart

    348  

100%

 

Village Fair
Phoenix, Arizona

    1989/2002         272,037     208,437     97.1 %

Best Buy

    195  

100%

 

Village Plaza
Phoenix, Arizona

    1978/2002         79,641     79,641     96.8 %

    274  

100%

 

Village Square I
Phoenix, Arizona

    1978/2002         21,606     21,606     93.3 %

    184  

100%

 

Village Square II(8)
Phoenix, Arizona

    1978/2002         146,358     70,558     91.8 %

    192  
                                       

 

Total/Average Community / Specialty Centers

    4,520,577     3,352,284     92.8 %     $ 426  
                                       

 

Total before major development and redevelopment properties and other assets

    67,968,435     32,473,632     92.3 %     $ 440  
                                       

MAJOR DEVELOPMENT AND REDEVELOPMENT PROPERTIES:

 

35.1%

 

Estrella Falls, The Market at
Goodyear, Arizona

   
2008/—
   
2008 ongoing
   
232,682
   
232,682
   
(12

)

   
N/A
 

100%

 

Northgate Mall(5)
San Rafael, California

    1964/1986     2008 ongoing     722,948     252,340     (12 )

Macy's, Kohl's(7), Sears

    N/A  

51.3%

 

Promenade at Casa Grande(13)
Casa Grande, Arizona

    2007/—     2007 ongoing     929,301     491,928     (12 )

Dillard's, J.C. Penney, Kohl's, Target

    N/A  

84.9%

 

SanTan Village Regional Center(14)
Gilbert, Arizona

    2007/—     2007 ongoing     927,692     607,692     (12 )

Dillard's, Macy's(14)

    N/A  

100%

 

Santa Monica Place(15)
Santa Monica, California

    1980/1999     2008 ongoing     534,000     260,000     (12 )

Macy's(15), Nordstrom(15)

    N/A  

100%

 

Shoppingtown Mall
Dewitt, New York

    1954/2005     2000     966,867     554,308     (12 )

J.C. Penney, Macy's, Sears

    N/A  

100%

 

The Oaks
Thousand Oaks, California

    1978/2002     2008 ongoing     1,034,267     476,774     (12 )

J.C. Penney, Macy's (two), Nordstrom

    N/A  
                                           

 

Total Major Development and Redevelopment Properties

    5,347,757     2,875,724                  
                                           

OTHER ASSETS:

 

100%

 

Former Mervyn's(7)(16)

   
Various/2007
         
1,324,451
   
   
 

   
N/A
 

 

Forever 21(7)(16)

    Various/2007           395,858                     N/A  

 

Kohl's(7)(16)

    Various/2007           653,580                     N/A  

100%

 

Paradise Village Ground Leases
Phoenix, Arizona

    Various/2002           177,763     177,763     82.5 %

    N/A  

30%

 

Wilshire Building
Santa Monica, California

    1978/2007           40,000     40,000     100.0 %

    N/A  
                                           

 

Total Other Assets

    2,591,652     217,763               N/A  
                                           

 

Grand Total at December 31, 2008

    75,907,844     35,567,119                  
                                           

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

(2)
With respect to 70 Centers, the underlying land controlled by the Company is owned in fee entirely by the Company, or, in the case of jointly-owned Centers, by the joint venture property partnership or limited liability company. With respect to the remaining Centers, the underlying land controlled by the Company is owned by third parties and leased to the Company, the property partnership or the limited liability company pursuant to long-term ground leases. Under the terms of a typical ground lease, the Company, the property partnership or

27


Table of Contents

    the limited liability company pays rent for the use of the land and is generally responsible for all costs and expenses associated with the building and improvements. In some cases, the Company, the property partnership or the limited liability company has an option or right of first refusal to purchase the land. The termination dates of the ground leases range from 2013 to 2132.

(3)
Includes GLA attributable to Anchors (whether owned or non-owned) and Mall and Freestanding Stores as of December 31, 2008.

(4)
Sales are based on reports by retailers leasing Mall and Freestanding Stores for the twelve months ended December 31, 2008 for tenants which have occupied such stores for a minimum of 12 months. Sales per square foot are based on tenants 10,000 square feet and under.

(5)
Portions of the land on which the Center is situated are subject to one or more ground leases.

(6)
Gottschalks filed for Chapter 11 bankruptcy in January 2009. All stores are currently open and operating.

(7)
Mervyn's filed bankruptcy on July 29, 2008. One of the Mervyn's locations owned by the Company closed in July 2008, six closed in November 2008 and the remaining Mervyn's locations closed in December 2008. Of the 45 former Mervyn's in the Company's portfolio, 12 are now leased to Forever 21 and 11 to Kohl's. The Forever 21 stores are scheduled to open in Spring 2009. The Kohl's stores are scheduled to open in Fall 2009. The Company also had three other Kohl's opened and operating at December 31, 2008.

(8)
These properties have a vacant Anchor location. The Company is contemplating various replacement tenants and/or redevelopment opportunities for these vacant sites.

(9)
Costco opened a 160,000 square foot store at Lakewood Center in February 2009.

(10)
The office portion of this mixed-use development does not have retail sales.

(11)
Barneys New York is scheduled to open a 60,000 square foot store at Scottsdale Fashion Square in Fall 2009.

(12)
Tenant spaces have been intentionally held off the market and remain vacant because of major development or redevelopment plans. As a result, the Company believes the percentage of mall and freestanding GLA leased and the sales per square foot at these major development properties is not meaningful data.

(13)
The Promenade at Casa Grande opened in November 2007. The Center will undergo further development through 2009.

(14)
SanTan Village Regional Center opened in October 2007. The Center will undergo further development through 2009. Macy's is scheduled to open a 120,000 square foot store in March 2009.

(15)
Santa Monica Place closed for redevelopment in January 2008. Macy's plans to convert to a Bloomingdale's in 2010. Nordstrom is scheduled to open a 122,000 square foot store at Santa Monica Place in 2010.

(16)
The Company acquired 39 Mervyn's stores in December 2007, one in January 2008 and one in February 2008. 29 of these Mervyn's stores are located at centers not owned or managed by the Company. With respect to 16 of these 29 stores, the underlying land controlled by the Company is owned in fee entirely by the Company. With respect to the remaining 13 stores, the underlying land controlled by the Company is owned by third parties and leased to the Company pursuant to long-term building or ground leases. Under the terms of a typical building or ground lease, the Company pays rent for the use of the building or land and is generally responsible for all the costs and expenses associated with the building and improvements. In some cases, the Company has an option or right to first refusal to purchase the land. The termination dates of the ground leases range from 2027 to 2077. See footnote (7) above regarding the Mervyn's bankruptcy.

28


Table of Contents

Mortgage Debt

        The following table sets forth certain information regarding the mortgages encumbering the Centers, including those Centers in which the Company has less than a 100% interest. The information set forth below is as of December 31, 2008 (dollars in thousands):

Property Pledged as Collateral
  Fixed or
Floating
  Annual
Interest
Rate(1)
  Carrying
Amount(1)
  Annual
Debt
Service
  Maturity
Date
  Balance Due
on Maturity
  Earliest Date
Notes Can Be
Defeased or Be
Prepaid

Consolidated Centers:

                                     

Capitola Mall(2)

  Fixed     7.13 % $ 37,497   $ 4,560     5/15/11   $ 32,724   Any Time

Cactus Power Center(3)

  Floating     3.23 %   654     21     3/14/11     654   Any Time

Carmel Plaza

  Fixed     8.18 %   25,805     2,424     5/1/09     25,642   Any Time

Chandler Fashion Center

  Fixed     5.50 %   166,500     5,220     11/1/12     152,097   Any Time

Chesterfield Towne Center(4)

  Fixed     9.07 %   54,111     6,576     1/1/24     1,087   Any Time

Danbury Fair Mall

  Fixed     4.64 %   169,889     14,700     2/1/11     155,173   Any Time

Deptford Mall

  Fixed     5.41 %   172,500     9,336     1/15/13     172,500   8/1/09

Deptford Mall(5)

  Fixed     6.46 %   15,642     1,212     6/1/16     13,877   Any Time

Fiesta Mall

  Fixed     4.98 %   84,000     4,092     1/1/15     84,000   Any Time

Flagstaff Mall

  Fixed     5.03 %   37,000     1,836     11/1/15     37,000   Any Time

FlatIron Crossing

  Fixed     5.26 %   184,248     13,224     12/1/13     164,187   Any Time

Freehold Raceway Mall

  Fixed     4.68 %   171,726     14,208     7/7/11     155,678   Any Time

Fresno Fashion Fair(6)(13)

  Fixed     6.76 %   169,411     13,248     8/1/15     154,596   Any Time

Great Northern Mall

  Fixed     5.11 %   39,591     2,808     12/1/13     35,566   Any Time

Hilton Village

  Fixed     5.27 %   8,547     444     2/1/12     8,600   5/8/09

La Cumbre Plaza(7)

  Floating     2.58 %   30,000     624     8/9/09     30,000   Any Time

Northridge Mall

  Fixed     4.94 %   79,657     5,436     7/1/09     24,353   Any Time

Oaks, The(8)

  Floating     3.48 %   165,000     5,250     7/10/11     165,000   Any Time

Oaks, The(9)

  Floating     4.24 %   65,525     2,319     7/10/11     65,525   Any Time

Pacific View

  Fixed     7.20 %   87,382     7,224     8/31/11     83,045   Any Time

Panorama Mall(10)

  Floating     1.62 %   50,000     708     2/28/10     50,000   Any Time

Paradise Valley Mall

  Fixed     5.89 %   20,259     2,196     5/1/09     19,863   Any Time

Prescott Gateway

  Fixed     5.86 %   60,000     3,468     12/1/11     60,000   Any Time

Promenade at Casa Grande(11)

  Floating     3.35 %   97,209     3,204     8/16/09     79,964   Any Time

Queens Center(12)

  Fixed     7.11 %   88,913     7,596     3/1/09     88,651   Any Time

Queens Center(13)

  Fixed     7.00 %   213,314     19,092     3/1/13     204,203   Any Time

Rimrock Mall

  Fixed     7.56 %   42,155     3,840     10/1/11     40,025   Any Time

Salisbury, Center at

  Fixed     5.83 %   115,000     6,660     5/1/16     115,000   Any Time

Santa Monica Place

  Fixed     7.79 %   77,888     7,272     11/1/10     75,554   Any Time

SanTan Village Regional Center(14)

  Floating     3.91 %   126,573     4,356     6/13/11     126,573   Any Time

Shoppingtown Mall

  Fixed     5.01 %   43,040     3,828     5/11/11     38,968   Any Time

South Plains Mall

  Fixed     8.29 %   57,721     5,448     3/1/29     57,557   Any Time

South Towne Center(15)

  Fixed     6.75 %   89,915     6,648     11/5/15     81,161   Any Time

Towne Mall

  Fixed     4.99 %   14,366     1,200     11/1/12     12,316   Any Time

Tucson La Encantada(2)

  Fixed     5.84 %   78,000     4,368     6/1/12     78,000   Any Time

Twenty Ninth Street(16)

  Floating     2.20 %   115,000     2,304     6/5/09     115,000   Any Time

Valley River Center

  Fixed     5.60 %   120,000     6,696     2/1/16     120,000   2/1/09

Valley View Center

  Fixed     5.81 %   125,000     7,152     1/1/11     125,000   Any Time

Victor Valley, Mall of(17)

  Floating     3.74 %   100,000     3,480     5/6/11     100,000   Any Time

Vintage Faire Mall

  Fixed     7.91 %   63,329     6,096     9/1/10     61,372   Any Time

Westside Pavilion(18)

  Floating     4.07 %   175,000     6,000     6/5/11     175,000   Any Time

Wilton Mall

  Fixed     4.79 %   42,608     4,188     11/1/09     40,838   Any Time
                                     

            $ 3,679,975                      
                                     

29


Table of Contents

Property Pledged as Collateral
  Fixed or
Floating
  Annual
Interest
Rate(1)
  Carrying
Amount(1)
  Annual
Debt
Service
  Maturity
Date
  Balance Due
on Maturity
  Earliest Date
Notes Can Be
Defeased or Be
Prepaid

Joint Venture Centers (at Company's Pro Rata Share):

                                     

Arrowhead Towne Center (33.3%)

  Fixed     6.38 % $ 26,007   $ 2,240     10/1/11   $ 24,256   Any Time

Biltmore Fashion Park (50%)

  Fixed     4.70 %   36,573     2,433     7/10/09     34,972   Any Time

Boulevard Shops (50%)(19)

  Floating     4.11 %   10,700     440     12/17/10     10,700   Any Time

Broadway Plaza (50%)(2)(20)

  Fixed     6.12 %   74,706     5,460     8/15/15     67,443   Any Time

Camelback Colonnade (75%)(21)

  Floating     1.90 %   31,125     539     10/9/09     31,125   Any Time

Cascade (51%)

  Fixed     5.28 %   19,783     1,362     7/1/10     19,221   Any Time

Chandler Festival (50%)(22)

  Fixed     6.39 %   14,850     958     11/1/15     14,583   Any Time

Chandler Gateway (50%)(23)

  Fixed     6.37 %   9,450     658     11/1/15     9,223   Any Time

Chandler Village Center (50%)(24)

  Floating     2.57 %   8,643     210     1/15/11     8,643   Any Time

Corte Madera, The Village at (50.1%)

  Fixed     7.75 %   32,062     3,095     11/1/09     31,534   Any Time

Desert Sky Mall (50%)(25)

  Floating     2.14 %   25,750     551     3/4/10     25,750   Any Time

Eastland Mall (50%)

  Fixed     5.80 %   84,000     4,836     6/1/16     84,000   Any Time

Empire Mall (50%)

  Fixed     5.81 %   88,150     5,104     6/1/16     88,150   Any Time

Estrella Falls, The Market at (35.1%)(26)

  Floating     3.94 %   11,560     389     6/1/11     11,560   Any Time

Granite Run (50%)

  Fixed     5.84 %   59,127     4,311     6/1/16     51,504   Any Time

Inland Center (50%)

  Fixed     4.69 %   27,000     1,270     3/11/09     27,000   Any Time

Kierland Greenway (24.5%)

  Fixed     6.02 %   15,450     1,144     1/1/13     13,679   Any Time

Kierland Main Street (24.5%)

  Fixed     4.99 %   3,753     251     1/2/13     3,502   Any Time

Kierland Tower Lofts (15%)(27)

  Floating     3.38 %   1,679     57     11/18/10     1,679   Any Time

Kitsap Mall/Place (51%)

  Fixed     8.14 %   28,793     2,755     6/1/10     28,143   Any Time

Lakewood Mall (51%)

  Fixed     5.43 %   127,500     6,995     6/1/15     127,500   Any Time

Los Cerritos Center (51%)(28)

  Floating     2.14 %   66,300     1,326     7/1/11     66,300   Any Time

Mesa Mall (50%)

  Fixed     5.82 %   43,625     2,526     6/1/16     43,625   Any Time

Metrocenter Mall (15%)(29)

  Fixed     6.05 %   16,800     806     2/9/10     16,800   Any Time

Metrocenter Mall (15%)(30)

  Floating     8.02 %   3,240     260     2/9/10     3,240   Any Time

North Bridge, The Shops at (50%)(31)

  Fixed     4.67 %   102,746     9,573     7/1/09     102,746   Any Time

NorthPark Center (50%)(32)

  Fixed     8.33 %   41,109     3,996     5/10/12     38,919   Any Time

NorthPark Center (50%)(32)

  Fixed     5.96 %   92,120     7,133     5/10/12     82,181   Any Time

NorthPark Land (50%)

  Fixed     8.33 %   39,707     3,858     5/10/12     33,633   Any Time

Redmond Office (51%)(2)(33)

  Fixed     6.77 %   31,460     4,443     7/10/09     30,825   Any Time

Redmond Retail (51%)

  Fixed     4.81 %   36,134     2,025     8/1/09     27,164   Any Time

Ridgmar (50%)

  Fixed     6.11 %   28,700     1,800     4/11/10     28,700   Any Time

Rushmore Mall (50%)

  Fixed     5.82 %   47,000     2,721     6/1/16     47,000   Any Time

SanTan Village Power Center (34.9%)

  Fixed     5.33 %   15,705     837     2/1/12     15,705   Any Time

Scottsdale Fashion Square (50%)

  Fixed     5.66 %   275,000     15,563     7/8/13     275,000   Any Time

Southern Hills (50%)

  Fixed     5.82 %   50,750     2,938     6/1/16     50,750   Any Time

Stonewood Mall (51%)

  Fixed     7.44 %   37,264     3,298     12/11/10     36,244   Any Time

Superstition Springs Center (33.3%)(34)

  Floating     1.25 %   22,498     279     9/9/09     22,498   Any Time

Tysons Corner Center (50%)

  Fixed     4.78 %   165,754     11,232     2/17/14     147,595   Any Time

Valley Mall (50%)

  Fixed     5.85 %   22,997     1,678     6/1/16     20,046   Any Time

Washington Square (51%)(35)

  Fixed     6.04 %   127,500     9,173     1/1/16     114,482   12/10/09

West Acres (19%)

  Fixed     6.41 %   12,799     850     10/1/16     5,684   Any Time

Wilshire Building (30%)

  Fixed     6.35 %   1,836     118     1/1/33     42   Any Time
                                     

            $ 2,017,705                      
                                     

(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. The debt premiums (discounts) are being amortized into interest expense over the term of the related debt, in a manner which approximates the effective interest method. The annual interest rate in the above tables represents the effective interest rate, including the debt premiums (discounts) and loan finance costs.

30


Table of Contents

    The debt premiums (discounts) as of December 31, 2008 consisted of the following (dollars in thousands):

    Consolidated Centers

Property Pledged as Collateral
   
 

Danbury Fair Mall

  $ 9,166  

Deptford Mall

    (41 )

Freehold Raceway Mall

    8,940  

Great Northern Mall

    (137 )

Hilton Village

    (53 )

Paradise Valley Mall

    99  

Shoppingtown Mall

    2,648  

Towne Mall

    371  

Wilton Mall

    1,263  
       

  $ 22,256  
       

    Joint Venture Centers (at Company's Pro Rata Share)

Property Pledged as Collateral
   
 

Arrowhead Towne Center

  $ 302  

Biltmore Fashion Park

    545  

Kierland Greenway

    588  

North Bridge, The Shops at

    246  

Tysons Corner Center

    2,917  

Wilshire Building

    (126 )
       

  $ 4,472  
       
(2)
Northwestern Mutual Life ("NML") is the lender of this loan. The funds advanced by NML are considered a related party as they are a joint venture partner with the Company in Broadway Plaza.

(3)
On March 14, 2008, the Company placed a construction loan on the property that provides for total borrowings of up to $101,000 and bears interest at LIBOR plus a spread of 1.10% to 1.35% depending on certain conditions. The loan matures on March 14, 2011, with two one-year extension options. At December 31, 2008, the total interest rate was 3.23%.

(4)
In addition to monthly principal and interest payments, contingent interest, as defined in the loan agreement, may be due to the extent that 35% of the amount by which the property's gross receipts exceeds a base amount. Contingent interest expense recognized by the Company was $258 for the year ended December 31, 2008.

(5)
On May 20, 2008, concurrent with the acquisition of the fee simple interest in a free standing department store, the Company assumed the existing loan on the property. The loan bears interest at 6.46% and matures on June 1, 2016. See "Recent Developments—Acquisitions and Dispositions."

(6)
On July 11, 2008, the Company replaced the existing loan on the property with a new $170,000 loan that bears interest at 6.76% and matures on August 1, 2015.

(7)
The loan bears interest at LIBOR plus 0.88%. On May 2, 2008, the Company extended the maturity to August 9, 2009. The loan is covered by an interest rate cap agreement that effectively prevents LIBOR from exceeding 7.12% over the loan term. At December 31, 2008, the total interest rate was 2.58%.

(8)
On July 10, 2008, the Company placed a loan on the property that bears interest at LIBOR plus 1.75% and matures on July 10, 2011, with two one-year extension options. At December 31, 2008, the total interest rate was 3.48%. The loan is covered by an interest rate cap agreement that effectively prevents LIBOR from exceeding 6.25% over the loan term.

(9)
On July 10, 2008, the Company placed a construction loan on the property that allows for total borrowings of up to $135,000. The loan bears interest at LIBOR plus a spread of 1.75% to 2.10%, depending on certain conditions. The loan matures on July 10, 2011, with two one-year extension options. At December 31, 2008, the total interest rate was 4.24%.

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(10)
The loan bears interest at LIBOR plus 0.85% and matures in February 2010, with a one-year extension option. The loan is covered by an interest rate cap agreement that effectively prevents LIBOR from exceeding 6.65% over the loan term. At December 31, 2008, the total interest rate was 1.62%.

(11)
The construction loan allows for total borrowings of up to $110,000, and bears interest at LIBOR plus a spread of 1.20% to 1.40% depending on certain conditions. The loan matures in August 2009, with two one-year extension options. At December 31, 2008, the total interest rate was 3.35%.

(12)
On February 2, 2009, the Company replaced the existing loan on the property with a new $130,000 loan that bears interest at 7.50% and matures on March 1, 2013. NML is the lender for 50% of the new loan. (See "Recent Developments—Financing Activity").

(13)
NML is the lender for 50% of the loan.

(14)
On June 13, 2008, the Company placed a construction loan on the property that allows for total borrowings of up to $150,000. The loan bears interest at LIBOR plus a spread of 2.10% to 2.25%, depending on certain conditions. The loan matures on June 13, 2011, with two one-year extension options. At December 31, 2008, the total interest rate was 3.91%.

(15)
The previous loan was paid off in full on August 11, 2008. On October 16, 2008, the Company placed a new loan for $90,000 on the property that bears interest at 6.25% and matures on November 5, 2015.

(16)
The construction loan allows for total borrowings of up to $115,000, bears interest at LIBOR plus 0.80% and matures on June 5, 2009. At December 31, 2008, the total interest rate was 2.20%. The Company has obtained a commitment for a three year loan extension at an interest rate of LIBOR plus 3.40%.

(17)
The previous loan was paid off in full on March 1, 2008. On May 6, 2008, the Company placed a new loan for $100,000 on the property that bears interest at LIBOR plus 1.60% and matures on May 6, 2011, with two one-year extension options. At December 31, 2008, the total interest rate on the new loan was 3.74%.

(18)
On June 5, 2008, the Company replaced the existing loan on the property with a new $175,000 loan that bears interest at LIBOR plus 2.00% and matures on June 5, 2011, with two one-year extension options. At December 31, 2008, the total interest rate on the new loan was 4.07%. The loan is covered by an interest rate cap agreement that effectively prevents LIBOR from exceeding 5.50% over the loan term.

(19)
The loan bears interest at LIBOR plus 0.90% and matures in December 2010. At December 31, 2008, the total interest rate was 4.11%.

(20)
On July 31, 2008, the joint venture replaced the existing loan on the property with a new $150,000 loan that bears interest at 6.12% and matures on August 15, 2015.

(21)
The loan bears interest at LIBOR plus 0.69% and matures on October 9, 2009, with a one-year extension option. The loan is covered by an interest rate cap agreement over the term which effectively prevents LIBOR from exceeding 8.54% over the loan term. At December 31, 2008, the total interest rate was 1.90%.

(22)
On October 1, 2008, the joint venture replaced the existing loan on the property with a new $29,700 loan that bears interest at 6.39% and matures on November 1, 2015.

(23)
On October 1, 2008, the joint venture replaced the existing loan on the property with a new $18,900 loan that bears interest at 6.37% and matures on November 1, 2015.

(24)
The loan bears interest at LIBOR plus 1.00% and matures in January 2011. At December 31, 2008, the total interest rate was 2.57%.

(25)
The loan bears interest at LIBOR plus 1.10%, and matures on March 4, 2010, with a one-year extension option. The loan is covered by an interest rate cap agreement that effectively prevents LIBOR from exceeding 7.65% over the term. At December 31, 2008, the total interest rate was 2.14%.

(26)
On May 14, 2008, the joint venture placed a construction loan on the property that allows for total borrowings of up to $80,000. The loan bears interest at LIBOR plus a spread of 1.50% to 1.60%, depending on certain conditions. The loan matures on June 1, 2011, with two one-year extension options. At December 31, 2008, the total interest rate was 3.94%.

(27)
The loan bears interest at LIBOR plus 3.0% and matures in November 2010. At December 31, 2008, the total interest rate was 3.38%.

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(28)
The loan bears interest at LIBOR plus 0.55% and matures in July 2011. The loan provides for additional borrowings of up to $70,000 until May 20, 2010 at a rate of LIBOR plus 0.90%. At December 31, 2008, the total interest rate was 2.14%.

(29)
The loan bears interest at LIBOR plus 0.94% and matures on February 9, 2010. The loan is covered by an interest rate swap agreement that effectively converted this loan from floating rate debt to fixed rate debt of 5.51% before amortization of deferred finance costs through February 15, 2009. The loan is also covered by an interest rate cap agreement that effectively prevents LIBOR from exceeding 7.25% over the loan term. At December 31, 2008, the total interest rate was 6.05%.

(30)
The construction loan allows for total borrowings of up to $25,880, bears interest at LIBOR plus 3.45% and matures February 9, 2010. The loan is covered by an interest rate swap agreement through February 15, 2009 that effectively converts the loan from floating rate debt to fixed rate debt of 8.02%. The loan is also covered by an interest rate cap agreement throughout the term that effectively prevent LIBOR from exceeding 7.25% over the loan term. At December 31, 2008, the total interest rate was 8.02%.

(31)
The loan bears interest at 4.67% and matures on July 1, 2009. The Company assumed its pro rata share of the loan on January 9, 2008, concurrent with its purchase of a 50% ownership interest in the joint venture (See "Recent Developments—Acquisitions and Dispositions").

(32)
Contingent interest, as defined in the loan agreement, is due upon the occurrence of certain capital events and is equal to 15% of proceeds less a base amount.

(33)
The Company's joint venture has obtained a commitment for a $62,000, five-year loan at a fixed interest rate of 7.5%.

(34)
The loan bears interest at LIBOR plus 0.37% and matures in September 2009, with two one-year extension options. The loan is covered by an interest rate cap agreement that effectively prevents LIBOR from exceeding 8.63% over the loan term. At December 31, 2008, the total interest rate was 1.25%.

(35)
On December 10, 2008, the joint venture replaced the existing loan on the property with a new $250,000 loan that bears interest at 6.04% and matures on January 1, 2016.

ITEM 3.    LEGAL PROCEEDINGS

        None of the Company, the Operating Partnership, the Management Companies or their respective affiliates are currently involved in any material litigation nor, to the Company's knowledge, is any material litigation currently threatened against such entities or the Centers, other than routine litigation arising in the ordinary course of business, most of which is expected to be covered by liability insurance.

ITEM 4.    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

        None

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PART II

ITEM 5.    MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

        The common stock of the Company is listed and traded on the New York Stock Exchange under the symbol "MAC". The common stock began trading on March 10, 1994 at a price of $19 per share. In 2008, the Company's shares traded at a high of $76.50 and a low of $8.31.

        As of February 10, 2009, there were approximately 941 stockholders of record. The following table shows high and low closing prices per share of common stock during each quarter in 2008 and 2007 and dividends/distributions per share of common stock declared and paid by quarter:

 
  Market Quotation
Per Share
   
 
 
  Dividends/
Distributions
Declared/Paid
 
Quarter Ended
  High   Low  

March 31, 2008

  $ 72.13   $ 58.91   $ 0.80  

June 30, 2008

    75.36     62.10     0.80  

September 30, 2008

    67.81     53.01     0.80  

December 31, 2008

    61.51     9.85     0.80  

March 31, 2007

   
103.32
   
85.76
   
0.71
 

June 30, 2007

    97.69     81.17     0.71  

September 30, 2007

    87.58     73.14     0.71  

December 31, 2007

    92.66     70.63     0.80  

        At December 31, 2008, the stockholders had converted all of the Company's outstanding shares of its Series A cumulative convertible redeemable preferred stock ("Series A Preferred Stock"). There was no established public trading market for the Series A Preferred Stock. The Series A Preferred Stock was issued on February 25, 1998. Preferred stock dividends were accrued quarterly and paid in arrears. The Series A Preferred Stock was convertible on a one for one basis into common stock and paid a quarterly dividend equal to the greater of $0.46 per share, or the dividend then payable on a share of common stock. No dividends could be declared or paid on any class of common or other junior stock to the extent that dividends on Series A Preferred Stock had not been declared and/or paid. The following table shows the dividends per share of Series A Preferred Stock declared and paid by quarter in 2008 and 2007:

 
  Series A Preferred
Stock Dividend
 
Quarter Ended
  Declared   Paid  

March 31, 2008

  $ 0.80   $ 0.80  

June 30, 2008

    0.80     0.80  

September 30, 2008

    0.80     0.80  

December 31, 2008

    N/A     0.80  

March 31, 2007

   
0.71
   
0.71
 

June 30, 2007

    0.71     0.71  

September 30, 2007

    0.80     0.71  

December 31, 2007

    0.80     0.80  

        The Company's existing financing agreements limit, and any other financing agreements that the Company enters into in the future will likely limit, the Company's ability to pay cash dividends. Specifically, the Company may pay cash dividends and make other distributions based on a formula derived from Funds from Operations (See "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations—Funds From Operations") and only if no event of default under the financing agreements has occurred, unless, under certain circumstances, payment of the distribution is necessary to enable the Company to qualify as a REIT under the Code.

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Stock Performance Graph

        The following graph provides a comparison, from December 31, 2003 through December 31, 2008, of the yearly percentage change in the cumulative total stockholder return (assuming reinvestment of dividends) of the Company, the Standard & Poor's ("S&P") 500 Index, the S&P Midcap 400 Index and the FTSE NAREIT Equity Index (the "FTSE NAREIT Equity Index"), an industry index of publicly-traded REITs (including the Company). The Company is providing the S&P Midcap 400 Index since it is a company within such index.

        The graph assumes that the value of the investment in each of the Company's common stock and the indices was $100 at the beginning of the period. The graph further assumes the reinvestment of dividends.

        Upon written request directed to the Secretary of the Company, the Company will provide any stockholder with a list of the REITs included in the FTSE NAREIT Equity Index. The historical information set forth below is not necessarily indicative of future performance. Data for the FTSE NAREIT Equity Index, the S&P 500 Index and the S&P Midcap 400 Index were provided to the Company by Research Data Group, Inc.

GRAPH

Copyright © 2009 S&P, a division of The McGraw-Hill Companies, Inc. All rights reserved. www.researchdatagroup.com/S&P.htm

 
  12/31/03   12/31/04   12/31/05   12/31/06   12/31/07   12/31/08  

The Macerich Company

  $ 100.00   $ 148.39   $ 165.41   $ 221.50   $ 188.07   $ 51.76  

S&P 500 Index

    100.00     110.88     116.33     134.70     142.10     89.53  

S&P Midcap 400 Index

    100.00     116.48     131.11     144.64     156.18     99.59  

FTSE NAREIT Equity Index

    100.00     131.58     147.58     199.32     168.05     104.65  

Recent Sales of Unregistered Securities

        On December 22, 2008, the Company, as general partner of the Operating Partnership, issued 139,070 shares of common stock of the Company upon the redemption of 139,070 common partnership units of the Operating Partnership. These shares of common stock were issued in a private placement to one limited partner of the Operating Partnership, an accredited investor, pursuant to Section 4(2) of the Securities Act of 1933, as amended.

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ITEM 6.    SELECTED FINANCIAL DATA

        The following sets forth selected financial data for the Company on a historical basis. The following data should be read in conjunction with the consolidated financial statements (and the notes thereto) of the Company and "Management's Discussion and Analysis of Financial Condition and Results of Operations" each included elsewhere in this Form 10-K. All amounts are in thousands except per share data.

 
  Years Ended December 31,  
 
  2008   2007   2006   2005   2004  

OPERATING DATA:

                               

Revenues:

                               
   

Minimum rents(1)

  $ 544,421   $ 475,749   $ 438,261   $ 392,046   $ 294,846  
   

Percentage rents

    19,092     26,104     23,876     23,744     15,655  
   

Tenant recoveries

    266,885     245,510     227,575     195,896     145,055  
   

Management Companies

    40,716     39,752     31,456     26,128     21,549  
   

Other

    30,376     27,199     28,451     22,333     18,070  
                       
   

Total revenues

    901,490     814,314     749,619     660,147     495,175  

Shopping center and operating expenses

    287,077     256,730     233,669     203,829     146,465  

Management Companies' operating expenses

    77,072     73,761     56,673     52,840     44,080  

REIT general and administrative expenses

    16,520     16,600     13,532     12,106     11,077  

Depreciation and amortization

    277,827     212,509     196,760     171,987     128,413  

Interest expense

    281,356     250,127     260,705     228,061     134,549  

(Gain) loss on early extinguishment of debt(2)

    (95,265 )   877     1,835     1,666     1,642  
                       
   

Total expenses

    844,587     810,604     763,174     670,489     466,226  

Minority interest in consolidated joint ventures

    (1,736 )   (2,301 )   (1,860 )   (1,087 )   (184 )

Equity in income of unconsolidated joint ventures

    93,831     81,458     86,053     76,303     54,881  

Income tax benefit (provision)(3)

    (1,126 )   470     (33 )   2,031     5,466  

(Loss) gain on sale or write-down of assets

    (31,819 )   12,146     (84 )   1,253     473  
                       
   

Income from continuing operations

    116,053     95,483     70,521     68,158     89,585  

Discontinued operations:(4)

                               
 

Gain (loss) on sale of assets

    100,533     (2,409 )   204,985     277     7,568  
 

Income from discontinued operations

    1,619     5,770     9,870     9,219     14,350  
                       
   

Total income from discontinued operations

    102,152     3,361     214,855     9,496     21,918  
                       

Income before minority interest and preferred dividends

    218,205     98,844     285,376     77,654     111,503  

Minority interest in Operating Partnership

    (30,765 )   (13,036 )   (40,827 )   22,001     (19,870 )
                       

Net income

    187,440     85,808     244,549     99,655     91,633  

Less preferred dividends

    4,124     10,058     10,083     9,649     9,140  

Less adjustment of minority interest due to

                               
 

redemption value

        2,046     17,062     183,620      
                       

Net income (loss) available to common stockholders

  $ 183,316   $ 73,704   $ 217,404   $ (93,614 ) $ 82,493  
                       

Earnings per share ("EPS")—basic:

                               
 

Income from continuing operations

  $ 1.29   $ 1.01   $ 0.72   $ 0.80   $ 1.11  
 

Discontinued operations

    1.18     0.02     2.35     (2.38 )   0.30  
                       
 

Net income (loss) per share available to common stockholders—basic

  $ 2.47   $ 1.03   $ 3.07   $ (1.58 ) $ 1.41  
                       

EPS—diluted:(5)(6)

                               
 

Income from continuing operations

  $ 1.29   $ 1.01   $ 0.80   $ 0.80   $ 1.10  
 

Discontinued operations

    1.18     0.01     2.25     (2.37 )   0.30  
                       
 

Net income (loss) per share available to common stockholders—diluted

  $ 2.47   $ 1.02   $ 3.05   $ (1.57 ) $ 1.40  
                       

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Table of Contents

 
  As of December 31,  
 
  2008   2007   2006   2005   2004  

BALANCE SHEET DATA:

                               

Investment in real estate (before accumulated depreciation)

  $ 7,355,703   $ 7,078,802   $ 6,356,156   $ 6,017,546   $ 4,149,776  

Total assets

  $ 8,090,435   $ 7,937,097   $ 7,373,676   $ 6,986,005   $ 4,637,096  

Total mortgage and notes payable

  $ 5,975,269   $ 5,762,958   $ 4,993,879   $ 5,424,730   $ 3,230,120  

Minority interest(7)

  $ 266,061   $ 547,693   $ 597,156   $ 474,590   $ 221,315  

Series A Preferred Stock(8)

  $   $ 83,495   $ 98,934   $ 98,934   $ 98,934  

Common stockholders' equity

  $ 1,364,299   $ 1,149,849   $ 1,379,132   $ 679,678   $ 913,533  

OTHER DATA:

                               

Funds from operations ("FFO")—diluted(10)

  $ 486,441   $ 407,927   $ 383,122   $ 336,831   $ 299,172  

Cash flows provided by (used in):

                               
 

Operating activities

  $ 251,947   $ 326,070   $ 211,850   $ 235,296   $ 213,197  
 

Investing activities

  $ (558,956 ) $ (865,283 ) $ (126,736 ) $ (131,948 ) $ (489,822 )
 

Financing activities

  $ 288,265   $ 355,051   $ 29,208   $ (20,349 ) $ 308,383  

Number of Centers at year end

    92     94     91     97     84  

Weighted average number of shares outstanding—EPS basic

   
74,319
   
71,768
   
70,826
   
59,279
   
58,537
 

Weighted average number of shares outstanding—EPS diluted(5)(6)

    86,794     84,760     88,058     73,573     73,099  

Cash distribution declared per common share

  $ 3.20   $ 2.93   $ 2.75   $ 2.63   $ 2.48  

(1)
Included in minimum rents is amortization of above and below market leases of $21.5 million, $10.6 million, $12.2 million, $11.0 million and $9.2 million for the years ended December 31, 2008, 2007, 2006, 2005 and 2004, respectively.

(2)
Included in (gain) loss from early extinguishment of debt for the year ended December 31, 2008, is $95.3 million from the repurchase and retirement of $222.8 million of the convertible senior notes ("Senior Notes") (See "Liquidity and Capital Resources").

(3)
The Company's Taxable REIT Subsidiaries ("TRSs") are subject to corporate level income taxes (See Note 19—Income Taxes of the Company's Consolidated Financial Statements).

(4)
Discontinued operations include the following:

    The Company sold Westbar on December 16, 2004, and the results for the period January 1, 2004 to December 16, 2004 have been classified as discontinued operations. The sale of Westbar resulted in a gain on sale of asset of $6.8 million.

    On January 5, 2005, the Company sold Arizona Lifestyle Galleries. The sale of this property resulted in a gain on sale of asset of $0.3 million. The impact on the results of operations for the period January 1, 2005 to January 5, 2005 and for the year ended December 31, 2004 have been reclassified to discontinued operations.

    On June 9, 2006, the Company sold Scottsdale 101 and the results for the period January 1, 2006 to June 9, 2006 and for the years ended December 31, 2005 and 2004 have been classified as discontinued operations. The sale of Scottsdale 101 resulted in a gain on sale of asset, at the Company's pro rata share, of $25.8 million.

    The Company sold Park Lane Mall on July 13, 2006 and the results for the period January 1, 2006 to July 13, 2006 and for the years ended December 31, 2005 and 2004 have been classified as discontinued operations. The sale of Park Lane Mall resulted in a gain on sale of asset of $5.9 million.

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Table of Contents

    The Company sold Greeley Mall and Holiday Village Mall in a combined sale on July 27, 2006, and the results for the period January 1, 2006 to July 27, 2006 and the years ended December 31, 2005 and 2004 have been classified as discontinued operations. The sale of these properties resulted in a gain on sale of assets of $28.7 million.

    The Company sold Great Falls Marketplace on August 11, 2006, and the results for the period January 1, 2006 to August 11, 2006 and for the years ended December 31, 2005 and 2004 have been classified as discontinued operations. The sale of Great Falls Marketplace resulted in a gain on sale of asset of $11.8 million.

    The Company sold Citadel Mall, Crossroads Mall and Northwest Arkansas Mall in a combined sale on December 29, 2006, and the results for the period January 1, 2006 to December 29, 2006 and the years ended December 31, 2005 and 2004 have been classified as discontinued operations. The sale of these properties resulted in a gain on sale of assets of $132.7 million.

    In addition, the Company recorded an additional loss of $2.4 million in 2007, related to the sale of properties in 2006.

    On January 1, 2008, MACWH, LP, a subsidiary of the Operating Partnership, at the election of the holders, redeemed the 3.4 million PCPUs in exchange for the 16.32% minority interest in the Non-Rochester Properties, in exchange for the Company's ownership interest in the Rochester Properties. As a result of the Rochester Redemption, the Company recognized a gain of $99.1 million on the exchange.

    The Company sold the fee simple and/or ground leasehold interests in three freestanding stores acquired from Mervyn's to Pacific Premier Retail Trust, one of its joint ventures, on December 19, 2008, and the results for the period of January 1, 2008 to December 19, 2008 and for the year ended December 31, 2007 have been classified as discontinued operations. The sale of these interests resulted in a gain on sale of assets of $1.5 million.

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Table of Contents

    Total revenues and income from discontinued operations were:

   
  Years Ended December 31,  
  (Dollars in millions)
  2008   2007   2006   2005   2004  
 

Revenues:

                               
   

Westbar

  $   $   $   $   $ 4.8  
   

Arizona LifeStyle Galleries

                    0.3  
   

Scottsdale 101

        0.1     4.7     9.8     6.9  
   

Park Lane Mall

            1.5     3.1     3.0  
   

Holiday Village Mall

    0.3     0.2     2.9     5.2     4.8  
   

Greeley Mall

            4.3     7.0     6.2  
   

Great Falls Marketplace

            1.8     2.7     2.6  
   

Citadel Mall

            15.7     15.3     15.4  
   

Northwest Arkansas Mall

            12.9     12.6     12.7  
   

Crossroads Mall

            11.5     10.9     11.2  
   

Mervyn's Stores

    4.0     0.2              
   

Rochester Properties

        83.1     80.0     51.7      
                         
   

Total

  $ 4.3   $ 83.6   $ 135.3   $ 118.3   $ 67.9  
                         
 

Income from operations:

                               
   

Westbar

  $   $   $   $   $ 1.8  
   

Arizona LifeStyle Galleries

                    (1.0 )
   

Scottsdale 101

            0.3     (0.2 )   (0.3 )
   

Park Lane Mall

                0.8     0.9  
   

Holiday Village Mall

    0.3     0.2     1.2     2.8     1.9  
   

Greeley Mall

        (0.1 )   0.6     0.9     0.5  
   

Great Falls Marketplace

            1.1     1.7     1.6  
   

Citadel Mall

        (0.1 )   2.5     1.8     2.0  
   

Northwest Arkansas Mall

            3.4     2.9     3.1  
   

Crossroads Mall

            2.3     3.2     3.9  
   

Mervyn's Stores

    1.3     0.1              
   

Rochester Properties

        5.7     (1.5 )   (4.7 )    
                         
   

Total

  $ 1.6   $ 5.8   $ 9.9   $ 9.2   $ 14.4  
                         
(5)
Assumes that all OP Units and Westcor partnership units are converted to common stock on a one-for-one basis. The Westcor partnership units were converted into OP Units on July 27, 2004, which were subsequently redeemed for common stock on October 4, 2005. It also assumes the conversion of MACWH, LP common and preferred units to the extent that they are dilutive to the EPS computation (See Note 12—Acquisitions in the Company's Notes to the Consolidated Financial Statements).

(6)
Includes the dilutive effect of share and unit-based compensation plans and convertible senior notes calculated using the treasury stock method and the dilutive effect of all other dilutive securities calculated using the "if converted" method.

(7)
"Minority Interest" reflects the ownership interest in the Operating Partnership and MACWH, LP not owned by the Company.

(8)
The holder of the Series A Preferred Stock converted 560,000, 684,000, 1,338,860 and 1,044,271 shares to common shares on October 18, 2007, May 6, 2008, May 8, 2008 and September 17, 2008, respectively. As of December 31, 2008, there was no Series A Preferred Stock outstanding.

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(9)
The Company uses FFO in addition to net income to report its operating and financial results and considers FFO and FFO—diluted as supplemental measures for the real estate industry and a supplement to Generally Accepted Accounting Principles ("GAAP") measures. The National Association of Real Estate Investment Trusts ("NAREIT") defines FFO as net income (loss) (computed in accordance with GAAP), excluding gains (or losses) from extraordinary items and sales of depreciated operating properties, plus real estate related depreciation and amortization and after adjustments for unconsolidated partnerships and joint ventures. Adjustments for unconsolidated partnerships and joint ventures are calculated to reflect FFO on the same basis. FFO and FFO on a fully diluted basis are useful to investors in comparing operating and financial results between periods. This is especially true since FFO excludes real estate depreciation and amortization as the Company believes real estate values fluctuate based on market conditions rather than depreciating in value ratably on a straight-line basis over time. FFO on a fully diluted basis is one of the measures investors find most useful in measuring the dilutive impact of outstanding convertible securities. FFO does not represent cash flow from operations as defined by GAAP, should not be considered as an alternative to net income as defined by GAAP and is not indicative of cash available to fund all cash flow needs. FFO as presented may not be comparable to similarly titled measures reported by other real estate investment trusts. For disclosure of net income, the most directly comparable GAAP financial measure, for the periods presented and a reconciliation of FFO and FFO—diluted to net income, see "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations—Funds from Operations."

    The computation of FFO-diluted includes the effect of share and unit-based compensation plans and convertible senior notes calculated using the treasury stock method. It also assumes the conversion of MACWH, LP common and preferred units and all other securities to the extent that they are dilutive to the FFO computation (See Note 12—Acquisitions of the Company's Notes to the Consolidated Financial Statements). On February 25, 1998, the Company sold $100 million of its Series A Preferred Stock. The Preferred Stock was convertible on a one-for-one basis for common stock. The Series A Preferred Stock then outstanding was dilutive to FFO for all periods presented and was dilutive to net income in 2006.

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ITEM 7.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Management's Overview and Summary

        The Company is involved in the acquisition, ownership, development, redevelopment, management and leasing of regional and community shopping centers located throughout the United States. The Company is the sole general partner of, and owns a majority of the ownership interests in, the Operating Partnership. As of December 31, 2008, the Operating Partnership owned or had an ownership interest in 72 regional shopping centers and 20 community shopping centers totaling approximately 76 million square feet of GLA. These 92 regional and community shopping centers are referred to hereinafter as the "Centers", unless the context otherwise requires. The Company is a self-administered and self-managed REIT and conducts all of its operations through the Operating Partnership and the Company's Management Companies.

        The following discussion is based primarily on the consolidated financial statements of the Company for the years ended December 31, 2008, 2007 and 2006. It compares the results of operations and cash flows for the year ended December 31, 2008 to the results of operations and cash flows for the year ended December 31, 2007. Also included is a comparison of the results of operations and cash flows for the year ended December 31, 2007 to the results of operations and cash flows for the year ended December 31, 2006. This information should be read in conjunction with the accompanying consolidated financial statements and notes thereto.

    Acquisitions and Dispositions:

        The financial statements reflect the following acquisitions, dispositions and changes in ownership subsequent to the occurrence of each transaction.

        On February 1, 2006, the Company acquired Valley River Center, a 915,656 square foot super-regional mall in Eugene, Oregon. The total purchase price was $187.5 million and concurrent with the acquisition, the Company placed a $100.0 million ten-year loan on the property. The balance of the purchase price was funded by cash and borrowings under the Company's line of credit.

        On June 9, 2006, the Company sold Scottsdale 101, a 564,000 square foot center in Phoenix, Arizona. The sale price was $117.6 million from which $56.0 million was used to payoff the mortgage on the property. The Company's share of the realized gain was $25.8 million.

        On July 13, 2006, the Company sold Park Lane Mall, a 370,000 square foot center in Reno, Nevada, for $20 million resulting in a gain of $5.9 million.

        On July 26, 2006, the Company purchased 11 department stores located in 10 of its Centers from Federated Department Stores, Inc. for approximately $100.0 million. The purchase price consisted of a $93.0 million cash payment at closing and a $7.0 million cash payment in 2007, in connection with development work by Federated at the Company's development properties. The Company's share of the purchase price was $81.0 million and was funded in part from the proceeds of sales of Park Lane Mall, Greeley Mall, Holiday Village Mall and Great Falls Marketplace, and from borrowings under the Company's line of credit. The balance of the purchase price was paid by the Company's joint venture partners.

        On July 27, 2006, the Company sold Holiday Village Mall, a 498,000 square foot center in Great Falls, Montana, and Greeley Mall, a 564,000 square foot center in Greeley, Colorado, in a combined sale for $86.8 million, resulting in a gain of $28.7 million.

        On August 11, 2006, the Company sold Great Falls Marketplace, a 215,000 square foot community center in Great Falls, Montana, for $27.5 million resulting in a gain of $11.8 million.

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        On December 1, 2006, the Company acquired Deptford Mall, a two-level 1.0 million square foot super-regional mall in Deptford, New Jersey. The total purchase price of $240.1 million was funded by cash and borrowings under the Company's line of credit. On December 7, 2006, the Company placed a $100.0 million six-year loan bearing interest at a fixed rate of 5.44% on the property.

        On December 29, 2006, the Company sold Citadel Mall, a 1,095,000 square foot center in Colorado Springs, Colorado, Crossroads Mall, a 1,268,000 square foot center in Oklahoma City, Oklahoma, and Northwest Arkansas Mall, a 820,000 square foot center in Fayetteville, Arkansas, in a combined sale for $373.8 million, resulting in a gain of $132.7 million. The net proceeds were used to pay down the Company's line of credit and pay off the Company's $75.0 million loan on Paradise Valley Mall.

        Valley River Center and Deptford Mall are referred to herein as the "2006 Acquisition Centers."

        On September 5, 2007, the Company purchased the remaining 50% outside ownership interest in Hilton Village, a 96,985 square foot specialty center in Scottsdale, Arizona. The total purchase price of $13.5 million was funded by cash, borrowings under the Company's line of credit and the assumption of a mortgage note payable. The Center was previously accounted for under the equity method as an investment in unconsolidated joint ventures.

        On December 17, 2007, the Company purchased a portfolio of ground leasehold interest and/or fee interests in 39 freestanding Mervyn's stores located in the Southwest United States. The purchase price of $400.2 million was funded by cash and borrowings under the Company's line of credit.

        Hilton Village and the interest in the 39 freestanding Mervyn's freestanding stores are referred herein as the "2007 Acquisition Properties."

        On January 1, 2008, a subsidiary of the Operating Partnership, at the election of the holders, redeemed its 3.4 million Class A participating convertible preferred units ("PCPUs"). As a result of the redemption, the Company received the 16.32% minority interest in the portion of the Wilmorite portfolio acquired on April 25, 2005 that included Danbury Fair Mall, Freehold Raceway Mall, Great Northern Mall, Rotterdam Square, Shoppingtown Mall, Towne Mall, Tysons Corner Center and Wilton Mall, collectively, referred to as the "Non-Rochester Properties," for total consideration of $224.4 million, in exchange for the Company's ownership interest in the portion of the Wilmorite portfolio that consisted of Eastview Mall, Eastview Commons, Greece Ridge Center, Marketplace Mall and Pittsford Plaza, collectively referred to as the "Rochester Properties." Included in the redemption consideration was the assumption of the remaining 16.32% interest in the indebtedness of the Non-Rochester Properties, which had an estimated fair value of $106.0 million. In addition, the Company also received additional consideration of $11.8 million, in the form of a note, for certain working capital adjustments, extraordinary capital expenditures, leasing commissions, tenant allowances, and decreases in indebtedness during the Company's period of ownership of the Rochester Properties. The Company recognized a gain of $99.1 million on the exchange. This exchange is referred to herein as the "Rochester Redemption."

        On January 10, 2008, the Company, in a 50/50 joint venture, acquired The Shops at North Bridge, a 680,933 square foot urban shopping center in Chicago, Illinois, for a total purchase price of $515.0 million. The Company's share of the purchase price was funded by the assumption of a pro rata share of the $205.0 million fixed rate mortgage on the Center and by borrowings under the Company's line of credit.

        On January 31, 2008, the Company purchased a ground leasehold interest in a freestanding Mervyn's store located in Hayward, California. The purchase price of $13.2 million was funded by cash and borrowings under the Company's line of credit.

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        On February 29, 2008, the Company purchased a fee simple interest in a freestanding Mervyn's store located in Monrovia, California. The purchase price of $19.3 million was funded by cash and borrowings under the Company's line of credit.

        On May 20, 2008, the Company purchased a fee simple interest in a 161,350 square foot Boscov's department store at Deptford Mall in Deptford, New Jersey. The total purchase price of $23.5 million was funded by the assumption of the existing $15.2 million mortgage note on the property and by borrowings under the Company's line of credit.

        The Boscov's store and the Mervyn's stores acquired in 2008 are referred to herein as the "2008 Acquisition Properties."

        On June 11, 2008, the Company became a 50% owner in a joint venture that acquired One Scottsdale, which plans to develop a luxury retail and mixed-use property in Scottsdale, Arizona. The Company's share of the purchase price was $52.5 million, which was funded by borrowings under the Company's line of credit.

        On December 19, 2008, the Company sold a fee and/or ground leasehold interest in three freestanding Mervyn's department stores to Pacific Premier Retail Trust, one of the Company's joint ventures, for $43.4 million, resulting in a gain on sale of assets of $1.5 million. The Company's pro rata share of the proceeds were used to pay down the Company's line of credit.

    Mervyn's:

        In July 2008, Mervyn's filed for bankruptcy protection and announced in October its plans to liquidate all merchandise, auction its store leases and wind down its business. The Company has 45 former Mervyn's stores in its portfolio. The Company owns the ground leasehold and/or fee simple interest in 44 of those stores and the remaining store is owned by a third party but is located at one of the Centers. In connection with the acquisition of the Mervyn's portfolio (See Note 12-Acquisitions of the Company's Consolidated Financial Statements) and applying Statement of Financial Accounting Standards ("SFAS") No. 141, the Company recorded intangible assets of $110.7 million and intangible liabilities of $59.0 million.

        In September 2008, the Company recorded a write-down of $5.2 million due to the anticipated rejection of six of the Company's leases by Mervyn's. In addition, the Company terminated its former plan to sell the 29 Mervyn's stores located at shopping centers not owned or managed by the Company. (See Note 13—Discontinued Operations of the Company's Consolidated Financial Statements). The Company's decision was based on current conditions in the credit market and the assumption that a better return could be obtained by holding and operating the assets. As result of the change in plans to sell, the Company recorded a loss of $5.3 million in order to adjust the carrying value of these assets for depreciation expense that otherwise would have been recognized had these assets been continuously classified as held and used.

        In December 2008, Kohl's and Forever 21 assumed a total of 23 of the Mervyn's leases and the remaining 22 leases were rejected by Mervyn's under the bankruptcy laws. As a result, the Company wrote-off the unamortized intangible assets and liabilities related to the rejected and unassumed leases in December 2008. The Company wrote-off $27.7 million of unamortized intangible assets related to lease in place values, leasing commissions and legal costs to depreciation and amortization. Unamortized intangible assets of $14.9 million relating to above market leases and unamortized intangible liabilities of $24.5 million relating to below market leases were written-off to minimum rents.

    Redevelopments and Developments:

        Construction continues on Santa Monica Place, a regional shopping center under development in Santa Monica, California. In September, the Company announced that Bloomingdale's will join

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Nordstrom. Bloomingdale's will open the first of the store's SoHo concept outside of Manhattan. In addition, the Company has announced deals with 11 retailers and restaurants slated to join the new Santa Monica Place—Ed Hardy, Arthur, R.O.C. Republic of Couture, Ilori, Love Culture, Michael Brandon, Shuz, restaurants La Sandia, Zengo and Pizza Antica, and gallery Artevo. These 11 strong brands join previously announced restaurants XINO and Osumo Sushi and fashion retailers Kitson LA, BCBG Max Azria, Coach, Lacoste, Joe's Jeans and True Religion, all of which are slated to open in 2010 alongside Bloomingdale's SoHo concept and Nordstrom.

        At Scottsdale Fashion Square, construction on an approximately 160,000 square foot expansion continues on schedule toward a Fall 2009 opening. The expansion will be anchored by a 60,000 square foot Barneys New York. In addition, recently signed fashion retailer Ed Hardy, French luxury homewear retailer Arthur and Forever 21 will join previously announced True Religion and restaurants Marcella's and Modern Steak, in the new wing. Recent additions to the Center's interior merchandise mix include Cartier and Bvlgari.

        Also during the three months ended December 31, 2008, the Company wrote off $8.7 million of development costs on development projects the Company has determined it will not pursue. In addition, the Company recorded an $18.8 million impairment charge to reduce its pro rata share of the carrying value of land held for development at a consolidated joint venture.

    Inflation:

        In the last three years, inflation has not had a significant impact on the Company because of a relatively low inflation rate. Most of the leases at the Centers have rent adjustments periodically through the lease term. These rent increases are either in fixed increments or based on using an annual multiple of increases in the Consumer Price Index ("CPI"). In addition, about 6%-13% of the leases expire each year, which enables the Company to replace existing leases with new leases at higher base rents if the rents of the existing leases are below the then existing market rate. Additionally, historically the majority of the leases required the tenants to pay their pro rata share of operating expenses. In January 2005, the Company began entering into leases that require tenants to pay a stated amount for operating expenses, generally excluding property taxes, regardless of the expenses actually incurred at any Center. This change shifts the burden of cost control to the Company.

    Seasonality:

        The shopping center industry is seasonal in nature, particularly in the fourth quarter during the holiday season when retailer occupancy and retail sales are typically at their highest levels. In addition, shopping malls achieve a substantial portion of their specialty (temporary retailer) rents during the holiday season and the majority of percentage rent is recognized in the fourth quarter. As a result of the above, earnings are generally higher in the fourth quarter.

Critical Accounting Policies

        The preparation of financial statements in conformity with generally accepted accounting principles ("GAAP") in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

        Some of these estimates and assumptions include judgments on revenue recognition, estimates for common area maintenance and real estate tax accruals, provisions for uncollectible accounts, impairment of long-lived assets, the allocation of purchase price between tangible and intangible assets, and estimates for environmental matters. The Company's significant accounting policies are described

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in more detail in Note 2—Summary of Significant Accounting Policies to the Consolidated Financial Statements. However, the following policies are deemed to be critical.

    Revenue Recognition

        Minimum rental revenues are recognized on a straight-line basis over the term of the related lease. The difference between the amount of rent due in a year and the amount recorded as rental income is referred to as the "straight line rent adjustment." Currently, 53% of the mall and freestanding leases contain provisions for CPI rent increases periodically throughout the term of the lease. The Company believes that using an annual multiple of CPI increases, rather than fixed contractual rent increases, results in revenue recognition that more closely matches the cash revenue from each lease and will provide more consistent rent growth throughout the term of the leases. Percentage rents are recognized when the tenants' specified sales targets have been met. Estimated recoveries from certain tenants for their pro rata share of real estate taxes, insurance and other shopping center operating expenses are recognized as revenues in the period the applicable expenses are incurred. Other tenants pay a fixed rate and these tenant recoveries' revenues are recognized on a straight-line basis over the term of the related leases.

    Property

        The Company capitalizes costs incurred in redevelopment and development of properties in accordance with Statement of Financial Accounting Standards ("SFAS") No. 34 "Capitalization of Interest Cost" and SFAS No. 67 "Accounting for Costs and the Initial Rental Operations of Real Estate Properties." The costs of land and buildings under development include specifically identifiable costs. The capitalized costs include pre-construction costs essential to the development of the property, development costs, construction costs, interest costs, real estate taxes, salaries and related costs and other costs incurred during the period of development. Capitalized costs are allocated to the specific components of a project that are benefited. The Company considers a construction project as completed and held available for occupancy and ceases capitalization of costs when the areas under development have been substantially completed.

        Maintenance and repair expenses are charged to operations as incurred. Costs for major replacements and betterments, which includes HVAC equipment, roofs, parking lots, etc., are capitalized and depreciated over their estimated useful lives. Gains and losses are recognized upon disposal or retirement of the related assets and are reflected in earnings.

        Property is recorded at cost and is depreciated using a straight-line method over the estimated useful lives of the assets as follows:

Buildings and improvements

  5-40 years

Tenant improvements

  5-7 years

Equipment and furnishings

  5-7 years

    Accounting for Acquisitions

        The Company accounts for all acquisitions in accordance with SFAS No. 141, "Business Combinations." The Company first determines the value of the land and buildings utilizing an "as if vacant" methodology. The Company then assigns a fair value to any debt assumed at acquisition. The balance of the purchase price is allocated to tenant improvements and identifiable intangible assets or liabilities. Tenant improvements represent the tangible assets associated with the existing leases valued on a fair market value basis at the acquisition date prorated over the remaining lease terms. The tenant improvements are classified as an asset under real estate investments and are depreciated over the remaining lease terms. Identifiable intangible assets and liabilities relate to the value of in-place

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operating leases which come in three forms: (i) leasing commissions and legal costs, which represent the value associated with "cost avoidance" of acquiring in-place leases, such as lease commissions paid under terms generally experienced in the Company's markets; (ii) value of in-place leases, which represents the estimated loss of revenue and of costs incurred for the period required to lease the "assumed vacant" property to the occupancy level when purchased; and (iii) above or below market value of in-place leases, which represents the difference between the contractual rents and market rents at the time of the acquisition, discounted for tenant credit risks. Leasing commissions and legal costs are recorded in deferred charges and other assets and are amortized over the remaining lease terms. The value of in-place leases are recorded in deferred charges and other assets and amortized over the remaining lease terms plus an estimate of renewal of the acquired leases. Above or below market leases are classified in deferred charges and other assets or in other accrued liabilities, depending on whether the contractual terms are above or below market, and the asset or liability is amortized to minimum rents over the remaining terms of the leases.

        When the Company acquires a real estate property, the Company allocates the purchase price to the components of these acquisitions using relative fair values computed using its estimates and assumptions. These estimates and assumptions impact the amount of costs allocated between various components as well as the amount of costs assigned to individual properties in multiple property acquisitions. These allocations also impact depreciation expense and gains or losses recorded on future sales of properties.

    Asset Impairment

        The Company assesses whether there has been impairment in the value of its long-lived assets by considering factors such as expected future operating income, trends and prospects, as well as the effects of demand, competition and other economic factors. Such factors include the tenant's ability to perform their duties and pay rent under the terms of the leases. The Company may recognize impairment losses if the cash flows are not sufficient to cover its investment. Such a loss would be determined as the difference between the carrying value and the fair value of a center.

    Fair Value of Financial Instruments:

        On January 1, 2008, the Company adopted 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 fair value hierarchy distinguishes between market participant assumptions based on market data obtained from sources independent of the reporting entity and the reporting entity's own assumptions about market participant assumptions.

        Level 1 inputs utilize quoted prices in active markets for identical assets or liabilities that the Company has the ability to access. Level 2 inputs are inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 inputs may include quoted prices for similar assets and liabilities in active markets, as well as inputs that are observable for the asset or liability (other than quoted prices), such as interest rates, foreign exchange rates, and yield curves that are observable at commonly quoted intervals. Level 3 inputs are unobservable inputs for the asset or liability, which are typically based on an entity's own assumptions, as there is little, if any, related market activity. In instances where the determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level input that is significant to the fair value measurement in its entirety. The Company's assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the asset or liability.

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        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.

    Deferred Charges

        Costs relating to obtaining tenant leases are deferred and amortized over the initial term of the agreement using the straight-line method. Costs relating to financing of shopping center properties are deferred and amortized over the life of the related loan using the straight-line method, which approximates the effective interest method. In-place lease values are amortized over the remaining lease term plus an estimate of the renewal term. Leasing commissions and legal costs are amortized on a straight-line basis over the individual remaining lease years. The ranges of the terms of the agreements are as follows:

Deferred lease costs   1-15 years
Deferred financing costs   1-15 years
In-place lease values   Remaining lease term plus an estimate for renewal
Leasing commissions and legal costs   5-10 years

    Recent Accounting Pronouncements Not Yet Adopted

        In December 2007, the Financial Accounting Standards Board ("FASB") issued SFAS No. 141(R), Business Combinations, and SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements—An Amendment of ARB No. 51. SFAS No. 141(R) requires an acquiring entity to recognize acquired assets and assumed liabilities in a transaction at fair value as of the acquisition date and changes the accounting treatment for certain items, including acquisition costs, which will be required to be expensed as incurred. SFAS No. 160 requires that noncontrolling interests be presented as a component of consolidated stockholders' equity and eliminates "minority interest accounting" such that the amount of net income attributable to the noncontrolling interests will be presented as part of consolidated net income on the consolidated statements of operations. SFAS No. 141(R) and SFAS No. 160 require concurrent adoption and are to be applied prospectively for the first annual reporting period beginning on or after December 15, 2008. Early adoption of either standard is prohibited. The Company believes that these statements will not have a material impact on its consolidated results of operations or cash flows. However, the Company is currently evaluating whether the adoption of SFAS No. 160 could have a material impact on the consolidated balance sheets and consolidated statements of stockholders' equity.

        In May 2008, the FASB issued FASB Staff Position APB 14-1, Accounting for Convertible Debt Instruments That May Be Settled Upon Conversion (Including Partial Cash Settlement) ("FSP APB 14-1"). This new standard requires the initial proceeds from convertible debt that may be settled in cash to be bifurcated between a liability component and an equity component. The objective of the guidance is to require the liability and equity components of convertible debt to be separately accounted for in a manner such that the interest expense recorded on the convertible debt would not equal the contractual rate of interest on the convertible debt, but instead would be recorded at a rate that would reflect the issuer's conventional non-convertible debt borrowing rate at the date of issuance. This is accomplished through the creation of a discount on the debt that would be accreted using the effective interest method as additional non-cash interest expense over the period the debt is expected to remain outstanding. The Company is required to adopt FSP APB 14-1 on January 1, 2009. This FSP will be applied retrospectively to all periods presented. The Company currently expects that FSP APB

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14-1 will have a material impact on the accounting for the convertible senior notes ("Senior Notes") and the Company's consolidated balance sheets and results of operations.

        In June 2008, the FASB issued Staff Position EITF No. 03-6-1, "Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities." FSP EITF No. 03-6-1 will be applied retrospectively to all the periods presented for the fiscal years beginning after December 15, 2008. The Company is currently evaluating the impact of adoption of FSP EITF No. 03-6-1 on its results of operations and financial condition.

        In June 2008, the FASB ratified EITF Issue No. 07-5, Determining Whether an Instrument (or Embedded Feature) Is Indexed to an Entity's Own Stock. Paragraph 11(a) of SFAS No. 133, Accounting for Derivatives and Hedging Activities, specifies that a contract that would otherwise meet the definition of a derivative but is both (a) indexed to the Company's own stock and (b) classified in stockholders' equity in the statement of financial position would not be considered a derivative financial instrument. EITF Issue No. 07-5 provides a new two-step model to be applied in determining whether a financial instrument or an embedded feature is indexed to an issuer's own stock and thus able to qualify for the SFAS No. 133 paragraph 11(a) scope exception. EITF Issue No. 07-5 will be effective for the first annual reporting period beginning after December 15, 2008, and early adoption is prohibited. Management is currently evaluating whether the adoption of EITF Issue No. 07-5 will have an impact on the accounting for the Senior Notes and related capped call option transactions. In the event that management determines that the adoption of EITF Issue No. 07-05 impacts the accounting for the Senior Notes, management's current conclusion regarding the impact of FSP APB-14-1 could change.

Results of Operations

        Many of the variations in the results of operations, discussed below, occurred due to the transactions described above including the 2008 Acquisition Properties, the 2007 Acquisition Properties, the 2006 Acquisition Centers and the Redevelopment Centers. For the comparison of the year ended December 31, 2008 to the year ended December 31, 2007, the "Same Centers" include all consolidated Centers, excluding the 2008 Acquisition Properties, the 2007 Acquisition Properties and the Redevelopment Centers. For the comparison of the year ended December 31, 2007 to the year ended December 31, 2006, the Same Centers include all consolidated Centers, excluding the 2007 Acquisition Properties, the 2006 Acquisition Centers and the Redevelopment Centers.

        For the comparison of the year ended December 31, 2008 to the year ended December 31, 2007, "Redevelopment Centers" include The Oaks, Northgate Mall, Santa Monica Place, Shoppingtown Mall, Westside Pavilion, The Marketplace at Flagstaff, SanTan Village Regional Center and Promenade at Casa Grande. For the comparison of the year ended December 31, 2007 to the year ended December 31, 2006, "Redevelopment Centers" include The Oaks, Twenty Ninth Street, Santa Monica Place, Westside Pavilion, The Marketplace at Flagstaff Mall, SanTan Village Regional Center and Promenade at Casa Grande.

        Unconsolidated joint ventures are reflected using the equity method of accounting. The Company's pro rata share of the results from these Centers is reflected in the Consolidated Statements of Operations as equity in income from unconsolidated joint ventures.

Comparison of Years Ended December 31, 2008 and 2007

    Revenues:

        Minimum and percentage rents (collectively referred to as "rental revenue") increased by $61.7 million, or 12.3%, from 2007 to 2008. The increase in rental revenue is attributed to an increase of $42.1 million from the 2007 Acquisition Properties, $13.9 million from the Redevelopment Centers,

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$3.8 million from the 2008 Acquisition Properties and $1.9 million from the Same Centers. The increase in the revenues from the Same Centers is primarily due to rent escalations and lease renewals at higher rents, which was offset by decreases in lease termination income, amortization of straight-line rents and amortization of above and below market leases. The increase in the revenues from the Same Centers was also offset by a decrease of $6.3 million in percentage rents due to a decrease in retail sales.

        Rental revenue includes the amortization of above and below market leases, the amortization of straight-line rents and lease termination income. The amortization of above and below market leases increased from $10.6 million in 2007 to $21.5 million in 2008. The amortization of straight-lined rents decreased from $6.9 million in 2007 to $5.7 million in 2008. Lease termination income increased from $9.7 million in 2007 to $9.9 million in 2008. The increase in above and below market leases is primarily due to the early termination of Mervyn's leases in 2008 (See "Management's Overview and Summary—Mervyn's.").

        Tenant recoveries increased $21.4 million, or 8.7%, from 2007 to 2008. The increase in tenant recoveries is attributed to an increase of $9.4 million from the Same Centers, $6.3 million from the 2007 Acquisition Properties, $4.7 from the Redevelopment Centers and $1.0 million from the 2008 Acquisition Properties.

        Management Companies' revenues increased by $1.0 million from 2007 to 2008, primarily due to increased management fees received from the Joint Venture Centers, additional third party management contracts and increased development fees from joint ventures.

    Shopping Center and Operating Expenses:

        Shopping center and operating expenses increased $30.3 million, or 11.8%, from 2007 to 2008. Approximately $13.6 million of the increase in shopping center and operating expenses is from the Same Centers, $11.3 million is from the 2007 Acquisition Properties, $5.0 million is from the Redevelopment Centers and $1.2 million is from the 2008 Acquisition Properties. The increase in Same Centers is primarily due to an increase in recoverable utility expenses and property taxes and a $2.0 million increase in bad debt expense.

    Management Companies' Operating Expenses:

        Management Companies' operating expenses increased $3.3 million in 2007 to 2008, in part as a result of the additional costs of managing the Joint Venture Centers and third party managed properties.

    REIT General and Administrative Expenses:

        REIT general and administrative expenses decreased by $0.1 million from 2007 to 2008. The decrease is primarily due to a decrease in share and unit-based compensation expense in 2008.

    Depreciation and Amortization:

        Depreciation and amortization increased $65.3 million from 2007 to 2008. The increase in depreciation and amortization is primarily attributed to an increase of $42.1 million from the 2007 Acquisition Properties, $12.0 million from the Redevelopment Centers, $7.3 million from the Same Centers and $3.7 million from the 2008 Acquisition Properties. Included in the increase of depreciation and amortization of 2007 Acquisition Properties is the write-off of $32.9 million of intangible assets as a result of the early termination of Mervyn's leases (See "Management's Overview and Summary—Mervyn's.")

    Interest Expense:

        Interest expense increased $31.2 million from 2007 to 2008. The increase in interest expense was primarily attributed to an increase of $17.9 million from borrowings under the Company's line of credit, $9.3 million from the Redevelopment Centers, $5.4 million from the Senior Notes issued on March 16, 2007 and $4.7 million from the Same Centers. The increase in interest expense was offset in part by a decrease of $3.8 million from term loans.

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        The increase in interest expense on the Company's line of credit was due to an increase in average outstanding borrowings during 2008, in part, because of the purchase of The Shops at North Bridge, the 2007 Acquisition Properties and the 2008 Acquisition Properties and the repurchase and retirement of Senior Notes in 2008, which is offset in part by lower LIBOR rates and spreads. The decrease in interest on term loans was due to the repayment of the $250 million loan in 2007.

        The above interest expense items are net of capitalized interest, which increased from $32.0 million in 2007 to $33.3 million in 2008 due to an increase in redevelopment activity in 2008.

    (Gain) Loss on Early Extinguishment of Debt:

        The Company recorded a gain of $95.3 million on the early extinguishment of $222.8 million of the Senior Notes in 2008. In 2007, the Company recorded a $0.9 million loss from the early extinguishment of the $250 million term loan (See "Liquidity and Capital Resources".)

    Equity in Income of Unconsolidated Joint Ventures:

        The equity in income of unconsolidated joint ventures increased $12.4 million from 2007 to 2008. The increase in equity in income of unconsolidated joint ventures is due in part to commission income of $6.5 million earned in 2008 from a joint venture, $3.6 million relating to the acquisition of The Shops at North Bridge in 2008, and $2.0 million relating to a loss on the sale of assets in the SDG Macerich Properties, L.P. joint venture in 2007.

    (Loss) Gain on Sale or Write-down of Assets:

        The Company recorded a loss on sale or write down of assets of $31.8 million in 2008 relating to an $8.7 million write-off of development costs on projects the Company has determined not to pursue, a $19.2 million impairment charge to reduce the carrying value of land held for development and a $5.3 million adjustment to reduce the carrying value of Mervyn's stores that the Company had previously classified as held for sale (See "Management's Overview and Summary—Mervyn's.") The gain on sale or write-down of assets in 2007 of $12.1 million is primarily related to gain on sales of land.

    Discontinued Operations:

        Income from discontinued operations increased $98.8 million from 2007 to 2008. The increase is primarily due to the $99.1 million gain from the Rochester Redemption in 2008. See "Management's Overview and Summary—Acquisitions and Dispositions." As a result of the Rochester Redemption, the Company classified the results of operations for these properties to discontinued operations for all periods presented.

    Minority Interest in the Operating Partnership:

        The minority interest in the Operating Partnership represents the 14.4% weighted average interest of the Operating Partnership not owned by the Company during 2008 compared to the 15.0% not owned by the Company during 2007. The decrease in minority interest is primarily attributed to the conversion of 3,067,131 preferred shares into common shares in 2008 (See Note 22—Cumulative Convertible Redeemable Preferred Stock of the Company's Consolidated Financial Statements) and the repurchase of 807,000 shares in 2007 (See Note 21—Stock Repurchase Program of the Company's Consolidated Financial Statements).

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    Funds From Operations:

        Primarily as a result of the factors mentioned above, "FFO"—diluted increased 19.2% from $407.9 million in 2007 to $486.4 million in 2008. For disclosure of net income, the most directly comparable GAAP financial measure, for the periods and a reconciliation of FFO and FFO—diluted to net income available to common stockholders, see "Funds from Operations."

    Operating Activities:

        Cash flow from operations decreased from $326.1 million in 2007 to $251.9 million in 2008. The decrease was primarily due to changes in assets and liabilities in 2007 compared to 2008, an increase in distributions of income from unconsolidated joint ventures and due to the results at the Centers as discussed above.

    Investing Activities:

        Cash used in investing activities decreased from $865.3 million in 2007 to $559.0 million in 2008. The decrease in cash used in investing activities was primarily due to a decrease in capital expenditures of $507.7 million and acquisition deposits of $51.9 million offset by a decrease in distributions from unconsolidated joint ventures of $132.5 million and an increase in contributions to unconsolidated joint ventures. The decrease in capital expenditures is primarily due to the purchase of the Mervyn's portfolio for $400.2 million in 2007. The decrease in acquisition deposits and the increase in contributions to unconsolidated joint ventures is primarily due to the Company's purchase of a pro rata share of The Shops at North Bridge for $155.0 million in 2008 (See "Management's Overview and Summary—Acquisitions and Dispositions.") The decrease in distributions from unconsolidated joint ventures is due to the receipt of the Company's pro rata share of loan proceeds from the refinance transactions at various unconsolidated joint ventures in 2007.

    Financing Activities:

        Cash flow provided by financing activities decreased from $355.1 million in 2007 to $288.3 million in 2008. The decrease in cash provided by financing activities was primarily attributed to the issuance of $950 million of Senior Notes in 2007, the repurchase of $222.8 million of Senior Notes in 2008 (see "Liquidity and Capital Resources") and the purchase of the Capped Calls in connection with the issuance of the Senior Notes in 2007.

Comparison of Years Ended December 31, 2007 and 2006

    Revenues:

        Rental revenue increased by $39.7 million, or 8.6%, from 2006 to 2007. The increase in rental revenue is attributed to an increase of $17.9 million from the 2006 Acquisition Centers, $13.8 million from the Redevelopment Centers, $6.7 million from the Same Centers and $1.2 million from the 2007 Acquisition Properties.

        The amortization of above and below market leases, which is recorded in rental revenue, decreased to $10.6 million in 2007 from $12.2 million in 2006. The decrease in amortization is primarily due to leases which were terminated in 2006. The amortization of straight-lined rents, included in rental revenue, was $6.9 million in 2007 compared to $4.7 million in 2006. Lease termination income, which is included in rental revenue, decreased to $9.8 million in 2007 from $13.2 million in 2006.

        Tenant recoveries increased $17.9 million, or 7.9%, from 2006 to 2007. The increase in tenant recoveries is attributed to an increase of $11.0 million from the 2006 Acquisition Centers, $4.3 million from the Redevelopment Centers, $2.4 million from the Same Centers and $0.2 million from the 2007 Acquisition Properties.

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        Management Companies' revenues increased by $8.3 million from 2006 to 2007, primarily due to increased management fees received from the Joint Venture Centers, additional third party management contracts and increased development fees from joint ventures.

    Shopping Center and Operating Expenses:

        Shopping center and operating expenses increased $23.1 million, or 9.9%, from 2006 to 2007. Approximately $9.6 million of the increase in shopping center and operating expenses is from the 2006 Acquisition Centers, $6.8 million is from the Redevelopment Centers, $6.1 million is from the Same Centers and $0.5 million is from the 2007 Acquisition Properties.

    Management Companies' Operating Expenses:

        Management Companies' operating expenses increased to $73.8 million in 2007 from $56.7 million in 2006, in part as a result of the additional costs of managing the Joint Venture Centers and third party managed properties, higher compensation expense due to increased staffing and higher professional fees.

    REIT General and Administrative Expenses:

        REIT general and administrative expenses increased by $3.1 million in 2007 from 2006, primarily due to increased share and unit-based compensation expense in 2007.

    Depreciation and Amortization:

        Depreciation and amortization increased $15.7 million in 2007 from 2006. The increase in depreciation and amortization is primarily attributed to an increase of $10.5 million at the Redevelopment Centers, $10.4 million from the 2006 Acquisition Centers and $0.1 million from the 2007 Acquisition Properties. This increase is offset in part by a decrease of $1.8 million from the Same Centers.

    Interest Expense:

        Interest expense decreased $10.6 million in 2007 from 2006. The decrease in interest expense was primarily attributed to a decrease of $17.2 million from term loans, $16.1 million from the line of credit, $8.1 million from the Same Centers and $2.7 million from the Redevelopment Centers. The decrease in interest expense was offset in part by an increase of $27.3 million from the $950.0 million Senior Notes issued on March 16, 2007 and $6.6 million from the 2006 Acquisition Centers. The decrease in interest on term loans was due to the repayment of the $250 million loan in 2007 and the repayment of the $619 million term loan in 2006. The decrease in interest on the line of credit was due to: (i) a decrease in average outstanding borrowings during 2007, in part, because of the issuance of the Senior Notes, (ii) a decrease in interest rates because of the $400 million swap and (iii) lower LIBOR rates and spreads. The decrease in interest from the Same Centers is due to: (i) the repayment of the $75.0 million loan on Paradise Valley Mall in January 2007, (ii) an increase in capitalized interest and (iii) a decrease in LIBOR rates on floating rate mortgages payable. The above interest expense items are net of capitalized interest, which increased to $32.0 million in 2007 from $14.9 million in 2006 due to an increase in redevelopment activity in 2007.

    Loss on Early Extinguishment of Debt:

        The Company recorded a $0.9 million loss from the early extinguishment of the $250 million term loan in 2007. In 2006, the Company recorded a loss from the early extinguishment of debt of $1.8