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

FORM 10-Q

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

For the quarterly period ended June 30, 2009

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)

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

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

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

YES  ý         NO  o

        Indicate by check mark whether the registrant has submitted electronically and posted on its corporate web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding twelve (12) months (or for such shorter period that the registrant was required to submit and post such files).

YES  o         NO  o

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

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

        Number of shares outstanding as of August 7, 2009 of the registrant's common stock, par value $.01 per share: 79,299,665 shares


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THE MACERICH COMPANY

FORM 10-Q

INDEX

Part I

 

Financial Information

       

Item 1.

 

Financial Statements (Unaudited)

    3  

 

Consolidated Balance Sheets of the Company as of June 30, 2009 and December 31, 2008

    3  

 

Consolidated Statements of Operations of the Company for the three and six months ended June 30, 2009 and 2008

    4  

 

Consolidated Statements of Equity of the Company for the six months ended June 30, 2009 and 2008

    5  

 

Consolidated Statements of Cash Flows of the Company for the six months ended June 30, 2009 and 2008

    7  

 

Notes to Consolidated Financial Statements

    8  

Item 2.

 

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

    44  

Item 3.

 

Quantitative and Qualitative Disclosures About Market Risk

    60  

Item 4.

 

Controls and Procedures

    61  

Part II

 

Other Information

       

Item 1.

 

Legal Proceedings

    62  

Item 1A.

 

Risk Factors

    62  

Item 2.

 

Unregistered Sales of Equity Securities and Use of Proceeds

    62  

Item 3.

 

Defaults Upon Senior Securities

    62  

Item 4.

 

Submission of Matters to a Vote of Security Holders

    62  

Item 5.

 

Other Information

    63  

Item 6.

 

Exhibits

    64  

Signature

    66  

2


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THE MACERICH COMPANY

CONSOLIDATED BALANCE SHEETS

(Dollars in thousands, except par value and share amounts)

(Unaudited)

 
  June 30,
2009
  December 31,
2008
 

ASSETS:

             

Property, net

  $ 6,360,530   $ 6,371,319  

Cash and cash equivalents

    57,889     66,529  

Restricted cash

    69,970     61,707  

Marketable securities

    27,462     27,943  

Tenant and other receivables, net

    92,526     118,374  

Deferred charges and other assets, net

    317,952     339,662  

Loans to unconsolidated joint ventures

    638     932  

Due from affiliates

    7,815     9,124  

Investments in unconsolidated joint ventures

    1,034,166     1,094,845  
           
     

Total assets

  $ 7,968,948   $ 8,090,435  
           

LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND EQUITY:

             

Mortgage notes payable:

             
 

Related parties

  $ 369,208   $ 306,859  
 

Others

    3,315,409     3,373,116  
           
     

Total

    3,684,617     3,679,975  

Bank and other notes payable

    2,272,523     2,260,443  

Accounts payable and accrued expenses

    77,137     114,502  

Other accrued liabilities

    262,544     289,146  

Investments in unconsolidated joint ventures

    65,071     80,915  

Preferred dividends payable

    207     243  
           
     

Total liabilities

    6,362,099     6,425,224  
           

Redeemable noncontrolling interests

    23,327     23,327  
           

Commitments and contingencies

             

Equity:

             
 

Stockholders' equity:

             
   

Common stock, $.01 par value, 250,000,000 and 145,000,000 shares authorized, 79,315,402 and 76,883,634 shares issued and outstanding at June 30, 2009 and December 31, 2008, respectively

    793     769  
   

Additional paid-in capital

    1,763,120     1,721,256  
   

Accumulated deficit

    (383,503 )   (274,834 )
   

Accumulated other comprehensive loss

    (35,936 )   (53,425 )
           
     

Total stockholders' equity

    1,344,474     1,393,766  
 

Noncontrolling interests

    239,048     248,118  
           
     

Total equity

    1,583,522     1,641,884  
           
     

Total liabilities, redeemable noncontrolling interests and equity

  $ 7,968,948   $ 8,090,435  
           

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

3


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THE MACERICH COMPANY

CONSOLIDATED STATEMENTS OF OPERATIONS

(Dollars in thousands, except share and per share amounts)

(Unaudited)

 
  For the Three Months
Ended June 30,
  For the Six Months
Ended June 30,
 
 
  2009   2008   2009   2008  

Revenues:

                         
 

Minimum rents

  $ 123,504   $ 129,831   $ 250,976   $ 260,979  
 

Percentage rents

    2,686     2,954     5,487     5,658  
 

Tenant recoveries

    62,530     66,913     127,441     134,570  
 

Management Companies

    9,345     10,382     17,885     20,073  
 

Other

    7,850     6,711     14,904     13,041  
                   
   

Total revenues

    205,915     216,791     416,693     434,321  
                   

Expenses:

                         
 

Shopping center and operating expenses

    67,554     69,008     138,326     139,631  
 

Management Companies' operating expenses

    18,872     20,529     42,302     38,872  
 

REIT general and administrative expenses

    4,648     4,135     9,906     8,538  
 

Depreciation and amortization

    63,740     57,474     128,651     118,129  
                   

    154,814     151,146     319,185     305,170  
                   
 

Interest expense:

                         
   

Related parties

    6,254     3,683     12,044     7,379  
   

Other

    65,660     68,359     129,808     139,032  
                   

    71,914     72,042     141,852     146,411  
 

Gain on early extinguishment of debt

    (7,127 )       (29,601 )    
                   
   

Total expenses

    219,601     223,188     431,436     451,581  

Equity in income of unconsolidated joint ventures

    14,556     24,946     30,482     47,244  

Income tax benefit

    380     689     1,181     388  

(Loss) gain on sale or write down of assets

    (25,605 )   489     (24,832 )   1,163  
                   

(Loss) income from continuing operations

    (24,355 )   19,727     (7,912 )   31,535  
                   

Discontinued operations:

                         
 

(Loss) gain on sale of assets

        (113 )   (17 )   99,150  
 

(Loss) income from discontinued operations

    (11 )   414     (20 )   1,007  
                   

Total (loss) income from discontinued operations

    (11 )   301     (37 )   100,157  
                   

Net (loss) income

    (24,366 )   20,028     (7,949 )   131,692  

Less net (loss) income attributable to noncontrolling interests

    (2,630 )   3,468     (229 )   20,068  
                   

Net (loss) income attributable to the Company

    (21,736 )   16,560     (7,720 )   111,624  

Less preferred dividends

        835         3,289  
                   

Net (loss) income available to common stockholders

  $ (21,736 ) $ 15,725   $ (7,720 ) $ 108,335  
                   

Earnings per common share attributable to Company—basic:

                         
 

(Loss) income from continuing operations

  $ (0.29 ) $ 0.21   $ (0.12 ) $ 0.31  
 

Discontinued operations

                1.17  
                   
 

Net (loss) income available to common stockholders

  $ (0.29 ) $ 0.21   $ (0.12 ) $ 1.48  
                   

Earnings per common share attributable to Company—diluted:

                         
 

(Loss) income from continuing operations

  $ (0.29 ) $ 0.21   $ (0.12 ) $ 0.30  
 

Discontinued operations

                1.17  
                   
 

Net (loss) income available to common stockholders

  $ (0.29 ) $ 0.21   $ (0.12 ) $ 1.47  
                   

Weighted average number of common shares outstanding:

                         
 

Basic

    77,270,000     73,780,000     77,082,000     73,061,000  
                   
 

Diluted

    77,270,000     86,781,000     77,082,000     88,465,000  
                   

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

4


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THE MACERICH COMPANY

CONSOLIDATED STATEMENTS OF EQUITY

(Dollars in thousands, except per share data)

(Unaudited)

 
  Stockholders' Equity    
   
   
 
 
  Shares   Par
Value
  Additional
Paid-in
Capital
  Accumulated
Deficit
  Accumulated
Other
Comprehensive
Loss
  Total Stockholders' Equity   Noncontrolling
Interest
  Total
Equity
  Redeemable
Noncontrolling
Interests
 

Balance January 1, 2009

    76,883,634   $ 769   $ 1,721,256   $ (274,834 ) $ (53,425 ) $ 1,393,766   $ 248,118   $ 1,641,884   $ 23,327  
                                       

Comprehensive income:

                                                       
 

Net loss

                (7,720 )       (7,720 )   (521 )   (8,241 )   292  
 

Interest rate swap/cap agreements

                    17,489     17,489         17,489      
                                       
 

Total comprehensive income

                (7,720 )   17,489     9,769     (521 )   9,248     292  

Amortization of share and unit-based plans

    171,612     2     8,837             8,839         8,839      

Employee stock purchases

    23,202         368             368         368      

Distributions paid ($1.40) per share

                (100,949 )       (100,949 )       (100,949 )    

Distributions to noncontrolling interests

                            (16,233 )   (16,233 )   (292 )

Issuance of common shares

    2,236,954     22     36,216             36,238         36,238      

Contributions from noncontrolling interests

                            4,741     4,741      

Other

            (515 )           (515 )       (515 )    

Redemption of noncontrolling interests

                            (99 )   (99 )    

Adjustment of noncontrolling interest in Operating Partnership

            (3,042 )           (3,042 )   3,042          
                                       

Balance June 30, 2009

    79,315,402   $ 793   $ 1,763,120   $ (383,503 ) $ (35,936 ) $ 1,344,474   $ 239,048   $ 1,583,522   $ 23,327  
                                       

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THE MACERICH COMPANY

CONSOLIDATED STATEMENTS OF EQUITY (Continued)

(Dollars in thousands, except per share data)

(Unaudited)

 

 
  Stockholders' Equity    
   
   
 
 
  Shares   Par
Value
  Additional
Paid-in
Capital
  Accumulated
Deficit
  Accumulated
Other
Comprehensive
Loss
  Total
Common
Stockholders'
Equity
  Noncontrolling
Interest
  Total
Equity
  Redeemable
Noncontrolling
Interests
 

Balance January 1, 2008

    72,311,763   $ 723   $ 1,428,124   $ (203,505 ) $ (24,508 ) $ 1,200,834   $ 230,529   $ 1,431,363   $ 322,619  
                                       

Comprehensive income:

                                                       
 

Net income

                108,335         108,335     19,776     128,111     292  
 

Reclassification of deferred losses

                    285     285         285      
 

Interest rate swap/cap agreements

                    (201 )   (201 )       (201 )    
                                       
 

Total comprehensive income

                108,335     84     108,419     19,776     128,195     292  

Amortization of share and unit-based plans

    185,503     2     10,615               10,617         10,617      

Exercise of stock options

    38,750         991             991         991      

Employee stock purchases

    6,494         363             363         363      

Distributions paid ($1.60) per share

                (116,261 )       (116,261 )       (116,261 )    

Distributions to noncontrolling interests

                            (21,712 )   (21,712 )   (292 )

Preferred dividends

            (3,289 )           (3,289 )       (3,289 )    

Contributions from noncontrolling interests

                            10,035     10,035      

Conversion of noncontrolling interests to common shares

    58,624     1     1,768             1,769     (1,769 )        

Conversion of preferred shares to common shares

    2,022,860     20     55,750             55,770         55,770      

Redemption of noncontrolling interests

                                    (96,564 )

Reversal of adjustments to redemption value of redeemable noncontrolling interests

            202,728             202,728         202,728     (202,728 )

Other

            106             106         106      

Adjustment of noncontrolling interest in Operating Partnership

            (36,441 )           (36,441 )   36,441          
                                       

Balance June 30, 2008

    74,623,994   $ 746   $ 1,660,715   $ (211,431 ) $ (24,424 ) $ 1,425,606   $ 273,300   $ 1,698,906   $ 23,327  
                                       

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

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THE MACERICH COMPANY

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in thousands)

(Unaudited)

 
  For the Six Months
Ended June 30,
 
 
  2009   2008  

Cash flows from operating activities:

             
 

Net (loss) income

  $ (7,949 ) $ 131,692  
 

Adjustments to reconcile net (loss) income to net cash provided by operating activities:

             
   

Gain on early extinguishment of debt

    (29,601 )    
   

Loss (gain) on sale or write down of assets

    24,832     (1,163 )
   

Loss (gain) on sale of assets of discontinued operations

    17     (99,150 )
   

Depreciation and amortization

    134,561     122,542  
   

Amortization of net discount on mortgage and bank and other notes payable

    301     2,774  
   

Amortization of share and unit-based plans

    5,036     5,695  
   

Equity in income of unconsolidated joint ventures

    (30,482 )   (47,244 )
   

Distributions of income from unconsolidated joint ventures

    5,698     14,922  
   

Changes in assets and liabilities, net of acquisitions and dispositions:

             
     

Tenant and other receivables, net

    17,163     25,645  
     

Other assets

    9,503     (2,885 )
     

Accounts payable and accrued expenses

    (55,080 )   (25,475 )
     

Due from affiliates

    1,309     (366 )
     

Other accrued liabilities

    (9,521 )   (19,741 )
           
 

Net cash provided by operating activities

    65,787     107,246  
           

Cash flows from investing activities:

             
 

Acquisitions of property, development, redevelopment and property improvements

    (97,336 )   (326,724 )
 

Redemption of Rochester Properties

        (18,873 )
 

Maturities of marketable securities

    638     807  
 

Deferred leasing costs

    (17,287 )   (18,127 )
 

Distributions from unconsolidated joint ventures

    96,758     48,999  
 

Contributions to unconsolidated joint ventures

    (19,391 )   (142,124 )
 

Proceeds from loans to unconsolidated joint ventures

    294     188  
 

Proceeds from sale of assets

    8,394     3,282  
 

Restricted cash

    (8,263 )   (628 )
           
 

Net cash used in investing activities

    (36,193 )   (453,200 )
           

Cash flows from financing activities:

             
 

Proceeds from mortgages, bank and other notes payable

    242,917     871,788  
 

Payments on mortgages, bank and other notes payable

    (146,661 )   (414,856 )
 

Repurchase of Senior Notes

    (50,704 )    
 

Deferred financing costs

    (3,172 )   (5,744 )
 

Proceeds from share and unit-based plans

    368     1,354  
 

Dividends and distributions

    (80,982 )   (128,981 )
 

Dividends to preferred stockholders / preferred unitholders

        (9,073 )
           
 

Net cash (used in) provided by financing activities

    (38,234 )   314,488  
           
 

Net decrease in cash

    (8,640 )   (31,466 )

Cash and cash equivalents, beginning of period

    66,529     85,273  
           

Cash and cash equivalents, end of period

  $ 57,889   $ 53,807  
           

Supplemental cash flow information:

             
 

Cash payments for interest, net of amounts capitalized

  $ 137,150   $ 143,125  
           

Non-cash transactions:

             
 

Acquisition of noncontrolling interests in properties

  $   $ 205,520  
           
 

Deposits contributed to unconsolidated joint ventures and the purchase of properties

  $   $ 51,943  
           
 

Accrued development costs included in accounts payable and accrued expenses and other accrued liabilities

  $ 47,750   $ 55,156  
           
 

Accrued preferred dividend payable

  $ 207   $ 1,112  
           
 

Acquisition of property by assumption of mortgage note payable

  $   $ 15,775  
           
 

Stock dividend

  $ 38,564   $  
           

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

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THE MACERICH COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share amounts)

(Unaudited)

1. Organization:

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

        The Company commenced operations effective with the completion of its initial public offering on March 16, 1994. As of June 30, 2009, the Company was the sole general partner of and held an 87% ownership interest in The Macerich Partnership, L.P. (the "Operating Partnership"). The Company was organized to qualify as a real estate investment trust ("REIT") under the Internal Revenue Code of 1986, as amended.

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

2. Summary of Significant Accounting Policies:

Basis of Presentation:

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

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

        The unaudited interim consolidated financial statements should be read in conjunction with the Company's audited consolidated financial statements and notes thereto included in the Company's Current Report on Form 8-K filed May 27, 2009. In the opinion of management, all adjustments (consisting of normal recurring adjustments) necessary for a fair presentation of the consolidated financial statements for the interim periods have been made. The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at

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THE MACERICH COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands, except per share amounts)

(Unaudited)

2. Summary of Significant Accounting Policies: (Continued)


the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The accompanying consolidated balance sheet as of December 31, 2008 has been derived from the audited financial statements, but does not include all disclosures required by GAAP.

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

Tenant and Other Receivables, net:

        Included in tenant and other receivables, net is an allowance for doubtful accounts of $5,907 and $3,754 at June 30, 2009 and December 31, 2008, respectively.

        Included in tenant and other receivables, net are the following notes receivable:

        On March 31, 2006, the Company received a note receivable that is secured by a deed of trust, bears interest at 5.5% and matures on March 31, 2031. At June 30, 2009 and December 31, 2008, the note had a balance of $9,338 and $9,450, respectively.

        On January 1, 2008, as part of the Rochester Redemption (See Note 16—Discontinued Operations), the Company received an unsecured note receivable that bears interest at 9.0% and matures on June 30, 2011. The balance on the note at June 30, 2009 and December 31, 2008 was $11,763.

Accounting Pronouncements Adopted on January 1, 2009:

        Financial Accounting Standards Board ("FASB") issued FASB Staff Position ("FSP") Statement on Financial Accounting Standards ("SFAS") No. 157-2, "Effective Date of FASB Statement No. 157," deferred the effective date of SFAS No. 157 for all non-financial assets and non-financial liabilities except those that are recognized or disclosed at fair value in the financial statements on a recurring basis to fiscal years beginning after November 15, 2008. FSP SFAS No. 157-4, "Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly," reaffirmed the need to use judgment to ascertain if a formerly active market has become inactive and in determining fair values when markets have become inactive. The adoption of FSP SFAS No. 157-2 and FSP SFAS 157-4 did not have a material impact on the Company's consolidated financial statements.

        SFAS No. 141(R), "Business Combinations," 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. The adoption of SFAS No. 141(R) did not have a material impact on the Company's consolidated financial statements.

        SFAS No. 161, "Disclosures about Derivative Instruments and Hedging Activities, an amendment of FASB Statement No. 133," amends and expands the disclosure requirements of SFAS No. 133. SFAS No. 161 requires qualitative disclosures about objectives and strategies for using derivatives and quantitative disclosures about the fair value of and gains and losses on derivative instruments. As a result of the Company's adoption of SFAS No. 161, the Company has expanded its disclosures

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THE MACERICH COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands, except per share amounts)

(Unaudited)

2. Summary of Significant Accounting Policies: (Continued)


concerning its derivative instruments and hedging activities. See Note 5—Derivative Instruments and Hedging Activities.

        Emerging Issues Task Force ("EITF") No. 07-5, "Determining Whether an Instrument (or Embedded Feature) Is Indexed to an Entity's Own Stock," 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. 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. The adoption of EITF No. 07-05 did not have a material impact on the Company's consolidated financial statements.

        SFAS No. 160, "Noncontrolling Interests in Consolidated Financial Statements—An Amendment of ARB No. 51," 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.

        FSP APB 14-1, "Accounting for Convertible Debt Instruments That May Be Settled In Cash Upon Conversion (Including Partial Cash Settlement)," 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.

        FSP EITF No. 03-6-1, "Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities," provides that instruments granted in share-based payment transactions are participating securities prior to vesting and, therefore, need to be included in the earnings allocation in computing earnings per share under the two-class method described SFAS No. 128, "Earnings per Share."

        See Note 21—Cumulative Effect of Adoption of Accounting Principles for a summary of the impact of the adoption of SFAS No. 160, FSP APB 14-1 and FSP EITF No. 03-6-1 on the Company's consolidated financial statements.

        FSP SFAS 107-1 and APB 28-1, "Interim Disclosures about Fair Value of Financial Instruments," requires disclosures on a quarterly basis that provide qualitative and quantitative information about fair value estimates for all those financial instruments not measured on the balance sheet at fair value. The Company has provided these disclosures in Note 10—Mortgage Notes Payable and Note 11—Bank and Other Notes Payable.

10


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THE MACERICH COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands, except per share amounts)

(Unaudited)

2. Summary of Significant Accounting Policies: (Continued)

        FSP SFAS No. 115-2 and SFAS No. 124-2, "Recognition and Presentation of Other-Than-Temporary Impairments," requires increased and more timely disclosures regarding expected cash flows, credit losses, and an aging of securities with unrealized losses. The adoption of FSP SFAS No. 115-2 and SFAS No. 124-2 did not have a significant impact on the Company's consolidated financial statements.

Other Recent Accounting Pronouncements:

        On April 1, 2009, the Company adopted the provisions of SFAS No. 165, "Subsequent Events." SFAS No. 165 establishes principles and requirements for evaluating and reporting subsequent events and distinguishes which subsequent events should be recognized in the financial statements versus which subsequent events should be disclosed in the financial statements. The adoption of SFAS No. 165 did not have a material impact on the Company's consolidated financial statements.

        On April 1, 2009, the Company adopted FSP SFAS 141(R)-1, "Accounting for Assets Acquired and Liabilities Assumed in a Business Combination That Arise from Contingencies." FSP SFAS 141(R)-1 addresses application issues on the accounting for contingencies in a business combination. The adoption of FSP SFAS 141(R)-1 did not have any impact on the Company's consolidated financial statements.

        In June 2009, the Financial Accounting Standards Board ("FASB") issued SFAS No. 166, "Accounting for Transfers of Financial Assets—an amendment of FASB No. 140." SFAS No. 166 removes the concept of a qualifying special-purpose entity from SFAS No. 140, "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities—a replacement of FASB Statement 125" and removes the exception from applying FASB Interpretation ("FIN") No. 46, "Consolidation of Variable Interest Entities (revised December 2003)," to qualifying special-purpose entities. SFAS No. 166 requires a transferor to consider all arrangements or agreements made contemporaneously with, or in contemplation of, a transfer of a financial asset in order to determine whether a transferor and all of the entities included in the transferor's financial statements being presented have surrendered control of the transferred financial asset. SFAS No. 166 is effective for fiscal years beginning after November 15, 2009 and should be applied prospectively. Early adoption of this statement is prohibited. The Company believes that this statement will not have a material impact on its results of operations or financial condition.

        In June 2009, the FASB issued SFAS No. 167, "Amendments to FASB Interpretation No. 46 (R)." SFAS No. 167 retains the scope of FIN No. 46(R) with the addition of entities previously considered qualifying special-purpose entities, as the concept of these entities was eliminated in SFAS No. 166. SFAS No. 167 amends certain guidance in FIN No. 46(R) for determining whether an entity is a variable interest entity. It is possible that application of this revised guidance will change an enterprise's assessment of which entities with which it is involved are variable interest entities. SFAS No. 167 requires ongoing reassessments of whether an enterprise is the primary beneficiary of a variable interest entity. SFAS No. 167 also amends FIN No. 46(R) to require additional disclosures about an enterprise's involvement in variable interest entities, which will enhance the information provided to users of financial statements. SFAS No. 167 is effective for fiscal years beginning after November 15, 2009. Earlier application is prohibited. The Company is currently evaluating the impact of future adoption of SFAS No. 167 on its results of operations and financial condition.

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THE MACERICH COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands, except per share amounts)

(Unaudited)

3. Earnings per Share ("EPS"):

        The following table reconciles the numerator and denominator used in the computation of earnings per share for the three and six months ended June 30, 2009 and 2008.

 
  For the Three
Months Ended
June 30,
  For the Six
Months Ended
June 30,
 
 
  2009   2008   2009   2008  

Numerator

                         

(Loss) income from continuing operations

  $ (24,355 ) $ 19,727   $ (7,912 ) $ 31,535  

(Loss) income from discontinued operations

    (11 )   301     (37 )   100,157  

Income (loss) attributable to noncontrolling interests

    2,630     (3,468 )   229     (20,068 )
                   

Net (loss) income attributable to the Company

    (21,736 )   16,560     (7,720 )   111,624  

Preferred dividends

        (835 )       (3,289 )

Allocation of earnings to participating securities

    (1,019 )   (217 )   (1,231 )   (478 )
                   

Numerator for basic earnings per share—net (loss) income available to common stockholders

    (22,755 )   15,508     (8,951 )   107,857  

Effect of assumed conversions:

                         
 

Partnership units

        2,590         18,665  
 

Convertible preferred stock

                3,289  
                   

Numerator for diluted earnings per share—net (loss) income available to common stockholders

  $ (22,755 ) $ 18,098   $ (8,951 ) $ 129,811  
                   

Denominator

                         

Denominator for basic earnings per share—weighted average number of common shares outstanding

    77,270     73,780     77,082     73,061  

Effect of dilutive securities:(1)

                         
 

Partnership units(2)

        12,539         12,546  
 

Share and unit-based plans(3)

        462         398  
 

Convertible preferred stock(4)

                2,460  
                   

Denominator for diluted earnings per share—weighted average number of common shares outstanding

    77,270     86,781     77,082     88,465  
                   

Earnings per common share—basic:

                         
 

(Loss) income from continuing operations

  $ (0.29 ) $ 0.21   $ (0.12 ) $ 0.31  
 

Discontinued operations

                1.17  
                   
 

Net (loss) income available to common stockholders

  $ (0.29 ) $ 0.21   $ (0.12 ) $ 1.48  
                   

Earnings per common share—diluted:

                         
 

(Loss) income from continuing operations

  $ (0.29 ) $ 0.21   $ (0.12 ) $ 0.30  
 

Discontinued operations

                1.17  
                   
 

Net (loss) income available to common stockholders

  $ (0.29 ) $ 0.21   $ (0.12 ) $ 1.47  
                   

(1)
The Senior Notes (See Note 11—Bank and Other Notes Payable) are excluded from diluted EPS for the three and six months ended June 30, 2009 and 2008 as their effect would be antidilutive to net (loss) income available to common stockholders.

(2)
Diluted EPS excludes 11,700,000 and 11,677,000 partnership units for the three and six months ended June 30, 2009, respectively, as their effect was antidilutive to net loss available to common stockholders.

12


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THE MACERICH COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands, except per share amounts)

(Unaudited)

3. Earnings per Share ("EPS"): (Continued)

(3)
Diluted EPS excludes 1,257,384 of unexercised stock appreciation rights and 132,500 of unexercised stock options for the three and six months ended June 30, 2009 as their effect was antidilutive to net loss available to common stockholders.

(4)
The then outstanding convertible preferred stock (See Note 13—Cumulative Convertible Redeemable Preferred Stock) was convertible on a one-for-one basis for common stock. The convertible preferred stock was dilutive to net income available to common stockholders for the six months ended June 30, 2008.

        The noncontrolling interests of the Operating Partnership as reflected in the Company's consolidated statements of operations have been allocated for EPS calculations as follows:

 
  For the Three
Months Ended
June 30,
  For the Six
Months Ended
June 30,
 
 
  2009   2008   2009   2008  

(Loss) income from continuing operations

  $ (3,292 ) $ 2,544   $ (1,164 ) $ 3,984  

Discontinued operations:

                         
 

(Loss) gain on sale of assets

        (15 )   (2 )   14,535  
 

(Loss) income from discontinued operations

    (1 )   61     (3 )   146  
                   
 

Total

  $ (3,293 ) $ 2,590   $ (1,169 ) $ 18,665  
                   

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THE MACERICH COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands, except per share amounts)

(Unaudited)

4. Investments in Unconsolidated Joint Ventures:

        The following are the Company's investments in various joint ventures or properties jointly owned with third parties. The Operating Partnership's interest in each joint venture as of June 30, 2009 is as follows:

Joint Venture
  Partnership's
Ownership %(1)
 

Biltmore Shopping Center Partners LLC

    50.0 %

Camelback Colonnade SPE LLC

    75.0 %

Chandler Festival SPE LLC

    50.0 %

Chandler Gateway SPE LLC

    50.0 %

Chandler Village Center, LLC

    50.0 %

Coolidge Holding LLC

    37.5 %

Corte Madera Village, LLC

    50.1 %

Desert Sky Mall—Tenants in Common

    50.0 %

East Mesa Land, L.L.C. 

    50.0 %

East Mesa Mall, L.L.C.—Superstition Springs Center

    33.3 %

Jaren Associates #4

    12.5 %

Kierland Tower Lofts, LLC

    15.0 %

Macerich Northwestern Associates—Broadway Plaza

    50.0 %

Macerich SanTan Phase 2 SPE LLC—SanTan Village Power Center

    34.9 %

MetroRising AMS Holding LLC—Metrocenter Mall

    15.0 %

New River Associates—Arrowhead Towne Center

    33.3 %

North Bridge Chicago LLC

    50.0 %

NorthPark Land Partners, LP

    50.0 %

NorthPark Partners, LP

    50.0 %

One Scottsdale Investors LLC

    50.0 %

Pacific Premier Retail Trust

    51.0 %

PHXAZ/Kierland Commons, L.L.C. 

    24.5 %

Propcor Associates

    25.0 %

Propcor II Associates, LLC—Boulevard Shops

    50.0 %

Scottsdale Fashion Square Partnership

    50.0 %

SDG Macerich Properties, L.P. 

    50.0 %

The Market at Estrella Falls LLC

    35.1 %

Tysons Corner Holdings LLC

    50.0 %

Tysons Corner LLC

    50.0 %

Tysons Corner Property Holdings II LLC

    50.0 %

Tysons Corner Property Holdings LLC

    50.0 %

Tysons Corner Property LLC

    50.0 %

WM Inland, L.L.C. 

    50.0 %

West Acres Development, LLP

    19.0 %

Westcor/Gilbert, L.L.C. 

    50.0 %

Westcor/Queen Creek Commercial LLC

    37.9 %

Westcor/Queen Creek LLC

    37.7 %

Westcor/Queen Creek Medical LLC

    37.7 %

Westcor/Queen Creek Residential LLC

    37.7 %

Westcor/Surprise Auto Park LLC

    33.3 %

Westpen Associates

    50.0 %

Wilshire Building—Tenants in Common

    30.0 %

WM Ridgmar, L.P. 

    50.0 %

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

14


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THE MACERICH COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands, except per share amounts)

(Unaudited)

4. Investments in Unconsolidated Joint Ventures: (Continued)

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

        The Company has recently made the following investments and dispositions in unconsolidated joint ventures:

        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 $515,000. The Company's share of the purchase price was funded by the assumption of a pro rata share of the $205,000 fixed rate mortgage on the Center and by borrowings under the Company's line of credit. The results of The Shops at North Bridge are included below for the period subsequent to its date of acquisition.

        On June 11, 2008, the Company became a 50% owner in a joint venture that acquired One Scottsdale, which plans to develop a mixed-use property in Scottsdale, Arizona. The Company's share of the purchase price was $52,500, which was funded by borrowings under the Company's line of credit. The results of One Scottsdale are included below for the period subsequent to its date of acquisition.

        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 $43,405, resulting in a gain on sale of assets of $1,511. The Company's pro rata share of the proceeds was used to pay down the Company's line of credit. See Mervyn's in Note 15—Acquisitions and in Note 16—Discontinued Operations.

        Combined and condensed balance sheets and statements of operations are presented below for all unconsolidated joint ventures.

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THE MACERICH COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands, except per share amounts)

(Unaudited)

4. Investments in Unconsolidated Joint Ventures: (Continued)

Combined and Condensed Balance Sheets of Unconsolidated Joint Ventures:

 
  June 30,
2009
  December 31,
2008
 

Assets(1):

             
 

Properties, net

  $ 4,710,733   $ 4,706,823  
 

Other assets

    407,842     531,976  
           
 

Total assets

  $ 5,118,575   $ 5,238,799  
           

Liabilities and partners' capital(1):

             
 

Mortgage notes payable(2)

  $ 4,229,209   $ 4,244,270  
 

Other liabilities

    187,689     215,975  
 

Company's capital

    396,067     434,504  
 

Outside partners' capital

    305,610     344,050  
           

Total liabilities and partners' capital

  $ 5,118,575   $ 5,238,799  
           

Investments in unconsolidated joint ventures:

             
 

Company's capital

  $ 396,067   $ 434,504  
 

Basis adjustment(3)

    573,028     579,426  
           
 

Investments in unconsolidated joint ventures

  $ 969,095   $ 1,013,930  
           
 

Assets—Investments in unconsolidated joint ventures

 
$

1,034,166
 
$

1,094,845
 
 

Liabilities—Investments in unconsolidated joint ventures

    (65,071 )   (80,915 )
           

  $ 969,095   $ 1,013,930  
           

(1)
These amounts include the assets and liabilities of the following significant subsidiaries as of June 30, 2009 and December 31, 2008:
 
  SDG
Macerich
Properties, L.P.
  Pacific
Premier
Retail
Trust
  Tysons
Corner
LLC
 

As of June 30, 2009:

                   

Total Assets

  $ 859,603   $ 1,079,450   $ 329,486  

Total Liabilities

  $ 818,347   $ 963,547   $ 338,518  

As of December 31, 2008:

                   

Total Assets

  $ 882,117   $ 1,148,831   $ 328,064  

Total Liabilities

  $ 823,550   $ 976,506   $ 333,307  
(2)
Certain joint ventures have debt that could become recourse debt to the Company should the joint venture be unable to discharge the obligations of the related debt. As of June 30, 2009 and

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Table of Contents


THE MACERICH COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands, except per share amounts)

(Unaudited)

4. Investments in Unconsolidated Joint Ventures: (Continued)

    December 31, 2008, a total of $17,440 and $16,898, respectively, could become recourse debt to the Company.

    Included in mortgage notes payable are amounts due to affiliates of Northwestern Mutual Life ("NML") of $415,392 and $211,098 as of June 30, 2009 and December 31, 2008, respectively. NML is considered a related party because it is a joint venture partner with the Company in Macerich Northwestern Associates. Interest expense incurred on these borrowings amounted to $4,213 and $2,054 for the three months ended June 30, 2009 and 2008, respectively, and $7,511 and $4,159 for the six months ended June 30, 2009 and 2008, respectively.

(3)
This represents the difference between the cost of an investment and the book value of the underlying equity of the joint venture. The Company is amortizing this difference into income on a straight-line basis, consistent with the lives of the underlying assets. The amortization of this difference was $1,247 and $1,876 for the three months ended June 30, 2009 and 2008, respectively, and $5,111 and $4,364 for the six months ended June 30, 2009 and 2008, respectively.

17


Table of Contents


THE MACERICH COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands, except per share amounts)

(Unaudited)

4. Investments in Unconsolidated Joint Ventures: (Continued)

Combined and Condensed Statements of Operations of Unconsolidated Joint Ventures:

 
  SDG
Macerich
Properties, L.P.
  Pacific
Premier
Retail Trust
  Tysons
Corner
LLC
  Other
Joint
Ventures
  Total  

Three Months Ended June 30, 2009

                               

Revenues:

                               
 

Minimum rents

  $ 22,493   $ 32,034   $ 14,504   $ 67,915   $ 136,946  
 

Percentage rents

    410     861     239     1,786     3,296  
 

Tenant recoveries

    11,849     12,199     9,539     33,514     67,101  
 

Other

    850     973     492     4,558     6,873  
                       
   

Total revenues

    35,602     46,067     24,774     107,773     214,216  
                       

Expenses:

                               
 

Shopping center and operating expenses

    13,711     13,286     8,040     42,010     77,047  
 

Interest expense

    11,641     12,451     3,964     27,769     55,825  
 

Depreciation and amortization

    7,776     8,959     4,504     26,008     47,247  
                       
 

Total operating expenses

    33,128     34,696     16,508     95,787     180,119  
                       

Gain (loss) on sale of assets

    46             (59 )   (13 )
                       

Net income

  $ 2,520   $ 11,371   $ 8,266   $ 11,927   $ 34,084  
                       

Company's equity in net income

  $ 1,260   $ 5,784   $ 4,133   $ 3,379   $ 14,556  
                       

Three Months Ended June 30, 2008

                               

Revenues:

                               
 

Minimum rents

  $ 23,384   $ 32,034   $ 15,056   $ 70,747   $ 141,221  
 

Percentage rents

    601     579     668     2,729     4,577  
 

Tenant recoveries

    11,850     12,000     9,202     33,396     66,448  
 

Other

    886     1,095     367     23,266     25,614  
                       
   

Total revenues

    36,721     45,708     25,293     130,138     237,860  
                       

Expenses:

                               
 

Shopping center and operating expenses

    14,792     13,326     7,496     41,913     77,527  
 

Interest expense

    11,632     11,289     4,126     28,773     55,820  
 

Depreciation and amortization

    7,707     8,089     4,658     26,140     46,594  
                       
 

Total operating expenses

    34,131     32,704     16,280     96,826     179,941  
                       

(Loss) gain on sale of assets

    (14 )           6,170     6,156  
                       

Net income

  $ 2,576   $ 13,004   $ 9,013   $ 39,482   $ 64,075  
                       

Company's equity in net income

  $ 1,288   $ 6,618   $ 4,507   $ 12,533   $ 24,946  
                       

18


Table of Contents


THE MACERICH COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands, except per share amounts)

(Unaudited)

4. Investments in Unconsolidated Joint Ventures: (Continued)

 

 
  SDG
Macerich
Properties, L.P.
  Pacific
Premier
Retail Trust
  Tysons
Corner
LLC
  Other
Joint
Ventures
  Total  

Six Months Ended June 30, 2009

                               

Revenues:

                               
 

Minimum rents

  $ 45,479   $ 64,801   $ 29,146   $ 137,716   $ 277,142  
 

Percentage rents

    1,244     1,417     382     3,268     6,311  
 

Tenant recoveries

    24,133     24,452     18,618     67,564     134,767  
 

Other

    1,686     1,970     885     9,799     14,340  
                       
   

Total revenues

    72,542     92,640     49,031     218,347     432,560  
                       

Expenses:

                               
 

Shopping center and operating expenses

    27,967     26,969     15,704     83,290     153,930  
 

Interest expense

    23,157     24,679     7,962     55,737     111,535  
 

Depreciation and amortization

    15,024     17,842     8,954     52,299     94,119  
                       
 

Total operating expenses

    66,148     69,490     32,620     191,326     359,584  
                       

Gain on sale of assets

    44               117     161  
                       

Net income

  $ 6,438   $ 23,150   $ 16,411   $ 27,138   $ 73,137  
                       

Company's equity in net income

  $ 3,219   $ 11,774   $ 8,206   $ 7,283   $ 30,482  
                       

Six Months Ended June 30, 2008

                               

Revenues:

                               
 

Minimum rents

  $ 46,585   $ 63,983   $ 30,150   $ 138,956   $ 279,674  
 

Percentage rents

    1,531     1,703     1,121     4,917     9,272  
 

Tenant recoveries

    24,277     24,916     18,235     67,794     135,222  
 

Other

    1,977     2,194     973     29,388     34,532  
                       
   

Total revenues

    74,370     92,796     50,479     241,055     458,700  
                       

Expenses:

                               
 

Shopping center and operating expenses

    29,738     26,463     15,210     81,324     152,735  
 

Interest expense

    23,260     22,894     8,242     58,313     112,709  
 

Depreciation and amortization

    15,158     15,921     9,280     49,464     89,823  
                       
 

Total operating expenses

    68,156     65,278     32,732     189,101     355,267  
                       

(Loss) gain on sale of assets

    (14 )           14,786     14,772  
                       

Net income

  $ 6,200   $ 27,518   $ 17,747   $ 66,740   $ 118,205  
                       

Company's equity in net income

  $ 3,100   $ 14,003   $ 8,874   $ 21,267   $ 47,244  
                       

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

19


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THE MACERICH COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands, except per share amounts)

(Unaudited)

5. Derivative Instruments and Hedging Activities:

        The Company recognizes all derivatives in the consolidated financial statements and measures the derivatives at fair value. The Company uses interest rate swap and cap agreements (collectively, "interest rate agreements") in the normal course of business to manage or reduce its exposure to adverse fluctuations in interest rates. The Company designs its hedges to be effective in reducing the risk exposure that they are designated to hedge. Any instrument that meets the cash flow hedging criteria in SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities," is formally designated as a cash flow hedge at the inception of the derivative contract. On an ongoing quarterly basis, the Company adjusts its balance sheet to reflect the current fair value of its derivatives. To the extent they are effective, changes in fair value of derivatives are recorded in comprehensive income. Ineffective portions, if any, are included in net income. No ineffectiveness was recorded in net income during the three or six months ended June 30, 2009 or 2008. If any derivative instrument used for risk management does not meet the hedging criteria, it is marked-to-market each period in the consolidated statements of operations. As of June 30, 2009, two of the Company's derivative instruments were not designated as cash flow hedges. Changes in the market value of these derivative instruments are recorded in the consolidated statements of operations. As of June 30, 2009, the Company's derivative instruments did not contain any credit risk related contingent features or collateral arrangements.

        The Company reclassified $44 and $285 for the three and six months ended June 30, 2008, respectively, related to treasury rate lock transactions settled in prior years from accumulated other comprehensive income to earnings.

        Amounts paid (received) as a result of interest rate agreements are recorded as an addition (reduction) of interest expense. The Company recorded other comprehensive (loss) income related to the marking-to-market of interest rate agreements of ($15,501) and $23,656 for the three months ended June 30, 2009 and 2008, respectively and $17,489 and ($201) for the six months ended June 30, 2009 and 2008, respectively. The amount expected to be reclassified to interest expense in the next 12 months is immaterial.

        The following derivatives were outstanding at June 30, 2009:

Property/Entity
  Notional
Amount
  Product   Rate   Maturity   Fair
Value
 

La Cumbre Plaza(1)(2)

  $ 30,000   Cap     7.12 %   8/9/2009   $  

Panorama Mall(1)(2)

    50,000   Cap     6.65 %   3/1/2010      

The Oaks(2)

    150,000   Cap     6.25 %   7/1/2010      

The Operating Partnership(3)

    450,000   Swap     4.80 %   4/15/2010     (14,401 )

The Operating Partnership(3)

    400,000   Swap     5.08 %   4/25/2011     (24,543 )

Westside Pavilion(2)

    175,000   Cap     5.50 %   6/1/2010      

(1)
Derivative is not designated as a hedge.

(2)
See additional disclosure in Note 10—Mortgage Notes Payable.

(3)
See additional disclosure in Note 11—Bank and Other Notes Payable.

20


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THE MACERICH COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands, except per share amounts)

(Unaudited)

5. Derivative Instruments and Hedging Activities: (Continued)

 
  Asset Derivatives   Liability Derivatives  
 
   
  June 30,
2009
  December 31,
2008
   
  June 30,
2009
  December 31,
2008
 
 
  Balance
Sheet
Location
  Fair
Value
  Fair
Value
  Balance
Sheet
Location
  Fair
Value
  Fair
Value
 
Derivatives designated as hedging instruments under SFAS No. 133
   
   
   
   
   
   
 
 

Interest rate cap agreements

  Other assets   $   $ 2   Other liabilities   $   $  
 

Interest rate swap agreements

  Other assets           Other liabilities     38,944     56,434  
                           

Total derivatives designated as hedging instruments under SFAS No. 133

            2         38,944     56,434  
                           

 

Derivatives not designated as hedging instruments under SFAS No. 133
   
   
   
   
   
   
 
 

Interest rate cap agreements

  Other assets           Other liabilities          
 

Interest rate swap agreements

  Other assets           Other liabilities          
                           

Total derivatives not designated as hedging instruments under SFAS No. 133

                         
                           

Total derivatives

      $   $ 2       $ 38,944   $ 56,434  
                           

6. Fair Value:

Derivatives:

        The fair values of interest rate agreements are determined using the market standard methodology of discounting the future expected cash receipts that would occur if variable interest rates fell below or rose above the strike rate of the interest rate agreements. The variable interest rates used in the calculation of projected receipts on the interest rate agreements are based on an expectation of future interest rates derived from observable market interest rate curves and volatilities. To comply with the provisions of SFAS No. 157, "Fair Value Measurements," the Company incorporates credit valuation adjustments to appropriately reflect both its own nonperformance risk and the respective counterparty's nonperformance risk in the fair value measurements. In adjusting the fair value of its derivative contracts for the effect of nonperformance risk, the Company has considered the impact of netting and any applicable credit enhancements, such as collateral postings, thresholds, mutual puts, and guarantees.

        Although the Company has determined that the majority of the inputs used to value its derivatives fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with its derivatives utilize Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by itself and its counterparties. However, as of June 30, 2009 and December 31, 2008, the Company has assessed the significance of the impact of the credit valuation adjustments on the overall valuation of its derivative positions and has determined that the credit valuation adjustments are not

21


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THE MACERICH COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands, except per share amounts)

(Unaudited)

6. Fair Value: (Continued)


significant to the overall valuation of its derivatives. As a result, the Company has determined that its derivative valuations in their entirety are classified in Level 2 of the fair value hierarchy.

Long-Lived Assets:

        In accordance with SFAS No. 144, "Accounting for Impairment or Disposal of Long-Lived Assets," long-lived assets held and used with a carrying value of $89,445 were written down to their fair value of $62,450, resulting in an impairment charge of $26,995, which was recorded to (loss) gain on sale or write down of assets for the three and six months ended June 30, 2009. The fair value was determined by the proceeds received on sales of the assets subsequent to June 30, 2009. See Note 22—Subsequent Events.

        The following table presents certain of the Company's long-lived assets held and used and derivative instruments measured at fair value as of June 30, 2009:

 
  Quoted Prices in
Active Markets for
Identical Assets and
Liabilities (Level 1)
  Significant Other
Observable
Inputs (Level 2)
  Significant
Unobservable
Inputs (Level 3)
  Total  

Assets

                         

Long-lived assets held and used

  $   $ 62,450   $   $ 62,450  

Liabilities

                         

Derivative Instruments

  $   $ 38,944   $   $ 38,944  

7. Property:

        Property consists of the following:

 
  June 30,
2009
  December 31,
2008
 

Land

  $ 1,149,612   $ 1,135,013  

Building improvements

    5,250,063     5,190,049  

Tenant improvements

    334,742     327,877  

Equipment and furnishings

    107,729     101,991  

Construction in progress

    603,163     600,773  
           

    7,445,309     7,355,703  

Less accumulated depreciation

    (1,084,779 )   (984,384 )
           

  $ 6,360,530   $ 6,371,319  
           

        The above schedule also includes the properties purchased in connection with the acquisition of Mervyn's and Boscov's freestanding stores acquired in 2008 (See Note 15—Acquisitions).

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THE MACERICH COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands, except per share amounts)

(Unaudited)

7. Property: (Continued)

        Depreciation expense was $53,399 and $44,772 for the three months ended June 30, 2009 and 2008, respectively and $106,022 and $91,560 for the six months ended June 30, 2009 and 2008, respectively.

        The Company recognized a gain on the sale of land of $1,453 and $489 during the three months ended June 30, 2009 and 2008, respectively and $2,807 and $1,163 for the six months ended June 30, 2009 and 2008, respectively. The Company wrote off $63 and $644 of development costs during the three months and six months ended June 30, 2009, respectively. In addition, the Company recorded an impairment charge of $26,995 for the three and six months ended June 30, 2009 related to the write down of assets sold in July 2009. (See Note 6—Fair Value).

8. Marketable Securities:

        Marketable Securities consists of the following:

 
  June 30,
2009
  December 31,
2008
 

Government debt securities, at par value

  $ 28,470   $ 29,108  

Less discount

    (1,008 )   (1,165 )
           

    27,462     27,943  

Unrealized gain

    2,828     4,347  
           

Fair value

  $ 30,290   $ 32,290  
           

        Future contractual maturities of marketable securities at June 30, 2009 are as follows:

1 year or less

  $ 1,299  

2 to 5 years

    4,091  

6 to 10 years

    23,080  
       

  $ 28,470  
       

        The proceeds from maturities and interest receipts from the marketable securities are restricted to the service of the $26,699 note on which the Company remains obligated following the sale of Greeley Mall in July 2006 (See Note 11—Bank and Other Notes Payable). The Company accounts for its investments in marketable securities as held-to-maturity debt securities under the provisions of SFAS No. 115, "Accounting for Certain Investments in Debt and Equity Securities," as the Company has the intent and the ability to hold these securities until maturity. Accordingly, investments in marketable securities are carried at their amortized cost. The discount on marketable securities is amortized into interest income on a straight-line basis over the term of the notes, which approximates the effective interest method.

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THE MACERICH COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands, except per share amounts)

(Unaudited)

9. Deferred Charges And Other Assets, net:

        Deferred charges and other assets, net consists of the following:

 
  June 30,
2009
  December 31,
2008
 

Leasing

  $ 149,262   $ 139,374  

Financing

    53,717     54,256  

Intangible assets resulting from SFAS No. 141(R) allocations:

             
 

In-place lease values

    163,175     175,428  
 

Leasing commissions and legal costs

    54,380     57,832  
           

    420,534     426,890  

Less accumulated amortization(1)

    (187,430 )   (181,579 )
           

    233,104     245,311  

Other assets

    84,848     94,351  
           

  $ 317,952   $ 339,662  
           

(1)
Accumulated amortization includes $104,240 and $104,600 relating to intangibles resulting from SFAS No. 141(R) allocations at June 30, 2009 and December 31, 2008, respectively. Amortization expense for SFAS No. 141(R) allocations was $4,815 and $8,168 for the three months ended June 30, 2009 and 2008, respectively and $11,645 and $17,239 for the six months ended June 30, 2009 and 2008, respectively.

        The allocated values of above market leases included in deferred charges and other assets, net, and below market leases included in other accrued liabilities, related to SFAS No. 141(R), consist of the following:

 
  June 30,
2009
  December 31,
2008
 

Above Market Leases

             

Original allocated value

  $ 54,619   $ 71,808  

Less accumulated amortization

    (34,954 )   (49,014 )
           

  $ 19,665   $ 22,794  
           

Below Market Leases

             

Original allocated value

  $ 157,137   $ 185,976  

Less accumulated amortization

    (83,690 )   (108,197 )
           

  $ 73,447   $ 77,779  
           

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THE MACERICH COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands, except per share amounts)

(Unaudited)

10. Mortgage Notes Payable:

        Mortgage notes payable consists of the following:

 
  Carrying Amount of Mortgage Notes(a)    
   
   
 
 
  June 30, 2009   December 31, 2008    
   
   
 
Property Pledged as Collateral
  Other   Related Party   Other   Related Party   Interest
Rate
  Monthly
Payment
Term(b)
  Maturity
Date
 

Capitola Mall

  $   $ 36,537   $   $ 37,497     7.13 %   380     2011  

Cactus Power Center(c)

    662         654           1.67 %   1     2011  

Carmel Plaza(d)

    25,562         25,805         7.45 %   202     2009  

Chandler Fashion Center

    164,788           166,500         5.50 %   1,043     2012  

Chesterfield Towne Center(e)

    53,260         54,111         9.07 %   548     2024  

Danbury Fair Mall

    166,524         169,889         4.64 %   1,225     2011  

Deptford Mall

    172,500         172,500         5.41 %   778     2013  

Deptford Mall

    15,547         15,642         6.46 %   101     2016  

Fiesta Mall

    84,000         84,000         4.98 %   341     2015  

Flagstaff Mall

    37,000         37,000         5.03 %   153     2015  

FlatIron Crossing

    182,435         184,248         5.26 %   1,102     2013  

Freehold Raceway Mall

    168,644         171,726         4.68 %   1,184     2011  

Fresno Fashion Fair

    84,251     84,251     84,706     84,705     6.76 %   1,104     2015  

Great Northern Mall

    39,225         39,591         5.11 %   234     2013  

Hilton Village

    8,556         8,547         5.27 %   37     2012  

La Cumbre Plaza(d)(f)

    30,000         30,000         1.70 %   30     2009  

Northridge Mall(g)

    72,000         79,657         8.20 %   453     2011  

Oaks, The(h)

    165,000         165,000         2.37 %   284     2011  

Oaks, The(i)

    81,756         65,525         3.02 %   165     2011  

Pacific View

    86,604         87,382         7.20 %   602     2011  

Panorama Mall(j)

    50,000         50,000         1.37 %   48     2010  

Paradise Valley Mall(k)

            20,259                  

Prescott Gateway

    60,000         60,000         5.86 %   289     2011  

Promenade at Casa Grande(l)

    96,168         97,209         1.77 %   138     2009  

Queens Center(m)(n)

    64,777     64,776     88,913         7.78 %   961     2013  

Queens Center(n)

    105,644     105,644     106,657     106,657     7.00 %   1,591     2013  

Rimrock Mall

    41,799         42,155         7.57 %   320     2011  

Salisbury, Center at

    115,000         115,000         5.83 %   555     2016  

Santa Monica Place

    77,274         77,888         7.79 %   606     2010  

SanTan Village Regional Center(o)

    132,669         126,573         3.02 %   284     2011  

Shoppingtown Mall

    42,216         43,040         5.01 %   319     2011  

South Plains Mall(p)

    57,469         57,721         9.49 %   454     2029  

South Towne Center

    89,393         89,915         6.39 %   554     2015  

Towne Mall

    14,120         14,366         4.99 %   100     2012  

Tucson La Encantada

          78,000         78,000     5.84 %   364     2012  

Twenty Ninth Street(q)

    106,225         115,000         5.45 %   465     2011  

Valley River Center

    120,000         120,000         5.59 %   558     2016  

Valley View Center

    125,000         125,000         5.81 %   596     2011  

Victor Valley, Mall of(r)

    100,000         100,000         2.18 %   160     2011  

Vintage Faire Mall

    62,769         63,329         7.92 %   508     2010  

Westside Pavilion(s)

    175,000         175,000         3.02 %   338     2011  

Wilton Mall

    41,572         42,608         4.79 %   349     2029  
                                     

  $ 3,315,409   $ 369,208   $ 3,373,116   $ 306,859                    
                                     

(a)
The mortgage notes payable balances include the unamortized debt premiums (discounts). Debt premiums (discounts) represent the excess (deficiency) of the fair value of debt over (under) the principal value of debt assumed in various acquisitions and are amortized into interest expense over the remaining term of the related debt in a manner that approximates the effective interest method. The interest rate disclosed represents the effective interest rate, including the debt premium (discounts) and deferred finance cost.

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THE MACERICH COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands, except per share amounts)

(Unaudited)

10. Mortgage Notes Payable: (Continued)

    Debt premiums (discounts) consist of the following:

Property Pledged as
Collateral
  June 30,
2009
  December 31,
2008
 

Danbury Fair Mall

  $ 7,069   $ 9,166  

Deptford Mall

    (39 )   (41 )

Freehold Raceway Mall

    7,223     8,940  

Great Northern Mall

    (123 )   (137 )

Hilton Village

    (44 )   (53 )

Paradise Valley Mall

        99  

Shoppingtown Mall

    2,110     2,648  

Towne Mall

    324     371  

Wilton Mall

    530     1,263  
           

  $ 17,050   $ 22,256  
           
(b)
This represents the monthly payment of principal and interest.

(c)
The construction loan on the property provides for total borrowings of up to $101,000, bears interest at LIBOR plus a spread of 1.10% to 1.35% depending on certain conditions and matures on March 14, 2011, with two one-year extension options. At June 30, 2009 and December 31, 2008, the total interest rate was 1.67% and 3.23%, respectively.

(d)
The Company is in negotiations to extend the loan.

(e)
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 was ($403) and $33 for the three months ended June 30, 2009 and 2008, respectively and ($331) and $113, for the six months ended June 30, 2009 and 2008, respectively.

(f)
The loan bears interest at LIBOR plus 0.88% and matures on August 9, 2009. The loan is covered by an interest rate cap agreement that effectively prevents LIBOR from exceeding 7.12%. See Note 5—Derivative Instruments and Hedging Activities. At June 30, 2009 and December 31, 2008, the total interest rate was 1.70% and 2.58%, respectively.

(g)
On June 1, 2009, the Company extended the loan until January 1, 2011 at an interest rate of 8.20%.

(h)
The loan bears interest at LIBOR plus 1.75% and matures on July 10, 2011 with two one-year extension options. At June 30, 2009 and December 31, 2008, the total interest rate was 2.37% and 3.48%, respectively. The loan is covered by an interest rate cap agreement that effectively prevents LIBOR from exceeding 6.25% over the loan term. See Note 5—Derivative Instruments and Hedging Activities.

(i)
The construction loan allows for total borrowings of up to $135,000, 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. At June 30, 2009 and December 31, 2008, the total interest rate was 3.02% and 4.24%, respectively.

(j)
The loan bears interest at LIBOR plus 0.85% and matures on February 28, 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%. See Note 5—Derivative Instruments and Hedging Activities. At June 30, 2009 and December 31, 2008, the total interest rate was 1.37% and 1.62%, respectively.

(k)
The loan was paid off in full on May 1, 2009. The Company has a commitment for a new $90,000 loan with a three-year term.

(l)
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 on August 16, 2009, with two one-year extension options, subject to provisions of the loan agreement. At June 30, 2009 and December 31, 2008, the total interest rate was 1.77% and 3.35%, respectively.

(m)
On February 2, 2009, the Company replaced the existing loan on the property with a new $130,000 loan that bears interest at 7.78% and matures on March 1, 2013. NML funded 50% of the loan proceeds.

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THE MACERICH COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands, except per share amounts)

(Unaudited)

10. Mortgage Notes Payable: (Continued)

(n)
On July 30, 2009, the Company sold a 49% interest on the property. See Note 22—Subsequent Events.

(o)
The construction loan on the property that allows for total borrowings of up to $150,000 and 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 June 30, 2009 and December 31, 2008, the total interest rate was 3.02% and 3.91%, respectively.

(p)
On March 1, 2009, the interest rate on the loan increased from 7.49% to 9.49% and the loan was extended until March 1, 2029.

(q)
On March 25, 2009, the loan agreement was modified to bear interest at LIBOR plus 3.40% and matures on June 5, 2011, with a one-year extension option. At June 30, 2009 and December 31, 2008, the total interest rate was 5.45% and 2.20%, respectively.

(r)
The loan bears interest at LIBOR plus 1.60% and matures on May 6, 2011, with two one-year extension options. At June 30, 2009 and December 31, 2008, the total interest rate on the loan was 2.18% and 3.74%, respectively.

(s)
The loan bears interest at LIBOR plus 2.00% and matures on June 5, 2011, with two one-year extension options. At June 30, 2009 and December 31, 2008, the total interest rate on the loan was 3.02% and 4.07%, respectively. The loan is covered by an interest rate cap agreement that effectively prevents LIBOR from exceeding 5.50% until June 1, 2010. See Note 5—Derivative Instruments and Hedging Activities.

        Most of the mortgage loan agreements contain a prepayment penalty provision for the early extinguishment of the debt.

        The Company expects all 2009 loan maturities will be refinanced, extended and/or paid-off from the Company's line of credit.

        Total interest expense capitalized was $4,763 and $8,584 for the three months ended June 30, 2009 and 2008, respectively and $9,823 and $15,637 for the six months ended June 30, 2009 and 2008, respectively.

        Related party mortgage notes payable are amounts due to affiliates of NML. See Note 18—Related Party Transactions, for interest expense associated with loans from NML.

        The fair value of mortgage notes payable at June 30, 2009 and December 31, 2008 was $3,523,589 and $3,529,762, respectively, based on current interest rates for comparable loans. The method for computing fair value was determined using a present value model and an interest rate that included a credit value adjustment based on the estimated value of the property that serves as collateral for the underlying debt.

11. Bank and Other Notes Payable:

        Bank and other notes payable consist of the following:

Convertible Senior Notes ("Senior Notes"):

        The Senior Notes bear interest at 3.25%, payable semiannually, are senior unsecured debt of the Company and are guaranteed by the Operating Partnership. Prior to December 14, 2011, upon the occurrence of certain specified events, the Senior Notes will be convertible at the option of the holder into cash, shares of the Company's common stock or a combination of cash and shares of the Company's common stock, at the election of the Company, at an initial conversion rate of 8.9702 shares per $1 principal amount. On and after December 15, 2011, the Senior Notes will be convertible

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THE MACERICH COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands, except per share amounts)

(Unaudited)

11. Bank and Other Notes Payable: (Continued)


at any time prior to the second business day preceding the maturity date at the option of the holder at the initial conversion rate. The initial conversion price of approximately $111.48 per share represented a 20% premium over the closing price of the Company's common stock on March 12, 2007, the date of issuance of the Senior Notes. The initial conversion rate is subject to adjustment under certain circumstances. Holders of the Senior Notes do not have the right to require the Company to repurchase the Senior Notes prior to maturity except in connection with the occurrence of certain fundamental change transactions.

        The Company purchased two capped calls ("Capped Calls") from affiliates of the initial purchasers of the Senior Notes that effectively increased the conversion price to approximately $130.06, which represents a 40% premium to the March 12, 2007 closing price of $92.90 per common share of the Company. The Capped Calls are expected to generally reduce the potential dilution upon exchange of the Senior Notes in the event the market value per share of the Company's common stock, as measured under the terms of the relevant settlement date, is greater than the strike price of the Capped Calls. If, however, the market value per share of the Company's common stock exceeds $130.06 per common share, then the dilution mitigation under the Capped Calls will be capped, which means there would be dilution from exchange of the Senior Notes to the extent that the market value per share of the Company's common stock exceeds $130.06.

        During the three and six months ended June 30, 2009, the Company repurchased and retired $27,500 and $84,315 of the Senior Notes for $18,950 and $50,705 and recorded a gain on extinguishment of $7,127 and $29,601, respectively. The repurchase was funded by borrowings under the Company's line of credit.

        The carrying value of the Senior Notes at June 30, 2009 and December 31, 2008 was $613,324 and $687,654, respectively, which included unamortized discount of $29,526 and $39,511, respectively. As of June 30, 2009 and December 31, 2008, the effective interest rate was 5.41%. The fair value of the Senior Notes at June 30, 2009 and December 31, 2008 was $504,637 and $379,435, respectively, based on the quoted market price on each date.

Line of Credit:

        The Company has a $1,500,000 revolving line of credit that matures on April 25, 2010 with a one-year extension option. The interest rate fluctuates from LIBOR plus 0.75% to LIBOR plus 1.10% depending on the Company's overall leverage. The Company has an interest rate swap agreement that effectively fixed the interest rate on $400,000 of the outstanding balance of the line of credit at 6.23% until April 25, 2011. See Note 5—Derivative Instruments and Hedging Activities. As of June 30, 2009 and December 31, 2008, borrowings outstanding were $1,190,000 and $1,099,500, at an average interest rate, excluding the $400,000 swapped portion, of 1.69% and 3.19%, respectively. The fair value of the Company's line of credit at June 30, 2009 and December 31, 2008 was $1,152,959 and $1,067,631, respectively, based on a present value model using current interest rate spreads offered to the Company for comparable debt.

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THE MACERICH COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands, except per share amounts)

(Unaudited)

11. Bank and Other Notes Payable: (Continued)

Term Loan:

        The Company has a five-year term loan that bears interest at LIBOR plus 1.50% and matures on April 26, 2010. The loan is covered by an interest rate swap agreement that effectively fixed the interest rate of the term loan at 6.30% until maturity. See Note 5—Derivative Instruments and Hedging Activities. As of June 30, 2009 and December 31, 2008, the note had a balance outstanding of $442,500 and $446,250, respectively, with an effective interest rate of 6.50%. The fair value of the term loan at June 30, 2009 and December 31, 2008 was $446,010 and $452,240, respectively, based on a present value model using current interest rate spreads offered to the Company for comparable debt. On July 30, 2009 and August 3, 2009, the Company paid down the note by $180,000 and $20,000, respectively, from the proceeds received from the sales of five Mervyn's freestanding stores and the sale of a 49% ownership interest in Queens Center. See Note 22—Subsequent Events.

Greeley Note:

        On July 27, 2006, concurrent with the sale of Greeley Mall, the Company provided marketable securities to replace Greeley Mall as collateral for the mortgage note payable on the property (See Note 8—Marketable Securities). As a result of this transaction, the debt was reclassified to bank and other notes payable. This note bears interest at an effective rate of 6.34% and matures in September 2013. As of June 30, 2009 and December 31, 2008, the note had a balance outstanding of $26,699 and $27,038, respectively. The fair value of the note at June 30, 2009 and December 31, 2008 was $19,552 and $19,074, respectively, based on current interest rates for comparable loans. The method for computing fair value was determined using a present value model and an interest rate that included a credit value adjustment based on the estimated value of the property that serves as collateral for the underlying debt.

        As of June 30, 2009 and December 31, 2008, the Company was in compliance with all applicable loan covenants under its debt agreements.

12. Noncontrolling Interests:

        The Company allocates net income to the Operating Partnership based on the weighted average ownership interest during the period. The 13% limited partnership interest of the Operating Partnership not owned by the Company at June 30, 2009 is reflected in these consolidated financial statements as permanent equity.

        The interests in the Operating Partnership are known as OP Units. OP Units not held by the Company are redeemable, at the election of the holder, and the Company may redeem them for the Company's stock or cash, at the Company's option. The redemption value for each OP Unit as of any balance sheet date is the amount equal to the average of the closing price per share of the Company's common stock, par value $0.01 per share, as reported on the New York Stock Exchange for the ten trading days ending on the respective balance sheet date. Accordingly, as of June 30, 2009 and December 31, 2008, the aggregate redemption value of the then-outstanding OP Units not owned by the Company was $205,190 and $227,091, respectively.

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THE MACERICH COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands, except per share amounts)

(Unaudited)

12. Noncontrolling Interests: (Continued)

        The Company issued common and preferred units of MACWH, LP in April 2005 in connection with the acquisition of the Wilmorite portfolio. The common and preferred units of MACWH, LP are redeemable at the election of the holder and the Company may redeem them for cash or shares of the Company's stock at the Company's option and are classified as permanent equity.

        Included in permanent equity are outside ownership interests in various consolidated joint ventures. The joint ventures do not have rights that require the Company to redeem the ownership interests in either cash or stock.

        The outside ownership interests in the Company's joint venture in Shoppingtown Mall have a purchase option for $24,000. In addition, under certain conditions as defined by the partnership agreement, these partners have the right to "put" their partnership interests to the Company. Due to the redemption feature of the ownership interest in Shoppingtown Mall, these noncontrolling interests have been included in temporary equity.

13. Cumulative Convertible Redeemable Preferred Stock:

        On February 25, 1998, the Company issued 3,627,131 shares of Series A cumulative convertible redeemable preferred stock ("Series A Preferred Stock") for proceeds totaling $100,000 in a private placement. The 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.

        The holder of the Series A Preferred Stock had redemption rights if a change in control of the Company occurred, as defined under the Articles Supplementary. Under such circumstances, the holder of the Series A Preferred Stock was entitled to require the Company to redeem its shares, to the extent the Company had funds legally available therefor, at a price equal to 105% of its liquidation preference plus accrued and unpaid dividends. The Series A Preferred Stock holder also had the right to require the Company to repurchase its shares if the Company failed to be taxed as a REIT for federal tax purposes at a price equal to 115% of its liquidation preference plus accrued and unpaid dividends to the extent funds were legally available therefor.

        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.

        On October 18, 2007, the holder of the Series A Preferred Stock converted 560,000 shares to common shares. On May 6, 2008, the holder of the Series A Preferred Stock converted 684,000 shares to common shares. On May 8, 2008, the holder of the Series A Preferred Stock converted 1,338,860 shares to common shares. On September 17, 2008, the holder of the Series A Preferred Stock converted the remaining 1,044,271 shares to common shares.

14. Stockholders' Equity:

        On June 8, 2009, the Company amended its articles of incorporation to increase the number of common shares authorized from 145,000,000 common shares to 250,000,000 common shares.

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THE MACERICH COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands, except per share amounts)

(Unaudited)

14. Stockholders' Equity: (Continued)

        On June 22, 2009, the Company issued 2,236,954 common shares to its common stockholders and OP Unit holders in connection with a declaration of a quarterly dividend of $0.60 per share of common stock on May 1, 2009, consisting of a combination of cash and shares of the Company's common stock. The cash component of the dividend (not including cash paid in lieu of fractional shares) was 10% in the aggregate, or $0.06 per share, with the balance paid in shares of the Company's common stock.

        In accordance with the provisions of IRS Revenue Procedure 2009-15, stockholders were asked to make an election to receive the dividend all in cash or all in shares. To the extent that more than 10% of cash was elected in the aggregate, the cash portion was prorated. Stockholders who elected to receive the dividend in cash received a cash payment of at least $0.06 per share. Stockholders who did not make an election received 10% in cash and 90% in shares of common stock. The number of shares issued as a result of the dividend was calculated based on the volume weighted average trading prices of the Company's common stock on the New York Stock Exchange on June 10, June 11 and June 12, 2009 of $19.9927.

        The Company has elected to account for the stock portion of its distribution as a stock issuance as opposed to a stock dividend. Accordingly, the impact of the shares issued is reflected in the Company's earnings per share calculation on a prospective basis. The issuance of the stock dividend resulted in a reduction of $0.01 on both basic and diluted earnings per share for the three months ended June 30, 2009.

15. Acquisitions:

        The Company has completed the following acquisitions:

Mervyn's:

        On December 17, 2007, the Company purchased a portfolio of ground leasehold and/or fee simple interests in 39 Mervyn's department stores for $400,160. The Company purchased an additional ground leasehold interest on January 31, 2008 for $13,182 and a fee simple interest on February 29, 2008 for $19,338. All of the purchased properties are located in the Southwest United States. The purchase price was funded by cash and borrowings under the Company's line of credit. Concurrent with each acquisition, the Company entered into individual agreements to lease back the properties to Mervyn's for terms of 14 to 20 years. In connection with the acquisition of the Mervyn's portfolio and applying SFAS No. 141(R), the Company recorded intangible assets of $110.7 million and intangible liabilities of $59.0 million. The results of operations include these properties since the acquisition date.

Boscov's:

        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 $23,500 was funded by the assumption of the existing mortgage note on the property and by borrowings under the Company's line of credit. The results of operations have included this property since the date of acquisition.

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THE MACERICH COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands, except per share amounts)

(Unaudited)

16. Discontinued Operations:

        The following operations were recently discontinued:

Mervyn's:

        In July 2008, Mervyn's filed for bankruptcy protection and announced in October 2008 its plans to liquidate all merchandise, auction its store leases and wind down its business. The Company had 45 former Mervyn's stores in its portfolio. The Company owned the ground leasehold and/or fee simple interest in 44 of those stores and the remaining store was owned by a third party but was located at one of the Centers.

        In September 2008, the Company recorded a write-down of $5,214 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. 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 a result of the change in plans to sell, the Company recorded a loss of $5,347 in (loss) gain on sale or write-down of assets 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 $27,655 of unamortized intangible assets related to lease in place values, leasing commissions and legal costs to depreciation and amortization. Unamortized intangible assets of $14,881 relating to above market leases and unamortized intangible liabilities of $24,523 relating to below market leases were written off to minimum rents.

        On December 19, 2008, the Company sold a fee and/or ground leasehold interest in three freestanding Mervyn's department stores (collectively referred to as the "PPRT Mervyn's") to Pacific Premier Retail Trust, one of the Company's joint ventures, for $43,405, resulting in a gain on sale of assets of $1,511. The Company's pro rata share of the proceeds was used to pay down the Company's line of credit.

Rochester Redemption:

        On January 1, 2008, a subsidiary of the Operating Partnership, at the election of the holders, redeemed the 3,426,609 participating convertible preferred units ("PCPUs"). As a result of the redemption, the Company received the 16.32% noncontrolling interest in the portion of the Wilmorite portfolio 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 $224,393, in exchange for the Company's ownership interest in the portion of the Wilmorite portfolio that consisted of Eastview Commons, Eastview Mall, Greece Ridge Center, Marketplace Mall and Pittsford Plaza, collectively referred to as the "Rochester Properties," including approximately $18,000 in cash held at those properties. Included in the redemption consideration was the assumption of the remaining 16.32%

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THE MACERICH COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands, except per share amounts)

(Unaudited)

16. Discontinued Operations: (Continued)


interest in the indebtedness of the Non-Rochester Properties, which had an estimated fair value of $105,962. In addition, the Company also received additional consideration of $11,763, 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 $99,082 on the exchange based on the difference between the fair value of the additional interest acquired in the Non-Rochester Properties and the carrying value of the Rochester Properties, net of noncontrolling interest. This exchange is referred to herein as the "Rochester Redemption."

        The Company determined the fair value of the debt using a present value model based upon the terms of equivalent debt and upon credit spreads made available to the Company. The following table represents the debt measured at fair value on January 1, 2008:

 
  Quoted Prices in
Active Markets for
Identical Assets and
Liabilities (Level 1)
  Significant Other
Observable
Inputs (Level 2)
  Significant
Unobservable
Inputs (Level 3)
  Balance at
January 1, 2008
 

Liabilities

                         

Debt on Non-Rochester Properties

  $   $ 71,032   $ 34,930   $ 105,962  

        The source of the Level 2 inputs involved the use of the nominal weekly average of the U.S. treasury rates. The source of the Level 3 inputs was based on comparable credit spreads on the estimated value of the property that serves as the underlying collateral of the debt.

        As a result of the Rochester Redemption, the Company recorded a credit to additional paid-in capital of $172,805 due to the reversal of adjustments to noncontrolling interests for the redemption value on the Rochester Properties over the Company's historical cost. In addition, the Company recorded a step-up in the basis of approximately $218,812 in the remaining portion of the Non-Rochester Properties.

        The Company has classified the results of operations for the three and six months ended June 30, 2009 and 2008 for all of the above dispositions as discontinued operations.

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THE MACERICH COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands, except per share amounts)

(Unaudited)

16. Discontinued Operations: (Continued)

        Revenues and (loss) income from discontinued operations consist of the following:

 
  For the Three
Months Ended
June 30,
  For the Six
Months Ended
June 30,
 
 
  2009   2008   2009   2008  

Revenues:

                         
 

Scottsdale/101

  $   $   $   $ 10  
 

Holiday Village

                338  
 

Great Falls Marketplace

        43         (21 )
 

PPRT Mervyn's

        1,017         2,129  
                   

  $   $ 1,060   $   $ 2,456  
                   

(Loss) income from discontinued operations:

                         
 

Scottsdale/101

  $ (2 ) $ (3 ) $ (11 ) $ (1 )
 

Holiday Village

    (9 )       (9 )   338  
 

Great Falls Marketplace

        31         (33 )
 

PPRT Mervyn's

        386         703  
                   

  $ (11 ) $ 414   $ (20 ) $ 1,007  
                   

17. Commitments and Contingencies:

        The Company has certain properties subject to non-cancelable operating ground leases. The leases expire at various times through 2107, subject in some cases to options to extend the terms of the lease. Certain leases provide for contingent rent payments based on a percentage of base rental income, as defined in the lease. Ground rent expenses were $2,052 and $1,818 for the three months ended June 30, 2009 and 2008, respectively and $4,087 and $3,365 for the six months ended June 30, 2009 and 2008, respectively. No contingent rent was incurred during the three or six months ended June 30, 2009 and 2008.

        As of June 30, 2009 and December 31, 2008, the Company was contingently liable for $20,148 and $19,699, respectively, in letters of credit guaranteeing performance by the Company of certain obligations relating to the Centers. The Company does not believe that these letters of credit will result in a liability to the Company. In addition, the Company has a $24,000 letter of credit that serves as collateral for a liability assumed in the acquisition of a property.

        The Company has entered into a number of construction agreements related to its redevelopment and development activities. Obligations under these agreements are contingent upon the completion of the services within the guidelines specified in the agreement. At June 30, 2009, the Company had $75,248 in outstanding obligations under these construction agreements which it believes will be settled in 2009.

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THE MACERICH COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands, except per share amounts)

(Unaudited)

18. Related-Party Transactions:

        Certain unconsolidated joint ventures and third-parties have engaged the Management Companies to manage the operations of the Centers. Under these arrangements, the Management Companies are reimbursed for compensation paid to on-site employees, leasing agents and project managers at the Centers, as well as insurance costs and other administrative expenses.

        The following are fees charged to unconsolidated joint ventures and third-party managed properties:

 
  For the Three
Months Ended
June 30,
  For the Six
Months Ended
June 30,
 
 
  2009   2008   2009   2008  

Management Fees

                         

MMC

  $ 2,934   $ 2,960   $ 5,903   $ 5,885  

Westcor Management Companies

    1,913     1,863     3,862     3,718  

Wilmorite Management Companies

    418     416     828     835  
                   

  $ 5,265   $ 5,239   $ 10,593   $ 10,438  
                   

Development and Leasing Fees

                         

MMC

  $ 1,091   $ 96   $ 1,561   $ 195  

Westcor Management Companies

    1,228     2,982     2,325     4,601  

Wilmorite Management Companies

    225     438     525     876  
                   

  $ 2,544   $ 3,516   $ 4,411   $ 5,672  
                   

        Certain mortgage notes on the properties are held by NML (See Note 10—Mortgage Notes Payable). Interest expense in connection with these notes was $6,254 and $3,678 for the three months ended June 30, 2009 and 2008, respectively and $12,044 and $7,372 for the six months ended June 30, 2009 and 2008, respectively. Included in accounts payable and accrued expenses is interest payable to these partners of $1,964 and $1,609 at June 30, 2009 and December 31, 2008, respectively.

        As of June 30, 2009 and December 31, 2008, the Company had loans to unconsolidated joint ventures of $638 and $932, respectively. Interest income associated with these notes was ($3) and $9 for the three months ended June 30, 2009 and 2008, respectively and $13 and $21 for the six months ended June 30, 2009 and 2008, respectively. These loans represent initial funds advanced to development stage projects prior to construction loan funding. Correspondingly, loan payables in the same amount have been accrued as an obligation by the various joint ventures.

        Due from affiliates of $7,815 and $9,124 at June 30, 2009 and December 31, 2008, respectively, represents unreimbursed costs and fees due from unconsolidated joint ventures under management agreements.

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THE MACERICH COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands, except per share amounts)

(Unaudited)

19. Share and Unit-Based Plans:

        The Company has established share and unit-based compensation plans for the purpose of attracting and retaining executive officers, directors and key employees. In addition, the Company has established an Employee Stock Purchase Plan to allow employees to purchase the Company's common stock at a discount.

        On February 25, 2009, the Company reduced its workforce by 142 employees out of a total of approximately 2,845 regular and temporary employees. This reduction in workforce was a result of the Company's review and realignment of its strategic priorities, including its expectation of reduced development and redevelopment activity in the near future. As part of the plan, the Company accelerated the vesting of the share and unit-based awards of certain terminated employees. As a result of the modification of the awards, the Company recorded a reduction in compensation cost of $487.

        On March 6, 2009, the Company granted 1,600,002 restricted stock units ("RSUs") to certain officers of the Company as an additional component of compensation. The outstanding RSUs vest over three years and the compensation cost related to the grants is determined by the market value at the grant date and is amortized over the vesting period on a straight-line basis. RSUs are subject to restrictions determined by the Company's compensation committee.

        The Company records compensation expense on a straight-line basis for awards, with the exception of the market-indexed awards granted under the Long-Term Incentive Plan ("LTIP"). The following summarizes the compensation cost under the share and unit-based plans:

 
  For the Three
Months Ended
June 30,
  For the Six
Months Ended
June 30,
 
 
  2009   2008   2009   2008  

LTIP units

  $ 909   $ 1,710   $ 1,967   $ 2,985  

Stock awards

    1,568     2,645     3,674     5,993  

Stock units

    944         1,214      

Stock options

    148     148     295     296  

Stock Appreciation Rights ("SARs")

    742     795     1,368     1,014  

Phantom stock units

    151     162     321     329  
                   

  $ 4,462   $ 5,460   $ 8,839   $ 10,617  
                   

        The Company capitalized share and unit-based compensation costs of $2,041 and $2,651 for the three months ended June 30, 2009 and 2008, respectively and $3,803 and $4,922 for the six months ended June 30, 2009 and 2008, respectively.

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THE MACERICH COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands, except per share amounts)

(Unaudited)

19. Share and Unit-Based Plans: (Continued)

        The following table summarizes the activity of the other non-vested share and unit based plans:

 
  LTIP Units   Stock Awards   Phantom Stock   SARs  
 
  Units   Weighted
Average
Grant Date
Fair Value
  Shares   Weighted
Average
Grant Date
Fair Value
  Units   Weighted
Average
Grant Date
Fair Value
  Units   Weighted
Average
Grant Date
Fair Value
 

Balance at January 1, 2009

    299,350   $ 57.02     275,181   $ 74.68     3,209   $ 83.88     1,228,384   $ 7.68  
 

Granted

            6,500     8.21     19,020     9.81     29,000     1.17  
 

Vested

    (46,410 )   65.29     (151,829 )   76.34     (20,624 )   15.57     (91,050 )   7.68  
 

Forfeited

            (460 )                    
                                           

Balance at June 30, 2009

    252,940   $ 55.50     129,392   $ 69.41     1,605   $ 83.88     1,166,334   $ 7.51  
                                           

20. Income Taxes:

        The Company elected to be taxed as a REIT under the Internal Revenue Code of 1986, as amended, commencing with its taxable year ended December 31, 1994. To qualify as a REIT, the Company must meet a number of organizational and operational requirements, including a requirement that it distribute at least 90% of its taxable income to its stockholders. It is management's current intention to adhere to these requirements and maintain the Company's REIT status. As a REIT, the Company generally will not be subject to corporate level federal income tax on net income it distributes currently to its stockholders. If the Company fails to qualify as a REIT in any taxable year, then it will be subject to federal income taxes at regular corporate rates (including any applicable alternative minimum tax) and may not be able to qualify as a REIT for four subsequent taxable years. Even if the Company qualifies for taxation as a REIT, the Company may be subject to certain state and local taxes on its income and property and to federal income and excise taxes on its undistributed taxable income, if any.

        Each partner is taxed individually on its share of partnership income or loss, and accordingly, no provision for federal and state income tax is provided for the Operating Partnership in the consolidated financial statements.

        The Company has made Taxable REIT Subsidiary elections for all of its corporate subsidiaries other than its Qualified REIT Subsidiaries. The elections, effective for the year beginning January 1, 2001 and future years, were made pursuant to section 856(l) of the Internal Revenue Code. The Company's Taxable REIT Subsidiaries ("TRSs") are subject to corporate level income taxes which are provided for in the Company's consolidated financial statements. The Company's primary TRSs include Macerich Management Company and Westcor Partners, L.L.C.

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THE MACERICH COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands, except per share amounts)

(Unaudited)

20. Income Taxes: (Continued)

        The income tax benefit (provision) of the TRSs is as follows:

 
  For the Three
Months Ended
June 30,
  For the Six
Months Ended
June 30,
 
 
  2009   2008   2009   2008  

Current

  $ 1   $ 7   $ (89 ) $  

Deferred

    379     682     1,270     388  
                   

Total income tax benefit

  $ 380   $ 689   $ 1,181   $ 388  
                   

        SFAS No. 109, "Income Taxes," requires recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred tax assets and liabilities are determined based on the differences between the financial reporting and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. The deferred tax assets and liabilities of the TRSs relate primarily to differences in the book and tax bases of property and to operating loss carryforwards for federal and state income tax purposes. A valuation allowance for deferred tax assets is provided if the Company believes it is more likely than not that all or some portion of the deferred tax assets will not be realized. Realization of deferred tax assets is dependent on the Company generating sufficient taxable income in future periods. The net operating loss carryforwards are currently scheduled to expire through 2028, beginning in 2012. Net deferred tax assets of $14,952 and $13,830 were included in deferred charges and other assets, net at June 30, 2009 and December 31, 2008, respectively.

        The Company had an unrecognized tax benefit, in accordance with FASB Interpretation No. 48, "Accounting for Uncertainty in Income Taxes," of $2,569 and $2,201 at June 30, 2009 and December 31, 2008, respectively. As a result of tax positions taken during the current year, an increase in the unrecognized tax benefit of $369 was included in the Company's consolidated statement of operations.

        The tax years 2005-2008 remain open to examination by the taxing jurisdictions to which the Company is subject. The Company does not expect that the total amount of unrecognized tax benefit will materially change within the next 12 months.

21. Cumulative Effect of Adoption of Accounting Principles:

Retrospective Adjustments Related to Convertible Debt:

        On January 1, 2009, the Company adopted FSP APB 14-1. The adoption of FSP APB 14-1 requires the Company to retrospectively allocate the initial proceeds from the Senior Notes between a liability component and an equity component based on the fair value calculated based on the present value of contractual cash flows discounted at an appropriate comparable non-convertible debt borrowing rate at the date of issuance of the Senior Notes. As a result, the Company allocated $869,351 of the initial $940,500 proceeds to the liability component and the remaining $71,149 of proceeds to the equity component at the date of issuance of the Senior Notes.

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THE MACERICH COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands, except per share amounts)

(Unaudited)

21. Cumulative Effect of Adoption of Accounting Principles: (Continued)

Retrospective Adjustments Related to Noncontrolling Interests:

        Effective January 1, 2009, the Company adopted the provisions of SFAS No. 160, which requires a noncontrolling interest in a subsidiary to be reported as equity and the amount of consolidated net income specifically attributable to the noncontrolling interest to be included within consolidated net income. SFAS No. 160 also requires consistency in the manner of reporting changes in the parent's ownership interest and requires fair value measurement of any noncontrolling equity investment retained in a deconsolidation. In connection with the retrospective adoption of SFAS No. 160, the Company also performed a concurrent review and retrospectively adopted the measurement provisions of EITF D-98.

        The Company's reassessment of EITF D-98 resulted in the continued classification of its redeemable equity interest in one of its consolidated joint ventures as temporary equity due to the possibility that the Company could be required to redeem this interest for cash upon the occurrence of certain events outside the control of the Company. The carrying amount of the redeemable equity interest is equal to its liquidation value, which is the amount payable upon the occurrence of such event.

        The Company's reassessment of EITF D-98 resulted in the reclassification of the OP Units and the common and preferred units of MACWH, LP to permanent equity. The OP Units and the common and preferred units of MACWH, LP are redeemable at the election of the holder and the Company may redeem them for cash or shares of stock of the Company at the Company's election. In addition, the Company reclassified outside ownership interests in various consolidated joint ventures to permanent equity.

        Further, as a result of the adoption of SFAS No. 160, net income attributable to noncontrolling interests is now excluded from the determination of consolidated net income. In addition, the individual components of other comprehensive income are now presented in the aggregate, with the portion attributable to noncontrolling interests deducted from comprehensive income attributable to common stockholders. Corresponding changes have also been made to the accompanying consolidated statements of cash flows.

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Table of Contents


THE MACERICH COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands, except per share amounts)

(Unaudited)

21. Cumulative Effect of Adoption of Accounting Principles: (Continued)

        The following is a summary of the impact of adoption of these standards on the financial statements of prior periods and includes reclassifications relating to discontinued operations (See Note 16—Discontinued Operations):

 
  As Previously
Reported
  Adoption of
FSP
APB 14-1
  Reclassification
Adjustments(1)
  As Adjusted  

Consolidated Statement of Operations for the three months ended June 30, 2008

                         

Revenues:

                         
 

Minimum rents

  $ 123,604   $   $ 6,227   $ 129,831  
 

Tenant recoveries

    65,646         1,267     66,913  
   

Total revenues

    209,297         7,494     216,791  

Expenses:

                         
 

Shopping center and operating expenses

    67,255         1,753     69,008  
 

Depreciation and amortization

    56,811         663     57,474  
 

Interest expense:

                         
   

Other

    64,823     3,536         68,359  
   

Total expenses

    217,236     3,536     2,416     223,188  

Income from continuing operations

    18,185     (3,536 )   5,078     19,727  

Discontinued operations:

                         
 

Income from discontinued operations

    5,493         (5,079 )   414  

Total income from discontinued operations

    5,380         (5,079 )   301  

Net income

    23,565     (3,536 )   (1 )   20,028  

Less net income attributable to noncontrolling interests

    3,936     (467 )   (1 )   3,468  

Net income attributable to the Company

    19,629     (3,069 )       16,560  

Net income available to common stockholders

    18,794     (3,069 )       15,725  

Earnings per common share attributable to Company—basic:

                         
 

Income from continuing operations

    0.19     (0.04 )   0.06     0.21  
 

Discontinued operations

    0.06         (0.06 )    
 

Net income available to common stockholders

    0.25     (0.04 )       0.21  

Earnings per common share attributable to Company—diluted:

                         
 

Income from continuing operations

    0.19     (0.04 )   0.06     0.21  
 

Discontinued operations

    0.06         (0.06 )    
 

Net income available to common stockholders

    0.25     (0.04 )       0.21  

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THE MACERICH COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands, except per share amounts)

(Unaudited)

21. Cumulative Effect of Adoption of Accounting Principles: (Continued)

 

 
  As Previously
Reported
  Adoption of
FSP
APB 14-1
  Reclassification
Adjustments(1)
  As Adjusted  

Consolidated Statement of Operations for the six months ended June 30, 2008

                         

Revenues:

                         
 

Minimum rents

  $ 249,435   $   $ 11,544   $ 260,979  
 

Tenant recoveries

    132,035         2,535     134,570  
 

Other

    13,040         1     13,041  
   

Total revenues

    420,241         14,080     434,321  

Expenses:

                         
 

Shopping center and operating expenses

    136,172         3,459     139,631  
 

Depreciation and amortization

    117,518         611     118,129  

    301,100         4,070     305,170  
 

Interest expense:

                         
   

Other

    131,954     7,078         139,032  
   

Total expenses

    440,433     7,078     4,070     451,581  

Income from continuing operations

    28,603     (7,078 )   10,010     31,535  

Discontinued operations:

                         
 

Income from discontinued operations

    11,018         (10,011 )   1,007  

Total income from discontinued operations

    110,168         (10,011 )   100,157  

Net income

    138,771     (7,078 )   (1 )   131,692  

Less net income attributable to noncontrolling interests

    21,060     (992 )       20,068  

Net income attributable to the Company

    117,711     (6,086 )   (1 )   111,624  

Net income available to common stockholders

    114,422     (6,086 )   (1 )   108,335  

Earnings per common share attributable to Company—basic:

                         
 

Income from continuing operations

    0.28     (0.08 )   0.11     0.31  
 

Discontinued operations

    1.29         (0.12 )   1.17  
 

Net income available to common stockholders

    1.57     (0.08 )   (0.01 )   1.48  

Earnings per common share attributable to Company—diluted:

                         
 

Income from continuing operations

    0.31     (0.07 )   0.06     0.30  
 

Discontinued operations

    1.24         (0.07 )   1.17  
 

Net income available to common stockholders

    1.55     (0.07 )   (0.01 )   1.47  

 

 
  As Previously
Reported
  Restatement
Adjustment
  Reclassification
Adjustments(1)
  As Restated  

Consolidated Statement of Cash Flows for the six months ended June 30, 2008

                         

Net income

  $ 117,711   $ (7,084 ) $ 21,065   $ 131,692  

Amortization of net discount on mortgage and bank and other notes payable

    (4,305 )   7,084     (5 )   2,774  

(1)
Reclassification adjustments include the reclassifications of the results of operations of sold properties to discontinued operations and the adoptions of SFAS No. 160 and EITF No. 03-06-1.

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THE MACERICH COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands, except per share amounts)

(Unaudited)

21. Cumulative Effect of Adoption of Accounting Principles: (Continued)

        The following is the pro forma impact for the three and six months ended June 30, 2009 had the Company not adopted FSP APB 14-1:

 
  As Computed
Before
Adoption
  As Reported   Adjustment  

Consolidated Statement of Operations for the three months ended June 30, 2009

                   
 

Interest expense:

                   
   

Other

  $ 63,393   $ 65,660   $ 2,267  
 

Gain on early extinguishment of debt

    (8,324 )   (7,127 )   1,197  
   

Total expenses

    216,137     219,601     3,464  

Loss from continuing operations

    (20,891 )   (24,355 )   (3,464 )

Net loss

    (20,902 )   (24,366 )   (3,464 )

Less net loss attributable to noncontrolling interests

    (2,174 )   (2,630 )   (456 )

Net loss attributable to the Company

    (18,728 )   (21,736 )   (3,008 )

Net loss available to common stockholders

    (18,728 )   (21,736 )   (3,008 )

Earnings per common share attributable to Company—basic:

                   
 

Loss from continuing operations

    (0.26 )   (0.29 )   (0.03 )
 

Net loss available to common stockholders

    (0.26 )   (0.29 )   (0.03 )

Earnings per common share attributable to Company—diluted:

                   
 

Loss from continuing operations

    (0.26 )   (0.29 )   (0.03 )
 

Net loss available to common stockholders

    (0.26 )   (0.29 )   (0.03 )

Consolidated Statement of Operations for the six months ended June 30, 2009

                   
 

Interest expense:

                   
   

Other

    124,972     129,808     4,836  
 

Gain on early extinguishment of debt

    (33,419 )   (29,601 )   3,818  
   

Total expenses

    422,782     431,436     8,654  

Income (loss) from continuing operations

    742     (7,912 )   (8,654 )

Net income (loss)

    705     (7,949 )   (8,654 )

Less net income (loss) attributable t