QuickLinks -- Click here to rapidly navigate through this document
    UNITED STATES
Securities and Exchange Commission
Washington, D.C. 20549
 FORM 10-K

 
 
Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the fiscal year ended December 31, 2006
    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)

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

 
 
95-4448705
(I.R.S. Employer Identification Number)

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

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

 
 
Title of each class
 Common Stock, $0.01 Par Value
Preferred Share Purchase Rights

 
 
Name of each exchange on which registered
 New York Stock Exchange
New York Stock Exchange

 
 
Indicate by check mark if the registrant is well-known seasoned issuer, as defined in Rule 405 of the Securities Act    YES ý    NO o

 
 
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act    YES o    NO ý

 
 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such report) and (2) has been subject to such filing requirements for the past 90 days.    YES ý    NO o

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

 
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. Large accelerated filer ý    Accelerated filer o    Non-accelerated filer    o

 
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    YES o    NO ý

 
 
The aggregate market value of voting and non-voting common equity held by non-affiliates of the registrant was approximately $3.3 billion as of the last business day of the registrant's most recent completed second quarter based upon the price at which the common shares were last sold on that day.

 
 
Number of shares outstanding of the registrant's common stock, as of February 16, 2007: 71,945,097 shares

 
 
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the proxy statement for the annual stockholders meeting to be held in 2007 are incorporated by reference into Part III of this Form 10-K


THE MACERICH COMPANY

Annual Report on Form 10-K

For the Year Ended December 31, 2006

INDEX


 
 
 
 
Page

Part I
 
 
Item 1.   Business   1
Item 1A.   Risk Factors   15
Item 1B.   Unresolved Staff Comments   22
Item 2.   Properties   23
Item 3.   Legal Proceedings   32
Item 4.   Submission of Matters to a Vote of Securities Holders   32

Part II
 
 
Item 5.   Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities   33
Item 6.   Selected Financial Data   36
Item 7.   Management's Discussion and Analysis of Financial Condition and Results of Operations   40
Item 7A.   Quantitative and Qualitative Disclosures About Market Risk   57
Item 8.   Financial Statements and Supplementary Data   59
Item 9.   Changes in and Disagreements With Accountants on Accounting and Financial Disclosure   59
Item 9A.   Controls and Procedures   59
Item 9A(T).   Controls and Procedures   62
Item 9B.   Other Information   62

Part III
 
 
Item 10.   Directors and Executive Officers and Corporate Governance   63
Item 11.   Executive Compensation   63
Item 12.   Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters   63
Item 13.   Certain Relationships and Related Transactions, and Director Independence   64
Item 14.   Principal Accountant Fees and Services   64

Part IV
 
 
Item 15.   Exhibits and Financial Statement Schedules   65

Signatures
 
142


Part I


Item 1. Business

General

The Macerich Company (the "Company") is involved in the acquisition, ownership, development, redevelopment, management and leasing of regional and community shopping centers located throughout the United States. The Company is the sole general partner of, and owns a majority of the ownership interests in, The Macerich Partnership, L.P., a Delaware limited partnership (the "Operating Partnership"). As of December 31, 2006, the Operating Partnership owned or had an ownership interest in 73 regional shopping centers and 18 community shopping centers aggregating approximately 76.9 million square feet of gross leasable area ("GLA"). These 91 regional and community shopping centers are referred to hereinafter as the "Centers", unless the context otherwise requires. The Company is a self-administered and self-managed real estate investment trust ("REIT") and conducts all of its operations through the Operating Partnership and the Company's management companies, Macerich Property Management Company, LLC, a single member Delaware limited liability company, Macerich Management Company, a California corporation, Westcor Partners, L.L.C., a single member Arizona limited liability company, Macerich Westcor Management LLC, a single member Delaware limited liability company, Westcor Partners of Colorado, LLC, a Colorado limited liability company, MACW Mall Management, Inc., a New York corporation and MACW Property Management, LLC, a single member New York limited liability company. All seven of the management companies are collectively referred to herein as the "Management Companies."

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

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

Recent Developments

Equity Offering:

On January 19, 2006, the Company issued 10,952,381 common shares for net proceeds of $746.5 million. The proceeds from issuance of the shares were used to pay off the $619.0 million acquisition loan from the Wilmorite acquisition (See "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations—Acquisitions and Dispositions") and to pay down a portion of the Company's line of credit pending use to pay part of the purchase price for Valley River Center (See "Acquisitions").

Acquisitions:

On February 1, 2006, the Company acquired Valley River Center, an 835,694 square foot super-regional mall in Eugene, Oregon. The total purchase price was $187.5 million and concurrent with the acquisition, the Company placed a $100.0 million ten-year loan bearing interest at a fixed rate of 5.58% on the property. The balance of the purchase price was funded by cash and borrowings under the Company's line of credit.

On July 26, 2006, the Company purchased 11 department stores located in 10 of its Centers from Federated Department Stores, Inc. for approximately $100.0 million. The purchase price consisted of a $93.0 million cash

The Macerich Company    1


payment and a $7.0 million obligation to be paid in connection with development work by Federated. The Company's share of the purchase price was $81.0 million and was funded in part from the proceeds of sales of Park Lane Mall, Greeley Mall, Holiday Village and Great Falls Marketplace, and from borrowings under the Company's line of credit (See "Dispositions"). The balance of the purchase price was paid by the Company's joint venture partners.

On December 1, 2006, the Company acquired Deptford Mall, a two-level 1.0 million square foot super-regional mall in Deptford, New Jersey. The total purchase price of $241.0 million was funded by cash and borrowings under the Company's line of credit. On December 7, 2006, the Company placed a $100.0 million six-year loan bearing interest at a fixed rate of 5.44% on the property. The loan provides the right, subject to certain conditions, to borrow an additional $72.5 million for up to one-year after the initial funding.

Financing Activity:

On February 15, 2006, the Company refinanced the loan on Panorama Mall. The outstanding $32.3 million loan was replaced with a four-year floating rate loan of $50.0 million with a one-year extension option. The interest rate was reduced from LIBOR plus 1.65% to LIBOR plus 0.85% with an interest rate LIBOR cap of 6.65%. The loan proceeds were used to pay down the Company's line of credit and for general corporate purposes.

On March 1, 2006, the Company's joint venture in Desert Sky Mall refinanced the loan on the property. The outstanding fixed rate loan of $26.0 million at an interest rate of 5.42% was replaced with a $51.5 million floating rate two-year loan at LIBOR plus 1.10% with an interest rate LIBOR cap of 7.65%. The new loan has three one-year extension options. The loan proceeds were retained in the joint venture to use for the renovation of the Center.

On April 19, 2006, the Company refinanced the loan on Centre at Salisbury. The outstanding $79.9 million loan with a floating rate of LIBOR plus 1.375% was replaced with a ten-year fixed rate loan of $115.0 million at an interest rate of 5.79%. The loan proceeds were used to pay down the Company's line of credit and for general corporate purposes.

On May 10, 2006, the SDG Macerich Properties, L.P. joint venture completed a refinancing of its portfolio debt. The joint venture paid off approximately $625.0 million of floating and fixed rate debt with an average interest rate of approximately 6.5%. This debt was replaced by a series of seven new ten-year mortgage notes payable totaling $796.5 million with an average interest rate of 5.81%. The Company's pro rata share of the net proceeds of approximately $85.5 million was used to pay down the Company's line of credit and for general corporate purposes.

On June 5, 2006, the Company obtained a construction loan on Twenty Ninth Street of up to $115.0 million. The initial floating interest rate is LIBOR plus a spread of 1.1% to 1.25% depending on certain conditions for a term of one year plus two one-year extension options.

On June 30, 2006, the Company's joint venture in Los Cerritos Center refinanced the loan on the property. The outstanding fixed rate $108.0 million loan at 7.13% was refinanced with a new $130.0 million five-year floating rate loan. The joint venture has the flexibility, subject to certain conditions, to borrow an additional $70.0 million. The initial interest rate is at LIBOR plus 0.55%. The Company's pro rata share of the net proceeds was used to pay down the Company's line of credit and for general corporate purposes.

2     The Macerich Company


On July 20, 2006, the Company amended and expanded its revolving line of credit to $1.5 billion from $1.0 billion and extended the maturity to April 25, 2010 with a one-year extension option. The interest rate, after amendment, fluctuates from LIBOR plus 1.0% to LIBOR plus 1.35% depending on the Company's overall leverage. In September 2006, the Company entered into an interest rate swap agreement that effectively fixed the interest on $400.0 million of the outstanding balance of the line of credit at 6.23% until April 25, 2011.

On August 14, 2006, the Company's joint venture in Superstition Springs Center refinanced the loan on the property. The outstanding floating rate loan of $67.1 million was refinanced with a new $67.5 million two-year floating rate loan with three one-year extension options. The initial interest rate is at LIBOR plus 0.37% with an interest rate LIBOR cap of 8.63%.

On August 16, 2006, the Company's joint venture in The Promenade at Casa Grande obtained a construction loan of up to $110.0 million. The initial floating interest rate is LIBOR plus 1.40% for a term of three years plus two one-year extension options.

On November 14, 2006, the Company refinanced the loan on Prescott Gateway. The $35.3 million loan with a floating rate of LIBOR plus 1.65% was replaced with a five-year fixed rate loan of $60.0 million at an interest rate of 5.78%. The loan proceeds were used to pay down the Company's line of credit and for general corporate purposes.

Redevelopment and Development Activity:

The grand opening of the first phase of Twenty Ninth Street, an 817,085 square foot shopping district in Boulder, Colorado, took place on October 13, 2006. The balance of the project is scheduled for completion in the Summer 2007. Phase I of the project is 93% leased. Recent store openings include Borders Books, Chipotle Mexican Grill, Helly Hansen, Lady Foot Locker, lululemon, and Solstice Sunglass Boutique. Wild Oats has also opened their corporate headquarters at this project. Recent lease commitments include Anthropologie, Sephora, Cantina Laredo, Jamba Juice and North Face.

On November 1, 2006, the Company received Phoenix City Council approval to add up to five mixed-use towers of up to 165 feet at Biltmore Fashion Park. Biltmore Fashion Park is an established luxury destination for first-to-market, high-end and luxury tenants in the metropolitan Phoenix market. The mixed-use towers are planned to be built over time based upon demand.

Groundbreaking took place on February 6, 2007 for the 230,000 square foot life style expansion at The Oaks in Thousand Oaks, California. Plans also call for the remodeling of both the interior spaces and the exterior façade, and will include a new 138,000 square foot Nordstrom scheduled to open at the Center in Fall 2008. New tenants include Abercrombie Kids, Forever 21, Forth & Towne, Guess?, J. Crew, Iridesse, Planet Funk and Solstice Sunglass Boutique. The combined expansion and renovation of the center is projected to cost approximately $250 million and be completed in Fall 2008.

The first phase of SanTan Village, a $205 million regional shopping center under construction in Gilbert, Arizona, is scheduled to open in Fall 2007. The Center, currently 85% leased, is an open-air streetscape that will contain in excess of 1.2 million square feet on 120 acres. More than 35 tenants have committed to date, including Dillard's, Harkins Theatres, Aeropostale, American Eagle Outfitters, Ann Taylor, Ann Taylor Loft, Apple, Banana Republic, Best Buy, Blue Wasabi, The Body Shop, The Buckle, Charlotte Russe, Chico's, The Children's Place, Coach, Coldwater

The Macerich Company    3


Creek, The Disney Store, Eddie Bauer, J. Jill, Lane Bryant/Cacique, lucy, PacSun, Soma by Chico's, Swarovski Crystals, Victoria's Secret, Weisfield's Jewelers, White House/Black Market and Z Gallerie.

Construction began in late 2006 on The Promenade at Casa Grande, a $135 million, 1.0 million-square-foot regional shopping center in Arizona's fastest-growing county. Located in Casa Grande, Pinal County, the center will be located along the I-10 corridor between Phoenix and Tucson. The project is 85% committed, including anchors Target and JC Penney, and will deliver shopping, dining and entertainment options to a key growth corridor. Phase I of the project, which will include a combination of large-format retailers, specialty shops and restaurants, is scheduled for completion in Fall 2007. Phase II is comprised of small shops and is scheduled to open in March 2008. The Promenade at Casa Grande is 51% owned by the Company.

On January 22, 2007, the Fairfax County Board of Supervisors approved plans for a transit-oriented development at Tysons Corner Center in McLean, Virginia. The expansion will add 3.5 million square feet of mixed-use space to the existing 2.2 million square foot regional shopping center. The project is planned to be built in phases over the next 10 years based on market demand and the expansion of the area's light rail system. Completion of the entitlement process for Phase I, totaling roughly 1.4 million square feet, is anticipated for the first quarter of 2008. The first phase of the project is anticipated to begin development in late 2009.

In late 2006, plans were announced to bring Barneys New York Department Store to Scottsdale Fashion Square, replacing one of the anchor spaces acquired as a result of the Federated-May merger. Demolition of the vacant space and adjoining parking structure will begin in 2007, allowing for construction of an additional 100,000 square feet of new shop space and the 65,000-square-foot Barneys New York location. This store is anticipated to open in Fall 2009.

Dispositions:

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

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

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

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

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

4     The Macerich Company



The Shopping Center Industry

General

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

Regional Shopping Centers

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

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

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


Business of the Company

Strategy:

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

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

The Macerich Company    5


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

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

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

On a selective basis, the Company also does property management and leasing for third parties. The Company currently manages seven malls for third party owners on a fee basis. In addition, the Company manages four community centers for a related party. (See —"Item 13 —Certain Relationships and Related Transactions").

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

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

The Centers

As of December 31, 2006, the Centers consist of 73 Regional Shopping Centers and 18 Community Shopping Centers aggregating approximately 76.9 million square feet of GLA. The 73 Regional Shopping Centers in the Company's portfolio average approximately 992,000 square feet of GLA and range in size from 2.2 million square feet of GLA at Tyson's Corner Center to 323,479 square feet of GLA at Panorama Mall. The Company's 18 Community Shopping Centers have an average of approximately 237,000 square feet of GLA. The Centers presently include 300 Anchors totaling approximately 41.0 million square feet of GLA and approximately 10,000 Mall and Freestanding Stores totaling approximately 35.9 million square feet of GLA.

Competition

There are numerous owners and developers of real estate that compete with the Company in its trade areas. There are seven other publicly traded mall companies and several large private mall companies, any of which under certain

6     The Macerich Company

circumstances could compete against the Company for an acquisition, an Anchor or a tenant. In addition, private equity firms compete with the Company in terms of acquisitions. This results in competition for both acquisition of centers and for tenants or Anchors to occupy space. The existence of competing shopping centers could have a material impact on the Company's ability to lease space and on the level of rent that can be achieved. There is also increasing competition from other retail formats and technologies, such as lifestyle centers, power centers, internet shopping and home shopping networks, factory outlet centers, discount shopping clubs and mail-order services that could adversely affect the Company's revenues.

Major Tenants

The Centers derived approximately 95.0% of their total rents for the year ended December 31, 2006 from Mall and Freestanding Stores. One tenant accounted for approximately 3.5% of minimum rents of the Company, and no other single tenant accounted for more than 2.9% as of December 31, 2006.

The following tenants (including their subsidiaries) represent the 10 largest tenants in the Company's portfolio (including joint ventures) based upon minimum rents in place as of December 31, 2006:

Tenant

   Primary DBA's

   Number of Locations in the Portfolio

   % of Total Minimum Rents
as of
December 31, 2006
Limited Brands, Inc.   Victoria Secret, Bath & Body Works, Express   210   3.5%
The Gap, Inc.   Gap, Old Navy, Banana Republic   108   2.9%
Foot Locker, Inc.   Footlocker, Lady Footlocker   157   1.9%
Luxottica Group S.P.A.   Lenscrafters, Sunglass Hut   203   1.5%
AT&T Mobility, LLC(1)   AT&T Wireless, Cingular Wireless   38   1.5%
Zale Corporation   Zales   126   1.2%
Abercrombie & Fitch Co.   Abercrombie & Fitch   64   1.2%
Signet Group   Kay Jewelers, J.B. Robinson   77   0.9%
Federated Department Stores(2)   Macy's, Afterhours Formalwear   74   0.9%
J.C. Penney Company, Inc.   J.C. Penney   46   0.9%
(1)
Includes AT&T Wireless office headquarters located at Redmond Town Center.

(2)
Federated Department Stores divested their formal wear division in early 2007. Federated owned and operated sixteen formal wear stores in the Centers.

Mall and Freestanding Stores

Mall and Freestanding Store leases generally provide for tenants to pay rent comprised of a base (or "minimum") rent and a percentage rent based on sales. In some cases, tenants pay only minimum rent, and in some cases, tenants pay only percentage rents. Historically, most leases for Mall and Freestanding Stores contain provisions that allow the Centers to recover their costs for maintenance of the common areas, property taxes, insurance, advertising and other expenditures related to the operations of the Center. Since January 2005, the Company generally began

The Macerich Company    7

entering into leases which require tenants to pay a stated amount for such operating expenses, generally excluding property taxes, regardless of the expenses the Company actually incurs at any Center.

Tenant space of 10,000 square feet and under in the portfolio at December 31, 2006 comprises 67.9% of all Mall and Freestanding Store space. The Company uses tenant spaces of 10,000 square feet and under for comparing rental rate activity. The Company believes that to include space over 10,000 square feet would provide a less meaningful comparison.

When an existing lease expires, the Company is often able to enter into a new lease with a higher base rent component. The average base rent for new Mall and Freestanding Store leases at the consolidated Centers, 10,000 square feet and under, commencing during 2006 was $38.40 per square foot, or 20.3% higher than the average base rent for all Mall and Freestanding Stores at the consolidated Centers, 10,000 square feet and under, expiring during 2006 of $31.92 per square foot.

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

For the Year Ended
December 31,

   Average Base Rent Per Square Foot(1)

   Avg. Base Rent Per Sq. Ft. on Leases Commencing During the Year(2)

   Avg. Base Rent Per Sq. Ft. on Leases Expiring During the Year(3)
Consolidated Centers:            
2006   $37.55   $38.40   $31.92
2005   $34.23   $35.60   $30.71
2004   $32.60   $35.31   $28.84

Joint Venture Centers:
 
 
 
 
 
 
2006   $37.94   $41.43   $36.19
2005   $36.35   $39.08   $30.18
2004   $33.39   $36.86   $29.32
(1)
Average base rent per square foot is based on Mall and Freestanding Store GLA for spaces, 10,000 square feet and under, occupied as of December 31 for each of the Centers owned by the Company in 2006, 2005 and 2004. Leases for La Encantada and the expansion area of Queens Center were excluded for 2005 and 2004.

(2)
The average base rent on lease signings during the year represents the actual rent to be paid on a per square foot basis during the first twelve months, for tenants 10,000 square feet and under. Leases for La Encantada and the expansion area of Queens Center were excluded for 2005 and 2004.

(3)
The average base rent per square foot on leases expiring during the year represents the final year minimum rent, on a cash basis, for all tenant leases 10,000 square feet and under expiring during the year. Leases for La Encantada and the expansion area of Queens Center were excluded for 2005 and 2004.

8     The Macerich Company

Cost of Occupancy

The Company's management believes that in order to maximize the Company's operating cash flow, the Centers' Mall Store tenants must be able to operate profitably. A major factor contributing to tenant profitability is cost of occupancy. The following table summarizes occupancy costs for Mall Store tenants in the Centers as a percentage of total Mall Store sales for the last three years:

 
   For Years ended December 31,
 
   2006

   2005

   2004
Consolidated Centers:            
Minimum Rents   8.1%   8.3%   8.3%
Percentage Rents   0.4%   0.5%   0.4%
Expense Recoveries(1)   3.7%   3.6%   3.7%
    12.2%   12.4%   12.4%

Joint Venture Centers:
 
 
 
 
 
 
Minimum Rents   7.2%   7.4%   7.7%
Percentage Rents   0.6%   0.5%   0.5%
Expense Recoveries(1)   3.1%   3.0%   3.2%
    10.9%   10.9%   11.4%
(1)
Represents real estate tax and common area maintenance charges.

Lease Expirations

The following tables show scheduled lease expirations (for Centers owned as of December 31, 2006) of Mall and Freestanding Stores (10,000 square feet and under) for the next ten years, assuming that none of the tenants exercise renewal options:

Consolidated Centers:

Year Ending
December 31,

   Number of
Leases
Expiring

   Approximate
GLA of
Leases Expiring(1)

   % of Total
Leased GLA
Represented by
Expiring Leases(2)

   Ending Base Rent
per Square Foot of
Expiring Leases(1)
2007   499   1,033,336   12.49%   $34.21
2008   398   845,132   10.22%   $34.22
2009   363   702,761   8.50%   $37.86
2010   436   883,322   10.68%   $39.51
2011   445   1,085,764   13.13%   $37.80
2012   275   736,086   8.90%   $37.10
2013   221   528,682   6.39%   $40.97
2014   254   610,399   7.38%   $47.99
2015   274   732,250   8.85%   $45.72
2016   253   660,243   7.98%   $39.31

The Macerich Company    9

Joint Venture Centers (at Company's pro rata share):

Year Ending
December 31,

   Number of
Leases
Expiring

   Approximate
GLA of
Leases Expiring(1)

   % of Total
Leased GLA
Represented by
Expiring Leases(2)

   Ending Base Rent
per Square Foot of
Expiring Leases(1)
2007   434   470,592   11.97%   $34.87
2008   436   437,159   11.12%   $37.43
2009   411   442,678   11.26%   $35.50
2010   401   407,195   10.36%   $39.13
2011   382   450,518   11.46%   $37.52
2012   259   273,849   6.97%   $43.01
2013   227   243,523   6.20%   $43.66
2014   218   268,382   6.83%   $41.53
2015   232   316,883   8.06%   $38.67
2016   285   358,294   9.12%   $46.68
(1)
Currently, 40% of leases have provisions for future consumer price index increases which are not reflected in ending lease rent.

(2)
For leases 10,000 square feet and under.

Anchors

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

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

Anchors accounted for approximately 5.0% of the Company's total rent for the year ended December 31, 2006.

10     The Macerich Company

The following table identifies each Anchor, each parent company that owns multiple Anchors and the number of square feet owned or leased by each such Anchor or parent company in the Company's portfolio at December 31, 2006:

Name

   Number of
Anchor Stores

   GLA
Owned by
Anchor

   GLA
Leased by
Anchor

   Total GLA
Occupied
by Anchor
Federated Department Stores                
  Macy's   57   6,501,584   2,905,664   9,407,248
  Bloomingdale's   1   —   255,888   255,888
    Total   58   6,501,584   3,161,552   9,663,136
Sears Holdings Corporation                
  Sears   51   4,713,818   2,216,406   6,930,224
  Great Indoors, The   1   —   131,051   131,051
  K-Mart   1   —   86,479   86,479
    Total   53   4,713,818   2,433,936   7,147,754
J.C. Penney   48   2,564,887   3,906,043   6,470,930
Dillard's   24   3,276,852   918,235   4,195,087
Nordstrom   11   699,127   1,128,369   1,827,496
Target   12   920,541   564,279   1,484,820
The Bon-Ton Stores, Inc.                
  Younkers   6   —   609,177   609,177
  Bon-Ton, The   4   263,534   166,559   430,093
  Herberger's   4   188,000   214,573   402,573
    Total   14   451,534   990,309   1,441,843
Sun Capital, Inc.                
  Mervyn's   16   712,715   538,103   1,250,818
Gottschalks   7   332,638   553,242   885,880
Boscov's   3   —   476,067   476,067
Wal-Mart(1)   3   371,527   100,709   472,236
Neiman Marcus   3   120,000   321,450   441,450
Lord & Taylor(2)   4   209,422   199,372   408,794
Home Depot(3)   3   132,003   274,402   406,405
Burlington Coat Factory(4)   4   186,570   146,176   332,746
Von Maur   3   186,686   59,563   246,249
Belk, Inc.                
  Belk   3   —   200,925   200,925
Kohl's(5)   2   76,145   114,359   190,504
Dick's Sporting Goods(6)   2   —   187,241   187,241
La Curacao(7)   1   164,656   —   164,656
Lowe's   1   135,197   —   135,197
Best Buy   2   129,441   —   129,441
Saks Fifth Avenue   1   —   92,000   92,000
Barneys New York(8)   1   —   81,398   81,398
L.L. Bean   1   —   75,778   75,778
Gordmans   1   —   60,000   60,000
Sports Authority(9)   1   —   52,250   52,250
Bealls   1   —   40,000   40,000
Vacant(10)   17   —   2,461,690   2,461,690
    300   21,885,343   19,137,448   41,022,791
(1)
Wal-Mart purchased the leasehold interest from Burlington Coat Factory at Village Crossroads.

The Macerich Company    11

(2)
NRCD Equity Partners, Inc. acquired Lord & Taylor from Federated Department Stores, Inc. in a transaction completed in October 2006.

(3)
Home Depot opened a new 141,000 square foot store at Twenty Ninth Street in January 2006.

(4)
Burlington Coat Factory is scheduled to open a 74,047 square foot store at Green Tree Mall in March 2007.

(5)
Kohl's purchased the 76,145 square foot Mervyn's building at Kitsap Mall from Sun Capital, Inc. in March 2006. Kohl's is scheduled to open in October 2007.

(6)
Dick's Sporting Goods is scheduled to open a 90,000 square foot store at Washington Square in March 2008.

(7)
La Curacao is scheduled to open a 164,656 square foot store at Desert Sky Mall in October 2007.

(8)
Barneys New York opened an 81,398 square foot store at North Park Center in September 2006.

(9)
Copeland Sports assigned its lease at Valley River Center to Sports Authority in January 2007 which subsequently closed. Sports Authority is scheduled to reopen in May 2007.

(10)
Included in "vacant" are 11 Federated Department Stores located in ten Centers totaling 1,940,980 square feet purchased by the Company in July 2006. The Company is planning various replacement tenant and/or redevelopment opportunities for these vacant stores.

Environmental Matters

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

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

12     The Macerich Company

PCE was detected in soil and groundwater in the vicinity of a dry cleaning establishment at North Valley Plaza, formerly owned by a joint venture of which the Company was a 50% member. The property was sold on December 18, 1997. The California Department of Toxic Substances Control ("DTSC") advised the Company in 1995 that very low levels of Dichloroethylene ("1,2 DCE"), a degradation byproduct of PCE, was detected in a municipal water well located 1/4 mile west of the dry cleaners, and that the dry cleaning facility may have contributed to the introduction of 1,2 DCE into the water well. According to the DTSC, the maximum contaminant level ("MCL") for 1,2 DCE which is permitted in drinking water is 6 parts per billion ("ppb"). The 1,2 DCE was detected in the water well at an average concentration of 1.7 ppb, which is below the MCL. In 1998, DTSC issued an order to multiple responsible parties regarding this contamination. The Company has retained an environmental consultant and has initiated extensive testing of the site. The joint venture agreed (between itself and the buyer) that it would be responsible for continuing to pursue the investigation and remediation of impacted soil and groundwater resulting from releases of PCE from the former dry cleaner. A total of $0.2 million and $0.1 million have already been incurred by the joint venture for remediation, professional and legal fees for the years ended December 31, 2006 and 2005, respectively. The Company has been sharing costs with former owners of the property. An additional $0.1 million remains reserved at December 31, 2006.

The Company acquired Fresno Fashion Fair in December 1996. Asbestos was detected in structural fireproofing throughout much of the Center. Testing data conducted by professional environmental consulting firms indicates that the fireproofing is largely inaccessible to building occupants and is well adhered to the structural members. Additionally, airborne concentrations of asbestos were well within OSHA's permissible exposure limit of .1 fcc. The accounting at acquisition included a reserve of $3.3 million to cover future removal of this asbestos, as necessary. The Center was recently renovated and a substantial amount of the asbestos was removed. The Company incurred $0.5 million and $0.5 million in remediation costs for the years ended December 31, 2006 and 2005, respectively. An additional $0.4 million remains reserved at December 31, 2006.

Insurance

Each of the Centers has comprehensive liability, fire, extended coverage and rental loss insurance with insured limits customarily carried for similar properties. The Company does not insure certain types of losses (such as losses from wars), because they are either uninsurable or not economically insurable. In addition, while the Company or the relevant joint venture, as applicable, carries earthquake insurance on the Centers located in California, the policies are subject to a deductible equal to 5% of the total insured value of each Center, a $100,000 per occurrence minimum and a combined annual aggregate loss limit of $115 million on these Centers. While the Company or the relevant joint venture also carries terrorism insurance on the Centers, the policies are subject to a $10,000 deductible and a combined annual aggregate loss of $800 million for both certified and non-certified acts of terrorism. In addition, the Company's ability to maintain this level of terrorism insurance

The Macerich Company    13

may be adversely impacted by the pending expiration of the Terrorism Risk Insurance Act on December 31, 2007. Each Center has environmental insurance covering eligible third-party losses, remediation and non-owned disposal sites, subject to a $100,000 deductible and a $10 million three-year aggregate limit. Some environmental losses are not covered by this insurance because they are uninsurable or not economically insurable. Furthermore, the Company carries title insurance on substantially all of the Centers for less than their full value.

Qualification as a Real Estate Investment Trust

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

Employees

As of December 31, 2006, the Company and the Management Companies employed 3,036 persons, including executive officers (6), personnel in the areas of acquisitions and business development (17), property management (495), leasing (187), redevelopment/development (93), financial services (268) and legal affairs (62). In addition, in an effort to minimize operating costs, the Company generally maintains its own security and guest services staff (1,871) and in some cases maintenance staff (37). The Company primarily engages a third party to handle maintenance at the Centers. Unions represent 29 of these employees. The Company believes that relations with its employees are good.

Available Information; Website Disclosure; Corporate Governance Documents

The Company's corporate website address is www.macerich.com. The Company makes available free-of-charge through this website its reports on Forms 10-K, 10-Q and 8-K and all amendments thereto, as soon as reasonably practicable after the reports have been filed with, or furnished to, the Securities and Exchange Commission. These reports are available under the heading "Investing —SEC Filings," through a free hyperlink to a third-party service.

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

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

Certifications

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

14     The Macerich Company


Item 1A. Risk Factors

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

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

Income from shopping center properties and shopping center values are also affected by applicable laws and regulations, including tax, environmental, safety and zoning laws, and by interest rate levels and the availability and cost of financing. In addition, the number of prospective buyers interested in purchasing shopping centers is limited. Therefore, if we were to sell one or more of our Centers, we may receive less money than we originally invested in the Center.

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

A significant percentage of our Centers are located in California and Arizona and 12 Centers in the aggregate are located in New York, New Jersey and Connecticut. To the extent that weak economic or real estate conditions, including as a result of the factors described in the preceding risk factor, or other factors affect California, Arizona, New York, New Jersey or Connecticut (or their respective regions) more severely than other areas of the country, our financial performance could be negatively impacted.

Our Centers must compete with other retail centers and retail formats for tenants and customers.

There are numerous shopping facilities that compete with the Centers in attracting tenants to lease space, and an increasing number of new retail formats and technologies other than retail shopping centers compete with the Centers for retail sales. Competing retail formats include lifestyle centers, factory outlet centers, power centers, discount shopping clubs, mail-order services, internet shopping and home shopping networks. Our revenues may be reduced as a result of increased competition.

The Macerich Company    15


Our Centers depend on tenants to generate rental revenues.

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

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

For example, on October 24, 2005, Federated Department Stores, Inc. disclosed that it had identified 82 duplicate locations in certain malls to be divested during 2006. In July 2006, we purchased 11 of the identified stores which were located in ten of our Centers. On February 1, 2006, Musicland Holding Corp. announced the closure of 341 of its low performing Sam Goody and Suncoast Picture Stores which include 26 stores located in the Centers. Approximately 80% of these stores remain vacant. We are contemplating various replacement tenant and/or redevelopment opportunities for all of these vacant stores. No assurance can be given regarding the impact on us of these divestitures or closures or whether we will be successful in leasing or redeveloping these vacant stores.

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

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

16     The Macerich Company


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


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

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

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

The tax consequences of the sale of some of the Centers may create conflicts of interest.

The principals will experience negative tax consequences if some of the Centers are sold. As a result, the principals may not favor a sale of these Centers even though such a sale may benefit our other stockholders.

The guarantees of indebtedness by and certain holdings of the principals may create conflicts of interest.

The principals have guaranteed mortgage loans encumbering one of the Centers. As of December 31, 2006, the principals have guaranteed an aggregate principal amount of approximately $21.8 million. The existence of guarantees of these loans by the principals could result in the principals having interests that are inconsistent with the interests of our stockholders.

The principals may have different interests than our stockholders because they are significant holders of the Operating Partnership.

The Macerich Company    17


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

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

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

In addition, if we were to lose our REIT status, we will be prohibited from qualifying as a REIT for the four taxable years following the year during which the qualification was lost, absent relief under statutory provisions. As a result, net income and the funds available for distributions to our stockholders would be reduced for at least five years and the fair market value of our shares could be materially adversely affected. Furthermore, the Internal Revenue Service could challenge our REIT status for past periods, which if successful could result in us owing a material amount of tax for prior periods. It is possible that future economic, market, legal, tax or other considerations might cause our board of directors to revoke our REIT election.

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

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

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

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

18     The Macerich Company

Complying with REIT requirements may force us to borrow to make distributions to our stockholders.

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

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

We own partial interests in property partnerships that own 42 Joint Venture Centers as well as fee title to a site that is ground leased to a property partnership that owns a Joint Venture Center and several development sites. We may acquire partial interests in additional properties through joint venture arrangements. Investments in Centers that are not Wholly Owned Centers involve risks different from those of investments in Wholly Owned Centers.

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

In addition, some of our outside partners control the day-to-day operations of eight Joint Venture Centers (NorthPark Center, West Acres Center, Eastland Mall, Granite Run Mall, Lake Square Mall, NorthPark Mall, South Park Mall and Valley Mall). We, therefore, do not control cash distributions from these Centers, and the lack of cash distributions from these Centers could jeopardize our ability to maintain our qualification as a REIT.

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

Because we conduct our operations through the Operating Partnership, our ability to service our debt obligations and pay dividends to our stockholders is strictly dependent upon the earnings and cash flows of the Operating Partnership and the ability of the Operating Partnership to make distributions to us. Under the Delaware Revised Uniform Limited Partnership Act, the Operating Partnership is prohibited from making any distribution to us to the extent that at the time of the distribution, after giving effect to the distribution, all liabilities of the Operating

The Macerich Company    19


Partnership (other than some non-recourse liabilities and some liabilities to the partners) exceed the fair value of the assets of the Operating Partnership.

Possible environmental liabilities could adversely affect us.

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

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

Uninsured losses could adversely affect our financial condition.

Each of our Centers has comprehensive liability, fire, extended coverage and rental loss insurance with insured limits customarily carried for similar properties. We do not insure certain types of losses (such as losses from wars), because they are either uninsurable or not economically insurable. In addition, while we or the relevant joint venture, as applicable, carry earthquake insurance on the Centers located in California, the policies are subject to a deductible equal to 5% of the total insured value of each Center, a $100,000 per occurrence minimum and a combined annual aggregate loss limit of $115 million on these Centers. While we or the relevant joint venture also carries terrorism insurance on the Centers, the policies are subject to a $10,000 deductible and a combined annual aggregate loss limit of $800 million for both certified and non-certified acts of terrorism. In addition, our ability to maintain this level of terrorism insurance may be adversely impacted by the pending expiration of the Terrorism Risk Insurance Act on December 31, 2007. Each Center has environmental insurance covering eligible third-party losses, remediation and non-owned disposal sites, subject to a $100,000 deductible and a $10 million three-year aggregate limit. Some environmental losses are not covered by this insurance because they are uninsurable or not economically insurable. Furthermore, we carry title insurance on many of the Centers for less than their full value. If an uninsured loss or a loss in excess of insured limits occurs, the entity that owns the affected Center could lose its capital invested in the Center, as well as the anticipated future revenue from the Center, while remaining obligated for any mortgage indebtedness or other financial obligations related to the Center. An uninsured loss or loss in excess of insured limits may negatively impact our financial condition.

20     The Macerich Company


As the general partner of the Operating Partnership and certain of the property partnerships, we are generally liable for any of its unsatisfied obligations other than non-recourse obligations.

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

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

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

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

The Macerich Company    21

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

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


Item 1B. Unresolved Staff Comments

Not Applicable

22     The Macerich Company


Item 2. Properties

Company's Ownership

   Name of Center/
Location(1)

   Year of
Original
Construction/
Acquisition

   Year of
Most
Recent
Expansion/
Renovation

   Total
GLA(2)

   Mall and
Freestanding GLA

   Percentage
of Mall and
Freestanding
GLA Leased

   Anchors

   Sales Per Square Foot(3)

WHOLLY OWNED:
100%   Capitola Mall(4)
Capitola, California		   1977/1995   1988   587,019   197,302   95.4%   Gottschalks, Macy's, Mervyn's, Sears   $339
100%   Chandler Fashion Center
Chandler, Arizona		   2001/2002   —   1,322,770   637,610   95.1%   Dillard's, Macy's, Nordstrom, Sears   640
100%   Chesterfield Towne Center(5)
Richmond, Virginia		   1975/1994   2000   1,035,371   424,982   89.0%   Dillard's, Macy's, Sears, J.C. Penney   340
100%   Danbury Fair Mall(5)
Danbury, Connecticut		   1986/2005   1991   1,292,578   496,370   98.1%   J.C. Penney, Lord & Taylor(6), Macy's, Sears   587
100%   Deptford Mall
Deptford, New Jersey		   1975/2006   1990   1,039,840   343,398   97.2%   Boscov's, J.C. Penney, Macy's, Sears   513
100%   Eastview Mall
Victor, New York		   1971/2005   2003   1,682,143   785,061   96.9%   The Bon-Ton, Home Depot, J.C. Penney, Macy's, Lord & Taylor(6), Sears, Target   418
100%   Fiesta Mall(5)
Mesa, Arizona		   1979/2004   1999   1,036,638   313,082   97.3%   Dillard's, Macy's, Sears   391
100%   Flagstaff Mall
Flagstaff, Arizona		   1979/2002   1986   354,519   150,507   91.8%   Dillard's, J.C. Penney, Sears   345
100%   FlatIron Crossing(5)
Broomfield, Colorado		   2000/2002   —   1,503,805   740,064   95.6%   Dillard's, Macy's, Nordstrom, Dick's Sporting Goods   424
100%   Freehold Raceway Mall
Freehold, New Jersey		   1990/2005   2004   1,580,422   788,798   98.1%   J.C. Penney, Lord & Taylor(6), Macy's, Nordstrom, Sears   470
100%   Fresno Fashion Fair
Fresno, California		   1970/1996   2006   955,586   394,705   97.5%   Gottschalks, J.C. Penney, Macy's (two)   635
100%   Great Northern Mall(5)
Clay, New York		   1988/2005   —   896,106   566,118   94.8%   Macy's, Sears   260
100%   Greece Ridge Center
Greece, New York		   1967/2005   1993   1,469,376   842,292   97.5%   Burlington Coat Factory, The Bon-Ton, J.C. Penney, Macy's, Sears   297
100%   Green Tree Mall
Clarksville, Indiana		   1968/1975   2005   795,382   290,335   80.7%   Dillard's J.C. Penney, Sears, Burlington Coat Factory(7)   379
100%   La Cumbre Plaza(4)
Santa Barbara, California		   1967/2004   1989   494,553   177,553   91.7%   Macy's, Sears   407
100%   Northgate Mall
San Rafael, California		   1964/1986   1987   731,803   261,472   90.7%   Macy's, Mervyn's, Sears   388
100%   Northridge Mall
Salinas, California		   1972/2003   1994   892,999   356,019   99.5%   J.C. Penney, Macy's, Mervyn's, Sears   359
100%   Pacific View(5)
Ventura, California		   1965/1996   2001   1,044,976   411,162   88.5%   J.C. Penney, Macy's, Sears   421
100%   Panorama Mall
Panorama, California		   1955/1979   2005   323,479   158,479   92.9%   Wal-Mart   409
100%   Paradise Valley Mall(5)
Phoenix, Arizona		   1979/2002   1990   1,222,802   417,374   89.6%   Dillard's, J.C. Penney, Macy's, Sears   366
100%   Prescott Gateway
Prescott, Arizona		   2002/2002   2004   578,295   334,107   85.2%   Dillard's, Sears, J.C. Penney   290
100%   Queens Center(4)
Queens, New York		   1973/1995   2004   961,987   407,220   98.2%   J.C. Penney, Macy's   778
100%   Rimrock Mall
Billings, Montana		   1978/1996   1999   604,014   292,344   89.5%   Dillard's (two), Herberger's, J.C. Penney   383
100%   Rotterdam Square
Schenectady, New York		   1980/2005   1990   583,240   273,465   91.2%   Macy's, K-Mart, Sears   250
100%   Salisbury, Centre at
Salisbury, Maryland		   1990/1995   2005   845,071   347,655   96.6%   Boscov's, J.C. Penney, Macy's, Sears   390
100%   Shoppingtown Mall (5)
Dewitt, New York		   1954/2005   2000   1,007,135   524,435   74.2%   J.C. Penney, Macy's, Sears   260
                                 

The Macerich Company    23

100%   Somersville Towne Center
Antioch, California		   1966/1986   2004   502,256   174,034   87.4%   Sears, Gottschalks, Mervyn's, Macy's   $387
100%   South Plains Mall
Lubbock, Texas		   1972/1998   1995   1,140,956   399,169   88.4%   Bealls, Dillard's (two), J.C. Penney, Mervyn's, Sears   356
100%   South Towne Center
Sandy, Utah		   1987/1997   1997   1,268,703   492,191   94.3%   Dillard's, J.C. Penney, Mervyn's, Target, Macy's   423
100%   The Oaks(5)
Thousand Oaks, California		   1978/2002   1993   1,067,698   341,623   92.5%   J.C. Penney, Macy's (two),   549
100%   Towne Mall
Elizabethtown, Kentucky		   1985/2005   1989   353,507   182,635   83.6%   J.C. Penney, Belk, Sears   296
100%   Valley River Center
Eugene, Oregon		   1969/2006   1990   835,694   259,630   86.9%   Sports Authority(8), Gottschalks, Macy's, J.C. Penney   454
100%   Valley View Center
Dallas, Texas		   1973/1997   2004   1,635,870   577,973   90.7%   Dillard's, Macy's, J.C. Penney, Sears   296
100%   Victor Valley, Mall of
Victorville, California		   1986/2004   2001   547,611   273,762   97.0%   Gottschalks, J.C. Penney, Mervyn's, Sears   483
100%   Vintage Faire Mall
Modesto, California		   1977/1996   2001   1,083,309   383,390   96.9%   Gottschalks, J.C. Penney, Macy's (two), Sears   597
100%   Westside Pavilion
Los Angeles, California		   1985/1998   2000   669,338   311,210   89.4%   Nordstrom, Macy's   479
100%   Wilton Mall at Saratoga
Saratoga Springs, New York		   1990/2005   1998   661,118   457,240   96.2%   The Bon-Ton, J.C. Penney, Sears   316
    Total/Average Wholly Owned   34,607,969   14,784,766   93.1%       $435

JOINT VENTURES (VARIOUS PARTNERS)(9):
33.3%   Arrowhead Towne Center
Glendale, Arizona		   1993/2002   2004   1,133,229   394,815   97.6%   Dillard's, Macy's, J.C. Penney, Sears, Mervyn's   $615
50%   Biltmore Fashion Park
Phoenix, Arizona		   1963/2003   2006   595,457   290,457   89.3%   Macy's, Saks Fifth Avenue   681
50%   Broadway Plaza(4)
Walnut Creek, California		   1951/1985   1994   697,984   252,487   96.6%   Macy's (two), Nordstrom   766
50.1%   Corte Madera, Village at
Corte Madera, California		   1985/1998   2005   437,950   219,950   96.5%   Macy's, Nordstrom   704
50%   Desert Sky Mall
Phoenix, Arizona		   1981/2002   1993   899,190   288,695   88.1%   Sears, Dillard's, Burlington Coat Factory, Mervyn's, La Curacao(10)   364
50%   Inland Center(4)(5)
San Bernardino, California		   1966/2004   2004   988,880   205,206   92.3%   Macy's, Sears, Gottschalks   508
37.5%   Marketplace Mall, The(4)
Henrietta, New York		   1982/2005   1993   1,018,066   503,474   92.3%   The Bon-Ton, J.C. Penney, Macy's, Sears   325
15%   Metrocenter Mall(4)
Phoenix,, Arizona		   1973/2005   2006   1,277,499   594,250   91.5%   Dillard's, J.C. Penney, Macy's, Sears   387
50%   NorthPark Center(4)
Dallas, Texas		   1965/2004   2005   1,981,419   929,099   95.1%   Dillard's, Macy's, Neiman Marcus, Nordstrom, Barneys New York(11)   710
50%   Ridgmar
Fort Worth, Texas		   1976/2005   2000   1,270,813   396,840   80.7%   Dillard's, Macy's, J.C. Penney, Neiman Marcus, Sears   326
50%   Scottsdale Fashion Square(5)(12)
Scottsdale, Arizona		   1961/2002   2003   2,049,169   847,750   94.3%   Dillard's, Macy's, Nordstrom, Neiman Marcus   741
33.3%   Superstition Springs Center(4)
Mesa, Arizona		   1990/2002   2002   1,275,370   428,831   97.6%   Burlington Coat Factory, Dillard's, Macy's, J.C. Penney, Sears, Mervyn's, Best Buy   456
50%   Tyson's Corner Center(4)
McLean, Virginia		   1990/2005   2003   2,200,252   1,312,010   98.0%   Bloomingdale's, Macy's, L.L. Bean, Lord & Taylor(6), Nordstrom   689
19%   West Acres
Fargo, North Dakota		   1972/1986   2001   948,102   395,547   98.9%   Macy's, Herberger's, J.C. Penney, Sears   470
    Total/Average Joint Ventures (Various Partners)   16,773,380   7,059,411   94.2%       $573
                                 

24     The Macerich Company


PACIFIC PREMIER RETAIL TRUST PROPERTIES:
51%   Cascade Mall
Burlington, Washington		   1989/1999   1998   594,163   269,927   90.7%   Macy's (two), J.C. Penney, Sears, Target   $369
51%   Kitsap Mall(4)
Silverdale, Washington		   1985/1999   1997   848,161   388,178   92.6%   Macy's, J.C. Penney, Kohl's(13), Sears   413
51%   Lakewood Mall(5)
Lakewood, California		   1953/1975   2001   2,090,975   982,991   96.2%   Home Depot, Target, J.C. Penney, Macy's, Mervyn's   424
51%   Los Cerritos Center(5)
Cerritos, California		   1971/1999   1998   1,288,685   487,404   96.3%   Macy's, Mervyn's, Nordstrom, Sears   551
51%   Redmond Town Center(4)(12)
Redmond, Washington		   1997/1999   2000   1,280,703   1,170,703   98.9%   Macy's   377
51%   Stonewood Mall(4)
Downey, California		   1953/1997   1991   930,539   359,792   99.6%   J.C. Penney, Mervyn's, Macy's, Sears   436
51%   Washington Square
Portland, Oregon		   1974/1999   2005   1,454,448   519,421   94.4%   J.C. Penney, Macy's, Dick's Sporting Goods(14), Nordstrom, Sears   716
    Total/Average Pacific Premier Retail Trust Properties   8,487,674   4,178,416   96.3%       $480

SDG MACERICH PROPERTIES, L.P. PROPERTIES:
50%   Eastland Mall(4)
Evansville, Indiana		   1978/1998   1996   1,040,090   550,946   95.7%   Dillard's, J.C. Penney, Macy's   $370
50%   Empire Mall(4)
Sioux Falls, South Dakota		   1975/1998   2000   1,341,202   595,680   94.5%   Macy's, J.C. Penney, Gordmans, Kohl's, Sears, Target, Younkers   384
50%   Granite Run Mall
Media, Pennsylvania		   1974/1998   1993   1,036,265   535,456   93.1%   Boscov's, J.C. Penney, Sears   293
50%   Lake Square Mall
Leesburg, Florida		   1980/1998   1995   561,030   264,993   87.7%   Belk, J.C. Penney, Sears, Target   296
50%   Lindale Mall
Cedar Rapids, Iowa		   1963/1998   1997   687,174   381,611   86.6%   Sears, Von Maur, Younkers   318
50%   Mesa Mall
Grand Junction, Colorado		   1980/1998   2003   851,513   410,305   94.4%   Herberger's, J.C. Penney, Mervyn's, Sears, Target   399
50%   NorthPark Mall
Davenport, Iowa		   1973/1998   2001   1,073,940   423,484   85.5%   J.C. Penney, Dillard's, Sears, Von Maur, Younkers   274
50%   Rushmore Mall
Rapid City, South Dakota		   1978/1998   1992   837,831   433,171   91.1%   Herberger's, J.C. Penney, Sears, Target   362
50%   Southern Hills Mall
Sioux City, Iowa		   1980/1998   2003   797,316   483,739   91.7%   Sears, Younkers, J.C. Penney   291
50%   SouthPark Mall
Moline, Illinois		   1974/1998   1990   1,025,860   447,804   88.2%   J.C. Penney, Sears, Younkers, Von Maur, Dillard's   221
50%   SouthRidge Mall(15)
Des Moines, Iowa		   1975/1998   1998   867,673   478,921   84.9%   Sears, Younkers, J.C. Penney, Target   194
50%   Valley Mall(5)
Harrisonburg, Virginia		   1978/1998   1992   505,726   190,648   95.1%   Belk, J.C. Penney, Target   272
    Total/Average SDG Macerich Properties, L.P. Properties   10,625,620   5,196,758   90.9%       $314
    Total/Average Joint Ventures   35,886,674   16,434,585   93.7%       $470
    Total/Average before Community Centers   70,494,643   31,219,351   93.4%       $452

COMMUNITY / SPECIALTY CENTERS:
100%   Borgata, The
Scottsdale, Arizona		   1981/2002   2006   93,711   93,711   77.7%   —   $425
50%   Boulevard Shops
Chandler, Arizona		   2001/2002   2004   180,823   180,823   100.0%   —   412
75%   Camelback Colonnade
Phoenix, Arizona		   1961/2002   1994   624,101   544,101   98.0%   Mervyn's   339
100%   Carmel Plaza
Carmel, California		   1974/1998   2006   96,434   96,434   91.3%   —   511
50%   Chandler Festival
Chandler, Arizona		   2001/2002   —   503,735   368,538   98.6%   Lowe's   298
50%   Chandler Gateway
Chandler, Arizona		   2001/2002                  255,289   124,238   100.0%   The Great Indoors   420
50%   Chandler Village Center
Chandler, Arizona		   2004/2002   2006   273,418   130,285   100.0%   Target   241
                                 

The Macerich Company    25

50%   Hilton Village(4)(11)
Scottsdale, Arizona		   1982/2002   —   96,546   96,546   96.1%   —   $511
24.5%   Kierland Commons
Scottsdale, Arizona		   1999/2005   2003   438,721   438,721   97.5%   —   747
100%   La Encantada
Tucson, Arizona		   2002/2002   2005   251,000   251,000   85.8%   —   531
100%   Paradise Village Office Park II
Phoenix, Arizona		   1982/2002   —   46,834   46,834   95.4%   —   N/A
63.6%   Pittsford Plaza(5)
Pittsford, New York		   1965/2005   1982   525,936   401,104   95.1%   —   281
100%   Village Center
Phoenix, Arizona		   1985/2002   —   170,801   59,055   90.4%   Target   332
100%   Village Crossroads
Phoenix, Arizona		   1993/2002   —   185,148   84,439   96.8%   Wal-Mart(16)   372
100%   Village Fair
Phoenix, Arizona		   1989/2002   —   271,417   207,817   97.6%   Best Buy   265
100%   Village Plaza
Phoenix, Arizona		   1978/2002   —   79,912   79,912   96.3%   —   308
100%   Village Square I
Phoenix, Arizona		   1978/2002   —   21,606   21,606   100.0%   —   187
100%   Village Square II
Phoenix, Arizona		   1978/2002   —   146,193   70,393   97.8%   Mervyn's   202
    Total/Average Community / Specialty Centers   4,261,625   3,295,557   95.9%       $449
    Total before major development and redevelopment properties and other assets   74,756,268   34,514,908   93.6%       $452

MAJOR DEVELOPMENT AND REDEVELOPMENT PROPERTIES:
34.9%   SanTan Village Phase 2
Gilbert, Arizona		   2004/2004   2006 ongoing   491,038   284,511   (18)   Wal-Mart   N/A
100%   Santa Monica Place(5)
Santa Monica, California		   1980/1999   1990   556,933   273,683   (18)   Macy's   N/A
100%   Twenty Ninth Street(4)
Boulder, Colorado		   1963/1979   2006 ongoing   817,085   525,431   (18)   Macy's, Home Depot(17)   N/A
100%   Westside Pavilion Adjacent
Los Angeles, California		   1985/1998   2006 ongoing   90,982   90,982   (18)   —   N/A
    Total Major Development and Redevelopment Properties       1,956,038   1,174,607            

OTHER ASSETS:
100%   Paradise Village Investment Co. ground leases   —/2002       169,490   169,490   89.8%   —   N/A
    Total Other Assets       169,490   169,490   89.8%        
    Grand Total at December 31, 2006       76,881,796   35,859,005            
(1)
With respect to 74 Centers, the underlying land controlled by the Company is owned in fee entirely by the Company, or, in the case of jointly-owned Centers, by the joint venture property partnership or limited liability company. With respect to the remaining Centers, the underlying land controlled by the Company is owned by third parties and leased to the Company, the property partnership or the limited liability company pursuant to long-term ground leases. Under the terms of a typical ground lease, the Company, the property partnership or the limited liability company pays rent for the use of the land and is generally responsible for all costs and expenses associated with the building and improvements. In some cases, the Company, the property partnership or the limited liability company has an option or right of first refusal to purchase the land. The termination dates of the ground leases range from 2013 to 2132.

(2)
Includes GLA attributable to Anchors (whether owned or non-owned) and Mall and Freestanding Stores as of December 31, 2006.

(3)
Sales are based on reports by retailers leasing Mall and Freestanding Stores for the twelve months ending December 31, 2006 for tenants which have occupied such stores for a minimum of 12 months. Sales per square foot are based on tenants 10,000 square feet and under, excluding theaters.

(4)
Portions of the land on which the Center is situated are subject to one or more ground leases.

(5)
These properties have a vacant Anchor location. The Company is contemplating various replacement tenant and/or redevelopment opportunities for these vacant sites.

26     The Macerich Company

(6)
NRCD Equity Partners, Inc., acquired Lord & Taylor from Federated Department Stores, Inc. in a transaction completed in October 2006.

(7)
Burlington Coat Factory is scheduled to open a 74,047 square foot store at Green Tree Mall in March 2007.

(8)
Copeland Sports assigned their lease at Valley River Center to Sports Authority in January 2007 which subsequently closed. Sports Authority is scheduled to reopen in May 2007.

(9)
The Company's ownership interest in this table reflects its legal ownership interest but may not reflect its economic interest since each joint venture has various agreements regarding cash flow, profits and losses, allocations, capital requirements and other matters.

(10)
La Curacao is scheduled to open a 164,656 square foot store at Desert Sky Mall in October 2007.

(11)
Barneys New York opened a 81,398 square foot store at North Park Center in September 2006.

(12)
The office portion of this mixed-use development does not have retail sales.

(13)
Kohl's purchased the 76,145 square foot Mervyn's building at Kitsap Mall from Sun Capital, Inc. in March 2006. Kohl's is scheduled to open in October 2007.

(14)
Dick's Sporting Goods is scheduled to open a 90,000 square foot store at Washington Square in March 2008.

(15)
The former Montgomery Wards building at Southridge Mall was demolished in April 2006.

(16)
Wal-Mart purchased the leasehold interest from Burlington Coat Factory at Village Crossroads.

(17)
Home Depot opened a new 141,000 square foot store at Twenty Ninth Street in January 2006.

(18)
Tenant spaces have been intentionally held off the market and remain vacant because of major development or redevelopment plans. As a result, the Company believes the percentage of mall and freestanding GLA leased and the sales per square foot at these major redevelopment properties is not meaningful data.

The Macerich Company    27

Mortgage Debt

The following table sets forth certain information regarding the mortgages encumbering the Centers, including those Centers in which the Company has less than a 100% interest. The information set forth below is as of December 31, 2006, (dollars in thousands):

Property Pledged as Collateral

   Fixed or Floating

   Annual Interest Rate

   Carrying Amount(1)

   Annual Debt Service

   Maturity Date

   Balance Due on Maturity

   Earliest Date Notes Can Be Defeased or Be Prepaid
Consolidated Centers:
Borgata   Fixed   5.39%   $14,885   $1,380   10/11/07   $14,352   Any Time
Capitola Mall   Fixed   7.13%   40,999   4,558   5/15/11   32,724   Any Time
Carmel Plaza   Fixed   8.18%   26,674   2,421   5/1/09   25,642   Any Time
Casa Grande(2)   Floating   6.75%   7,304   493   8/16/09   7,304   Any Time
Chandler Fashion Center   Fixed   5.48%   172,904   12,514   11/1/12   152,097   Any Time
Chesterfield Towne Center(3)   Fixed   9.07%   57,155   6,580   1/1/24   1,087   Any Time
Danbury Fair Mall   Fixed   4.64%   182,877   14,698   2/1/11   155,173   Any Time
Deptford Mall(4)   Fixed   5.44%   100,000   5,440   1/5/13   100,000   12/7/09
Eastview Commons   Fixed   5.46%   9,117   792   9/30/10   7,942   Any Time
Eastview Mall   Fixed   5.10%   102,873   7,107   1/18/14   87,927   Any Time
Fiesta Mall   Fixed   4.88%   84,000   4,152   1/1/15   84,000   12/2/07
Flagstaff Mall   Fixed   4.97%   37,000   1,863   11/1/15   37,000   10/3/08
FlatIron Crossing   Fixed   5.23%   191,046   13,223   12/1/13   164,187   Any Time
Freehold Raceway Mall   Fixed   4.68%   183,505   14,208   7/7/11   155,678   Any Time
Fresno Fashion Fair   Fixed   6.52%   64,595   5,244   8/10/08   62,974   Any Time
Great Northern Mall   Fixed   5.19%   40,947   2,685   12/1/13   35,566   Any Time
Greece Ridge Center(5)   Floating   6.00%   72,000   4,320   11/6/07   72,000   Any Time
La Cumbre Plaza(6)   Floating   6.23%   30,000   1,869   8/9/07   30,000   Any Time
La Encantada(7)   Floating   7.08%   51,000   3,611   8/1/08   51,000   Any Time
Marketplace Mall   Fixed   5.30%   40,473   3,204   12/10/17   24,353   Any Time
Northridge Mall(8)   Fixed   4.84%   82,514   5,438   7/1/09   70,991   Any Time
Oaks, The(9)   Floating   6.05%   92,000   5,566   7/1/07   92,000   Any Time
Pacific View   Fixed   7.16%   90,231   7,780   8/31/11   83,045   Any Time
Panorama Mall(10)   Floating   6.23%   50,000   3,115   2/28/10   50,000   Any Time
Paradise Valley Mall(11)   Fixed   5.39%   74,990   6,068   1/1/07   74,889   Any Time
Paradise Valley Mall   Fixed   5.89%   22,154   2,193   5/1/09   19,863   Any Time
Pittsford Plaza   Fixed   5.02%   25,278   1,914   1/1/13   20,673   1/1/07
Prescott Gateway(12)   Fixed   5.78%   60,000   3,468   12/1/11   60,000   12/21/08
Queens Center   Fixed   6.88%   92,039   7,595   3/1/09   88,651   Any Time
Queens Center(13)   Fixed   7.00%   220,625   18,013   3/31/13   204,203   2/19/08
Rimrock Mall   Fixed   7.45%   43,452   3,841   10/1/11   40,025   Any Time
Salisbury, Center at(14)   Fixed   5.79%   115,000   6,659   5/1/16   115,000   6/29/08
Santa Monica Place   Fixed   7.70%   80,073   7,272   11/1/10   75,544   Any Time
Shoppingtown Mall   Fixed   5.01%   46,217   3,828   5/11/11   38,968   Any Time
South Plains Mall   Fixed   8.22%   59,681   5,448   3/1/09   57,557   Any Time
South Towne Center   Fixed   6.61%   64,000   4,289   10/10/08   64,000   Any Time
Towne Mall   Fixed   4.99%   15,291   1,206   11/1/12   12,316   Any Time
Twenty Ninth Street(15)   Floating   6.67%   94,080   6,275   6/15/07   94,080   Any Time
Valley River Center(16)   Fixed   5.58%   100,000   5,580   2/1/16   100,000   2/1/09
Valley View Center   Fixed   5.72%   125,000   7,247   1/1/11   125,000   3/14/08
Victor Valley, Mall of   Fixed   4.60%   52,429   3,645   3/1/08   50,850   Any Time
Village Fair North   Fixed   5.89%   11,210   983   7/15/08   10,710   Any Time
Vintage Faire Mall   Fixed   7.89%   65,363   6,099   9/1/10   61,372   Any Time
Westside Pavilion   Fixed   6.67%   93,513   7,538   7/1/08   91,133   Any Time
Wilton Mall   Fixed   4.79%   46,604   4,183   11/1/09   40,838   Any Time
            $3,331,098                
                             

28     The Macerich Company

Joint Venture Centers (at Company's Pro Rata Share):
Arrowhead Towne Center (33.3%)   Fixed   6.38%   $27,096   $2,240   10/1/11   $24,256   Any Time
Biltmore Fashion Park (50%)   Fixed   4.68%   39,790   2,433   7/10/09   34,972   Any Time
Boulevard Shops (50%)(17)   Floating   6.60%   10,700   706   12/16/07   10,700   Any Time
Broadway Plaza (50%)   Fixed   6.68%   31,012   3,089   8/1/08   29,315   Any Time
Camelback Colonnade (75%)(18)   Floating   6.04%   31,125   1,880   10/9/07   31,125   11/29/07
Cascade (51%)   Fixed   5.10%   20,424   1,362   7/1/10   19,221   6/22/07
Chandler Festival (50%)   Fixed   4.37%   15,157   958   10/1/08   14,583   7/1/08
Chandler Gateway (50%)   Fixed   5.19%   9,548   658   10/1/08   9,223   7/1/08
Chandler Village Center (50%)(19)   Floating   7.01%   8,578   601   12/19/07   8,578   Any Time
Corte Madera, The Village at (50.1%)   Fixed   7.75%   33,201   3,095   11/1/09   31,534   Any Time
Desert Sky Mall (50%)(20)   Floating   6.45%   25,750   1,661   3/6/08   25,750   10/26/08
Eastland Mall (50%)(21)   Fixed   5.79%   84,000   4,836   6/1/16   84,000   6/22/08
Empire Mall (50%)(21)   Fixed   5.79%   88,150   5,104   6/1/16   88,150   11/29/08
Granite Run (50%)(21)   Fixed   5.83%   60,595   4,311   6/1/16   51,504   6/7/08
Hilton Village (50%)(22)   Fixed   5.39%   3,996   415   1/1/07   3,949   Any Time
Inland Center (50%)   Fixed   4.64%   27,000   1,270   2/11/09   27,000   Any Time
Kierland Greenway (24.5%)   Fixed   5.85%   16,231   1,144   1/1/13   13,679   Any Time
Kierland Main Street (24.5%)   Fixed   4.99%   3,821   251   1/2/13   3,502   11/3/07
Kierland Tower Lofts (15%)(23)   Floating   7.13%   2,146   153   12/14/08   2,146   Any Time
Kitsap Mall/Place (51%)   Fixed   8.06%   29,592   2,755   6/1/10   28,143   Any Time
Lakewood Mall (51%)   Fixed   5.41%   127,500   6,995   6/1/15   127,500   8/19/07
Los Cerritos Center (51%)(24)   Floating   5.91%   66,300   3,918   7/1/11   66,300   Any Time
Mesa Mall (50%)(21)   Fixed   5.79%   43,625   2,526   6/1/16   43,625   8/29/08
Metrocenter Mall (15%)(25)   Fixed   4.80%   16,800   806   2/9/08   16,800   Any Time
Metrocenter Mall (15%)(26)   Floating   8.74%   1,868   163   2/9/08   1,868   Any Time
NorthPark Center (50%)(27)   Fixed   8.33%   42,159   3,996   5/10/12   38,919   Any Time
NorthPark Center (50%)(27)   Fixed   5.41%   94,782   7,133   5/10/12   82,181   Any Time
NorthPark Land (50%)   Fixed   8.33%   40,722   3,858   5/10/12   33,633   Any Time
NorthPark Land (50%)(28)   Floating   8.25%   3,500   289   8/30/07   3,500   Any Time
Redmond Office (51%)   Fixed   6.77%   35,774   4,443   7/10/09   30,285   Any Time
Redmond Retail (51%)   Fixed   4.81%   37,415   2,025   8/1/09   27,164   2/1/07
Ridgmar (50%)   Fixed   6.07%   28,700   1,800   4/11/10   28,700   Any Time
Rushmore (50%)(21)   Fixed   5.79%   47,000   2,721   6/1/16   47,000   8/2/08
SanTan Village Phase 2 (34.9%)(29)   Floating   7.36%   8,978   661   11/2/07   8,978   Any Time
Scottsdale Fashion Square (50%)   Fixed   5.39%   78,768   5,702   8/31/07   78,000   Any Time
Scottsdale Fashion Square (50%)   Fixed   5.39%   33,774   2,904   8/31/07   33,250   Any Time
Southern Hills (50%)(21)   Fixed   5.79%   50,750   2,938   6/1/16   50,750   8/2/08
Stonewood Mall (51%)   Fixed   7.41%   38,180   3,298   12/11/10   36,244   Any Time
Superstition Springs Center (33.3%)(30)   Floating   5.72%   22,498   1,287   9/9/08   22,498   10/24/08
Tyson's Corner Center (50%)(31)   Fixed   4.78%   172,021   11,232   2/17/14   147,595   Any Time
Valley Mall (50%)(21)   Fixed   5.83%   23,592   1,678   6/1/16   20,046   6/22/08
Washington Square (51%)   Fixed   6.70%   51,577   5,051   2/1/09   48,021   Any Time
Washington Square (51%)(32)   Floating   7.35%   16,988   1,249   2/1/09   16,988   Any Time
West Acres (19%)(33)   Fixed   6.41%   13,264   850   9/30/09   5,684   Any Time
            $1,664,447                
(1)
The mortgage notes payable balances include the unamortized debt premiums (discounts). Debt premiums (discounts) represent the excess of the fair value of debt over the principal value of debt assumed in various acquisitions. The debt premiums (discounts) are being amortized into interest expense over the term of the related debt, in a manner which approximates the effective interest method. The annual interest rate in the above tables represent the effective interest rate, including the debt premiums (discounts).

The Macerich Company    29

Property Pledged as Collateral

    
  
 
Borgata   $245  
Danbury Fair Mall   17,634  
Eastview Commons   776  
Eastview Mall   2,018  
Freehold Raceway Mall   15,806  
Great Northern Mall   (191 )
Marketplace Mall   1,813  
Paradise Valley Mall   2  
Paradise Valley Mall   685  
Pittsford Plaza   1,025  
Shoppingtown Mall   4,813  
Towne Mall   558  
Victor Valley, Mall of   377  
Village Fair North   146  
Wilton Mall   4,195  
 
    $49,902  
 
Property Pledged as Collateral

    
Arrowhead Towne Center   $524
Biltmore Fashion Park   2,572
Hilton Village   2
Kierland Greenway   876
Scottsdale Fashion Square   768
Scottsdale Fashion Square   521
Tysons Corner   4,019
    $9,282
(2)
On August 16, 2006, the Company placed a construction note payable on the property for up to $110,000, which bears interest at LIBOR plus a spread of 1.20% to 1.40% depending on certain conditions. The loan matures in August 2009, with two one-year extension options. At December 31, 2006, the total interest rate was 6.75%.

(3)
In addition to monthly principal and interest payments, contingent interest, as defined in the loan agreement, may be due to the extent that 35% of the amount by which the property's gross receipts exceeds a base amount. Contingent interest expense recognized by the Company was $576 for the year ended December 31, 2006.

(4)
On December 7, 2006, the Company placed an interest only $100,000 loan that bears interest at 5.44% and matures in January 2013. The loan provides for additional borrowings of up to $72,500 during the one-year period ending December 7, 2007, subject to certain conditions.

(5)
The floating rate loan bears interest at LIBOR plus 0.65%. The Company has stepped interest rate cap agreements over the term of the loan that effectively prevent LIBOR from exceeding 7.95%. At December 31, 2006, the total interest rate was 6.0%.

(6)
The floating rate loan bears interest at LIBOR plus 0.88% that matures on August 9, 2007 with two one-year extensions through August 9, 2009. The Company has an interest rate cap agreement over the loan term which effectively prevents LIBOR from exceeding 7.12%. At December 31, 2006, the total interest rate was 6.23%.

(7)
On January 6, 2006, the Company modified the loan to reduce the interest rate to LIBOR plus 1.75% with the opportunity for further reduction upon satisfaction of certain conditions to LIBOR plus 1.50%. The maturity was extended to August 1, 2008 with two extension options of eighteen and twelve months, respectively. At December 31, 2006, the total interest rate was 7.08%.

(8)
The loan bore interest at LIBOR plus 2.0% for six months and then converted at January 1, 2005 to a fixed rate loan at 4.94%. The effective interest rate over the entire term is 4.84%.

(9)
Concurrent with the acquisition of the property, the Company placed a $108,000 loan bearing interest at LIBOR plus 1.15% and maturing July 1, 2004 with three consecutive one-year options. $92,000 of the loan was at LIBOR plus 0.7% and $16,000 was at LIBOR plus 3.75%. The Company extended the loan maturity to July 2007. The Company paid off $16,000 of the loan in May 2006, and paid off the remaining $92,000 loan balance on February 2, 2007. The

30     The Macerich Company

(10)
On February 15, 2006, the Company paid off the existing $32,250 floating rate loan that bore interest at LIBOR plus 1.65% and replaced it with a $50,000 floating rate loan that bears interest at LIBOR plus 0.85% and matures in February 2010. There is an interest rate cap agreement on the new loan which effectively prevents LIBOR from exceeding 6.65%. At December 31, 2006, the total interest rate was 6.23%.

(11)
This loan was paid off in full on January 2, 2007.

(12)
On November 14, 2006, the Company paid off the existing $35,280 floating rate loan and replaced it with a $60,000 fixed rate loan that bears interest at 5.78% and matures in December 2011.

(13)
Northwestern Mutual Life ("NML") is the lender for 50% of the loan. The funds advanced by NML are considered related party debt as they are a joint venture partner with the Company in Broadway Plaza.

(14)
On April 19, 2006, the Company refinanced the loan on the property. The existing floating rate loan was replaced with an $115,000 loan bearing interest at 5.79% and maturing on May 1, 2016.

(15)
On June 7, 2006, the Company placed a construction note payable on the property for up to $115,000, which bears interest at LIBOR plus a spread of 1.1% to 1.25% depending on certain conditions. The loan matures in June 2007, with two one-year extension options. At December 31, 2006, the total interest rate was 6.67%.

(16)
Concurrent with the acquisition of this property, the Company placed a $100,000 loan that bears interest at 5.58% and matures on February 16, 2016. On January 23, 2007, the Company exercised an earn-out provision under the loan agreement and borrowed an additional $20,000 at a fixed rate of 5.64%.

(17)
This loan bears interest at LIBOR plus 1.25%, matures on December 16, 2007 and has a one-year extension option. At December 31, 2006, the total interest rate was 6.60%.

(18)
This loan bears interest at LIBOR plus 0.69%, matures on October 9, 2007, and has three one-year extension options. This floating rate debt is covered by an interest rate cap agreement over the loan term which effectively prevents LIBOR from exceeding 8.54%. At December 31, 2006, the total interest rate was 6.04%.

(19)
This represents a construction loan not to exceed $17,500 and bearing interest at LIBOR plus 1.65%. At December 31, 2006, the total interest rate was 7.01%.

(20)
On March 1, 2006, the joint venture refinanced the existing loan on the property with a $51.5 million floating rate loan bearing interest at LIBOR plus 1.10%. This floating rate debt is covered by an interest rate cap agreement over the loan term which effectively prevents LIBOR from exceeding 7.65%. The loan matures in March 2008 and has three one year extension options. At December 31, 2006, the total interest rate was 6.45%.

(21)
On May 31, 2006, SDG Macerich Properties, L.P. replaced the existing debt that was collectively collateralized by all the properties held by SDG Macerich Properties, LP., with mortgage notes payable placed on seven specific properties. The remaining five assets are unencumbered. The new debt includes interest-only loans on Eastland Mall, Empire Mall, Mesa Mall, Rushmore Mall and Southern Hills Mall that bear interest at 5.79% and fixed rate loans on Granite Run Mall and Valley Mall that bear interest at 5.83%. All of these loans mature on June 1, 2016.

(22)
This loan was refinanced on January 2, 2007 with an $8,600 fixed rate loan at 5.21% and maturing February 1, 2012.

(23)
This represents a construction loan not to exceed $49,472 and bearing interest at LIBOR plus 1.75%. At December 31, 2006, the total interest rate was 7.13%.

(24)
On May 20, 2006, the joint venture replaced the existing loan with a new $130,000 loan bearing interest at LIBOR plus 0.55% that matures on July 1, 2011. The loan provides for additional borrowings of up to $70,000 during the four year period following the initial funding at a rate of LIBOR plus 0.90%. At December 31, 2006, the total interest rate was 5.91%.

(25)
This loan bears interest at LIBOR plus 0.94%, matures on February 9, 2008 and has two one-year extension options. The joint venture entered into an interest rate swap agreement for $112.0 million to convert this loan from floating rate debt to fixed at a rate of 3.86%, which effectively limits the interest rate on this loan to 4.80%.

(26)
This loan provides for total funding of up to $37,380, subject to certain conditions, and bears interest at LIBOR plus 3.45% and matures February 9, 2008. At December 31, 2006, the total interest rate was 8.74%. The joint venture has two interest rate cap agreements throughout the term, which effectively prevent LIBOR from exceeding 5.25% on $11,500 of the loan and 7.25% on the remaining $25,880 of the loan.

(27)
The annual debt service represents the payment of principal and interest. In addition, contingent interest, as defined in the loan agreement, is due upon the occurrence of certain capital events and is equal to 15% of proceeds less the base amount. On December 21, 2006, the construction loan on the property converted to a mortgage note payable, bearing interest at 5.41% and maturing on May 10, 2012.

The Macerich Company    31

(28)
This represents an interest only line of credit that bears interest at the lender's prime rate and matures August 30, 2007. At December 31, 2006, the total interest rate was 8.25%.

(29)
The property had a construction note payable which was not to exceed $28.0 million which bore interest at LIBOR plus 2.0%. At December 31, 2006, the total interest rate was 7.36%. This debt was refinanced on January 30, 2007 with a $45,000 fixed rate loan at 5.33%, maturing February 1, 2012.

(30)
On August 14, 2006, the joint venture replaced the existing loan on the property with a new $67,500 two-year floating rate loan that bears interest at LIBOR plus 0.37%. In addition, the joint venture has an interest rate cap agreement that effectively prevents LIBOR from exceeding 8.63% throughout the loan term. At December 31, 2006, the total interest rate was 5.72%.

(31)
The loan bears interest at fixed rate of 5.23% and matures on February 17, 2014. Through February 28, 2006, the loan was interest only and requires principal plus interest payments thereafter. On March 31, 2006, the joint venture earned an interest rebate from the lender of $1,257 for meeting a targeted completion date of an expansion to the property. As a result of the rebate, the effective rate of interest on the loan was reduced from 4.82% to 4.78% over the remaining loan term.

(32)
On October 7, 2004, the joint venture placed an additional mortgage loan on the property totaling $35.0 million and bearing interest at LIBOR plus 2.00%. At December 31, 2006, the total interest rate was 7.35%.

(33)
On August 7, 2006, the joint venture replaced the existing loan on the property with a new $70,000 fixed rate loan that bears interest at 6.41%.


Item 3. Legal Proceedings

None of the Company, the Operating Partnership, the Management Companies or their respective affiliates are currently involved in any material litigation nor, to the Company's knowledge, is any material litigation currently threatened against such entities or the Centers, other than routine litigation arising in the ordinary course of business, most of which is expected to be covered by liability insurance. For information about certain environmental matters, see "Business —Environmental Matters."


Item 4. Submission of Matters to a Vote of Securities Holders

None

32     The Macerich Company


PART II


Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

The common stock of the Company is listed and traded on the New York Stock Exchange under the symbol "MAC". The common stock began trading on March 10, 1994 at a price of $19 per share. In 2006, the Company's shares traded at a high of $87.10 and a low of $66.70.

As of February 16, 2007, there were approximately 965 stockholders of record. The following table shows high and low closing prices per share of common stock during each quarter in 2006 and 2005 and dividends/distributions per share of common stock declared and paid by quarter:

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

   High

   Low
March 31, 2006   $75.13   $68.89   $0.68
June 30, 2006   74.05   67.90   0.68
September 30, 2006   77.11   70.02   0.68
December 31, 2006   87.00   76.16   0.71
March 31, 2005   62.15   53.28   0.65
June 30, 2005   67.32   54.00   0.65
September 30, 2005   71.19   62.15   0.65
December 31, 2005   68.58   60.91   0.68

The Company has outstanding 3,627,131 shares of its Series A cumulative convertible redeemable preferred stock ("Series A Preferred Stock"). There is no established public trading market for the Series A Preferred Stock. The Series A Preferred Stock was issued on February 25, 1998. Preferred stock dividends are accrued quarterly and paid in arrears. The Series A Preferred Stock can be converted on a one for one basis into common stock and will pay a quarterly dividend equal to the greater of $0.46 per share, or the dividend then payable on a share of common stock. No dividends will be declared or paid on any class of common or other junior stock to the extent that dividends on

The Macerich Company    33


Series A Preferred Stock have not been declared and/or paid. The following table shows the dividends per share of preferred stock declared and paid by quarter in 2006 and 2005:

 
   Series A
Preferred Stock
Dividend
Quarter Ended

   Declared

   Paid
March 31, 2006   $0.68   $0.68
June 30, 2006   0.68   0.68
September 30, 2006   0.71   0.68
December 31, 2006   0.71   0.71
March 31, 2005   0.65   0.65
June 30, 2005   0.65   0.65
September 30, 2005   0.68   0.65
December 31, 2005   0.68   0.68

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


Stock Performance Graph

The following graph provides a comparison, from December 31, 2001 through December 31, 2006, of the yearly percentage change in the cumulative total stockholder return (assuming reinvestment of dividends) of the Company, the Standard & Poor's ("S&P") 500 Index, the S&P Midcap 400 Index and the NAREIT All Equity REIT Index (the "NAREIT Index"), an industry index of publicly-traded REITs (including the Company). The Company is providing the S&P Midcap 400 Index since it is now a company within such Index.

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

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

34     The Macerich Company

GRAPHIC

Copyright © 2007 Standard & Poor's, a division of The McGraw-Hill Companies, Inc. All rights reserved. www.researchdatagroup.com/S&P.htm

 
   12/31/01

   12/31/02

   12/31/03

   12/31/04

   12/31/05

   12/31/06
The Macerich Company   $100.00   $124.65   $192.44   $285.56   $318.32   $426.25
S & P 500 Index   100.00   77.90   100.24   111.15   116.61   135.03
S & P Midcap 400 Index   100.00   85.49   115.94   135.05   152.00   167.69
NAREIT Index   100.00   103.82   142.37   187.33   210.12   283.78

The Macerich Company    35


Item 6. Selected Financial Data

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

 
   Years Ended December 31,
 
   2006

   2005

   2004

   2003

   2002

OPERATING DATA:
 
 
 
 
 
 
 
 
 
 
  Revenues:                    
    Minimum rents(1)   $489,078   $423,759   $294,846   $256,974   $189,047
    Percentage rents   24,667   24,152   15,655   10,646   9,361
    Tenant recoveries   254,526   214,832   145,055   139,380   102,872
    Management Companies(2)   31,456   26,128   21,549   14,630   4,826
    Other   29,929   22,953   18,070   16,487   11,194
    Total revenues   829,656   711,824   495,175   438,117   317,300
Shopping center and operating expenses   262,127   223,905   146,465   136,881   99,377
Management Companies' operating expenses(2)   56,673   52,840   44,080   32,031   12,881
REIT general and administrative expenses   13,532   12,106   11,077   8,482   7,435
Depreciation and amortization   224,273   193,145   128,413   95,888   65,478
Interest expense   274,667   237,097   134,549   121,105   110,610
  Total expenses   831,272   719,093   464,584   394,387   295,781
Minority interest in consolidated joint ventures   (3,667)   (700)   (184)   (112)   (395)
Equity in income of unconsolidated joint ventures and management companies(2)   86,053   76,303   54,881   59,348   43,049
Income tax (expense) benefit (3)   (33)   2,031   5,466   444   (300)
Gain (loss) on sale or write down of assets   38   1,253   473   11,960   (3,820)
Loss on early extinguishment of debt   (1,835)   (1,666)   (1,642)   (44)   (3,605)
Income from continuing operations   78,940   69,952   89,585   115,326   56,448
Discontinued operations:(4)                    
  Gain on sale of assets   204,863   277   7,568   22,491   26,073
  Income from discontinued operations   11,376   13,907   14,350   19,124   19,050
Total income from discontinued operations   216,239   14,184   21,918   41,615   45,123
Income before minority interest and preferred dividends   295,179   84,136   111,503   156,941   101,571
Minority interest in Operating Partnership(5)   (42,821)   (12,450)   (19,870)   (28,907)   (20,189)
Net income   252,358   71,686   91,633   128,034   81,382
Less preferred dividends   24,336   19,098   9,140   14,816   20,417
Net income available to common stockholders   $228,022   $52,588   $82,493   $113,218   $60,965
Earnings per share ("EPS") —basic:                    
  Income from continuing operations   $0.65   $0.70   $1.11   $1.49   $0.72
  Discontinued operations   2.57   0.19   0.30   0.62   0.91
    Net income per share —basic   $3.22   $0.89   $1.41   $2.11   $1.63
EPS —diluted:(6)(7)                    
  Income from continuing operations   $0.73   $0.69   $1.10   $1.54   $0.72
  Discontinued operations   2.46   0.19   0.30   0.55   0.90
Net income per share —diluted   $3.19   $0.88   $1.40   $2.09   $1.62

36     The Macerich Company

 
   As of December 31,
 
   2006

   2005

   2004

   2003

   2002

BALANCE SHEET DATA
 
 
 
 
 
 
 
 
 
 
Investment in real estate (before accumulated depreciation)   $6,499,205   $6,160,595   $4,149,776   $3,662,359   $3,251,674
Total assets   $7,562,163   $7,178,944   $4,637,096   $4,145,593   $3,662,080
Total mortgage, notes and debentures payable   $4,993,879   $5,424,730   $3,230,120   $2,682,598   $2,291,908
Minority interest(3)   $387,183   $284,809   $221,315   $237,615   $221,497
Class A participating convertible preferred units   $213,786   $213,786   $ —   $ —   $ —
Class A non-participating convertible preferred units   $21,501   $21,501   $ —   $ —   $ —
Series A and Series B Preferred Stock   $98,934   $98,934   $98,934   $98,934   $247,336
Common stockholders' equity   $1,542,305   $827,108   $913,533   $953,485   $797,798
 
   Years Ended December 31,

 
 
2006
 
2005
 
2004
 
2003
 
2002

OTHER DATA:
 
 
 
 
 
 
 
 
 
 
Funds from operations ("FFO") —diluted(8)   $383,122   $336,831   $299,172   $269,132   $194,643
Cash flows provided by (used in):                    
  Operating activities   $211,850   $235,296   $213,197   $215,752   $163,176
  Investing activities   $(126,736)   $(131,948)   $(489,822)   $(341,341)   $(875,032)
  Financing activities   $29,208   $(20,349)   $308,383   $115,703   $739,122
  Number of centers at year end   91   97   84   78   79
Weighted average number of shares outstanding —EPS basic   70,826   59,279   58,537   53,669   37,348
Weighted average number of shares outstanding —EPS diluted(6)(7)   88,058   73,573   73,099   75,198   50,066
Cash distribution declared per common share   $2.75   $2.63   $2.48   $2.32   $2.22
(1)
Included in minimum rents is amortization of above and below market leases of $13.1 million, $11.6 million, $9.2 million, $6.1 million and $1.1 million for the years ended December 31, 2006, 2005, 2004, 2003 and 2002, respectively.

(2)
Unconsolidated joint ventures include all Centers and entities in which the Company does not have a controlling ownership interest and Macerich Management Company through June 30, 2003. The Company accounts for the unconsolidated joint ventures using the equity method of accounting. Effective July 1, 2003, the Company began to consolidate Macerich Management Company, in accordance with FIN 46. Effective July 26, 2002, the Company consolidated the accounts of the Westcor management companies.

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

(4)
In 2002, the Company adopted SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets." (See "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations —Statement on Critical Accounting Policies").

Discontinued operations include the following:

The Company sold Boulder Plaza on March 19, 2002 and the results for the period from January 1, 2002 to March 19, 2002 have been classified as discontinued operations. The sale of Boulder Plaza resulted in a gain on sale of asset of $13.9 million in 2002.

The Company sold its 67% interest in Paradise Village Gateway on January 2, 2003 (acquired in July 2002), and the loss on sale of $0.2 million has been classified as discontinued operations in 2003.

The Company sold Bristol Center on August 4, 2003, and the results for the period January 1, 2003 to August 4, 2003 and for the year ended December 31, 2002 has been classified as discontinued operations. The sale of Bristol Center resulted in a gain on sale of asset of $22.2 million in 2003.

The Company sold Westbar on December 16, 2004, and the results for the period January 1, 2004 to December 16, 2004, for the year ended December 31, 2003 and for the period July 26, 2002 to December 31, 2002 have been classified as discontinued operations. The sale of Westbar resulted in a gain on sale of asset of $6.8 million.

On January 5, 2005, the Company sold Arizona Lifestyle Galleries. The sale of this property resulted in a gain on sale of $0.3 million and the impact on the results of operations for the years ended December 31, 2005 and 2004 have been reclassified to discontinued operations. Prior to 2004, this property was accounted for under the equity method of accounting.

On June 9, 2006, the Company sold Scottsdale/101 and the results for the period January 1, 2006 to June 9, 2006 and for the years ended December 31, 2005 and 2004 have been classified as discontinued operations. Prior to January 1, 2004, this property was accounted for under

The Macerich Company    37

 
   Year Ended December 31,
(Dollars in millions)

   2006

   2005

   2004

   2003

   2002
Revenues:                    
  Boulder Plaza   $ —   $ —   $ —   $ —   $0.5
  Paradise Village Gateway   —   —   —   —   2.4
  Bristol   —   —   —   2.5   4.0
  Westbar   —   —   4.8   5.7   2.1
  Arizona LifeStyle Galleries   —   —   0.3   —   —
  Scottsdale/101   4.7   9.8   6.9   —   —
  Park Lane Mall   1.5   3.1   3.0   3.1   3.4
  Holiday Village   2.9   5.2   4.8   5.3   5.1
  Greeley Mall   4.3   7.0   6.2   5.9   6.2
  Great Falls Marketplace   1.8   2.7   2.6   2.5   2.5
  Citadel Mall   15.7   15.3   15.4   16.1   16.4
  Northwest Arkansas Mall   12.9   12.6   12.7   12.5   12.2
  Crossroads Mall   11.5   10.9   11.2   12.2   11.8
  Total   $55.3   $66.6   $67.9   $65.8   $66.6
Income from operations:                    
  Boulder Plaza   $ —   $ —   $ —   $ —   $0.3
  Paradise Village Gateway   —   —   —   —   0.5
  Bristol   —   —   —   1.4   1.0
  Westbar   —   —   1.8   1.7   0.8
  Arizona LifeStyle Galleries   —   —   (1.0)   —   —
  Scottsdale/101   0.3   (0.2)   (0.3)   —   —
  Park Lane Mall   0.0   0.8   0.9   1.0   1.3
  Holiday Village   1.2   2.8   1.9   2.4   2.2
  Greeley Mall   0.6   0.9   0.5   1.2   1.6
  Great Falls Marketplace   1.1   1.7   1.6   1.5   1.5
  Citadel Mall   2.5   1.8   2.0   3.0   3.3
  Northwest Arkansas Mall   3.4   2.9   3.1   3.2   2.9
  Crossroads Mall   2.3   3.2   3.9   3.7   3.7
  Total   $11.4   $13.9   $14.4   $19.1   $19.1
(5)
"Minority Interest" reflects the ownership interest in the Operating Partnership and other entities not owned by the Company.

(6)
Assumes that all OP Units and Westcor partnership units are converted to common stock on a one-for-one basis. The Westcor partnership units were converted into OP Units on July 27, 2004, which were subsequently redeemed for common stock on October 4, 2005. It also assumes the conversion of MACWH, LP common and preferred units to the extent that they are dilutive to the EPS computation (See Note 12—Acquisitions of the Company's Notes to the Consolidated Financial Statements).

(7)
Assumes issuance of common stock for in-the-money options and restricted stock calculated using the treasury method in accordance with SFAS No. 128 for all years presented.

38     The Macerich Company

(8)
The Company uses Funds from Operations ("FFO") in addition to net income to report its operating and financial results and considers FFO and FFO —diluted as supplemental measures for the real estate industry and a supplement to Generally Accepted Accounting Principles ("GAAP") measures. The National Association of Real Estate Investment Trusts ("NAREIT") defines FFO as net income (loss) (computed in accordance with GAAP), excluding gains (or losses) from extraordinary items and sales of depreciated operating properties, plus real estate related depreciation and amortization and after adjustments for unconsolidated partnerships and joint ventures. Adjustments for unconsolidated partnerships and joint ventures are calculated to reflect FFO on the same basis. FFO and FFO on a fully diluted basis are useful to investors in comparing operating and financial results between periods. This is especially true since FFO excludes real estate depreciation and amortization as the Company believes real estate values fluctuate based on market conditions rather than depreciating in value ratably on a straight-line basis over time. FFO on a fully diluted basis is one of the measures investors find most useful in measuring the dilutive impact of outstanding convertible securities. FFO does not represent cash flow from operations as defined by GAAP, should not be considered as an alternative to net income as defined by GAAP and is not indicative of cash available to fund all cash flow needs. FFO as presented may not be comparable to similarly titled measures reported by other real estate investment trusts. For the reconciliation of FFO and FFO-diluted to net income, see "Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations —Funds from Operations."

The computation of FFO-diluted includes the effect of outstanding common stock options and restricted stock using the treasury method. It also assumes the conversion of MACWH, LP common and preferred units to the extent that they are dilutive to the FFO computation (See Note 12 —"Acquisitions of the Company's Notes to the Consolidated Financial Statements"). The Company had $125.1 million of convertible subordinated debentures (the "Debentures") which matured December 15, 2002. The Debentures were dilutive for the year ended December 31, 2002 and were included in the FFO calculation. The Debentures were paid off in full on December 13, 2002. On February 25, 1998, the Company sold $100 million of its Series A Preferred Stock. On June 16, 1998, the Company sold $150 million of its Series B Preferred Stock. The Preferred Stock can be converted on a one-for-one basis for common stock. The Series A and Series B Preferred Stock then outstanding was dilutive to FFO in 2006, 2005, 2004, 2003, 2002 and was dilutive to net income in 2006 and 2003. All of the Series B Preferred Stock was converted to common stock on September 9, 2003.

The Macerich Company    39


Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations

This Annual Report on Form 10-K contains or incorporates statements that constitute forward-looking statements. Those statements appear in a number of places in this Form 10-K and include statements regarding, among other matters, the Company's growth, acquisition, redevelopment and development opportunities, the Company's acquisition and other strategies, regulatory matters pertaining to compliance with governmental regulations and other factors affecting the Company's financial condition or results of operations. Words such as "expects," "anticipates," "intends," "projects," "predicts," "plans," "believes," "seeks," "estimates," and "should" and variations of these words and similar expressions, are used in many cases to identify these forward-looking statements. Stockholders are cautioned that any such forward-looking statements are not guarantees of future performance and involve risks, uncertainties and other factors that may cause actual results, performance or achievements of the Company or industry to vary materially from the Company's future results, performance or achievements, or those of the industry, expressed or implied in such forward-looking statements. Such factors include the matters described herein under "Item 1A. Risk Factors," among others. The Company will not update any forward-looking information to reflect actual results or changes in the factors affecting the forward-looking information.


Management's Overview and Summary

The Macerich Company (the "Company") is involved in the acquisition, ownership, development, redevelopment, management, and leasing of regional and community shopping centers located throughout the United States. The Company is the sole general partner of, and owns a majority of the ownership interests in, The Macerich Partnership, L.P., a Delaware limited partnership (the "Operating Partnership"). As of December 31, 2006, the Operating Partnership owned or had an ownership interest in 73 regional shopping centers and 18 community shopping centers aggregating approximately 76.9 million square feet of gross leasable area ("GLA"). These 91 regional and community shopping centers are referred to hereinafter as the "Centers", unless the context otherwise requires. The Company is a self-administered and self-managed real estate investment trust ("REIT") and conducts all of its operations through the Operating Partnership and the Management Companies.

The following discussion is based primarily on the consolidated financial statements of the Company for the years ended December 31, 2006, 2005 and 2004. It compares the activity for the year ended December 31, 2006 to results of operations for the year ended December 31, 2005. Also included is a comparison of the activities for the year ended December 31, 2005 to the results for the year ended December 31, 2004. This information should be read in conjunction with the accompanying consolidated financial statements and notes thereto.

Acquisitions and dispositions:

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

On January 30, 2004, the Company, in a 50/50 joint venture with a private investment company, acquired Inland Center, a 1 million square foot super-regional mall in San Bernardino, California. The total purchase price was $63.3 million and concurrently with the acquisition, the joint venture placed a $54.0 million fixed rate loan on the property. The Company's share of the remainder of the purchase price was funded by cash and borrowings under the Company's line of credit.

40     The Macerich Company


On May 11, 2004, the Company acquired an ownership interest in NorthPark Center, a 2.0 million square foot regional mall in Dallas, Texas. The Company's initial investment in the property was $30.0 million which was funded by borrowings under the Company's line of credit. In addition, the Company assumed a pro rata share of debt of $86.6 million and funded an additional $45.0 million post-closing.

On July 1, 2004, the Company acquired the Mall of Victor Valley in Victorville, California and on July 20, 2004, the Company acquired La Cumbre Plaza in Santa Barbara, California. The Mall of Victor Valley is a 547,611 square foot regional mall and La Cumbre Plaza is a 494,553 square foot regional mall. The combined total purchase price was $151.3 million. The purchase price for the Mall of Victor Valley included the assumption of an existing fixed rate loan of $54.0 million at 5.25% maturing in March, 2008. Concurrent with the closing of La Cumbre Plaza, a $30.0 million floating rate loan was placed on the property with an initial interest rate of 2.29%. The balance of the purchase price was paid in cash and borrowings from the Company's revolving line of credit.

On November 16, 2004, the Company acquired Fiesta Mall, a 1 million square foot super regional mall in Mesa, Arizona. The total purchase price was $135.2 million which was funded by borrowings under the Company's line of credit. On December 2, 2004, the Company placed a ten year $84.0 million fixed rate loan at 4.88% on the property.

On December 16, 2004, the Company sold the Westbar property, a Phoenix area property that consisted of a collection of ground leases, a shopping center, and land for $47.5 million. The sale resulted in a gain on sale of asset of $6.8 million.

On December 30, 2004, the Company purchased the unaffiliated owners' 50% tenants in common interest in Paradise Village Ground Leases, Village Center, Village Crossroads, Village Fair and Paradise Village Office Park II. All of these assets are located in Phoenix, Arizona. The total purchase price was $50.0 million which included the assumption of the unaffiliated owners' share of debt of $15.2 million. The balance of the purchase price was paid in cash and borrowings from the Company's line of credit. Accordingly, the Company now owns 100% of these assets.

The Mall of Victor Valley, La Cumbre Plaza, Fiesta Mall, Paradise Village Ground Leases, Village Center, Village Crossroads, Village Fair and Paradise Village Office Park II are referred to herein as the "2004 Acquisition Centers."

On January 5, 2005, the Company sold Arizona Lifestyle Galleries for $4.3 million. The sale resulted in a gain on sale on asset of $0.3 million.

On January 11, 2005, the Company became a 15% owner in a joint venture that acquired Metrocenter Mall, a 1.3 million square foot super-regional mall in Phoenix, Arizona. The total purchase price was $160 million and concurrently with the acquisition, the joint venture placed a $112 million loan on the property. The Company's share of the purchase price, net of the debt, was $7.2 million which was funded by cash and borrowings under the Company's line of credit.

The Macerich Company    41


On January 21, 2005, the Company formed a 50/50 joint venture with a private investment company. The joint venture acquired a 49% interest in Kierland Commons, a 438,721 square foot mixed-use center in Phoenix, Arizona. The joint venture's purchase price for the interest in the Center was $49.0 million. The Company assumed its share of the underlying property debt and funded the remainder of its share of the purchase price by cash and borrowings under the Company's line of credit.

On April 8, 2005, the Company acquired Ridgmar Mall, a 1.3 million square foot super-regional mall in Fort Worth, Texas. The acquisition was completed in a 50/50 joint venture with an affiliate of Walton Street Capital, LLC. The purchase price was $71.1 million. Concurrent with the closing, a $57.4 million loan bearing interest at a fixed rate of 6.0725% was placed on the property. The balance of the purchase price was funded by borrowings under the Company's line of credit.

On April 25, 2005, the Company acquired Wilmorite Properties, Inc., a Delaware corporation ("Wilmorite") and Wilmorite Holdings, L.P., a Delaware limited partnership ("Wilmorite Holdings"). Wilmorite's portfolio includes interests in 11 regional malls and two open-air community shopping centers with 13.4 million square feet of space located in Connecticut, New York, New Jersey, Kentucky and Virginia. The total purchase price was approximately $2.333 billion, plus adjustments for working capital, including the assumption of approximately $877.2 million of existing debt with an average interest rate of 6.43% and the issuance of $212.7 million of participating convertible preferred units ("PCPUs"), $21.5 million of non-participating convertible preferred units and $5.8 million of common units in Wilmorite Holdings. The balance of the consideration to the equity holders of Wilmorite and Wilmorite Holdings was paid in cash, which was provided primarily by a five-year, $450 million term loan bearing interest at LIBOR plus 1.50% and a $650 million acquisition loan with a term of up to two years and bearing interest initially at LIBOR plus 1.60%. An affiliate of the Operating Partnership is the general partner and, together with other affiliates, own approximately 83% of Wilmorite Holdings, with the remaining 17% held by those limited partners of Wilmorite Holdings who elected to receive convertible preferred units or common units in Wilmorite Holdings rather than cash. The PCPUs can be redeemed, subject to certain conditions, for the portion of the Wilmorite portfolio generally located in the area of Rochester, New York. The Wilmorite portfolio, exclusive of Tysons Corner Center and Tysons Corner Office (collectively referred herein as "Tysons Center"), are referred to herein as the "2005 Acquisition Centers."

On February 1, 2006, the Company acquired Valley River Center, an 835,694 square foot super-regional mall in Eugene, Oregon. The total purchase price was $187.5 million and concurrent with the acquisition, the Company placed a $100.0 million ten-year loan on the property. The balance of the purchase price was funded by cash and borrowings under the Company's line of credit.

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

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

On July 26, 2006, the Company purchased 11 department stores located in 10 of its Centers from Federated Department Stores, Inc. for approximately $100.0 million. The purchase price consisted of a $93.0 million cash

42     The Macerich Company


payment and a $7.0 million future obligation to be paid concurrent with development work by Federated in the future at Company's development properties. The Company's share of the purchase price was $81.0 million and was funded in part from the proceeds of sales of Park Lane Mall, Greeley Mall, Holiday Village and Great Falls Marketplace, and from borrowings under the Company's line of credit. The balance of the purchase price was paid by the Company's joint venture partners.

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

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

On December 1, 2006, the Company acquired Deptford Mall, a two-level 1.0 million square foot super-regional mall in Deptford, New Jersey. The total purchase price of $241.0 million was funded by cash and borrowings under the Company's line of credit. On December 7, 2006, the Company placed a $100.0 million six-year loan bearing interest at a fixed rate of 5.44% on the property. The loan provides the right, subject to certain conditions, to borrow an additional $72.5 million for up to one-year after the initial funding.

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

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

Redevelopment:

The grand opening of the first phase of Twenty Ninth Street, an 817,085 square foot shopping district in Boulder, Colorado, took place on October 13, 2006. The balance of the project is scheduled for completion in the Summer 2007. Phase I of the project is 93% leased. Recent store openings include Borders Books, Chipotle Mexican Grill, Helly Hansen, Lady Foot Locker, lululemon, and Solstice Sunglass Boutique. Wild Oats has also opened their corporate headquarters at this project. Recent lease commitments include Anthropologie, Sephora, Cantina Laredo, Jamba Juice and North Face.

On November 1, 2006, the Company received Phoenix City Council approval to add up to five mixed-use towers of up to 165 feet at Biltmore Fashion Park. Biltmore Fashion Park is an established luxury destination for first-to-market, high-end and luxury tenants in the metropolitan Phoenix market. The mixed-use towers are planned to be built over time based upon demand.

Groundbreaking took place on February 6, 2007 for the 230,000 square foot life style expansion at The Oaks in Thousand Oaks, California. Plans also call for the remodeling of both the interior spaces and the exterior façade, and will include a new 138,000 square foot Nordstrom scheduled to open at the Center in Fall 2008. New tenants include Abercrombie Kids, Forever 21, Forth & Towne, Guess?, J. Crew, Iridesse, Planet Funk and Solstice

The Macerich Company    43


Sunglass Boutique. The combined expansion and renovation of the center is projected to cost approximately $250 million and be completed in Fall 2008.

The first phase of SanTan Village, a $205 million regional shopping center under construction in Gilbert, Arizona, is scheduled to open in Fall 2007. The center, currently 85% leased, is an open-air streetscape that will contain in excess of 1.2 million square feet on 120 acres. More than 35 tenants have committed to date, including Dillard's, Harkins Theatres, Aeropostale, American Eagle Outfitters, Ann Taylor, Ann Taylor Loft, Apple, Banana Republic, Best Buy, Blue Wasabi, The Body Shop, The Buckle, Charlotte Russe, Chico's, The Children's Place, Coach, Coldwater Creek, The Disney Store, Eddie Bauer, J. Jill, Lane Bryant/Cacique, lucy, PacSun, Soma by Chico's, Swarovski Crystals, Victoria's Secret, Weisfield's Jewelers, White House/Black Market and Z Gallerie.

Construction began in late 2006 on The Promenade at Casa Grande, a $135 million, 1.0 million-square-foot regional shopping center in Arizona's fastest-growing county. Located in Casa Grande, Pinal County, the center will be located along the I-10 corridor between Phoenix and Tucson. The project is 85% committed, including anchors Target and JC Penney, and will deliver shopping, dining and entertainment options to a key growth corridor. Phase I of the project, which will include a combination of large-format retailers, specialty shops and restaurants, is scheduled for completion in Fall 2007. Phase II is comprised of small shops and is scheduled to open in March 2008. The Promenade at Casa Grande is 51% owned by the Company.

On January 22, 2007, the Fairfax County Board of Supervisors approved plans for a transit-oriented development at Tysons Corner Center in McLean, Virginia. The expansion will add 3.5 million square feet of mixed-use space to the existing 2.2 million square foot regional shopping center. The project is planned to be built in phases over the next 10 years based on market demand and the expansion of the area's light rail system. Completion of the entitlement process for Phase I, totaling roughly 1.4 million square feet, is anticipated for the first quarter of 2008. The first phase of the project is anticipated to begin development in late 2009.

In late 2006, plans were announced to bring Barneys New York Department Store to Scottsdale Fashion Square, replacing one of the anchor spaces acquired as a result of the Federated-May merger. Demolition of the vacant space and adjoining parking structure will begin in 2007, allowing for construction of an additional 100,000 square feet of new shop space and the 65,000-square-foot Barneys New York location. This store is anticipated to open in Fall 2009.

Inflation:

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

44     The Macerich Company

Seasonality:

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


Critical Accounting Policies

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

Some of these estimates and assumptions include judgments on revenue recognition, estimates for common area maintenance and real estate tax accruals, provisions for uncollectible accounts, impairment of long-lived assets, the allocation of purchase price between tangible and intangible assets, and estimates for environmental matters. The Company's significant accounting policies are described in more detail in Note 2 to the Consolidated Financial Statements. However, the following policies are deemed to be critical.

Revenue Recognition

Minimum rental revenues are recognized on a straight-line basis over the term of the related lease. The difference between the amount of rent due in a year and the amount recorded as rental income is referred to as the "straight lining of rent adjustment." Currently, 40% of the mall and freestanding leases contain provisions for CPI rent increases periodically throughout the term of the lease. The Company believes that using an annual multiple of CPI increases, rather than fixed contractual rent increases, results in revenue recognition that more closely matches the cash revenue from each lease and will provide more consistent rent growth throughout the term of the leases. Percentage rents are recognized when the tenants' specified sales targets have been met. Estimated recoveries from tenants for real estate taxes, insurance and other shopping center operating expenses are recognized as revenues in the period the applicable expenses are incurred.

Property

Costs related to the development, redevelopment, construction and improvement of properties are capitalized. Interest incurred on development, redevelopment and construction projects is capitalized until construction is substantially complete.

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

The Macerich Company    45


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

Buildings and improvements   5-40 years
Tenant improvements   5-7 years
Equipment and furnishings   5-7 years

Accounting for Acquisitions

The Company accounts for all acquisitions in accordance with Statement of Financial Accounting Standards ("SFAS") No. 141, "Business Combinations." The Company will first determine the value of the land and buildings utilizing an "as if vacant" methodology. The Company will then assign a fair value to any debt assumed at acquisition. The balance of the purchase price will be allocated to tenant improvements and identifiable intangible assets or liabilities. Tenant improvements represent the tangible assets associated with the existing leases valued on a fair market value basis at the acquisition date prorated over the remaining lease terms. The tenant improvements are classified as an asset under real estate investments and are depreciated over the remaining lease terms. Identifiable intangible assets and liabilities relate to the value of in-place operating leases which come in three forms: (i) leasing commissions and legal costs, which represent the value associated with "cost avoidance" of acquiring in-place leases, such as lease commissions paid under terms generally experienced in the Company's markets; (ii) value of in-place leases, which represents the estimated loss of revenue and of costs incurred for the period required to lease the "assumed vacant" property to the occupancy level when purchased; and (iii) above or below market value of in-place leases, which represents the difference between the contractual rents and market rents at the time of the acquisition, discounted for tenant credit risks. Leasing commissions and legal costs are recorded in deferred charges and other assets and are amortized over the remaining lease terms. The value of in-place leases are recorded in deferred charges and other assets and amortized over the remaining lease terms plus an estimate of renewal of the acquired leases. Above or below market leases are classified in deferred charges and other assets or in other accrued liabilities, depending on whether the contractual terms are above or below market, and the asset or liability is amortized to rental revenue over the remaining terms of the leases.

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

Asset Impairment

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

46     The Macerich Company

Deferred Charges

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

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


Results of Operations

Many of the variations in the results of operations, discussed below, occurred due to the transactions described above including the 2006 Acquisition Centers, 2005 Acquisition Centers, 2004 Acquisition Centers and Redevelopment Centers. For the comparison of the year ended December 31, 2006 to the year ended December 31, 2005, "Same Centers" include all consolidated Centers, excluding 2006 Acquisition Centers, 2005 Acquisition Centers and Redevelopment Centers. For the comparison of the year ended December 31, 2005 to the year ended December 31, 2004, "Same Centers" include all consolidated Centers, except the 2005 Acquisition Centers, 2004 Acquisition Centers and Redevelopment Centers.

For the comparison of the year ended December 31, 2006 to the year ended December 31, 2005, "Redevelopment Centers" include Twenty Ninth Street, Santa Monica Place and Westside Pavilion. For the comparison of year ended December 31, 2005 to the year ended December 31, 2004, "Redevelopment Centers" include La Encantada, Twenty-Ninth Street, Santa Monica Place and Queens Center.

For comparison of the year ended December 31, 2006 to the year ended December 31, 2005, Kierland Commons, Metrocenter Mall, Ridgmar Mall and Tysons Center are referred to herein as the "Joint Venture Acquisition Centers." For the comparison of the year ended December 31, 2005 to the year ended December 31, 2004, Biltmore Fashion Square, Inland Center and NorthPark Center are also included in the "Joint Venture Acquisition Centers". Unconsolidated joint ventures are reflected using the equity method of accounting. The Company's pro rata share of the results from these Centers is reflected in the results of operations in the income statement line item entitled "Equity in income from unconsolidated joint ventures."


Comparison of Years Ended December 31, 2006 and 2005

Revenues

Minimum and percentage rents (collectively referred to as "rental revenue") increased by $65.8 million or 14.7% from 2005 to 2006. Approximately $43.5 million of the increase in rental revenue related to the 2005 Acquisition Centers, $11.9 million was related to the 2006 Acquisition Centers and $9.9 million was related to the Same Centers due in part to an increase in lease termination income of $7.2 million compared to 2005 at the Same Centers. These increases are offset in part by a decrease in rental revenue of $0.5 million at the Redevelopment Centers.

The Macerich Company    47

The amount of straight-lined rents, included in rental revenue, was $7.8 million in 2006 compared to $6.7 million in 2005. This increase is primarily due to the 2006 Acquisition Centers.

The amortization of above and below market leases, which is recorded in rental revenue, increased to $13.1 million in 2006 from $11.6 million in 2005. The increase in amortization is primarily due to the 2005 Acquisition Centers and 2006 Acquisition Centers.

Tenant recoveries increased $39.7 million or 18.5% from 2005 to 2006. Approximately $23.0 million of the increase in tenant recoveries related to the 2005 Acquisition Centers, $5.1 million related to the 2006 Acquisition Centers and $12.4 million related to the Same Centers due to an increase in recoverable shopping center expenses. The increase in tenant recoveries was offset in part by a decrease of $0.9 million at the Redevelopment Centers.

Management Companies' Revenues

Management Companies' revenues increased by $5.3 million from 2005 to 2006, primarily due to increased management fees received from the Joint Venture Acquisition Centers, third party management contracts and increased development fees from joint ventures.

Shopping Center and Operating Expenses

Shopping center and operating expenses increased $38.2 million or 17.1% from 2005 to 2006. Approximately $25.6 million of the increase in shopping center and operating expenses related to the 2005 Acquisition Centers, $5.0 million related to the 2006 Acquisition Centers and $8.0 million related to the Same Centers offset in part by a $0.5 million decrease at the Redevelopment Centers.

Management Companies' Operating Expenses

Management Companies' operating expenses increased to $56.7 million in 2006 from $52.8 million in 2005, primarily as a result of the additional costs of managing the Joint Venture Acquisition Centers and third party managed properties.

REIT General and Administrative Expenses

REIT general and administrative expenses increased by $1.4 million in 2006 from 2005, primarily due to increased share-based compensation expense in 2006.

Depreciation and Amortization

Depreciation and amortization increased $31.1 million in 2006 from 2005. The increase is primarily attributed to the 2005 Acquisition Centers of $17.8 million, the 2006 Acquisition Centers of $6.2 million and the Same Centers of $7.4 million.

Interest Expense

Interest expense increased $37.6 million in 2006 from 2005. Approximately $13.8 million of the increase relates to the term loan associated with the 2005 Acquisition Centers, $12.4 million relates to assumed debt from the 2005 Acquisition Centers, $5.3 million relates to the 2006 Acquisition Centers, $13.3 million relates to increased borrowings and higher interest rates under the Company's line of credit, $6.7 million relates to higher interest rates on the $250 million term loan and approximately $8.9 million relates to increased interest expense due to

48     The Macerich Company

refinancings and higher rates on floating rate debt regarding the Same Centers. These increases were offset in part by an approximately $1.3 million decrease in interest expense at the Redevelopment Centers and $21.6 million relating to the pay off of the acquisition loan associated with the 2005 Acquisition Centers. Additionally, capitalized interest was $14.9 million in 2006, up from $10.0 million in 2005.

Equity in Income of Unconsolidated Joint Ventures

The equity in income of unconsolidated joint ventures increased $9.7 million in 2006 from 2005. Approximately $6.5 million of the increase relates to increased income from the Joint Venture Acquisition Centers, increased net income of $3.3 million from the Pacific Premier Retail Trust joint venture due to increased rental revenue and $4.6 million from other joint ventures due to increased rental revenues. This is partly offset by a $4.7 million increase in interest expense from the SDG Macerich Properties, L.P. joint venture (See "Item 1. Business —Recent Developments —Financing Activities").

Loss on Early Extinguishment of Debt

The Company recorded a loss from the early extinguishment of debt of $1.8 million in 2006 related to the pay off of the $619 million acquisition loan on January 19, 2006. In 2005, the Company recorded a loss on early extinguishment of debt of $1.7 relating to the refinancing of the mortgage note payable on Valley View Mall.

Discontinued Operations

The increase of $202.1 million in discontinued operations relates to the gain on sales of Scottsdale/101, Park Lane Mall, Holiday Village, Greeley Mall, Great Falls Marketplace, Citadel Mall, Crossroads Mall and Northwest Arkansas Mall in 2006 (See "Management's Overview and Summary —Acquisitions and dispositions"). As result of the sales, the Company reclassified the results of operations for these properties for 2006 and 2005.

Minority Interest in the Operating Partnership

The minority interest in the Operating Partnership represents the 15.8% weighted average interest of the Operating Partnership not owned by the Company during 2006 compared to the 19.0% not owned by the Company during 2005. The change is primarily due to the stock offering by the Company in January 2006.

Funds From Operations

Primarily as a result of the factors mentioned above, Funds from Operations ("FFO") —Diluted increased 13.7% to $383.1 million in 2006 from $336.8 million in 2005. For the reconciliation of FFO and FFO-diluted to net income available to common stockholders, see "Funds from Operations."

Operating Activities

Cash flow from operations decreased to $211.9 million in 2006 from $235.3 million in 2005. The decrease is primarily due to changes in assets and liabilities in 2006 compared to 2005 and due to the results at the Centers as discussed above.

Investing Activities

Cash used in investing activities decreased to $126.7 million in 2006 from $131.9 million in 2005. The decrease is primarily attributed to the cash used to acquire the 2006 Acquisition Centers and increases in development and redevelopment costs at the Centers. This is offset by $610.6 million in proceeds from the sale of assets in 2006 (See "Management's Overview and Summary —Acquisitions and dispositions").

The Macerich Company    49

Financing Activities

Cash flow provided by financing activities was $29.2 million in 2006 compared to cash used in financing activities of $20.3 million in 2005. The increase is primarily attributed to the net proceeds of $746.8 million from the stock offering in January 2006 offset in part by a reduction of debt of in 2006 compared to 2005.


Comparison of Years Ended December 31, 2005 and 2004

Revenues

Rental revenue increased by 44.3% to $447.9 million in 2005 from $310.5 million in 2004. Approximately $92.9 million of the increase relates to the 2005 Acquisition Centers, $21.6 million relates to the 2004 Acquisition Centers and $24.0 million primarily relates to the Redevelopment Centers. The increase in rental revenue was offset by a decrease at the Same Centers of $1.1 million.

The amount of straight-lined rents, included in rental revenue, was $6.7 million in 2005 compared to $1.0 million in 2004. This increase in straight-lining of rents relates to the 2005 Acquisition Centers and the 2004 Acquisition Centers which is offset by decreases resulting from the Company structuring the majority of its new leases using an annual multiple of CPI increases, which generally do not require straight-lining treatment.

The amortization of above and below market leases, which is recorded in minimum rents, increased to $11.6 million in 2005 from $9.2 million in 2004. The increase is primarily due to the 2005 Acquisition Centers and the 2004 Acquisition Centers.

Tenant recoveries increased to $214.8 million in 2005 from $145.1 million in 2004. Approximately $52.9 million of the increase relates to the 2005 Acquisition Centers, $5.8 million relates to the Redevelopment Centers, $9.2 million relates to the 2004 Acquisition Centers and $1.8 million relates to the Same Centers.

Management Companies' revenues increased by 21.4% to $26.1 million in 2005 from $21.5 million in 2004 primarily due to increased management fees received from the 2005 and 2004 Joint Venture Acquisition Centers and third party management contracts.

Shopping Center and Operating Expenses

Shopping center and operating expenses increased to $223.9 million in 2005 compared to $146.5 million in 2004. This increase is a result of $54.9 million of expenses from the 2005 Acquisition Centers, $10.5 million from the 2004 Acquisition Centers and $5.6 million from the Redevelopment Centers. In addition, there was a write-off of a contingent compensation liability of $6.4 million in 2004.

Management Companies' Operating Expenses

Management Companies' operating expenses increased by 19.7% to $52.8 million in 2005 from $44.1 million in 2004, primarily due to a higher compensation expense in 2005 compared to 2004.

REIT General and Administrative Expenses

REIT general and administrative expenses increased to $12.1 million in 2005 from $11.1 million in 2004, primarily due to increases in stock-based compensation expense compared to 2004.

50     The Macerich Company

Depreciation and Amortization

Depreciation and amortization increased to $193.1 million in 2005 from $128.4 million in 2004. Approximately $60.6 million relates to the 2005 Acquisition Centers, $3.0 million related to the 2004 Acquisition Centers and $4.1 million relates to the Redevelopment Centers. This was offset by a $3.0 million decrease relating to the Same Centers.

Interest Expense

Interest expense increased to $237.1 million in 2005 from $134.5 million in 2004. Approximately $26.6 million relates to the assumed debt from the 2005 Acquisition Centers, $39.8 million relates to the term and acquisition loans for the Wilmorite Acquisition, $19.8 million relates to increased borrowings and higher interest rates under the Company's line of credit, $2.0 million relates to the Northridge Center loan which closed on June 30, 2004, $5.9 million relates to the 2004 Acquisition Centers, $11.4 million related to the Redevelopment Centers and $2.7 million relates to an increase in interest rates on floating rate debt at the Same Centers. These increases are offset in part by a $4.6 million decrease related to the payoff of the $250 million term loan on July 30, 2004. Additionally, capitalized interest was $10.0 million in 2005, down from $8.9 million in 2004.

Equity in Income from Unconsolidated Joint Ventures

The equity in income from unconsolidated joint ventures was $76.3 million for 2005, compared to $54.9 million in 2004. This primarily relates to increased net income from the 2005 and 2004 Joint Venture Acquisition Centers of $13.7 million. Included in the equity in income from unconsolidated joint ventures is the Company's pro rata share of straight-line rents, which increased to $4.8 million in 2005 from $1.0 million in 2004.

Gain on Sale of Assets

In 2005, a gain of $1.3 million was recorded relating to land sales compared to a $0.5 million gain on land sales in 2004.

Loss on Early Extinguishment of Debt

In 2005, the Company recorded a loss from early extinguishment of debt of $1.7 million related to the refinancing of the Valley View Mall loan. In 2004, the Company recorded a loss from early extinguishment of debt of $1.6 million related to the payoff of a loan at one of the Redevelopment Centers and the payoff of the $250 million term loan on July 30, 2004.

Discontinued Operations

The gain on sale of $0.3 million in 2005 relates primarily to the sale of Arizona Lifestyle Galleries on January 5, 2005. In 2004, the gain on sale primarily related to the $6.8 million gain from the sale of the Westbar property on December 16, 2004. The decrease in income from discontinued operations relates to the Westbar property. As a result of sales of properties in 2006, the Company reclassified the results of operations for these properties in 2005 and 2004.

Minority Interest in the Operating Partnership

The minority interest in the Operating Partnership represents the 19.0% weighted average interest of the Operating Partnership not owned by the Company during 2005. This compares to 19.5% not owned by the Company during 2004.

The Macerich Company    51

Funds From Operations

Primarily as a result of the factors mentioned above, FFO —Diluted increased 12.6% to $336.8 million in 2005 from $299.2 million in 2004. For the reconciliation of FFO and FFO —diluted to net income available to common stockholders, see "Funds from Operations."

Operating Activities

Cash flow from operations was $235.3 million in 2005 compared to $213.2 million in 2004. The increase is primarily due to the foregoing results at the Centers and offset by an increase in working capital.

Investing Activities

Cash used in investing activities was $131.9 million in 2005 compared to $489.8 million in 2004. The change resulted primarily from increases in distributions of capital from unconsolidated joint ventures. This is offset by the joint venture acquisitions of Metrocenter and Kierland Commons, the Company's additional contributions to NorthPark Center and the decreased development, redevelopment, expansion and renovation of Centers in 2005 compared to 2004 due to completion of the Queens Center and La Encantada projects.

Financing Activities

Cash flow used in financing activities was $20.3 million in 2005 compared to cash flow provided by financing activities of $308.4 million in 2004. The 2005 decrease compared to 2004 resulted primarily from fewer refinancings for 2005 than 2004 and increased dividend payments to common stockholders. Additionally, the funding of the Queens construction loan was $65.7 million less in 2005 compared to 2004 due to the substantial completion of the expansion project.

Liquidity and Capital Resources

The Company intends to meet its short term liquidity requirements through cash generated from operations, working capital reserves, property secured borrowings, unsecured corporate borrowings and borrowings under the revolving line of credit. The Company anticipates that revenues will continue to provide necessary funds for its operating expenses and debt service requirements, and to pay dividends to stockholders in accordance with REIT requirements. The Company anticipates that cash generated from operations, together with cash on hand, will be adequate to fund capital expenditures which will not be reimbursed by tenants, other than non-recurring capital expenditures.

52     The Macerich Company

The following tables summarize capital expenditures incurred at the Centers for the years ended December 31:

(Dollars in thousands)
Consolidated Centers:

   2006

   2005

   2004
Acquisitions of property and equipment   $580,542   $1,767,237   $301,061
Development, redevelopment and expansion of Centers   174,522   77,254   139,292
Renovations of Centers   51,406   51,092   21,240
Tenant allowances   35,603   21,765   10,876
Deferred leasing charges   22,776   21,836   16,822
    $864,849   $1,939,184   $489,291

Joint Venture Centers (at Company's pro rata share):
 
 
 
 
 
 
Acquisitions of property and equipment   $28,732   $736,451   $41,174
Development, redevelopment and expansion of Centers   48,785   79,400   6,596
Renovations of Centers   8,119   32,243   10,046
Tenant allowances   13,795   8,922   10,485
Deferred leasing charges   4,269   5,113   3,666
    $103,700   $862,129   $71,967

Management expects similar levels to be incurred in future years for tenant allowances and deferred leasing charges and to incur between $400 million to $600 million in 2007 for development, redevelopment, expansion and renovations. Capital for major expenditures or major developments and redevelopments has been, and is expected to continue to be, obtained from equity or debt financings which include borrowings under the Company's line of credit and construction loans. However, many factors impact the Company's ability to access capital, such as its overall debt level, interest rates, interest coverage ratios and prevailing market conditions.

The Company's total outstanding loan indebtedness at December 31, 2006 was $6.6 billion (including $1.7 billion of its pro rata share of joint venture debt). This equated to a debt to Total Market Capitalization (defined as total debt of the Company, including its pro rata share of joint venture debt, plus aggregate market value of outstanding shares of common stock, assuming full conversion of OP Units, MACWH, LP units and preferred stock into common stock) ratio of approximately 45.5% at December 31, 2006. The majority of the Company's debt consists of fixed-rate conventional mortgages payable collateralized by individual properties.

The Company has filed a shelf registration statement, effective June 6, 2002, to sell securities. The shelf registration is for a total of $1.0 billion of common stock, common stock warrant or common stock rights. The Company sold a total of 15.2 million shares of common stock under this shelf registration on November 27, 2002. The aggregate offering price of this transaction was approximately $440.2 million, leaving approximately $559.8 million available under the shelf registration statement. In addition, the Company filed another shelf registration statement, effective October 27, 2003, to sell up to $300 million of preferred stock. On January 12, 2006, the Company filed a shelf registration statement registering an unspecified amount of common stock that it may offer in the future.

On January 19, 2006, the Company issued 10.9 million shares of common stock for net proceeds of $746.5 million. The net proceeds were used to pay off the $619.0 million acquisition loan and to pay down the line of credit pending use to pay part of the cash purchase price of Valley River Center.

The Macerich Company    53


On May 10, 2006, the SDG Macerich Properties, L.P. joint venture completed a refinancing of its portfolio debt. The joint venture paid off approximately $625.0 million of floating and fixed rate debt with an average interest rate of approximately 6.50%. This debt was replaced by a series of seven new ten-year mortgage notes payable totaling $796.5 million with an average interest rate of 5.81%. The Company's pro rata share of the net proceeds of approximately $85.5 million was used to pay down the Company's line of credit.

The Company had a $1.0 billion revolving line of credit that was set to mature on July 30, 2007 plus a one-year extension. The interest rate fluctuated from LIBOR plus 1.15% to LIBOR plus 1.70% depending on the Company's overall leverage level. On July 20, 2006, the Company amended and expanded the revolving line of credit to $1.5 billion and extended the maturity to April 25, 2010 with a one-year extension option. The interest rate, after amendment, will fluctuate from LIBOR plus 1.0% to LIBOR plus 1.35% depending on the Company's overall leverage. In September 2006, the Company entered into an interest rate swap agreement that effectively fixed the interest rate on $400.0 million of the outstanding balance of the line of credit at 6.23% until April 25, 2011. As of December 31, 2006 and 2005, borrowings outstanding were $934.5 million and $863.0 million at an average interest rate, net of the $400.0 million swapped portion, of 6.60% and 5.93%, respectively.

On May 13, 2003, the Company issued $250.0 million in unsecured notes maturing in May 2007 with a one-year extension option bearing interest at LIBOR plus 2.50%. On April 25, 2005, concurrent with the Wilmorite acquisition, the Company modified these unsecured notes and reduced the interest rate to LIBOR plus 1.50%. At December 31, 2006 and 2005, the entire $250.0 million of notes were outstanding at an interest rate of 6.94% and 6.0%, respectively. The Company had an interest rate swap agreement which effectively fixed the interest rate at 4.45% from November 2003 to October 13, 2005.

On April 25, 2005, concurrent with the Wilmorite acquisition, the Company obtained a five year, $450.0 million term loan bearing interest at LIBOR plus 1.50%. In November 2005, the Company entered into an interest rate swap agreement that effectively fixed the interest rate of the $450.0 million term loan at 6.30% from December 1, 2005 to April 15, 2010. At December 31, 2006 and 2005 the entire loan was outstanding with an interest rate of 6.30%.

On December 29, 2006, the Company sold Citadel Mall, Crossroads Mall and Northwest Arkansas Mall in a combined sale for $373.8 million. The net proceeds from these sales were used to pay down the Company's line of credit and to pay off the $75.0 million loan on Paradise Valley Mall on January 2, 2007.

At December 31, 2006, the Company was in compliance with all applicable loan covenants.

At December 31, 2006, the Company had cash and cash equivalents available of $269.4 million.

Off-Balance Sheet Arrangements

The Company has an ownership interest in a number of joint ventures as detailed in Note 4 to the Company's Consolidated Financial Statements included herein. The Company accounts for those investments that it does not have a controlling interest or is not the primary beneficiary using the equity method of accounting and those investments are reflected on the Consolidated Balance Sheets of the Company as "Investments in Unconsolidated Joint Ventures." A pro rata share of the mortgage debt on these properties is shown in Item 2. Properties—Mortgage Debt.

54     The Macerich Company

In addition, certain joint ventures also have debt that could become recourse debt to the Company or its subsidiaries, in excess of it's pro rata share, should the joint ventures be unable to discharge the obligations of the related debt.

The following reflects the maximum amount of debt principal that could recourse to the Company at December 31, 2006 (in thousands):

Property

   Recourse Debt

   Maturity Date
Boulevard Shops   $4,280   12/16/2007
Chandler Village Center   4,290   12/19/2007
    $8,570    

The above amounts decreased $13.1 million from December 31, 2005.

Additionally, as of December 31, 2006, the Company is contingently liable for $6.1 million 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.

Long-term contractual obligations

The following is a schedule of long-term contractual obligations (as of December 31, 2006) for the consolidated Centers over the periods in which they are expected to be paid (in thousands):

 
   Payment Due by Period
Contractual Obligations

   Total

   Less than
1 year

   1 - 3
years

   3 - 5
years

   More than
five years
Long-term debt obligations (includes expected interest payments)   $6,084,855   $865,129   $1,313,134   $2,596,702   $1,309,890
Operating lease obligations   263,898   5,251   10,576   10,700   237,371
Purchase obligations   31,111   31,111   —   —   —
Other long-term liabilities   304,575   304,575   —   —   —
    $6,684,439   $1,206,066   $1,323,710   $2,607,402   $1,547,261

Funds From Operations

The Company uses Funds from Operations ("FFO") in addition to net income to report its operating and financial results and considers FFO and FFO —diluted as supplemental measures for the real estate industry and a supplement to Generally Accepted Accounting Principles ("GAAP") measures. The National Association of Real Estate Investment Trusts ("NAREIT") defines FFO as net income (loss) (computed in accordance with GAAP, excluding gains (or losses) from extraordinary items and sales of depreciated operating properties, plus real estate related depreciation and amortization and after adjustments for unconsolidated partnerships and joint ventures. Adjustments for unconsolidated partnerships and joint ventures are calculated to reflect FFO on the same basis. FFO and FFO on a fully diluted basis are useful to investors in comparing operating and financial results between periods. This is especially true since FFO excludes real estate depreciation and amortization as the

The Macerich Company    55

Company believes real estate values fluctuate based on market conditions rather than depreciating in value ratably on a straight-line basis over time. FFO on a fully diluted basis is one of the measures investors find most useful in measuring the dilutive impact of outstanding convertible securities. FFO does not represent cash flow from operations as defined by GAAP, should not be considered as an alternative to net income as defined by GAAP and is not indicative of cash available to fund all cash flow needs. FFO, as presented, may not be comparable to similarly titled measures reported by other real estate investment trusts. The reconciliation of FFO and FFO —diluted to net income available to common stockholders is provided below.

The following reconciles net income available to common stockholders to FFO and FFO —diluted (dollars in thousands):

 
   2006

   2005

   2004

   2003

   2002
Net income —available to common stockholders   $228,022   $52,588   $82,493   $113,218   $60,965
Adjustments to reconcile net income to FFO —basic:                    
  Minority interest in the Operating Partnership   42,821   12,450   19,870   28,907   20,189
  Gain on sale or write-down of consolidated assets   (241,732)   (1,530)   (8,041)   (34,451)   (22,253)
  Add: Gain on undepreciated assets —consolidated assets   8,827   1,068   939   1,054   128
  Add: Minority interest share of gain on sale of consolidated joint ventures   36,831   239   —   —   —
  Less: Impairment write-down of consolidated assets   —   —   —   —   (3,029)
  (Gain) loss on sale or write-down of assets from unconsolidated entities (pro rata)   (725)   (1,954)   (3,353)   (155)   8,021
  Add: Gain on sale of undepreciated assets —from unconolidated entities (pro rata)   725   2,092   3,464   387   2,403
  Less: Impairment write-down of pro rata unconsolidated entities   —   —   —   —   (10,237)
  Depreciation and amortization on consolidated centers   231,247   203,065   144,828   109,569   78,837
  Depreciation and amortization on joint ventures and from management companies (pro rata)   82,745   73,247   61,060   45,133   37,355
  Less: depreciation on personal property and amortization of loan costs and interest rate caps   (15,722)   (14,724)   (11,228)   (9,346)   (7,463)
FFO —basic   373,039   326,541   290,032   254,316   164,916
Additional adjustments to arrive at FFO —diluted:                    
  Impact of convertible preferred stock   10,083   9,648   9,140   14,816   20,417
  Impact of non-participating convertible preferred units   —   642   —   —   —
  Impact of stock options using the treasury method   —   —   —   —   —
  Impact of convertible debentures   —   —   —   —   9,310
FFO —diluted   $383,122   $336,831   $299,172   $269,132   $194,643
Weighted average number of FFO shares outstanding for:                    
FFO —basic(1)   84,138   73,250   72,715   67,332   49,611
Adjustments for the impact of dilutive securities in computing FFO —diluted:                    
  Convertible preferred stock   3,627   3,627   3,627   7,386   9,115
  Non-participating convertible preferred units   —   197   —   —   —
  Stock options   293   323   385   480   456
  Convertible debentures   —   —   —   —   3,833
FFO —diluted(2)   88,058   77,397   76,727   75,198   63,015
(1)
Calculated based upon basic net income as adjusted to reach basic FFO. As of December 31, 2006, 2005, 2004, 2003, and 2002, 13.2 million, 13.5 million, 14.2 million, 14.2 million and 13.7 million of OP Units and Westcor partnership units were outstanding, respectively. The Westcor partnership units were converted to OP Units on July 27, 2004 which were subsequently redeemed for common stock on October 4, 2005.

(2)
The computation of FFO —diluted shares outstanding includes the effect of outstanding common stock options and restricted stock using the treasury method. It also assumes the conversion of MACWH, LP common and preferred units to the extent that it is dilutive to the FFO computation (See Note 12—"Acquisitions of the Company's Notes to the Consolidated Financial Statements"). The convertible debentures were dilutive for the year ended December 31, 2002 and were included in the FFO calculation. The convertible debentures were paid off in full on December 13, 2002. On February 25, 1998, the Company sold $100 million of its Series A Preferred Stock. On June 16, 1998, the Company sold $150 million of its Series B Preferred Stock. On September 9, 2003, 5.5 million shares of Series B Preferred Stock were converted into common shares. The preferred stock can be converted on a one-for-one basis for common stock. The then outstanding preferred shares are assumed converted for purposes of 2006, 2005, 2004, 2003 and 2002 FFO —diluted as they are dilutive to that calculation.

56     The Macerich Company


Item 7A. Quantitative and Qualitative Disclosures About Market Risk

The Company's primary market risk exposure is interest rate risk. The Company has managed and will continue to manage interest rate risk by (1) maintaining a ratio of fixed rate, long-term debt to total debt such that floating rate exposure is kept at an acceptable level, (2) reducing interest rate exposure on certain long-term floating rate debt through the use of interest rate caps and/or swaps with appropriately matching maturities, (3) using treasury rate locks where appropriate to fix rates on anticipated debt transactions, and (4) taking advantage of favorable market conditions for long-term debt and/or equity.

The following table sets forth information as of December 31, 2006 concerning the Company's long term debt obligations, including principal cash flows by scheduled maturity, weighted average interest rates and estimated fair value ("FV") (dollars in thousands):

 
   For the years ending December 31,
    
    
    
 
   2007

   2008

   2009

   2010

   2011

   Thereafter

   Total

   FV
CONSOLIDATED CENTERS:                            
Long term debt:                                
  Fixed rate(1)   $134,750   $324,881   $356,932   $1,036,099   $721,632   $1,238,701   $3,812,995   $3,431,970
  Average interest rate   6.00%   6.00%   6.00%   5.90%   5.70%   5.80%   5.99%    
  Floating rate   444,756   144,324   7,304   584,500   —   —   1,180,884   1,180,884
  Average interest rate   6.60%   6.50%   6.50%   6.40%   —   —   6.59%    
Total debt —Consolidated Centers   $579,506   $469,205   $364,236   $1,620,599   $721,632   $1,238,701   $4,993,879   $4,612,854

JOINT VENTURE CENTERS:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Long term debt (at Company's pro rata share):                                
  Fixed rate   $131,364   $85,362   $222,323   $121,132   $32,928   $872,907   $1,466,016   $1,502,388
  Average interest rate   6.00%   6.00%   6.20%   5.90%   5.90%   5.80%   5.84%    
  Floating rate   54,343   39,200   16,089   —   66,300   22,499   198,431   198,431
  Average interest rate   6.30%   6.30%   6.20%   —   6.10%   6.20%   6.33%    
Total debt —Joint Venture Centers   $185,707   $124,562   $238,412   $121,132   $99,228   $895,406   $1,664,447   $1,700,819
(1)
Fixed rate debt includes the $450 million floating rate term note and $400 million of the line of credit balance. These amounts have effective fixed rates over the remaining terms due to swap agreements as discussed below.

The consolidated Centers' total fixed rate debt at December 31, 2006 and 2005 was $3.8 billion and $3.2 billion, respectively. The average interest rate on fixed rate debt at December 31, 2006 and 2005 was 5.99% and 5.70%, respectively. The consolidated Centers' total floating rate debt at December 31, 2006 and 2005 was $1.2 billion and $2.2 billion, respectively. The average interest rate on floating rate debt at December 31, 2006 and 2005 was 6.59% and 5.80%, respectively.

The Company's pro rata share of the Joint Venture Centers' fixed rate debt at December 31, 2006 and 2005 was $1.5 billion and $1.3 billion, respectively. The average interest rate on fixed rate debt at December 31, 2006 and 2005 was 5.84% and 6.60%, respectively. The Company's pro rata share of the Joint Venture Centers' floating rate debt at December 31, 2006 and 2005 was $198.4 million and $250.3 million, respectively. The average interest rate on the floating rate debt was 6.33% and 5.20%, respectively.

The Company uses derivative financial instruments in the normal course of business to manage or hedge interest rate risk and records all derivatives on the balance sheet at fair value in accordance with SFAS No. 133,

The Macerich Company    57


"Accounting for Derivative Instruments and Hedging Activities" (See "Note 5 —Derivative Instruments and Hedging Activities" of the Company's Consolidated Financial Statements).

The following are outstanding derivatives at December 31, 2006 (amounts in thousands):

Property/Entity

   Notional Amount

   Product

   Rate

   Maturity

   Company's Ownership

   Fair Value(1)
Camelback Colonnade   $41,500   Cap   8.54%   11/15/2008   75%   $ —
Desert Sky Mall   $51,500   Cap   7.65%   3/15/2008   50%   $ —
Greece Ridge Center   $72,000   Cap   7.95%   12/15/2007   100%   $ —
La Cumbre Plaza   $30,000   Cap   7.12%   8/9/2007   100%   $ —
Metrocenter Mall   $37,380   Cap   7.25%   2/15/2008   15%   $ —
Metrocenter Mall   $11,500   Cap   5.25%   2/15/2008   15%   $2
Panorama Mall   $50,000   Cap   6.65%   3/1/2008   100%   $ —
Oaks, The   $92,000   Cap   7.10%   7/1/2007   100%   $ —
Superstition Springs Center   $67,500   Cap   8.63%   9/9/2008   33.33%   $ —
Metrocenter Mall   $112,000   Swap   3.86%   2/15/2008   15%   $250
The Operating Partnership   $450,000   Swap   4.80%   4/15/2010   100%   $2,094
The Operating Partnership   $400,000   Swap   5.08%   4/25/2011   100%   $(2,186)
(1)
Fair value at the Company's ownership percentage.

Interest rate cap agreements ("Cap") offer protection against floating rates on the notional amount from exceeding the rates noted in the above schedule and interest rate swap agreements ("Swap") effectively replace a floating rate on the notional amount with a fixed rate as noted above.

In addition, the Company has assessed the market risk for its floating rate debt and believes that a 1% increase in interest rates would decrease future earnings and cash flows by approximately $13.8 million per year based on $1.4 billion outstanding of floating rate debt at December 31, 2006.

The fair value of the Company's long term debt is estimated based on discounted cash flows at interest rates that management believes reflect the risks associated with long term debt of similar risk and duration.

58     The Macerich Company


Item 8. Financial Statements and Supplementary Data

Refer to the Index to Financial Statements and Financial Statement Schedules for the required information appearing in Item 15.


Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None


Item 9A. Controls and Procedures

Management, including our Chief Executive Officer and Chief Financial Officer, does not expect that its disclosure controls and procedures or its internal controls will prevent all error and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected.

However, based on their evaluation as of December 31, 2006, the Company's Chief Executive Officer and Chief Financial Officer, have concluded that the Company's disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended) were effective to ensure that the information required to be disclosed by the Company in the reports that it files or submits under the Securities Exchange Act of 1934 is (a) recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms and (b) accumulated and communicated to the Company's management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

Management's Report on Internal Control over Financial Reporting

The Company's management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934, as amended). The Company's management assessed the effectiveness of the Company's internal control over financial reporting as of December 31, 2006. In making this assessment, the Company's management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO") in Internal Control —Integrated Framework. The Company's management has concluded that, as of December 31, 2006, its internal control over financial reporting is effective based on these criteria. The Company's independent registered public accounting firm, Deloitte and Touche LLP, has issued an audit report on management's assessment of our internal control over financial reporting, which is included herein.

The Macerich Company    59

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders of
The Macerich Company
Santa Monica, California

We have audited management's assessment, included in the accompanying Management's Report on Internal Control over Financial Reporting, that The Macerich Company and its subsidiaries (the "Company") maintained effective internal control over financial reporting as of December 31, 2006, based on criteria established in Internal Control —Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. The Company's management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express an opinion on management's assessment and an opinion on the effectiveness of the Company's internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, evaluating management's assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinions.

A company's internal control over financial reporting is a process designed by, or under the supervision of, the company's principal executive and principal financial officers, or persons performing similar functions, and effected by the company's board of directors, management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.

Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

60     The Macerich Company


In our opinion, management's assessment that the Company maintained effective internal control over financial reporting as of December 31, 2006, is fairly stated, in all material respects, based on the criteria established in Internal Control —Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2006, based on the criteria established in Internal Control —Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated financial statements and financial statement schedules as of and for the year ended December 31, 2006, of the Company and our report dated February 27, 2007 expressed an unqualified opinion on those financial statements and financial statement schedules.

Deloitte & Touche LLP
Los Angeles, California

February 27, 2007

The Macerich Company    61

Changes in Internal Control over Financial Reporting

There were no changes in the Company's internal controls over financial reporting during the quarter ended December 31, 2006 that have materially affected, or are reasonably likely to materially affect, the Company's internal controls over financial reporting.


Item 9A(T). Controls and Procedures

Not Applicable


Item 9B. Other Information

None

62     The Macerich Company


Part III

Item 10. Directors and Executive Officers and Corporate Governance

There is hereby incorporated by reference the information which appears under the captions "Information Regarding Nominees and Directors," "Executive Officers," "Section 16(a) Beneficial Ownership Reporting Compliance," "Audit Committee Matters" and "Codes of Ethics" in the Company's definitive proxy statement for its 2007 Annual Meeting of Stockholders that is responsive to the information required by this Item.

During 2006, there were no material changes to the procedures described in the Company's proxy statement relating to the 2006 Annual Meeting of Stockholders by which stockholders may recommend nominees to the Company.


Item 11. Executive Compensation

There is hereby incorporated by reference the information which appears under the caption "Election of Directors" in the Company's definitive proxy statement for its 2007 Annual Meeting of Stockholders that is responsive to the information required by this Item. Notwithstanding the foregoing, the Compensation Committee Report set forth therein shall not be incorporated by reference herein, in any of the Company's prior or future filings under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, except to the extent the Company specifically incorporates such report by reference therein and shall not be otherwise deemed filed under either of such Acts.


Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholders Matters

There is hereby incorporated by reference the information which appears under the captions "Principal Stockholders," "Information Regarding Nominees and Directors" and "Executive Officers" in the Company's definitive proxy statement for its 2007 Annual Meeting of Stockholders that is responsive to the information required by this Item.

Equity Compensation Plan Information

The Company currently maintains two equity compensation plans for the granting of equity awards to directors, officers and employees: the 2003 Equity Incentive Plan ("2003 Plan") and the Eligible Directors' Deferred Compensation/Phantom Stock Plan ("Director Phantom Stock Plan"). Certain of the Company's outstanding stock awards were granted under other equity compensation plans which are no longer available for stock awards: the 1994 Eligible Directors' Stock Option Plan (the "Director Plan"), the Amended and Restated 1994 Incentive Plan (the "1994 Plan") and the 2000 Incentive Plan (the "2000 Plan").

The Macerich Company    63

Summary Table

The following table sets forth, for the Company's equity compensation plans, the number of shares of Common Stock subject to outstanding options, warrants and rights, the weighted-average exercise price of outstanding options, and the number of shares remaining available for future award grants as of December 31, 2006.

Plan Category

   Number of shares of
Common Stock to be
issued upon exercise
of outstanding
options, warrants
and rights
(a)

   Weighted average
exercise price of
outstanding opitons,
warrants and
rights(1)
(b)

   Number of shares of
Common stock remaining
available for future
issuance under equity
compensation plans
(excluding shares
reflected in column(a))
(c)

  
 
Equity Compensation Plans approved by stockholders   727,085 (2) $23.84   5,998,569 (3)
Equity Compensation Plans not approved by stockholders   20,000 (4) $30.75   —  
 
    747,085       5,998,569  
 
(1)
Weighted average exercise price of outstanding options does not include stock units or limited operating partnership units.

(2)
Represents 400,822 shares subject to outstanding options under the 1994 Plan and 2003 Plan, 215,709 shares which may be issued upon redemption of limited operating partnership units under the 2003 Plan, and 101,054 shares underlying stock units, payable on a one-for-one basis, credited to stock unit accounts under the Director Phantom Stock Plan, and 9,500 shares subject to outstanding options under the Director Plan.

(3)
Of these shares, 5,134,664 were available for options, stock appreciation rights, restricted stock, stock units, stock bonuses, performance based awards, dividend equivalent rights and operating partnership units or other convertible or exchangeable units under the 2003 Plan, 131,084 were available for issuance under stock units under the Director Phantom Stock Plan and 732,821 were available for issuance under the Employee Stock Purchase Plan.

(4)
Represents 20,000 shares subject to outstanding options under the 2000 Plan. The 2000 Plan did not require approval of, and has not been approved by, the Company's stockholders. No additional awards will be made under the 2000 Plan. The 2000 Plan generally provided for the grant of options, stock appreciation rights, restricted stock awards, stock units, stock bonuses and dividend equivalent rights to employees, directors and consultants of the Company or its subsidiaries. The only awards that were granted under the 2000 Plan were stock options and restricted stock. The stock options granted generally expire not more than 10 years after the date of grant and vest in three equal annual installments, commencing on the first anniversary of the grant date. The restricted stock grants generally vest over three years.


Item 13. Certain Relationships and Related Transactions, and Director Independence

There is hereby incorporated by reference the information which appears under the captions "Certain Transactions", "Related Party Transaction Policies and Procedures" and "The Board of Directors and its Committees" in the Company's definitive proxy statement for its 2007 Annual Meeting of Stockholders that is responsive to the information required by this Item.


Item 14. Principal Accountant Fees and Services

There is hereby incorporated by reference the information which appears under the captions "Principal Accountant Fees and Services" and "Audit Committee Pre-Approval Policy" in the Company's definitive proxy statement for its 2007 Annual Meeting of Stockholders that is responsive to the information required by this Item.

64     The Macerich Company


PART IV

Item 15. Exhibits and Financial Statement Schedules

 
    
    
   Page
(a) and (c)   1.   Financial Statements of the Company    

 
 
 
 
Report of Independent Registered Public Accounting Firm
 
67

 
 
 
 
Consolidated balance sheets of the Company as of December 31, 2006 and 2005
 
68

 
 
 
 
Consolidated statements of operations of the Company for the years ended December 31, 2006, 2005 and 2004
 
69

 
 
 
 
Consolidated statements of common stockholders' equity of the Company for the years ended December 31, 2006, 2005 and 2004
 
70

 
 
 
 
Consolidated statements of cash flows of the Company for the years ended December 31, 2006, 2005 and 2004
 
71

 
 
 
 
Notes to consolidated financial statements
 
72

 
 
2.
 
Financial Statements of Pacific Premier Retail Trust
 
 

 
 
 
 
Report of Independent Registered Public Accounting Firm
 
110

 
 
 
 
Consolidated balance sheets of Pacific Premier Retail Trust as of December 31, 2006 and 2005
 
111

 
 
 
 
Consolidated statements of operations of Pacific Premier Retail Trust for the years ended December 31, 2006, 2005 and 2004
 
112

 
 
 
 
Consolidated statements of stockholders' equity of Pacific Premier Retail Trust for the years ended December 31, 2006, 2005 and 2004
 
113

 
 
 
 
Consolidated statements of cash flows of Pacific Premier Retail Trust for the years ended December 31, 2006, 2005 and 2004
 
114

 
 
 
 
Notes to consolidated financial statements
 
115

 
 
3.
 
Financial Statements of SDG Macerich Properties, L.P.
 
 

 
 
 
 
Report of Independent Registered Public Accounting Firm
 
124

 
 
 
 
Balance sheets of SDG Macerich Properties, L.P. as of December 31, 2006 and 2005
 
125

 
 
 
 
Statements of operations of SDG Macerich Properties, L.P. for the years ended December 31, 2006, 2005 and 2004
 
126

 
 
 
 
Statements of cash flows of SDG Macerich Properties, L.P. for the years ended December 31, 2006, 2005 and 2004
 
127

 
 
 
 
Statements of partners' equity of SDG Macerich Properties, L.P. for the years ended December 31, 2006, 2005 and 2004
 
128

 
 
 
 
Notes to financial statements
 
129
             

The Macerich Company    65


 
 
4.
 
Financial Statement Schedules
 
 

 
 
 
 
Schedule III —Real estate and accumulated depreciation of the Company
 
135

 
 
 
 
Schedule III —Real estate and accumulated depreciation of Pacific Premier Retail Trust
 
138

 
 
 
 
Schedule III —Real estate and accumulated depreciation of SDG Macerich Properties, L.P
 
140

(b)
 
1.
 
Exhibits
 
 

 
 
 
 
The Exhibit Index attached hereto is incorporated by reference under this item
 
 

66     The Macerich Company


REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of
The Macerich Company
Santa Monica, California

We have audited the accompanying consolidated balance sheets of The Macerich Company and subsidiaries (the "Company") as of December 31, 2006 and 2005, and the related consolidated statements of operations, common stockholders' equity, and cash flows for each of the three years in the period ended December 31, 2006. Our audits also included the Company's consolidated financial statement schedules listed in the Index at Item 15(a)(4). These consolidated financial statements and consolidated financial statement schedules are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements and consolidated financial statement schedules based on our audits. We did not audit the consolidated financial statements or the consolidated financial statements of SDG Macerich Properties, L.P. (the "Partnership"), the Company's investment in which is reflected in the accompanying consolidated financial statements using the equity method of accounting. The Company's equity of $50,696,000 and $142,102,000 in the Partnership's net assets at December 31, 2006 and 2005, respectively, and $11,197,000, $15,537,000 and $16,499,000 in the Partnership's net income for the three years ended December 31, 2006 are included in the accompanying consolidated financial statements. Such financial statements were audited by other auditors whose report has been furnished to us, and our opinion, insofar as it relates to the amounts included for the Partnership, is based solely on the report of such other auditors.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits and the report of other auditors provide a reasonable basis for our opinion.

In our opinion, based on our audits and the report of other auditors, such 2006, 2005 and 2004 consolidated financial statements present fairly, in all material respects, the financial position of The Macerich Company and subsidiaries as of December 31, 2006 and 2005, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2006, in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, based on our audits and the report of the other auditors, such consolidated financial statement schedules, when considered in relation to the basic consolidated financial statements taken as a whole, present fairly, in all material respects, the information set forth therein.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of the Company's internal control over financial reporting as of December 31, 2006, based on the criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 27, 2007 expressed an unqualified opinion on management's assessment of the effectiveness of the Company's internal control over financial reporting and an unqualified opinion on the effectiveness of the Company's internal control over financial reporting.

   

Deloitte & Touche LLP
Los Angeles, California
 

February 27, 2007
 

The Macerich Company    67


THE MACERICH COMPANY

CONSOLIDATED BALANCE SHEETS

(Dollars in thousands, except share amounts)

 
   December 31,
  
 
   2006

   2005

  
 
ASSETS:          
Property, net   $5,755,283   $5,438,496  
Cash and cash equivalents   269,435   155,113  
Restricted cash   66,376   54,659  
Marketable securities   30,019   —  
Tenant receivables, net   117,855   89,165  
Deferred charges and other assets, net   307,825   360,217  
Loans to unconsolidated joint ventures   708   1,415  
Due from affiliates   4,282   4,258  
Investments in unconsolidated joint ventures   1,010,380   1,075,621  
 
      Total assets   $7,562,163   $7,178,944  
 

LIABILITIES, PREFERRED STOCK AND COMMON STOCKHOLDERS' EQUITY:
 
 
 
 
 
Mortgage notes payable:          
  Related parties   $151,311   $154,531  
  Others   3,179,787   3,088,199  
 
      Total   3,331,098   3,242,730  
Bank and other notes payable   1,662,781   2,182,000  
Accounts payable and accrued expenses   86,127   75,121  
Other accrued liabilities   212,249   226,985  
Preferred stock dividend payable   6,199   5,970  
 
      Total liabilities   5,298,454   5,732,806  
 
Minority interest   387,183   284,809  
 
Commitments and contingencies          
Class A participating convertible preferred units   213,786   213,786  
 
Class A non-participating convertible preferred units   21,501   21,501  
 
Series A cumulative convertible redeemable preferred stock, $.01 par value, 3,627,131 shares authorized, issued and outstanding at December 31, 2006 and 2005, respectively   98,934   98,934  
 
Common stockholders' equity:          
  Common stock, $.01 par value, 145,000,000 shares authorized, 71,567,908 and 59,941,552 shares issued and outstanding at December 31, 2006 and 2005, respectively   716   599  
  Additional paid-in capital   1,717,498   1,050,891  
  Accumulated deficit   (178,249 ) (209,005 )
  Accumulated other comprehensive income   2,340   87  
  Unamortized restricted stock   —   (15,464 )
 
      Total common stockholders' equity   1,542,305   827,108  
 
      Total liabilities, preferred stock and common stockholders' equity   $7,562,163   $7,178,944  
 

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

68     The Macerich Company


THE MACERICH COMPANY

CONSOLIDATED STATEMENTS OF OPERATIONS

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

 
   For The Years Ended December 31,
  
 
   2006

   2005

   2004

  
 
Revenues:              
  Minimum rents   $489,078   $423,759   $294,846  
  Percentage rents   24,667   24,152   15,655  
  Tenant recoveries   254,526   214,832   145,055  
  Management Companies   31,456   26,128   21,549  
  Other   29,929   22,953   18,070  
 
  Total revenues   829,656   711,824   495,175  
 
Expenses:              
  Shopping center and operating expenses   262,127   223,905   146,465  
  Management Companies' operating expenses   56,673   52,840   44,080  
  REIT general and administrative expenses   13,532   12,106   11,077  
  Depreciation and amortization   224,273   193,145   128,413  
 
    556,605   481,996   330,035  
 
  Interest expense:              
    Related parties   10,858   9,638   5,800  
    Other   263,809   227,459   128,749  
 
    274,667   237,097   134,549  
 
  Total expenses   831,272   719,093   464,584  
Minority interest in consolidated joint ventures   (3,667 ) (700 ) (184 )
Equity in income of unconsolidated joint ventures   86,053   76,303   54,881  
Income tax (expense) benefit   (33 ) 2,031   5,466  
Gain on sale of assets   38   1,253   473  
Loss on early extinguishment of debt   (1,835 ) (1,666 ) (1,642 )
 
Income from continuing operations   78,940   69,952   89,585  
Discontinued operations:              
  Gain on sale of assets   204,863   277   7,568  
  Income from discontinued operations   11,376   13,907   14,350  
 
Total income from discontinued operations   216,239   14,184   21,918  
 
Income before minority interest and preferred dividends   295,179   84,136   111,503  
Less: minority interest in Operating Partnership   42,821   12,450   19,870  
 
Net income   252,358   71,686   91,633  
Less: preferred dividends   24,336   19,098   9,140  
 
Net income available to common stockholders   $228,022   $52,588   $82,493  
 
Earnings per common share—basic:              
  Income from continuing operations   $0.65   $0.70   $1.11  
  Discontinued operations   2.57   0.19   0.30  
 
  Net income   $3.22   $0.89   $1.41  
 
Earnings per common share—diluted:              
  Income from continuing operations   $0.73   $0.69   $1.10  
  Discontinued operations   2.46   0.19   0.30  
 
  Net income   $3.19   $0.88   $1.40  
 
Weighted average number of common              
  shares outstanding:              
  Basic   70,826,000   59,279,000   58,537,000  
 
  Diluted   88,058,000   73,573,000   73,099,000  
 

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

The Macerich Company    69


THE MACERICH COMPANY

CONSOLIDATED STATEMENTS OF COMMON STOCKHOLDERS' EQUITY

(Dollars in thousands, except per share data)

 
   Common Stock
    
    
    
    
    
 
   Additional
Paid-in
Capital

    
   Accumulated Other
Comprehensive
Income

   Unamortized
Restricted
Stock

   Total Common
Stockholders'
Equity
 
   Shares

   Par Value

   Accumulated
Deficit
Balance January 1, 2004   57,902,524   578   $1,008,488   $(38,541)   $(2,335)   $(14,705)   $953,485
Comprehensive income:                            
  Net income   —   —   —   91,633   —   —   91,633
  Reclassification of deferred losses   —   —   —   —   1,351   —   1,351
  Interest rate swap/cap agreements   —   —   —   —   2,076   —   2,076
  Total comprehensive income   —   —   —   91,633   3,427   —   95,060
Issuance of restricted stock   153,692   2   8,282   —   —   —   8,284
Unvested restricted stock   (153,692)   (2)   —   —   —   (8,282)   (8,284)
Issuance of phantom stock   17,862   —   795   —   —   —   795
Amortization of share-based plans   320,114   3   —   —   —   8,391   8,394
Exercise of stock options   465,984   5   9,509   —   —   —   9,514
Distributions paid ($2.48) per share   —   —   —   (147,441)   —   —   (147,441)
Preferred dividends   —   —   —   (9,140)   —   —   (9,140)
Conversion of Operating Partnership Units   79,210   —   1,785   —   —   —   1,785
Adjustment to reflect minority interest on a pro rata basis per period end ownership percentage of Operating Partnership Units   —   —   1,081   —   —   —   1,081
Balance December 31, 2004   58,785,694   586   1,029,940   (103,489)   1,092   (14,596)   913,533
Comprehensive income (loss):                            
  Net income   —   —   —   71,686   —   —   71,686
  Reclassification of deferred losses   —   —   —   —   1,351   —   1,351
  Interest rate swap/cap agreements   —   —   —   —   (2,356)   —   (2,356)
  Total comprehensive income (loss)   —   —   —   71,686   (1,005)   —   70,681
Issuance of restricted stock   260,898   3   12,393   —   —   —   12,396
Unvested restricted stock   (260,898)   (3)   —   —   —   (12,393)   (12,396)
Amortization of share-based plans   247,371   3   —   —   —   11,525   11,528
Exercise of stock options   182,237   2   4,595   —   —   —   4,597
Distributions paid ($2.63) per share   —   —   —   (158,104)   —   —   (158,104)
Preferred dividends   —   —   —   (19,098)   —   —   (19,098)
Conversion of Operating Partnership Units   726,250   8   21,587   —   —   —   21,595
Adjustment to reflect minority interest on a pro rata basis per period end ownership percentage of Operating Partnership Units   —   —   (17,624)   —   —   —   (17,624)
Balance December 31, 2005   59,941,552   599   1,050,891   (209,005)   87   (15,464)   827,108
Comprehensive income:                            
  Net income   —   —   —   252,358   —   —   252,358
  Reclassification of deferred losses   —   —   —   —   1,510   —   1,510
  Interest rate swap/cap agreements   —   —   —   —   743   —   743
  Total comprehensive income   —   —   —   252,358   2,253   —   254,611
Amortization of share-based plans   415,787   4   15,406   —   —   —   15,410
Exercise of stock options   14,101   —   260   —   —   —   260
Employee stock purchases   3,365   —   203   —   —   —   203
Common stock offering, gross   10,952,381   110   761,081   —   —   —   761,191
Underwriting and offering costs   —   —   (14,706)   —   —   —   (14,706)
Distributions paid ($2.75) per share   —   —   —   (197,266)   —   —   (197,266)
Preferred dividends   —   —   —   (24,336)   —   —   (24,336)
Conversion of Operating Partnership Units   240,722   3   9,916   —   —   —   9,919
Change in accounting principle due to adoption of SFAS No. 123(R)   —   —   (15,464)   —   —   15,464   —
Reclassification upon adoption of SFAS No. 123(R)   —   —   6,000   —   —   —   6,000
Adjustment to reflect minority interest on a pro rata basis per period end ownership percentage of Operating Partnership Units   —   —   (96,089)   —   —   —   (96,089)
Balance December 31, 2006   71,567,908   $716   $1,717,498   $(178,249)   $2,340   $ —   $1,542,305

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

70     The Macerich Company


THE MACERICH COMPANY

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in thousands)

 
   For the years ended December 31,
 
   2006

   2005

   2004
Cash flows from operating activities:            
  Net income available to common stockholders   $228,022   $52,588   $82,493
  Preferred dividends   24,336   19,098   9,140
  Net income   252,358   71,686   91,633
  Adjustments to reconcile net income to net cash provided by operating activities:            
    Loss on early extinguishment of debt   1,835   1,666   1,642
    Gain on sale of assets   (38)   (1,253)   (473)
    Discontinued operations gain on sale of assets   (204,863)   (277)   (7,568)
    Depreciation and amortization   236,670   208,932   146,378
    Amortization of net premium on mortgage notes payable   (11,835)   (10,193)   (805)
    Amortization of share-based plans   9,607   8,286   6,236
    Minority interest in Operating Partnership   42,821   12,450   19,870
    Minority interest in consolidated joint ventures   4,101   600   184
    Equity in income of unconsolidated joint ventures   (86,053)   (76,303)   (54,881)
    Distributions of income from unconsolidated joint ventures   4,106   9,010   12,728
    Changes in assets and liabilities, net of acquisitions and dispositions:            
      Tenant receivables, net   (22,319)   (6,400)   (951)
      Other assets   8,303   31,517   (12,162)
      Accounts payable and accrued expenses   (14,000)   5,181   (3,678)
      Due from affiliates   (24)   (14,276)   1,904
      Other accrued liabilities   (8,819)   (5,330)   13,140
  Net cash provided by operating activities   211,850   235,296   213,197
Cash flows from investing activities:            
  Acquisitions of property, development, redevelopment and property improvements   (822,903)   (171,842)   (538,529)
  Issuance of note receivable   (10,000)   —   —
  Purchase of marketable securities   (30,307)   —   —
  Maturities of marketable securities   444   —   —
  Deferred leasing costs   (29,688)   (21,837)   (16,822)
  Distributions from unconsolidated joint ventures   187,269   155,537   80,303
  Contributions to unconsolidated joint ventures   (31,499)   (101,429)   (78,451)
  Repayments of loans to unconsolidated joint ventures   707   5,228   22,594
  Proceeds from sale of assets   610,578   6,945   46,630
  Restricted cash   (1,337)   (4,550)   (5,547)
  Net cash used in investing activities   (126,736)   (131,948)   (489,822)
Cash flows from financing activities:            
  Proceeds from mortgages and bank and other notes payable   1,912,179   483,127   770,306
  Payments on mortgages and bank and other notes payable   (2,329,827)   (286,369)   (276,003)
  Deferred financing costs   (6,886)   (4,141)   (8,723)
  Proceeds from share-based plans   463   4,597   9,514
  Net proceeds from stock offering   746,805   —   —
  Dividends and distributions   (269,419)   (202,078)   (177,717)
  Dividends to preferred stockholders/preferred unit holders   (24,107)   (15,485)   (8,994)
  Net cash provided by (used in) financing activities   29,208   (20,349)   308,383
  Net increase in cash   114,322   82,999   31,758
Cash and cash equivalents, beginning of period   155,113   72,114   40,356
Cash and cash equivalents, end of period   $269,435   $155,113   $72,114
Supplemental cash flow information:            
  Cash payments for interest, net of amounts capitalized   $282,987   $244,474   $140,552
Non-cash transactions:            
  Reclassification from other accrued liabilities to additional paid-in capital upon adoption of SFAS No. 123(R)   $6,000   $ —   $ —
  Acquisition of property by issuance of bank notes payable   $ —   $1,198,503   $ —
  Acquisition of property by assumption of mortgage notes payable   $ —   $809,542   $54,023
  Acquisition of property by issuance of convertible preferred units and common units   $ —   $241,103   $ —
  Development costs included in accounts payable and other accrued liabilities   $25,754   $9,697   $8,300

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

The Macerich Company    71


THE MACERICH COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share amounts)

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 December 31, 2006, the Company is the sole general partner of and assuming conversion of the preferred units holds an 84% ownership interest in The Macerich Partnership, L.P. (the "Operating Partnership"). The interests in the Operating Partnership are known as OP Units. OP Units not held by the Company are redeemable, subject to certain restrictions, on a one-for-one basis for the Company's common stock or cash at the Company's option.

The Company was organized to qualify as a real estate investment trust ("REIT") under the Internal Revenue Code of 1986, as amended. The 16% limited partnership interest of the Operating Partnership not owned by the Company is reflected in these financial statements as minority interest.

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 and Westcor Partners of Colorado, LLC, a Colorado limited liability company. As part of the Wilmorite closing (See Note 12 —Acquisitions), the Company acquired MACW Mall Management, Inc., a New York corporation and MACW Property Management, LLC, a New York single member limited liability company. These 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:

These consolidated financial statements have been prepared in accordance with generally accepted accounting principles ("GAAP") in the United States of America. 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". All intercompany accounts and transactions have been eliminated in the consolidated financial statements.

72     The Macerich Company

Cash and Cash Equivalents:

The Company considers all highly liquid investments with an original maturity of three months or less when purchased to be cash equivalents, for which cost approximates fair value. Restricted cash includes impounds of property taxes and other capital reserves required under the loan agreements.

Tenant Receivables:

Included in tenant receivables are allowances for doubtful accounts of $2,700 and $4,588 at December 31, 2006 and 2005, respectively. Also included in tenant receivables are accrued percentage rents of $11,086 and $11,423 at December 31, 2006 and 2005, respectively.

Revenues:

Minimum rental revenues are recognized on a straight-line basis over the term of the related lease. The difference between the amount of rent due in a year and the amount recorded as rental income is referred to as the "straight-lining of rent adjustment." Rental income was increased by $7,759, $6,703 and $1,037 due to the straight-lining of rent adjustment during the years ended December 31, 2006, 2005 and 2004, respectively. Percentage rents are recognized and accrued when tenants' specified sales targets have been met.

Estimated recoveries from tenants for real estate taxes, insurance and other shopping center operating expenses are recognized as revenues in the period the applicable expenses are incurred.

The Management Companies provide property management, leasing, corporate, development, redevelopment and acquisition services to affiliated and non-affiliated shopping centers. In consideration for these services, the Management Companies receive monthly management fees generally ranging from 1.5% to 6% of the gross monthly rental revenue of the properties managed.

Property:

Costs related to the development, redevelopment, construction and improvement of properties are capitalized. Interest incurred on development, redevelopment and construction projects is capitalized until construction is substantially complete.

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

The Macerich Company    73


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

Buildings and improvements   5-40 years
Tenant improvements   5-7 years
Equipment and furnishings   5-7 years

Acquisitions:

The Company accounts for all acquisitions in accordance with Statement of Financial Accounting Standards ("SFAS") No. 141, "Business Combinations." The Company will first determine the value of the land and buildings utilizing an "as if vacant" methodology. The Company will then assign a fair value to any debt assumed at acquisition. The balance of the purchase price will be allocated to tenant improvements and identifiable intangible assets or liabilities. Tenant improvements represent the tangible assets associated with the existing leases valued on a fair market value basis at the acquisition date prorated over the remaining lease terms. The tenant improvements are classified as an asset under real estate investments and are depreciated over the remaining lease terms. Identifiable intangible assets and liabilities relate to the value of in-place operating leases which come in three forms: (i) leasing commissions and legal costs, which represent the value associated with "cost avoidance" of acquiring in-place leases, such as lease commissions paid under terms generally experienced in the Company's markets; (ii) value of in-place leases, which represents the estimated loss of revenue and of costs incurred for the period required to lease the "assumed vacant" property to the occupancy level when purchased; and (iii) above or below market value of in-place leases, which represents the difference between the contractual rents and market rents at the time of the acquisition, discounted for tenant credit risks. Leasing commissions and legal costs are recorded in deferred charges and other assets and are amortized over the remaining lease terms. The value of in-place leases are recorded in deferred charges and other assets and amortized over the remaining lease terms plus an estimate of renewal of the acquired leases. Above or below market leases are classified in deferred charges and other assets or in other accrued liabilities, depending on whether the contractual terms are above or below market, and the asset or liability is amortized to rental revenue over the remaining terms of the leases.

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

74     The Macerich Company


Marketable Securities:

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.

Deferred Charges:

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

The range of the terms of the agreements is as follows:

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

Accounting for the Impairment or Disposal of Long-Lived Assets:

The Company assesses whether there has been impairment in the value of its long-lived assets by considering expected future operating income, trends and prospects, as well as the effects of demand, competition and other economic factors. Such factors include the tenants' ability to perform their duties and pay rent under the terms of the leases. The determination of recoverability is made based upon the estimated undiscounted future net cash flows, excluding interest expense. The amount of impairment loss, if any, is determined by comparing the fair value, as determined by an undiscounted cash flows analysis, with the carrying value of the related assets. Long-lived assets classified as held for sale are measured at the lower of the carrying amount or fair value less cost to sell. Management does not believe impairment has occurred in its net property carrying values at December 31, 2006 or 2005.

Fair Value of Financial Instruments

The Company calculates the fair value of financial instruments and includes this additional information in the notes to consolidated financial statements when the fair value is different than the carrying value of those financial instruments. When the fair value reasonably approximates the carrying value, no additional disclosure is made. The estimated fair value amounts have been determined by the Company using available market

The Macerich Company    75

information and appropriate valuation methodologies. However, considerable judgment is required in interpreting market data to develop the estimates of fair value. Accordingly, the estimates presented herein are not necessarily indicative of the amounts that the Company could realize in a current market exchange. The use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair value amounts.

Concentration of Risk:

The Company maintains its cash accounts in a number of commercial banks. Accounts at these banks are guaranteed by the Federal Deposit Insurance Corporation ("FDIC") up to $100. At various times during the year, the Company had deposits in excess of the FDIC insurance limit.

No Center or tenant generated more than 10% of total revenues during 2006, 2005 or 2004.

The Limited represented 3.5%, 4.1% and 3.6% of total minimum rents in place as of December 31, 2006, 2005 and 2004, respectively, and no other retailer represented more than 2.9%, 3.6% and 3.2% of total minimum rents as of December 31, 2006, 2005 and 2004, respectively.

Management Estimates:

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. In the year ending December 31, 2004, the Company changed its estimate for common area expense recoveries applicable to prior periods. This change in estimate resulted in a $4,129 charge for the year ending December 31, 2004.

Recent Accounting Pronouncements:

In December 2004, the Financial Accounting Standards Board ("FASB") issued SFAS No. 123 (revised), "Share-Based Payment." SFAS No. 123(R) requires that all share-based payments to employees, including grants of employee stock options, be recognized in the income statement based on their fair values. The Company adopted this statement as of January 1, 2006. See Note 16 —Share-Based Plans, for the impact of the adoption of SFAS No. 123(R) on the results of operations.

In March 2005, FASB issued Interpretation No. 47 ("FIN 47"), "Accounting for Conditional Asset Retirement Obligations —an interpretation of SFAS No. 143." FIN 47, requires that a liability be recognized for the fair value of a conditional asset retirement obligation if the fair value can be reasonably estimated. As a result of the Company's adoption of FIN 47, the Company recorded an additional liability of $615 in 2005. As of December 31, 2006 and 2005, the Company's liability for retirement obligations was $414 and $1,163, respectively.

76     The Macerich Company


In February 2006, the FASB issued SFAS No. 155, "Accounting for Certain Hybrid Financial Instruments —An Amendment of FASB Statements No. 133 and 140." This statement amended SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities," and No. 140, "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities." SFAS No. 155 permits fair value remeasurement for any hybrid financial instrument that contains an embedded derivative that otherwise would require bifurcation. This statement also established a requirement to evaluate interests in securitized financial assets to identify interests that are freestanding derivatives or that are hybrid financial instruments that contain an embedded derivative requiring bifurcation. The Company is required to adopt SFAS No. 155 for fiscal year 2007 and does not expect its adoption to have a material effect on the Company's results of operations or financial condition.

In June 2006, the FASB issued Interpretation No. 48, "Accounting for Uncertainty in Income Taxes —an interpretation of FASB Statement No. 109" ("FIN 48"). This interpretation clarifies the accounting for uncertainty in income taxes recognized in an enterprise's financial statements in accordance with SFAS No. 109, "Accounting for Income Taxes." This interpretation prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. This interpretation also provides guidance on derecognition of previously recognized income tax benefits, classification, interest and penalties, accounting in interim periods, disclosure, and transition. FIN 48 is effective for fiscal years beginning after December 15, 2006. The Company has concluded that the adoption of FIN 48 will not have a material impact on its consolidated financial statements.

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

In September 2006, the Securities and Exchange Commission issued Staff Accounting Bulletin ("SAB") No. 108. SAB No. 108 establishes a framework for quantifying materiality of financial statement misstatements. SAB No. 108 is effective for fiscal years ending after November 16, 2006. The adoption of SAB No. 108 did not have a material impact on the Company's consolidated results of operations or financial condition.

3.    Earnings per Share ("EPS"):

The computation of basic earnings per share is based on net income and the weighted average number of common shares outstanding for the years ended December 31, 2006, 2005 and 2004. The computation of diluted earnings per share includes the effect of dilutive securities calculated using the treasury stock method. The OP Units not held by the Company have been included in the diluted EPS calculation since they may be redeemable on a one-for-one basis, at the Company's option.

The Macerich Company    77


The following table reconciles the basic and diluted earnings per share calculation for the years ended December 31:

 
   2006
   2005
   2004
 
   Net Income

   Shares

   Per Share

   Net Income

   Shares

   Per Share

   Net Income

   Shares

   Per Share
Net income   $252,358           $71,686           $91,633        
Less: Preferred dividends(1)   24,336           19,098           9,140        
Basic EPS:                                    
Net income available to common stockholders   228,022   70,826   $3.22   52,588   59,279   $0.89   82,493   58,537   $1.41
Diluted EPS:                                    
Conversion of OP units   42,821   13,312       12,450   13,971       19,870   14,178    
Employee stock options   —   293       —   323       —   384    
Convertible preferred stock(2)   10,083   3,627       —   —       —   —    
Net income available to common stockholders   $280,926   88,058   $3.19   $65,038   73,573   $0.88   $102,363   73,099   $1.40
(1)
Preferred dividends include convertible preferred unit dividends of $14,253 and $9,449 for the years ended December 31, 2006 and 2005, respectively (See Note 12 —Acquisitions).

(2)
The preferred stock (See Note 21 —Cumulative Convertible Redeemable Preferred Stock) can be converted on a one-for-one basis for common stock. The convertible preferred stock was dilutive to net income in 2006 and antidilutive for 2005 and 2004.

The minority interest of the Operating Partnership as reflected in the Company's consolidated statements of operations has been allocated for EPS calculations as follows for the years ended December 31:

 
   2006

   2005

   2004
Income from continuing operations   $8,634   $9,756   $15,597
Discontinued operations:            
  Gain on sale of assets   32,390   53   1,475
  Income from discontinued operations   1,797   2,641   2,798
    Total   $42,821   $12,450   $19,870

78     The Macerich Company

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 December 31, 2006 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   50.0%
MetroRising AMS Holding LLC   15.0%
New River Associates —Arrowhead Towne Center   33.3%
NorthPark Land Partners, LP   50.0%
NorthPark Partners, LP   50.0%
Pacific Premier Retail Trust   51.0%
PHXAZ/Kierland Commons, L.L.C.   24.5%
Propcor Associates   25.0%
Propcor II Associates, LLC —Boulevard Shops   50.0%
SanTan Village Phase 2 LLC   34.9%
Scottsdale Fashion Square Partnership   50.0%
SDG Macerich Properties, L.P.   50.0%
The Market at Estrella Falls LLC   35.1%
Tysons Corner Holdings LLC   50.0%
Tysons Corner LLC   50.0%
Tysons Corner Property Holdings II LLC   50.0%
Tysons Corner Property Holdings LLC   50.0%
Tysons Corner Property LLC   50.0%
W.M. Inland, L.L.C.   50.0%
West Acres Development, LLP   19.0%
Westcor/Gilbert, L.L.C.   50.0%
Westcor/Goodyear, L.L.C.   50.0%
Westcor/Queen Creek Commercial LLC   37.6%
Westcor/Queen Creek LLC   37.6%
Westcor/Queen Creek Medical LLC   37.6%
     

The Macerich Company    79

Westcor/Queen Creek Residential LLC   37.5%
Westcor/Surprise Auto Park LLC   33.3%
Westcor/Surprise LLC   33.3%
Westlinc Associates —Hilton Village   50.0%
Westpen Associates   50.0%
WM Ridgmar, L.P.   50.0%
(1)
The Operating Partnership's ownership interest in this table reflects its legal ownership interest but may not reflect its economic interest since each joint venture has various agreements regarding cash flow, profits and losses, allocations, capital requirements and other matters.

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

The Company has acquired the following investments in unconsolidated joint ventures during the years ended December 31, 2006, 2005 and 2004:

On January 30, 2004, the Company, in a 50/50 joint venture with a private investment company, acquired Inland Center, a 1 million square foot super-regional mall in San Bernardino, California. The total purchase price was $63,300 and concurrently with the acquisition, the joint venture placed a $54,000 fixed rate loan on the property. The balance of the Company's pro rata share of the purchase price was funded by cash and borrowings under the Company's line of credit. The results of Inland Center are included below for the period subsequent to its date of acquisition.

On May 11, 2004, the Company acquired an ownership interest in NorthPark Center, a 2.0 million square foot regional mall in Dallas, Texas. The Company's initial investment in the property was $30,005 which was funded by borrowings under the Company's line of credit. In addition, the Company assumed a pro rata share of debt of $86,599 and funded an additional $45,000 post-closing. The results of NorthPark Center are included below for the period subsequent to its date of acquisition.

On January 11, 2005, the Company became a 15% owner in a joint venture that acquired Metrocenter Mall, a 1.3 million square foot super-regional mall in Phoenix, Arizona. The total purchase price was $160,000 and concurrently with the acquisition, the joint venture placed a $112,000 floating rate loan on the property. The

80     The Macerich Company


Company's share of the purchase price, net of the debt, was $7,200 which was funded by cash and borrowings under the Company's line of credit. The results of Metrocenter Mall are included below for the period subsequent to its date of acquisition.

On January 21, 2005, the Company formed a 50/50 joint venture with a private investment company. The joint venture acquired a 49% interest in Kierland Commons, a 438,721 square foot mixed use center in Phoenix, Arizona. The joint venture's purchase price for the interest in the center was $49,000. The Company assumed its share of the underlying property debt and funded the remainder of its share of the purchase price by cash and borrowings under the Company's line of credit. The results of Kierland Commons are included below for the period subsequent to its date of acquisition.

On April 8, 2005, the Company in a 50/50 joint venture with an affiliate of Walton Street Capital, LLC, acquired Ridgmar Mall, a 1.3 million square foot super-regional mall in Fort Worth, Texas. The total purchase price was $71,075 and concurrently with the transaction, the joint venture placed a $57,400 fixed rate loan of 6.0725% on the property. The balance of the Company's pro rata share, $6,838, of the purchase price was funded by borrowings under the Company's line of credit. The results of Ridgmar Mall are included below for the period subsequent to its date of acquisition.

On April 25, 2005, as part of the Wilmorite acquisition (See Note 12 —Acquisitions), the Company became a 50% joint venture partner in Tyson's Corner Center, a 2.2 million square foot super-regional mall in McLean, Virginia. The results of Tyson's Corner Center are included below for the period subsequent to its date of acquisition.

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

The Macerich Company    81



Combined and Condensed Balance Sheets of Unconsolidated Joint Ventures as of December 31:

 
   2006

   2005
Assets(1):        
  Properties, net   $4,251,765   $4,127,540
  Other assets   429,028   333,022
  Total assets   $4,680,793   $4,460,562
Liabilities and partners' capital(1):        
  Mortgage notes payable(2)   $3,515,154   $3,077,018
  Other liabilities   140,889   169,253
  The Company's capital(3)   559,172   618,803
  Outside partners' capital   465,578   595,488
  Total liabilities and partners' capital   $4,680,793   $4,460,562
(1)
These amounts include the assets and liabilities of the following joint ventures as of December 31, 2006:

 
   SDG
Macerich
Properties, L.P.

   Pacific
Premier
Retail
Trust

   Tysons
Corner
LLC
Total Assets   $924,720   $1,027,132   $644,545
Total Liabilities   $823,327   $848,070   $371,360
 
   SDG
Macerich
Properties, L.P.

   Pacific
Premier
Retail
Trust

   Tysons
Corner
LLC
Total Assets   $939,426   $1,025,714   $647,798
Total Liabilities   $655,191   $852,574   $377,599
(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 December 31, 2006 and 2005, a total of $8,570 and $21,630 could become recourse debt to the Company, respectively.

82     The Macerich Company

(3)
The Company's investment in joint ventures is $451,208 and $456,818 more than the underlying equity as reflected in the joint ventures financial statements as of December 31, 2006 and 2005, respectively. 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 depreciable lives on property (See "Note 2 —Summary of Significant Accounting Policies"). The amortization of this difference was $14,847, $14,326 and $13,758 for the years ended December 31, 2006, 2005 and 2004, respectively.

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

Year ended December 31, 2006
 
 
 
 
 
 
 
 
 
 
Revenues:                    
  Minimum rents   $97,843   $124,103   $59,580   $225,000   $506,526
  Percentage rents   4,855   7,611   2,107   21,850   36,423
  Tenant recoveries   51,480   48,739   28,513   107,288   236,020
  Other   3,437   4,166   2,051   22,876   32,530
    Total revenues   157,615   184,619   92,251   377,014   811,499
Expenses:                    
  Shopping center and operating expenses   62,770   51,441   25,557   128,498   268,266
  Interest expense   44,393   50,981   16,995   90,064   202,433
  Depreciation and amortization   28,058   29,554   20,478   78,071   156,161
  Total operating expenses   135,221   131,976   63,030   296,633   626,860
Gain on sale of assets   —   —   —   1,742   1,742
Net income   $22,394   $52,643   $29,221   $82,123   $186,381
Company's equity in net income   $11,197   $26,802   $14,610   $33,444   $86,053

The Macerich Company    83

 
   SDG
Macerich
Properties, L.P.

   Pacific Premier Retail Trust

   Tysons
Corner
LLC

   Other Joint Ventures

   Total

Year ended December 31, 2005
 
 
 
 
 
 
 
 
 
 
Revenues:                    
  Minimum rents   $96,509   $116,421   $34,218   $181,857   $429,005
  Percentage rents   4,783   7,171   1,479   15,089   28,522
  Tenant recoveries   50,381   42,455   15,774   82,723   191,333
  Other   3,753   3,852   817   17,916   26,338
  Total revenues   155,426   169,899   52,288   297,585   675,198
Expenses:                    
  Shopping center and operating expenses   62,466   46,682   15,395   102,298   226,841
  Interest expense   34,758   49,476   9,388   69,346   162,968
  Depreciation and amortization   27,128   27,567   9,986   61,955   126,636
  Total operating expenses   124,352   123,725   34,769   233,599   516,445
Gain on sale of assets   —   —   —   15,517   15,517
Loss on early extinguishment of debt   —   (13)   —   —   (13)
Net income   $31,074   $46,161   $17,519   $79,503   $174,257
Company's equity in net income   $15,537   $23,583   $4,994   $32,189   $76,303

84     The Macerich Company

Combined and Condensed Statements of Operations of Unconsolidated Joint Ventures:

 
   SDG
Macerich
Properties, L.P.

   Pacific Premier Retail Trust

   Other Joint Ventures

   Total

Year Ended December 31, 2004
 
 
 
 
 
 
 
 
Revenues:                
  Minimum rents   $94,243   $111,303   $148,538   $354,084
  Percentage rents   5,377   6,711   11,286   23,374
  Tenant recoveries   50,698   42,660   66,410   159,768
  Other   2,223   2,893   10,113   15,229
    Total revenues   152,541   163,567   236,347   552,455
Expenses:                
  Shopping center and operating expenses   62,209   47,984   84,338   194,531
  Interest expense   29,923   46,212   60,970   137,105
  Depreciation and amortization   27,410   26,009   43,877   97,296
  Total operating expenses   119,542   120,205   189,185   428,932
(Loss) gain on sale or write-down of assets   —   (11)   10,046   10,035
Loss on early extinguishment of debt   —   (1,036)   —   (1,036)
Net income   $32,999   $42,315   $57,208   $132,522
Company's equity in net income   $16,499   $21,563   $16,819   $54,881

Significant accounting policies used by the unconsolidated joint ventures are similar to those used by the Company. Included in mortgage notes payable are amounts due to affiliates of Northwestern Mutual Life ("NML") of $132,170 and $137,954 as of December 31, 2006 and 2005 respectively. NML is considered a related party because they are a joint venture partner with the Company in Macerich Northwestern Associates. Interest expense incurred on these borrowings amounted to $9,082, $9,422 and $9,814 for the years ended December 31, 2006, 2005 and 2004, respectively.

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 derivative financial instruments 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 133, "Accounting for Derivative Instruments and Hedging Activities," is formally designated as a

The Macerich Company    85


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 years ended December 31, 2006, 2005 or 2004. 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 December 31, 2006, five of the Company's derivative instruments were not designated as cash flow hedges. Changes in the market value of these derivative instruments will be recorded in the consolidated statements of operations.

As of December 31, 2006 and 2005, the Company had $1,252 and $2,762, respectively, reflected in other comprehensive income related to treasury rate locks settled in prior years. The Company reclassified $1,510, $1,351 and $1,351 for the years ended December 31, 2006, 2005 and 2004, respectively, related to treasury rate lock transactions settled in prior years from accumulated other comprehensive income to earnings. It is anticipated that the remaining $1,252 will be reclassified during the following year.

Interest rate swap and cap agreements are purchased by the Company from third parties to manage the risk of interest rate changes on some of the Company's floating rate debt. Payments received as a result of these agreements are recorded as a reduction of interest expense. The fair value of the instrument is included in deferred charges and other assets if the fair value is an asset or in other accrued liabilities if the fair value is a deficit. The Company recorded other comprehensive income (loss) of $743, ($2,356) and $2,076 related to the marking-to-market of interest rate swap/cap agreements for the years ended December 31, 2006, 2005 and 2004, respectively. The amount expected to be reclassified to interest expense in the next 12 months will be immaterial.

6.    Property:

Property at December 31, 2006 and 2005 consists of the following:

 
   2006

   2005

  
 
Land   $1,147,464   $1,095,180  
Building improvements   4,743,960   4,604,803  
Tenant improvements   231,210   222,619  
Equipment and furnishings   82,456   75,836  
Construction in progress   294,115   162,157  
 
    6,499,205   6,160,595  
Less accumulated depreciation   (743,922 ) (722,099 )
 
    $5,755,283   $5,438,496  
 

86     The Macerich Company

Depreciation expense for the years ended December 31, 2006, 2005 and 2004 was $171,015, $148,116 and $104,431, respectively.

The Company recognized a loss on the sale of equipment and furnishings of $600 and $55 during the years ended December 31, 2006 and 2005, respectively. In addition, the Company recognized a gain on the sale of land of $638, $1,308 and $473 during the years ended December 31, 2006, 2005 and 2004, respectively.

The above schedule also includes the properties purchased in connection with the acquisition of Wilmorite, Valley River Center, Federated stores and Deptford Mall (See Note 12—Acquisitions).

7.    Marketable Securities:

Marketable Securities at December 31, 2006 and 2005 consists of the following:

 
   2006

   2005
Government debt securities, at par value   $31,866   —
Less discount   (1,847 ) —
    30,019   —
Unrealized gain   514   —
Fair value   $30,533   —

Future contractual maturities of marketable securities are as follows:
 
 
 
 
1 year or less   $1,322    
1 to 5 years   5,397    
5 to 10 year   25,147    
    $31,866    

The proceeds from maturities and interest receipts from the marketable securities are restricted to the service of the $28,281 note on which the Company remains obligated following the sale of Greeley Mall in July 2006 (See Note 10—Bank and Other Notes Payable).

The Macerich Company    87


8.    Deferred Charges And Other Assets:

Deferred charges and other assets at December 31, 2006 and 2005 consist of the following:

 
   2006

   2005

  
 
Leasing   $115,657   $117,060  
Financing   40,906   39,323  
Intangible assets resulting from SFAS No. 141 allocations(1):          
  In-place lease values   207,023   218,488  
  Leasing commissions and legal costs   36,177   36,732  
 
    399,763   411,603  
Less accumulated amortization(2)   (171,073 ) (142,747 )
 
    228,690   268,856  
Other assets   79,135   91,361  
 
    $307,825   $360,217  
 
(1)
The estimated amortization of these intangibles for the next five years and subsequent is as follows:

Year ending December 31,

    
2007   $24,422
2008   20,235
2009   17,024
2010   14,305
2011   11,980
Thereafter   69,062
    $157,028
(2)
Accumulated amortization includes $86,172 and $64,396 relating to intangibles resulting from SFAS No. 141 allocations at December 31, 2006 and 2005, respectively.

Additionally, as it relates to SFAS No. 141, a deferred credit is recorded in "Other accrued liabilities" of the Company representing the allocated value to below market leases of $150,300, less accumulated amortization of $77,261 and $66,059, as of December 31, 2006 and 2005, respectively. Included in "Other assets" of the Company is an allocated value of above market leases of $64,718, less accumulated amortization of $36,058 and $34,159, as of December 31, 2006 and 2005, respectively. Accordingly, the allocated values of below and above

88     The Macerich Company


market leases will be amortized into minimum rents on a straight-line basis over the individual remaining lease terms. The estimated amortization of these values for the next five years and subsequent years is as follows:

Year ending December 31,

   Below Market

   Above Market
2007   $15,730   $6,785
2008   13,141   5,721
2009   10,765   4,838
2010   8,977   3,559
2011   6,634   2,520
Thereafter   17,792   7,136
    $73,039   $30,559

The Macerich Company    89

9.    Mortgage Notes Payable:

Mortgage notes payable at December 31, 2006 and 2005 consist of the following:

 
   Carrying Amount of Mortgage Notes(a)
    
    
    
 
   2006
   2005
    
    
    
 
    
   Monthly Payment Term(b)

    
Property Pledged as Collateral

   Other

   Related Party

   Other

   Related Party

   Interest Rate

   Maturity Date
Borgata   $14,885   $ —   $15,422   $ —   5.39%   $115   2007
Capitola Mall   —   40,999   —   42,573   7.13%   380   2011
Carmel Plaza   26,674   —   27,064   —   8.18%   202   2009
Casa Grande(c)   7,304   —   —   —   6.75%   41   2009
Chandler Fashion Center   172,904       175,853   —   5.48%   1,043   2012
Chesterfield Towne Center(d)   57,155   —   58,483   —   9.07%   548   2024
Citadel, The(e)   —   —   64,069   —   7.20%   —   —
Crossroads Mall(f)   —   —   —   —   6.26%   —   —
Danbury Fair Mall   182,877   —   189,137   —   4.64%   1,225   2011
Deptford Mall(g)   100,000   —   —   —   5.44%   453   2013
Eastview Commons   9,117   —   9,411   —   5.46%   66   2010
Eastview Mall   102,873   —   104,654   —   5.10%   592   2014
Fiesta Mall   84,000   —   84,000   —   4.88%   346   2015
Flagstaff Mall   37,000   —   37,000   —   4.97%   155   2015
FlatIron Crossing   191,046   —   194,188   —   5.23%   1,102   2013
Freehold Raceway Mall   183,505   —   189,161   —   4.68%   1,184   2011
Fresno Fashion Fair   64,595   —   65,535   —   6.52%   437   2008
Great Northern Mall   40,947   —   41,575   —   5.19%   224   2013
Greece Ridge Center(h)   72,000   —   72,012   —   6.00%   360   2007
Greeley Mall(i)   —   —   28,849   —   6.18%   —   —
La Cumbre Plaza(j)   30,000   —   30,000   —   6.23%   156   2007
La Encantada(k)   51,000   —   45,905   —   7.08%   301   2008
Marketplace Mall   40,473   —   41,545   —   5.30%   267   2017
Northridge Mall(l)   82,514   —   83,840   —   4.84%   453   2009
Northwest Arkansas Mall(e)   —   —   54,442   —   7.33%   —   —
Oaks, The(m)   92,000   —   108,000       6.05%   464   2007
Pacific View   90,231   —   91,512       7.16%   648   2011
Panorama Mall(n)   50,000   —   32,250   —   6.23%   259   2010
Paradise Valley Mall(o)   74,990   —   76,930   —   5.39%   506   2007
Paradise Valley Mall   22,154   —   23,033   —   5.89%   183   2009
Pittsford Plaza   25,278   —   25,930   —   5.02%   160   2013
Prescott Gateway(p)   60,000   —   35,280   —   5.78%   289   2011
Paradise Village Ground Leases(q)   —   —   7,190   —   5.39%   —   —
Queens Center   92,039   —   93,461   —   6.88%   633   2009
Queens Center   110,313   110,312   111,958   111,958   7.00%   1,501   2013
Rimrock Mall   43,452   —   44,032   —   7.45%   320   2011
Rotterdam Square(r)   —   —   9,786   —   6.00%   —   —
Salisbury, Center at(s)   115,000   —   79,875   —   5.79%   554   2016
Santa Monica Place   80,073   —   81,052   —   7.70%   606   2010
Scottsdale/101(t)   —   —   56,000   —   6.05%   262   —
Shoppingtown Mall   46,217   —   47,752   —   5.01%   319   2011
South Plains Mall   59,681   —   60,561   —   8.22%   454   2009
South Towne Center   64,000   —   64,000   —   6.61%   357   2008
Towne Mall   15,291   —   15,724   —   4.99%   101   2012
Twenty Ninth Street(u)   94,080   —   —   —   6.67%   523   2007
Valley River Center(v)   100,000   —   —   —   5.58%   465   2016
Valley View Center   125,000   —   125,000   —   5.72%   596   2011
Victor Valley, Mall of   52,429   —   53,601   —   4.60%   304   2008
Village Center(w)   —   —   6,877   —   5.39%   —   —
Village Fair North   11,210   —   11,524   —   5.89%   82   2008
Village Plaza(x)   —   —   5,024   —   5.39%   —   —
Vintage Faire Mall   65,363   —   66,266   —   7.89%   508   2010
Westside Pavilion   93,513   —   94,895   —   6.67%   628   2008
Wilton Mall   46,604   —   48,541   —   4.79%   349   2009
    $3,179,787   $151,311   $3,088,199   $154,531            

90     The Macerich Company

(a)
The mortgage notes payable balances include the unamortized debt premiums (discount). Debt premiums (discount) 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 represents the effective interest rate, including the debt premium (discount).
Property Pledged as Collateral

   2006

   2005

  
 
Borgata   $245   $538  
Danbury Fair Mall   17,634   21,862  
Eastview Commons   776   979  
Eastview Mall   2,018   2,300  
Freehold Raceway Mall   15,806   19,239  
Great Northern Mall   (191 ) (218 )
Marketplace Mall   1,813   1,976  
Paradise Valley Mall   2   789  
Paradise Valley Mall   685   978  
Pittsford Plaza   1,025   1,192  
Paradise Village Ground Leases   —   30  
Rotterdam Square   —   110  
Shoppingtown Mall   4,813   5,896  
Towne Mall   558   652  
Victor Valley, Mall of   377   699  
Village Center   —   35  
Village Fair North   146   243  
Village Plaza   —   130  
Wilton Mall   4,195   5,661  
 
    $49,902   $63,091  
 
(b)
This represents the monthly payment of principal and interest.

(c)
On August 16, 2006, the Company placed a construction note payable on the property for up to $110,000, which bears interest at LIBOR plus a spread of 1.20% to 1.40% depending on certain conditions. The loan matures in August 2009, with two one-year extension options. At December 31, 2006, the total interest rate was 6.75%.

(d)
In addition to monthly principal and interest payments, contingent interest, as defined in the loan agreement, may be due to the extent that 35% of the amount by which the property's gross receipts exceeds a base amount. Contingent interest expense recognized by the Company was $576, $696 and $658 for the years ended December 31, 2006, 2005 and 2004, respectively.

(e)
These loans were paid off in full on December 29, 2006 concurrent with the sale of the property (See Note 13—Discontinued Operations).

(f)
On July 20, 2006, the Company placed a $61,200 loan that bears interest at 6.26% and was set to mature in August 2016. The loan was assumed by a third party concurrent with sale of the property on December 29, 2006 (See Note 13—Discontinued Operations).

(g)
On December 7, 2006, the Company placed an interest only $100,000 loan that bears interest at 5.44% and matures in January 2013. The loan provides for additional borrowings of up to $72,500 during the one-year period ending December 7, 2007, subject to certain conditions.

(h)
The floating rate loan bears interest at LIBOR plus 0.65%. The Company has stepped interest rate cap agreements over the term of the loan that effectively prevent LIBOR from exceeding 7.95%. At December 31, 2006 and 2005, the total interest rate was 6.0% and 5.02%, respectively.

The Macerich Company    91

(i)
The loan is no longer collateralized by the Greeley Mall. In conjunction with the defeasance described in Note 10 —Bank and Other Notes Payable, this loan is now classified as a note payable.

(j)
The floating rate loan bears interest at LIBOR plus 0.88% that matures on August 9, 2007 with two one-year extensions through August 9, 2009. The Company has an interest rate cap agreement over the loan term which effectively prevents LIBOR from exceeding 7.12%. At December 31, 2006 and 2005, the total interest rate was 6.23% and 5.25%, respectively.

(k)
This represents a construction loan that bore interest at LIBOR plus 2.0%. On January 6, 2006, the Company modified the loan to reduce the interest rate to LIBOR plus 1.75% with the opportunity for further reduction upon satisfaction of certain conditions to LIBOR plus 1.50%. The maturity was extended to August 1, 2008 with two extension options of eighteen and twelve months, respectively. At December 31, 2006 and 2005, the total interest rate was 7.08% and 6.39%, respectively.

(l)
The loan bore interest at LIBOR plus 2.0% for six months and then converted at January 1, 2005 to a fixed rate loan at 4.94%. The effective interest rate over the entire term is 4.84%.

(m)
Concurrent with the acquisition of the property, the Company placed a $108,000 loan bearing interest at LIBOR plus 1.15% and maturing July 1, 2004 with three consecutive one-year options. $92,000 of the loan was at LIBOR plus 0.7% and $16,000 was at LIBOR plus 3.75%. The Company extended the loan maturity to July 2007. In May 2006, the Company paid off $16,000 of the loan. On February 2, 2007, the Company paid off the remaining $92,000 loan balance. The Company had an interest rate cap agreement over the loan term which effectively prevented LIBOR from exceeding 7.10%. At December 31, 2006 and 2005, the total interest rate was 6.05% and 5.25%, respectively.

(n)
On February 15, 2006, the Company paid off the existing $32,250 floating rate loan that bore interest at LIBOR plus 1.65% and replaced it with a $50,000 floating rate loan that bears interest at LIBOR plus 0.85% and matures in February 2010. There is an interest rate cap agreement on the new loan which effectively prevents LIBOR from exceeding 6.65%. At December 31, 2006 and 2005, the total interest rate was 6.23% and 4.90%, respectively.

(o)
This loan was paid off in full on January 2, 2007.

(p)
On November 14, 2006, the Company paid off the existing $35,280 floating rate loan and replaced it with a $60,000 fixed rate loan that bears interest of 5.78% and matures in December 2011. At December 31, 2006 and 2005, the total interest rate was 5.78% and 6.03%, respectively.

(q)
This loan was paid off in full on January 3, 2006.

(r)
This loan was paid off in full on September 1, 2006.

(s)
This floating rate loan bore interest at LIBOR plus 1.375% and was to mature on February 20, 2006. On April 19, 2006, the Company refinanced the loan on the property. The existing loan was replaced with a $115,000 loan bearing interest at 5.79% and maturing on May 1, 2016.

(t)
The loan was paid off in June 2006 concurrent with the sale of the property (See Note 13 —Discontinued Operations).

(u)
On June 7, 2006, the Company placed a construction note payable on the property for up to $115,000, which bears interest at LIBOR plus a spread of 1.1% to 1.25% depending on certain conditions. The loan matures in June 2007, with two one-year extension options. At December 31, 2006, the total interest rate was 6.67%.

(v)
Concurrent with the acquisition of this property, the Company placed a $100,000 loan that bears interest at 5.58% and matures on February 16, 2016. On January 23, 2007, the Company exercised an earn-out provision under the loan agreement and borrowed an additional $20,000 at a fixed rate of 5.64%.

92     The Macerich Company

(w)
The loan was paid off in on January 3, 2006.

(x)
This loan was paid off in full on August 1, 2006.

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

Total interest expense capitalized during 2006, 2005 and 2004 was $14,927, $9,994 and $12,132, respectively.

Related party mortgage notes payable are amounts due to affiliates of NML. See Note 11 —Related Party Transactions, for interest expense associated with loans from NML.

The fair value of mortgage notes payable is estimated to be approximately $3,854,913 and $3,341,000, at December 31, 2006 and 2005, respectively, based on current interest rates for comparable loans.

The above debt matures as follows:

Year Ending December 31,

   Amount
2007   $256,901
2008   468,556
2009   363,551
2010   185,370
2011   595,866
Thereafter   1,460,854
    $3,331,098

10.    Bank and Other Notes Payable:

The Company had a $1,000,000 revolving line of credit that was set to mature on July 30, 2007 plus a one-year extension. On July 20, 2006, the Company amended and expanded the revolving line of credit to $1,500,000 and extended the maturity to April 25, 2010 with a one-year extension option. The interest rate, after amendment, fluctuated from LIBOR plus 1.0% to LIBOR plus 1.35% depending on the Company's overall leverage. In September 2006, the Company entered into 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. As of December 31, 2006 and 2005, borrowings outstanding were $934,500 and $863,000 at an average interest rate, net of the $400,000 swapped portion, of 6.60% and 5.93%, respectively.

The Macerich Company    93


On May 13, 2003, the Company issued $250,000 in unsecured notes maturing in May 2007 with a one-year extension option bearing interest at LIBOR plus 2.50%. The proceeds were used to pay down the Company's line of credit. At December 31, 2006 and 2005, $250,000 was outstanding at an interest rate of 6.94% and 6.0%, respectively. The Company had an interest rate swap agreement from November 2003 to October 13, 2005, which effectively fixed the LIBOR rate at 4.45%. On April 25, 2005, the Company modified the notes and reduced the interest rate from LIBOR plus 2.5% to LIBOR plus 1.5%.

On April 25, 2005, concurrent with the Wilmorite acquisition (See Note 12 —Acquisitions), the Company obtained a five-year, $450,000 term loan bearing interest at LIBOR plus 1.50% and a $650,000 acquisition loan which had a term of up to two years and bore interest initially at LIBOR plus 1.60%. In November 2005, the Company entered into an interest rate swap agreement that effectively fixed the interest rate of the $450,000 term loan at 6.30% from December 1, 2005 to April 25, 2010. At December 31, 2005, the entire term loan and $619,000 of the acquisition loan were outstanding with interest rates of 6.30% and 6.04%, respectively. On January 19, 2006, concurrent with a stock offering (See Note 20 —Stock Offering), the acquisition loan was paid off in full, resulting in a loss on early extinguishment of debt of $1,782. As of December 31, 2006, the entire term loan was outstanding with an interest rate of 6.30%.

On July 27, 2006, concurrent with the sale of Greeley Mall (See Note 13 —Discontinued Operations), the Company provided marketable securities to replace Greeley Mall as collateral for the mortgage note payable on the property. As a result of this transaction, the debt has been reclassified to bank and other notes payable. This note bears interest at 6.18% and matures in September 2013. As of December 31, 2006, the note had a balance outstanding of $28,281.

As of December 31, 2006 and 2005, the Company was in compliance with all applicable loan covenants.

11.    Related-Party Transactions:

Certain unconsolidated joint ventures 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

94     The Macerich Company


administrative expenses. The following are fees charged to unconsolidated joint ventures for the years ended December 31:

 
   2006

   2005

   2004
Management Fees            
MMC   $10,520   $11,096   $9,678
Westcor Management Companies   6,812   6,163   5,008
Wilmorite Management Companies   1,551   747   —
    $18,883   $18,006   $14,686
Development and Leasing Fees            
MMC   $704   $1,866   $868
Westcor Management Companies   5,136   2,295   2,296
Wilmorite Management Companies   79   772   —
    $5,919   $4,933   $3,164

Certain mortgage notes on the properties are held by NML (See Note 9 —Mortgage Notes Payable). Interest expense in connection with these notes was $10,860, $9,638 and $5,800 for the years ended December 31, 2006, 2005 and 2004, respectively. Included in accounts payable and accrued expenses is interest payable to these partners of $793 and $782 at December 31, 2006 and 2005, respectively.

As of December 31, 2006 and 2005, the Company had loans to unconsolidated joint ventures of $708 and $1,415, respectively. Interest income associated with these notes was $734, $452 and $426 for the years ended December 31, 2006, 2005 and 2004, 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 $4,282 and $4,258 at December 31, 2006 and 2005, respectively, represents unreimbursed costs and fees due from unconsolidated joint ventures under management agreements.

Certain Company officers and affiliates have guaranteed mortgages of $21,750 at one of the Company's joint venture properties.

The Macerich Company    95


12.    Acquisitions:

The Company has completed the following acquisitions during the years ended December 31, 2006, 2005 and 2004:

Wilmorite:

On April 25, 2005, the Company and the Operating Partnership acquired Wilmorite Properties, Inc., a Delaware corporation ("Wilmorite") and Wilmorite Holdings, L.P., a Delaware limited partnership ("Wilmorite Holdings"). The results of Wilmorite and Wilmorite Holding's operations have been included in the Company's consolidated financial statements since that date. Wilmorite's portfolio included interests in 11 regional malls and two open-air community shopping centers with 13.4 million square feet of space located in Connecticut, New York, New Jersey, Kentucky and Virginia.

The total purchase price was approximately $2,333,333, plus adjustments for working capital, including the assumption of approximately $877,174 of existing debt with an average interest rate of 6.43% and the issuance of $212,668 of participating convertible preferred units ("PCPUs"), $21,501 of non-participating convertible preferred units and $5,815 of common units in Wilmorite Holdings. The balance of the consideration to the equity holders of Wilmorite and Wilmorite Holdings was paid in cash, which was provided primarily by a five-year, $450,000 term loan bearing interest at LIBOR plus 1.50% and a $650,000 acquisition loan which had a term of up to two years and bore interest initially at LIBOR plus 1.60%. In January 2006, the acquisition loan was paid off in full (See Note 10 —Bank and Other Notes Payable). An affiliate of the Operating Partnership is the general partner, and together with other affiliates, own approximately 83% of Wilmorite Holdings, with the remaining 17% held by those limited partners of Wilmorite Holdings who elected to receive convertible preferred units or common units in Wilmorite Holdings rather than cash. The PCPUs can be redeemed, subject to certain conditions, for the portion of the Wilmorite portfolio that consists of Eastview Mall, Eastview Commons, Greece Ridge Center, Marketplace Mall and Pittsford Plaza. That right is exercisable during a period of three months beginning on August 31, 2007.

On an unaudited pro forma basis, reflecting the acquisition of Wilmorite as if it had occurred on January 1, 2004, the Company would have reflected net income available to common stockholders of $41,962 and $52,808, net income available to common stockholders on a diluted per share basis of $0.71 and $0.90 and total consolidated revenues of $832,152 and $750,205 for the years ended December 31, 2005 and 2004, respectively.

96     The Macerich Company


The following table summarizes the fair values of the assets acquired and the liabilities assumed at the date of acquisition:

Assets:    
  Property   $1,798,487
  Investments in unconsolidated joint ventures   443,681
  Other assets   225,275
  Total assets   2,467,443
Liabilities:    
  Mortgage notes payable   809,542
  Other liabilities   130,191
  Minority interest   96,196
  Total liabilities   1,035,929
  Net assets acquired   $1,431,514

Valley River:

On February 1, 2006, the Company acquired Valley River Center, an 835,694 square foot super-regional mall in Eugene, Oregon. The total purchase price was $187,500 and concurrent with the acquisition, the Company placed a $100,000 loan on the property. The balance of the purchase price was funded by cash and borrowings under the Company's line of credit. The results of Valley River Center's operations have been included in the Company's consolidated financial statements since the acquisition date.

Federated:

On July 26, 2006, the Company purchased 11 department stores located in 10 of its Centers from Federated Department Stores, Inc. for approximately $100,000. The purchase price consisted of a $93,000 cash payment and a future $7,000 obligation to be paid in connection with future development work by Federated. The Company's share of the purchase price of $81,043 was funded in part from the proceeds of sales of properties and from borrowings under the line of credit. The balance of the purchase price was paid by the Company's joint venture partners where four of the eleven stores were located. The purchase price allocation included in the Company's balance sheet as of December 31, 2006 was based on information available at that time. Subsequent adjustments to the allocation may be made based on additional information.

Deptford:

On December 1, 2006, the Company acquired the Deptford Mall, a 1,039,840 square foot super-regional mall in Deptford, New Jersey. The total purchase price was $240,055. The purchase price was funded by cash and borrowings under the Company's line of credit. Subsequently, the Company placed a $100,000 loan on the property. The proceeds from the loan were used to pay down the Company's line of credit. The results of Deptford Mall's operations have been included in the Company's consolidated financial statements since the acquisition date. The purchase price allocation included in the Company's balance sheet as of December 31, 2006 was based on information available at that time. Subsequent adjustments to the allocation will be made based on additional information.

The Macerich Company    97

13.    Discontinued Operations:

The following dispositions occurred during the years ended December 31, 2006, 2005 and 2004:

On December 16, 2004, the Company sold Westbar for $47,500 resulting in a gain on sale of asset of $6,781.

On January 5, 2005, the Company sold Arizona Lifestyle Galleries for $4,300. The sale of this property resulted in a gain on sale of asset of $297.

On June 9, 2006, the Company sold Scottsdale/101 for $117,600 resulting in a gain on sale of asset of $62,633. The Company's share of the gain was $25,802. The Company's pro rata share of the proceeds were used to pay down the Company's line of credit.

On July 13, 2006, the Company sold Park Lane Mall for $20,000 resulting in a gain on sale of asset of $5,853.

On July 27, 2006, the Company sold Holiday Village and Greeley Mall in a combined sale for $86,800, resulting in a gain on sale of asset of $28,711. Concurrent with the sale, the Company defeased the mortgage note payable on Greeley Mall. As a result of the defeasance, the lender's secured interest in the property was replaced with a secured interest in marketable securities (See Note 7—Marketable Securities). This transaction did not meet the criteria for extinguishment of debt under SFAS No. 140, "Accounting for Transfers and Servicing of Financial Assets and Extinguishment of Liabilities."

On August 11, 2006, the Company sold Great Falls Marketplace for $27,500 resulting in a gain on sale of asset of $11,826.

The proceeds from the sale of Park Lane, Holiday Village, Greeley Mall and Great Falls Marketplace were used in part to fund the Company's pro rata share of the purchase price of the Federated stores acquisition (See Note 12—Acquisitions) and pay down the line of credit.

On December 29, 2006, the Company sold Citadel Mall, Northwest Arkansas Mall and Crossroads Mall in a combined sale for $373,800, resulting in a gain of $132,671. The proceeds were used to pay down the Company's line of credit and pay off the mortgage note payable on Paradise Valley Mall (See Note 9—Mortgage Notes Payable).

The Company has classified the results of operations for the years ended December 31, 2006, 2005 and 2004 for all of the above dispositions as discontinued operations. The carrying value of the properties sold in 2006 at December 31, 2005 and 2004 was $168,475 and $171,283, respectively.

98     The Macerich Company

Revenues and income were as follows:

 
   Year Ended December 31,
 
   2006

   2005

   2004
Revenues:            
  Westbar   $ —   $ —   $4,784
  Arizona LifeStyle Galleries   —   —   288
  Scottsdale/101   4,668   9,777   6,907
  Park Lane Mall   1,510   3,091   2,963
  Holiday Village   2,900   5,156   4,801
  Greeley Mall   4,344   7,046   6,200
  Great Falls Marketplace   1,773   2,680   2,634
  Citadel Mall   15,729   15,278   15,385
  Northwest Arkansas Mall   12,918   12,584   12,713
  Crossroads Mall   11,479   10,923   11,228
  Total   $55,321   $66,535   $67,903

Income from operations:
 
 
 
 
 
 
  Westbar   $ —   $ —   $1,775
  Arizona LifeStyle Galleries   —   (4)   (1,023)
  Scottsdale/101   344   (206)   (325)
  Park Lane Mall   44   839   907
  Holiday Village   1,179   2,753   1,903
  Greeley Mall   574   873   457
  Great Falls Marketplace   1,136   1,668   1,616
  Citadel Mall   2,546   1,831   1,991
  Northwest Arkansas Mall   3,429   2,903   3,088
  Crossroads Mall   2,124   3,250   3,961
  Total   $11,376   $13,907   $14,350

The Macerich Company    99

14.    Future Rental Revenues:

Under existing non-cancelable operating lease agreements, tenants are committed to pay the following minimum rental payments to the Company:

Year Ending December 31,

    
2007   $387,952
2008   345,600
2009   314,801
2010   279,999
2011   236,309
Thereafter   714,298
    $2,278,959

15.    Commitments and Contingencies:

The Company has certain properties subject to non-cancelable operating ground leases. The leases expire at various times through 2097, 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. Ground rent expenses were $4,235, $3,860 and $2,530 for the years ended December 31, 2006, 2005 and 2004, respectively. No contingent rent was incurred for the years ended December 31, 2006, 2005 and 2004.

Minimum future rental payments required under the leases are as follows:

Year Ending December 31,

    
2007   $5,251
2008   5,273
2009   5,303
2010   5,338
2011   5,362
Thereafter   237,371
    $263,898

As of December 31, 2006 and 2005, the Company is contingently liable for $6,087 and $5,616, 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 to a liability assumed in the acquisition of Wilmorite (See Note 12—Acquisitions).

100     The Macerich Company


16.    Share-Based Plans:

The Company has established share-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 ("ESPP") to allow employees to purchase the Company's common stock at a discount.

On January 1, 2006, the Company adopted SFAS No. 123(R), "Share-Based Payment," to account for its share-based compensation plans using the modified-prospective method. Accordingly, prior period amounts have not been restated. Under SFAS No. 123(R), an equity instrument is not recorded to common stockholders' equity until the related compensation expense is recorded over the requisite service period of the award. The Company records compensation expense on a straight-line basis for awards exclusive of the Long-Term Incentive Plan awards. Prior to the adoption of SFAS No. 123(R), and in accordance with the previous accounting guidance, the Company recognized compensation expense and an increase to additional paid in capital for the fair value of vested stock awards and stock options. In addition, the Company recognized compensation expense and a corresponding liability for the fair value of vested stock units issued under the Eligible Directors' Deferred Compensation/Phantom Stock Plan ("Directors' Phantom Stock Plan").

In connection with the adoption of SFAS No. 123(R), the Company determined that $6,000 included in other accrued liabilities at December 31, 2005, in connection with the Directors' Phantom Stock Plan, should be included in additional paid-in capital. Additionally, the Company reclassified $15,464 from the Unamortized Restricted Stock line item within equity to additional paid-in capital. The Company made these reclassifications during the year ended December 31, 2006.

2003 Equity Incentive Plan:

The 2003 Equity Incentive Plan ("2003 Plan") authorizes the grant of stock awards, stock options, stock appreciation rights, stock units, stock bonuses, performance based awards, dividend equivalent rights and operating partnership units or other convertible or exchangeable units. As of December 31, 2006, only stock awards, limited operating partnership units and stock options have been granted under the 2003 Plan. All awards granted under the 2003 Plan have a term of 10 years or less. These awards were generally granted based on certain performance criteria for the Company and the employees. The aggregate number of shares of common stock that may be issued under the 2003 Plan is 6,000,000 shares. As of December 31, 2006, there were 5,134,664 shares available for issuance under the 2003 Plan.

The following stock awards, limited operating partnership units and stock options have been granted under the 2003 Plan:

Stock Awards

The outstanding stock awards vest over three years and the compensation cost related to the grants are determined by the market value at the grant date and are amortized over the vesting period on a straight-line

The Macerich Company    101


basis. Stock awards are subject to restrictions determined by the Company's compensation committee. Stock awards have the same dividend and voting rights as common stock. Compensation cost for stock awards was $14,190, $11,528 and $8,394 for the years ended December 31, 2006, 2005 and 2004, respectively. As of December 31, 2006, there was $15,256 of total unrecognized compensation cost related to non-vested stock awards. This cost is expected to be recognized over a weighted average period of three years.

On October 31, 2006, as part of a separation agreement with a former executive, the Company accelerated the vesting of 34,829 shares of stock awards. As result of the accelerated vesting, the Company recognized an additional $610 in compensation cost.

Long-Term Incentive Plan Units

On October 26, 2006, The Macerich Company 2006 Long-Term Incentive Plan ("2006 LTIP"), a long-term incentive compensation program, was approved pursuant to the 2003 Plan. Under the 2006 LTIP, each award recipient is issued a new form of limited operating partnership units ("LTIP Units") in the Operating Partnership. The LTIP Units vest over a three-year period based on the percentile ranking of the Company in terms of total return to stockholders (the "Total Return") per common stock share relative to the Total Return of a group of peer REITs, as measured at the end of each year of the measurement period. Upon the occurence of specified events and subject to the satisfaction of applicable vesting conditions, LTIP Units are ultimately redeemable for common stock on a one-unit for one-share basis. LTIP Units receive cash dividends based on the dividend amount paid on the common stock. On October 26, 2006, the Company granted 215,709 LTIP Units to four executive officers at a weighted average grant date fair value of $80.04. None of the granted LTIP Units were vested at December 31, 2006. Compensation expense for LTIP Units was $685 for the year ended December 31, 2006. As of December 31, 2006, there was $10,520 of unrecognized cost related to non-vested LTIP Units, which is expected to be recognized over the three years ending December 31, 2009 using the graded attribution method.

The fair value of the Company's LTIP Units was estimated on the date of grant using a Monte Carlo Simulation model. The stock price of the Company, along with the stock prices of the group of peer REITs, was assumed to follow the Multivariate Geometric Brownian Motion Process. Multivariate Geometric Brownian Motion is a common assumption when modeling in financial markets, as it allows the modeled quantity (in this case, the stock price) to vary randomly from its current value and take any value greater than zero. The volatilities of the returns on the price of the Company and the peer group REITs were estimated based on a three year look-back period. The expected growth rate of the stock prices over the three year "derived service period" were determined with consideration of the three year risk free rate as of the grant date.

102     The Macerich Company


Stock Options

On October 8, 2003, the Company granted 2,500 stock options at a weighted average exercise price of $39.43. These outstanding stock options vested six months after the grant date and were issued with a strike price equal to the fair value of the common stock at the grant date. The term of these stock options is ten years from the grant date. The Company has not issued stock options since 2003. All outstanding stock options were fully vested as of December 31, 2004 and therefore, were not impacted by the adoption of SFAS No. 123(R).

The following table summarizes the activity of non-vested stock awards during the years ended December 31, 2006, 2005 and 2004:

 
   Stock Awards
 
  
 
   Number of
Shares

   Weighted Average
Grant Date
Fair Value
Balance at January 1, 2004   681,550   $29.33
  Granted   153,692   $53.90
  Vested   (320,114)   $27.68
  Forfeited   (3,982)   $34.76
Balance at December 31, 2004   511,146   $38.38
  Granted   260,898   $53.28
  Vested   (247,371)   $36.35
  Forfeited   (1,019)   $50.47
Balance at December 31, 2005   523,654   $47.07
  Granted   185,976   $73.93
  Vested   (314,733)   $44.95
  Forfeited   (2,603)   $64.24
Balance at December 31, 2006   392,294   $61.06

Total fair value of stock awards vested during the years ended December 31, 2006, 2005 and 2004 were $23,302, $13,267 and $16,873, respectively.

Directors' Phantom Stock Plan:

The Directors' Phantom Stock Plan offers non-employee members of the board of directors ("Directors") the opportunity to defer their cash compensation and to receive that compensation in common stock rather than in cash after termination of service or a predetermined period. Compensation generally includes the annual retainer and regular meeting fees payable by the Company to the Directors. Every Director has elected to receive their compensation in common stock. Deferred amounts are credited as units of phantom stock at the beginning of

The Macerich Company    103

each three-year deferral period by dividing the present value of the deferred compensation by the average fair market value of the Company's common stock at the date of award. Compensation expense related to the phantom stock award was determined by the amortization of the value of the stock units on a straight-line basis over the applicable three-year service period. The stock units (including dividend equivalents) vest as the Directors' services (to which the fees relate) are rendered. Vested phantom stock units are ultimately paid out in common stock on a one-unit for one-share basis. Stock units receive dividend equivalents in the form of additional stock units, based on the dividend amount paid on the common stock. Compensation expense for stock awards was $534, $1,128 and $1,750 for the years ended December 31, 2006, 2005 and 2004, respectively. The aggregate number of phantom stock units that may be granted under the Directors' Phantom Stock Plan is 250,000. As of December 31, 2006, there were 131,084 units available for grant under the Directors' Phantom Stock Plan. As of December 31, 2006, there was no unrecognized cost related to non-vested phantom stock units.

The following table summarizes the activity of the non-vested phantom stock units:

 
   Number of
Shares

   Weighted Average
Exercise Price
Balance at January 1, 2004   17,576   $43.70
  Granted   5,393   $50.90
  Vested   (11,252)   $47.15
  Forfeited   —   —
Balance at December 31, 2004   11,717   $38.38
  Granted   3,957   $53.28
  Vested   (9,816)   $51.86
  Forfeited   —   —
Balance at December 31, 2005   5,858   $43.70
  Granted   3,707   $74.90
  Vested   (9,565)   $55.79
  Forfeited   —   —
Balance at December 31, 2006   —    

During 2004, the Company issued 17,862 shares of common stock at a value of $934 for an equivalent number of vested phantom stock units.

Employee Stock Purchase Plan:

The ESPP authorizes eligible employees to purchase the Company's common stock through voluntary payroll deduction made during periodic offering periods. Under the plan, common stock is purchased at a 10% discount from the lesser of the fair value of common stock at the beginning and ending of the offering period. A maximum of 750,000 shares of common stock is available for purchase under the ESPP. The number of shares available for future purchase under the plan at December 31, 2006 was 732,821.

104     The Macerich Company

Other Share-Based Plans

Prior to the adoption of the 2003 Plan, the Company had several other share-based plans. Under these plans, 427,822 stock options were outstanding as of December 31, 2006. No additional shares may be issued under these plans. All stock options outstanding under these plans were fully vested as of December 31, 2005 and were, therefore, not impacted by the adoption of SFAS No. 123(R). As of December 31, 2006, all of the outstanding shares are exercisable at a weighted average price of $24.07. The weighted average remaining contractual life for options outstanding and exercisable was three years.

17.    Profit Sharing Plan:

The Company has a retirement profit sharing plan that covers substantially all of its eligible employees. The plan is qualified in accordance with section 401(a) of the Internal Revenue Code. Effective January 1, 1995, this plan was modified to include a 401(k) plan whereby employees can elect to defer compensation subject to Internal Revenue Service withholding rules. This plan was further amended effective February 1, 1999, to add The Macerich Company

Common Stock Fund as a new investment alternative under the plan. A total of 150,000 shares of common stock were reserved for issuance under the plan. Contributions by the Company to the plan were made at the discretion of the Board of Directors and were based upon a specified percentage of employee compensation. The Company contributed $1,694 during the year ended December 31, 2004. On January 1, 2004, the plan adopted the "Safe Harbor" provision under Sections 401(k)(12) and 401(m)(11) of the Internal Revenue Code. In accordance with these newly adopted provisions, the Company began matching contributions equal to 100 percent of the first three percent of compensation deferred by a participant and 50 percent of the next two percent of compensation deferred by a participant. During the years ended December 31, 2006 and 2005, these matching contributions made by the Company were $1,747 and $1,984, respectively. Contributions are recognized as compensation in the period they are made.

18.    Deferred Compensation Plans:

The Company has established deferred compensation plans under which key executives of the Company may elect to defer receiving a portion of their cash compensation otherwise payable in one calendar year until a later year. The Company may, as determined by the Board of Directors at its sole discretion, credit a participant's account with an amount equal to a percentage of the participant's deferral. The Company contributed $712, $595 and $632 to the plans during the years ended December 31, 2006, 2005 and 2004, respectively. Contributions are recognized as compensation in the periods they are made.

In addition, certain executives have split dollar life insurance agreements with the Company whereby the Company generally pays annual premiums on a life insurance policy in an amount equal to the executives deferral under one of the Company's deferred compensation plans. Since July 30, 2002, the effective date of the Sarbanes-Oxley Act of 2002, the Company has not made any premium payments on the policies.

The Macerich Company    105


19.    Income Taxes:

The Company elected to be taxed as a REIT under the Internal Revenue Code 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 following table reconciles net income available to common stockholders to taxable income available to common stockholders for the year ended December 31:

 
   2006

   2005

   2004
Net income available to common stockholders   $228,022   $52,588   $82,493
  Add: Book depreciation and amortization available to common stockholders   261,065   197,861   117,882
  Less: Tax depreciation and amortization available to common stockholders   (203,961)   (161,108)   (101,122)
  Book/tax difference on gain on divestiture of real estate   (82,502)   253   (3,383)
  Book/tax difference related to SFAS 141 purchase price allocation and market value debt adjustment (excluding SFAS 141 depreciation and amortization)   (6,403)   (16,962)   (12,436)
    Other book/tax differences, net(1)   (7,675)   5,798   (3,529)
Taxable income available to common stockholders   $188,546   $78,430   $79,905
(1)
Primarily due to due to timing differences relating to straight-line rents and prepaid rents, stock option exercises deductible for tax purposes and investments in unconsolidated joint ventures and Taxable REIT Subsidiaries ("TRSs").

106     The Macerich Company

For income tax purposes, distributions paid to common stockholders consist of ordinary income, capital gains, unrecaptured Section 1250 gain and return of capital or a combination thereof. The following table details the components of the distributions, on a per share basis, for the years ended December 31:

 
   2006

   2005

   2004
Ordinary income   $1.14   41.4%   $1.41   53.6%   $1.58   63.7%
Qualified dividends   —   0.0%   0.07   2.7%   —   0.0%
Capital gains   0.93   33.8%   0.03   1.1%   0.03   1.2%
Unrecaptured Section 1250 gain   0.66   24.0%   —   0.0%   —   0.0%
Return of capital   0.02   0.8%   1.12   42.6%   0.87   35.1%
Dividends paid   $2.75   100.0%   $2.63   100.0%   $2.48   100.0%

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 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, LLC.

The income tax expense (benefit) of the TRSs for the years ended December 31, 2006, 2005 and 2004 is as follows:

 
   2006

   2005

   2004
Current   $35   $1,171   $570
Deferred   (2)   (3,202)   (6,036)
  Total income tax expense (benefit)   $33   $(2,031)   $(5,466)

Income tax benefit of the TRSs for the years ended December 31, 2006, 2005 and 2004 are reconciled to the amount computed by applying the Federal Corporate tax rate as follows:

 
   2006

   2005

   2004
Book income (loss) for taxable REIT subsidiaries   $466   $(3,729)   $2,595
Tax at statutory rate on earnings from continuing operations before income taxes   $158   $(1,267)   $882
Stock-based compensation   (652)   (844)   (1,753)
Change in tax rate relating to change in tax status   —   —   (2,964)
Change in state tax rate   (290)   —   (394)
Tax at statutory rate on earnings not subject to federal            
  income taxes and other   817   80   (1,237)
Income tax expense (benefit)   $33   $(2,031)   $(5,466)

The Macerich Company    107

SFAS No. 109 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 TRS's 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 2026, beginning in 2011.

The tax effects of temporary differences and carryforwards of the TRSs included in the net deferred tax assets at December 31, 2006 and 2005 are summarized as follows:

 
   2006

   2005
Net operating loss carryforwards   $14,797   $14,146
Property, primarily differences in depreciation and amortization, the tax basis of land assets and treatment of certain other costs   (5,095)   (5,033)
Other   1,525   1,143
Net deferred tax assets   $11,227   $10,256

20.    Stock Offering:

On January 19, 2006, the Company issued 10,952,381 common shares for net proceeds of $746,485. The proceeds from issuance of the shares were used to pay off the $619,000 acquisition loan (See Note 10 —Bank and Other Notes Payable) and to pay down a portion of the Company's line of credit pending use to pay part of the purchase price for Valley River Center (See Note 12 —Acquisitions).

21.    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 can be converted on a one for one basis into common stock and will pay a quarterly dividend equal to the greater of $0.46 per share, or the dividend then payable on a share of common stock.

No dividends will be declared or paid on any class of common or other junior stock to the extent that dividends on Series A Preferred Stock have not been declared and/or paid.

The holders of Series A Preferred Stock have redemption rights if a change in control of the Company occurs, as defined under the Articles Supplementary. Under such circumstances, the holders of the Series A Preferred Stock

108     The Macerich Company


are entitled to require the Company to redeem their shares, to the extent the Company has 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 has the right to require the Company to repurchase its shares if the Company fails 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 are legally available therefor.

22.    Segment Information:

SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information," established standards for disclosure about operating segments and related disclosures about products and services, geographic areas and major customers. The Company currently operates in one business segment, the acquisition, ownership, development, redevelopment, management and leasing of regional and community shopping centers. Additionally, the Company operates in one geographic area, the United States.

23.    Quarterly Financial Data (Unaudited):

The following is a summary of quarterly results of operations for 2006 and 2005:

 
   2006 Quarter Ended
   2005 Quarter Ended
 
   Dec 31

   Sep 30

   Jun 30

   Mar 31

   Dec 31

   Sep 30

   Jun 30

   Mar 31
Revenues(1)   $233,806   $212,106   $207,834   $212,656   $209,865   $201,590   $186,506   $148,173
Net income available to common stockholders   $147,929   $46,968   $25,672   $7,453   $23,637   $4,064   $6,747   $18,140
Net income available to common stockholders per share—basic   $2.07   $0.66   $0.36   $0.11   $0.39   $0.07   $0.11   $0.31
Net income available to common stockholders per share—diluted   $1.98   $0.66   $0.36   $0.11   $0.39   $0.07   $0.11   $0.30
(1)
Revenues as reported in the Company's Form 10-Q's have been reclassified to reflect SFAS No. 144 for discontinued operations.

24.    Subsequent Events:

On February 9, 2007, the Company declared a dividend/distribution of $0.71 per share for common stockholders and OP Unit holders of record on February 23, 2007. In addition, the Company declared a dividend of $0.71 on the Company's Series A Preferred Stock. On February 9, 2007, MACWH, LP declared a distribution of $0.96 per unit for its convertible preferred unit holders and $0.71 per unit for its common unit holders of record on February 23, 2007. All dividends/distributions will be payable on March 8, 2007.

The Macerich Company    109


REPORTS OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMS

To the Board of Trustees and Stockholders of
Pacific Premier Retail Trust

We have audited the accompanying consolidated balance sheets of Pacific Premier Retail Trust, a Maryland Real Estate Investment Trust (the "Trust") as of December 31, 2006 and 2005, and the related consolidated statements of operations, stockholders' equity, and cash flows for each of the three years in the period ended December 31, 2006. Our audits also included the consolidated financial statement schedule listed in the Index at Item 15(a)(4), as of and for the years ended December 31, 2006, 2005 and 2004. These consolidated financial statements and the consolidated financial statement schedules are the responsibility of the Trust's management. Our responsibility is to express an opinion on these consolidated financial statements and the consolidated financial statement schedules based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States of America and in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Trust is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Trust's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such 2006, 2005 and 2004 financial statements present fairly, in all material respects, the financial position of the Trust as of December 31, 2006 and 2005, and the results of its operations and its cash flows for each of the years ended December 31, 2006 in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, based on our audits the consolidated financial statement schedules as of and for the years ended December 31, 2006, 2005 and 2004, when considered in relation to the basic consolidated financial statements taken as a whole, present fairly, in all material respects, the information set forth therein.

Deloitte & Touche LLP
Los Angeles, California
February 27, 2007

110     The Macerich Company


PACIFIC PREMIER RETAIL TRUST

CONSOLIDATED BALANCE SHEETS

(Dollars in thousands, except share amounts)

 
   December 31,
 
   2006

   2005
ASSETS        
Property, net   $987,820   $991,754
Cash and cash equivalents   8,939   8,492
Restricted cash   1,319   1,771
Tenant receivables, net   6,684   2,727
Deferred rent receivable   9,999   9,896
Deferred charges, net   10,243   9,395
Other assets   2,128   1,679
    Total assets   $1,027,132   $1,025,714

LIABILITIES AND STOCKHOLDERS' EQUITY:
 
 
 
 
Mortgage notes payable:        
  Related parties   $70,146   $73,967
  Others   760,736   746,861
    Total   830,882   820,828
Accounts payable   1,262   17,188
Accrued interest payable   4,014   4,022
Tenant security deposits   2,047   1,852
Other accrued liabilities   9,093   7,720
Due to related parties   772   964
    Total liabilities   848,070   852,574
Commitments and contingencies        
Stockholders' equity:        
  Series A and Series B redeemable preferred stock, $.01 par value, 625 shares authorized, issued and outstanding at December 31, 2006 and 2005   —     —  
  Series A and Series B common stock, $.01 par value, 219,611 shares authorized issued and outstanding at December 31, 2006 and 2005   2   2
  Additional paid-in capital   307,613   307,613
  Accumulated deficit   (128,553)   (134,475)
    Total common stockholders' equity   179,062   173,140
    Total liabilities, preferred stock and common stockholders' equity   $1,027,132   $1,025,714

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

The Macerich Company    111


PACIFIC PREMIER RETAIL TRUST

CONSOLIDATED STATEMENTS OF OPERATIONS

(Dollars in thousands)

 
   For the years ended December 31,
 
   2006

   2005

   2004
Revenues:            
  Minimum rents   $124,103   $116,421   $111,303
  Percentage rents   7,611   7,171   6,711
  Tenant recoveries   48,739   42,455   42,660
  Other   4,166   3,852   2,893
    184,619   169,899   163,567
Expenses:            
  Maintenance and repairs   10,484   9,921   9,658
  Real estate taxes   13,588   12,219   12,911
  Management fees   6,382   6,005   5,779
  General and administrative   4,993   3,498   4,901
  Ground rent   1,425   1,811   1,309
  Insurance   1,649   1,456   1,815
  Marketing   648   696   613
  Utilities   6,903   5,857   5,936
  Security   5,184   5,074   4,935
  Interest   50,981   49,476   46,212
  Depreciation and amortization   29,554   27,567   26,009
    131,791   123,580   120,078
Income before loss on sale of assets, minority interest and loss on early extinguishment of debt   52,828   46,319   43,489
Loss on sale of assets   —     —     (11)
Minority interest   (185)   (145)   (127)
Loss on early extinguishment of debt   —     (13)   (1,036)
Net income available to common stockholders   $52,643   $46,161   $42,315

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

112     The Macerich Company


PACIFIC PREMIER RETAIL TRUST

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(Dollars in thousands, except share data)

 
   Common Shares

   Preferred Shares

   Common Stock Par Value

   Additional Paid-in Capital

   Accumulated Earnings (Deficit)

   Total Stockholders' Equity
Balance January 1, 2004   219,611   625   $2   $307,613   $7,971   $315,586
Distributions paid to Macerich PPR Corp.   —   —   —   —   (23,551)   (23,551)
Distributions paid to Ontario Teachers' Pension Plan Board   —   —   —   —   (22,755)   (22,755)
Other distributions paid   —   —   —   —   (75)   (75)
Net income   —   —   —   —   42,315   42,315
Balance December 31, 2004   219,611   625   2   307,613   3,905   311,520
Distributions paid to Macerich PPR Corp.   —   —   —   —   (93,830)   (93,830)
Distributions paid to Ontario Teachers' Pension Plan Board   —   —   —   —   (90,636)   (90,636)
Other distributions paid   —   —   —   —   (75)   (75)
Net income   —   —   —   —   46,161   46,161
Balance December 31, 2005   219,611   625   2   307,613   (134,475)   173,140
Distributions paid to Macerich PPR Corp.   —   —   —   —   (23,647)   (23,647)
Distributions paid to Ontario Teachers' Pension Plan Board   —   —   —   —   (22,999)   (22,999)
Other distributions paid   —   —   —   —   (75)   (75)
Net income   —   —   —   —   52,643   52,643
Balance December 31, 2006   219,611   625   $2   $307,613   $(128,553)   $179,062

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

The Macerich Company    113


PACIFIC PREMIER RETAIL TRUST

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in thousands)

 
   For the years ended December 31,
 
   2006

   2005

   2004
Cash flows from operating activities:            
  Net income   $52,643   $46,161   $42,315
  Adjustments to reconcile net income to net cash provided by operating activities:            
    Depreciation and amortization   29,554   27,567   26,009
    Loss on sale of assets   —   —   11
    Minority interest   185   145   127
    Loss on early extinguishment of debt   —   13   1,036
    Changes in assets and liabilities:            
      Tenant receivables, net   (3,957)   5,089   660
      Deferred rent receivable   (103)   (201)   139
      Other assets   (449)   (123)   432
      Accounts payable   (15,926)   14,377   1,559
      Accrued interest payable   (8)   732   (157)
      Tenant security deposits   195   272   118
      Other accrued liabilities   1,188   96   1,902
      Due to related parties   (192)   38   (1,376)
  Net cash provided by operating activities   63,130   94,166   72,775
Cash flows from investing activities:            
  Acquistions of property and improvements   (22,669)   (47,919)   (18,613)
  Deferred leasing charges   (3,657)   (2,918)   (2,733)
  Proceeds from sale of assets   —   —   (2,456)
  Restricted cash   452   347   662
  Net cash used in investing activities   (25,874)   (50,490)   (23,140)
Cash flows from financing activities:            
  Proceeds from notes payable   130,000   291,000   110,000
  Payments on notes payable   (119,946)   (155,627)   (104,641)
  Distributions   (46,346)   (184,166)   (46,007)
  Dividends to preferred stockholders   (375)   (375)   (375)
  Deferred financing costs   (142)   (842)   76
  Net cash used in financing activities   (36,809)   (50,010)   (40,947)
  Net increase (decrease) in cash   447   (6,334)   8,688
Cash and cash equivalents, beginning of period   8,492   14,826   6,138
Cash and cash equivalents, end of period   $8,939   $8,492   $14,826
Supplemental cash flow information:            
  Cash payment for interest, net of amounts capitalized   $50,989   $48,744   $46,369

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

114     The Macerich Company


PACIFIC PREMIER RETAIL TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share amounts)

1.    Organization and Basis of Presentation:

On February 18, 1999, Macerich PPR Corp. (the "Corp"), an indirect wholly-owned subsidiary of The Macerich Company (the "Company"), and Ontario Teachers' Pension Plan Board ("Ontario Teachers") formed the Pacific Premier Retail Trust (the "Trust") to acquire and operate a portfolio of regional shopping centers ("Centers").

Included in the Centers is a 99% interest in Los Cerritos Center and Stonewood Mall, all other Centers are held at 100%.

The Centers as of December 31, 2006 and their locations are as follows:

Cascade Mall   Burlington, Washington
Creekside Crossing Mall   Redmond, Washington
Cross Court Plaza   Burlington, Washington
Kitsap Mall   Silverdale, Washington
Kitsap Place Mall   Silverdale, Washington
Lakewood Mall   Lakewood, California
Los Cerritos Center   Cerritos, California
Northpoint Plaza   Silverdale, Washington
Redmond Towne Center   Redmond, Washington
Redmond Office   Redmond, Washington
Stonewood Mall   Downey, California
Washington Square Mall   Portland, Oregon
Washington Square Too   Portland, Oregon

The Trust was organized to qualify as a real estate investment trust ("REIT") under the Internal Revenue Code of 1986, as amended. The Corp maintains a 51% ownership interest in the Trust, while Ontario Teachers' maintains a 49% ownership interest in the Trust.

2.    Summary of Significant Accounting Policies:

Cash and Cash Equivalents:

The Trust considers all highly liquid investments with an original maturity of three months or less when purchased to be cash equivalents, for which cost approximates fair value.

Tenant Receivables:

Included in tenant receivables are accrued percentage rents of $2,540 and $3,097 and an allowance for doubtful accounts of $442 and $392 at December 31, 2006 and 2005, respectively.

The Macerich Company    115

Revenues:

Minimum rental revenues are recognized on a straight-line basis over the terms of the related lease. The difference between the amount of rent due in a year and the amount recorded as rental income is referred to as the "straight-lining of rent adjustment." Rental income was increased (decreased) by $104, $200 and ($138) in 2006, 2005 and 2004, respectively, due to the straight-lining of rents. Percentage rents are recognized on an accrual basis and are accrued when tenants' specified sales targets have been met.

Estimated recoveries from tenants for real estate taxes, insurance and other shopping center operating expenses are recognized as revenues in the period the applicable expenses are incurred or as specified in the leases.

Property:

Costs related to the redevelopment, construction and improvement of properties are capitalized. Interest incurred or imputed on redevelopment and construction projects is capitalized until construction is substantially complete.

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

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

Building and improvements   5-39 years
Tenant improvements   5-7 years
Equipment and furnishings   5-7 years

The Trust assesses whether there has been impairment in the value of its long-lived assets by considering expected future operating income, trends and prospects, as well as the effects of demand, competition and other economic factors. Such factors include the tenants' ability to perform their duties and pay rent under the terms of the leases. The determination of recoverability is made based upon the estimated undiscounted future net cash flows, excluding interest expense. The amount of impairment loss, if any, is determined by comparing the fair value, as determined by a undiscounted cash flows analysis, with the carrying value of the related assets. Long-lived assets classified as held for sale are measured at the lower of the carrying amount or fair value less cost to sell. Management does not believe impairment has occurred in its net property carrying values at December 31, 2006 or 2005.

116     The Macerich Company


Deferred Charges:

Costs relating to obtaining tenant leases are deferred and amortized over the initial term of the agreement using the straight-line method. Costs relating to financing of properties are deferred and amortized over the life of the related loan using the straight-line method, which approximates the effective interest method. The range of terms of the agreements is as follows:

Deferred lease cost   1-9 years
Deferred finance costs   1-12 years

Included in deferred charges are accumulated amortization of $12,209 and $9,266 at December 31, 2006 and 2005, respectively.

Fair Value of Financial Instruments

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

Concentration of Risk:

The Trust maintains its cash accounts in a number of commercial banks. Accounts at these banks are guaranteed by the Federal Deposit Insurance Corporation ("FDIC") up to $100. At various times during the year, the Trust had deposits in excess of the FDIC insurance limit.

One tenant represented 10.6%, 10.7% and 11.4% of total minimum rents in place as of December 31, 2006, 2005 and 2004, respectively. No other tenant represented more than 10% of total minimum rents as of December 31, 2006, 2005 and 2004.

Management Estimates:

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

The Macerich Company    117

Recent Accounting Pronouncements:

In December 2004, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 123 (revised), "Share-Based Payment" SFAS No. 123(R) requires that all share-based payments to employees, including grants of employee stock options, be recognized in the income statement based on their fair values. The adoption of this statement did not have a material effect on the results of operations.

In March 2005, FASB issued FIN No. 47, "Accounting for Conditional Asset Retirement Obligations —an interpretation of SFAS No. 143." FIN No. 47, requires that a liability be recognized for the fair value of a conditional asset retirement obligation if the fair value can be reasonably estimated. The adoption of FIN No. 47 did not have a material effect on the Trust's results of operations or financial condition.

In June 2006, the FASB issued Interpretation No. 48, "Accounting for Uncertainty in Income Taxes —an interpretation of FASB Statement No. 109" ("FIN 48"). This interpretation clarifies the accounting for uncertainty in income taxes recognized in an enterprise's financial statements in accordance with SFAS No. 109, "Accounting for Income Taxes." This Interpretation prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. This Interpretation also provides guidance on derecognition of previously recognized income tax benefits, classification, interest and penalties, accounting in interim periods, disclosure, and transition. FIN 48 is effective for fiscal years beginning after December 15, 2006. The Trust has concluded that the adoption of FIN 48 will not have a material impact on its financial statements.

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

In September 2006, the Securities and Exchange Commission issued Staff Accounting Bulletin ("SAB") No. 108. SAB No. 108 establishes a framework for quantifying materiality of financial statement misstatements. SAB No. 108 is effective for fiscal years ending after November 16, 2006. The adoption of SAB No. 108 did not have a material impact on the Trust's consolidated results of operations and financial condition.

In February 2006, the FASB issued SFAS No. 155, "Accounting for Certain Hybrid Financial Instruments —An Amendment of FASB Statements No. 133 and 140." This statement amended SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities," and No. 140, "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities." SFAS No. 155 permits fair value remeasurement for any hybrid financial instrument that contains an embedded derivative that otherwise would require bifurcation. This statement also established a requirement to evaluate interests in securitized financial assets to identify interests

118     The Macerich Company


that are freestanding derivatives or that are hybrid financial instruments that contain an embedded derivative requiring bifurcation. The Trust is required to adopt SFAS No. 155 for fiscal year 2007 and does not expect its adoption to have a material effect on the its results of operations or financial condition.

3.    Property:

Property is summarized at December 31, 2006 and 2005 as follows:

 
   2006

   2005
Land   $238,569   $238,569
Building improvements   867,778   871,957
Tenant improvements   24,354   20,324
Equipment and furnishings   7,119   5,959
Construction in progress   21,596   131
    1,159,416   1,136,940
Less accumulated depreciation   (171,596)   (145,186)
    $987,820   $991,754

Depreciation expense for the years ended December 31, 2006, 2005 and 2004 was $26,603, $24,802 and $23,850, respectively.

4.    Mortgage Notes Payable:

Mortgage notes payable at December 31, 2006 and 2005 consist of the following:

 
   Carrying Amount of Mortage Notes
    
    
    
 
   2006
   2005
    
    
    
 
    
   Monthly Payment Term(a)

    
Property Pledged as Collateral

   Other

   Related Party

   Other

   Related Party

   Interest Rate

   Maturity Date
Cascade Mall   $40,048   $ —   $40,631   $ —   5.10%   $223   2010
Kitsap Mall/Kitsap Place(b)   58,024   —   58,719   —   8.06%   450   2010
Lakewood Mall   250,000   —   250,000   —   5.41%   1,127   2015
Los Cerritos Center(c)   130,000   —   109,024   —   5.91%   640   2011
Redmond Town Center —Retail   73,362   —   74,530   —   4.81%   301   2009
Redmond Town Center —Office   —   70,146   —   73,967   6.77%   726   2009
Stonewood Mall   74,862   —   75,671   —   7.41%   539   2010
Washington Square   101,131   —   104,148   —   6.70%   825   2009
Washington Square(d)   33,309   —   34,138   —   7.35%   204   2009
    $760,736   $70,146   $746,861   $73,967            

The Macerich Company    119

(a)
This represents the monthly payment of principal and interest.

(b)
This debt is cross-collateralized by Kitsap Mall and Kitsap Place.

(c)
On May 20, 2006, the joint venture replaced the existing loan with a new $130,000 loan bearing interest at LIBOR plus 0.55% that matures on July 1, 2011. The loan provides for additional borrowings of up to $70,000 during the four year period following the initial funding at a rate of LIBOR plus 0.90%. At December 31, 2006, the total interest rate was 5.91%.

(d)
This loan bears interest at LIBOR plus 2.00% and matures February 1, 2009. At December 31, 2006 and 2005, the total interest rate was 7.35% and 6.25%, respectively.

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

Total interest costs capitalized for the years ended December 31, 2006, 2005 and 2004 were $668, $942 and $332, respectively.

The fair value of mortgage notes payable at December 31, 2006 and 2005 was estimated to be approximately $839,711 and $846,335, based on interest rates for comparable loans.

The above debt matures as follows:

Years Ending December 31,

   Amount
2007   $11,643
2008   12,382
2009   261,122
2010   165,735
2011   130,000
Thereafter   250,000
    $830,882

5.    Related Party Transactions:

The Trust engages the Macerich Management Company (the "Management Company"), a subsidiary of the Company, to manage the operations of the Trust. The Management Company provides property management, leasing, corporate, redevelopment and acquisitions services to the properties of the Trust. Under these arrangements, the Management Company is reimbursed for compensation paid to on-site employees, leasing agents and project managers at the properties, as well as insurance costs and other administrative expenses. In

120     The Macerich Company


consideration of these services, the Management Company receives monthly management fees of 4.0% of the gross monthly rental revenue of the properties. During the years ended 2006, 2005 and 2004, the Trust incurred management fees of $6,382, $6,005 and $5,779, respectively, to the Management Company.

A mortgage note collateralized by the office component of Redmond Town Center is held by one of the Company's joint venture partners. In connection with this note, interest expense was $4,875, $5,125 and $5,361 during the years ended December 31, 2006, 2005 and 2004, respectively. Additionally, no interest costs were capitalized during the years ended December 31, 2006, 2005 and 2004, respectively, in relation to this note.

6.    Income taxes:

The Trust elected to be taxed as a REIT under the Internal Revenue Code of 1986, as amended, commencing with its taxable year ended December 31, 1999. To qualify as a REIT, the Trust 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 the Trust's current intention to adhere to these requirements and maintain the Trust's REIT status. As a REIT, the Trust generally will not be subject to corporate level federal income tax on net income it distributes currently to its stockholders. As such, no provision for federal income taxes has been included in the accompanying consolidated financial statements. If the Trust 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 Trust qualifies for taxation as a REIT, the Trust 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.

The following table reconciles net income to taxable income for the years ended December 31:

 
   2006

   2005

   2004
Net income   $52,643   $46,161   $42,315
  Add: Book depreciation and amortization   29,554   27,567   26,009
  Less: Tax depreciation and amortization   (28,928)   (26,979)   (25,982)
    Other book/tax differences, net(1)   184   (1,617)   1,697
Taxable income available to common stockholders   $53,453   $45,132   $44,039
(1)
Primarily due to timing differences relating to straight-line rents and prepaid rents.

The Macerich Company    121

For income tax purposes, distributions consist of ordinary income, capital gains, return of capital or a combination thereof. The following table details the components of the distributions for the years ended December 31:

 
   2006

   2005

   2004
Ordinary income   $233.79   100.0%   $211.03   25.2%   $326.31   99.8%
Qualified dividends   —   0.0%   —   0.0%   —   0.0%
Capital gains   —   0.0%   —   0.0%   0.66   0.2%
Return of capital   —   0.0%   627.26   74.8%   —   0.0%
Dividends paid   $233.79   100.0%   $838.29   100.0%   $326.97   100.0%

7.    Future Rental Revenues:

Under existing non-cancelable operating lease agreements, tenants are committed to pay the following minimum rental payments to the Trust:

Years Ending December 31,

   Amount
2007   $112,407
2008   98,460
2009   88,707
2010   78,042
2011   67,006
Thereafter   191,308
    $635,930

8.    Redeemable Preferred Stock:

On October 6, 1999, the Trust issued 125 shares of Redeemable Preferred Shares of Beneficial Interest ("Preferred Stock") for proceeds totaling $500 in a private placement. On October 26, 1999, the Trust issued 254 and 246 shares of Preferred Stock to the Corp and Ontario Teachers', respectively. The Preferred Stock can be redeemed by the Trust at any time with 15 days notice for $4,000 per share plus accumulated and unpaid dividends and the applicable redemption premium. The Preferred Stock will pay a semiannual dividend equal to $300 per share. The Preferred Stock has limited voting rights.

9.    Commitments:

The Trust has certain properties subject to non-cancelable operating ground leases. The leases expire at various times through 2069, subject in some cases to options to extend the terms of the lease. Ground rent expense, net of amounts capitalized, was $1,425, $1,811 and $1,309 for the years ended December 31, 2006, 2005 and 2004, respectively.

122     The Macerich Company


Minimum future rental payments required under the leases are as follows:

Years Ending December 31,

   Amount
2007   $1,331
2008   1,413
2009   1,413
2010   1,413
2011   1,413
Thereafter   64,594
    $71,577

The Macerich Company    123


REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Partners
SDG Macerich Properties, L.P.:

We have audited the accompanying balance sheets of SDG Macerich Properties, L.P. as of December 31, 2006 and 2005, and the related statements of operations, cash flows, and partners' equity for each of the years in the three-year period ended December 31, 2006. In connection with our audits of the financial statements, we have also audited the related financial statement schedule (Schedule III). These financial statements and the financial statement schedule are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements and financial statement schedule based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of SDG Macerich Properties, L.P. as of December 31, 2006 and 2005, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2006, in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related financial statement schedule (Schedule III), when considered in relation to the basic financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.

KPMG LLP

Indianapolis, Indiana
February 27, 2007

124     The Macerich Company


SDG MACERICH PROPERTIES, L.P.

BALANCE SHEETS

(Dollars in thousands)

December 31,
 
   2006

   2005
Assets        
Properties:        
  Land   $194,312   199,449
  Buildings and improvements   906,343   887,357
  Equipment and furnishings   5,329   4,646
    1,105,984   1,091,452
  Less accumulated depreciation   214,090   191,270
    891,894   900,182
Cash and cash equivalents   10,951   17,713
Tenant receivables, including accrued revenue, less allowance for doubtful accounts of $1,366 and $1,803   17,952   19,499
Deferred financing costs, net of accumulated amortization of $225 and $4,417   2,086   347
Prepaid real estate taxes and other assets   1,837   1,685
    $924,720   939,426
Liabilities and Partners' Equity        
Mortgage notes payable   $795,424   626,329
Accounts payable   7,931   10,336
Due to affiliates   589   491
Accrued real estate taxes   16,752   15,946
Accrued interest expense   2,290   1,723
Accrued management fee   303   278
Other liabilities   38   88
    Total liabilities   823,327   655,191
Partners' equity   101,393   284,235
    $924,720   939,426

See accompanying notes to financial statements.

The Macerich Company    125


SDG MACERICH PROPERTIES, L.P.

STATEMENTS OF OPERATIONS

Years ended December 31, 2006, 2005 and 2004

(Dollars in thousands)

 
   2006

   2005

   2004
Revenues:            
  Minimum rents   $97,843   96,509   94,243
  Overage rents   4,855   4,783   5,377
  Tenant recoveries   51,480   50,381   50,698
  Other   3,437   3,753   2,223
    157,615   155,426   152,541
Expenses:            
  Property operations   23,025   22,642   23,447
  Depreciation of properties   28,058   27,128   27,410
  Real estate taxes   20,617   20,215   19,770
  Repairs and maintenance   8,324   8,193   6,658
  Advertising and promotion   4,862   5,119   5,567
  Management fees   4,164   4,344   4,040
  Provision for credit losses, net   567   810   1,437
  Interest on mortgage notes   44,393   34,758   29,923
  Other   1,211   1,143   1,290
    135,221   124,352   119,542
    Net income   $22,394   31,074   32,999

See accompanying notes to financial statements.

126     The Macerich Company


SDG MACERICH PROPERTIES, L.P.

STATEMENTS OF CASH FLOWS

Years ended December 31, 2006, 2005 and 2004

(Dollars in thousands)

 
   2006

   2005

   2004
Cash flows from operating activities:            
  Net income   $22,394   31,074   32,999
  Adjustments to reconcile net income to net            
  cash provided by operating activities:            
    Depreciation of properties   28,058   27,128   27,410
    Amortization of debt premium   (1,329)   (3,336)   (3,134)
    Amortization of financing costs   572   1,159   1,163
    Change in tenant receivables   1,547   3,021   (470)
    Other items, net   (1,133)   947   (988)
      Net cash provided by operating activities   50,109   59,993   56,980
Cash flows from investing activities:            
  Additions to properties   (19,778)   (17,551)   (19,832)
  Proceeds from sale of land and building   —   5,058   422
      Net cash used by investing activities   (19,778)   (12,493)   (19,410)
Cash flows from financing activities:            
  Payments on mortgage notes payable   (626,126)   —   —
  Proceeds from mortgage notes payable   796,550   —   —
  Deferred financing costs   (2,311)   —   —
  Distributions to partners   (205,206)   (42,700)   (39,790)
      Net cash used by financing activities   (37,093)   (42,700)   (39,790)
      Net change in cash and cash equivalents   (6,762)   4,800   (2,220)
Cash and cash equivalents at beginning of year   17,713   12,913   15,133
Cash and cash equivalents at end of year   $10,951   17,713   12,913
Supplemental cash flow information:            
  Cash payments for interest   $44,822   36,639   31,737

See accompanying notes to financial statements.

The Macerich Company    127


SDG MACERICH PROPERTIES, L.P.

STATEMENTS OF PARTNERS EQUITY

Years ended December 31, 2006, 2005 and 2004

(Dollars in thousands)

 
   Simon
Property
Group, Inc.
affiliates

   The
Macerich
Company
affiliates

   Accumulated
other
comprehensive
income (loss)

   Total
Percentage ownership interest   50%   50%       100%
Balance at December 31, 2003   $151,311   151,311   17   302,639
  Net income   16,500   16,499   —   32,999
  Other comprehensive income:                
    Derivative financial instruments   —   —   (33)   (33)
      Total comprehensive income               32,966
  Distributions   (19,895)   (19,895)   —   (39,790)
Balance at December 31, 2004   147,916   147,915   (16)   295,815
  Net income   15,537   15,537   —   31,074
  Other comprehensive income:                
    Derivative financial instruments   —   —   46   46
      Total comprehensive income               31,120
  Distributions   (21,350)   (21,350)   —   (42,700)
Balance at December 31, 2005   142,103   142,102   30   284,235
  Net income   11,197   11,197   —   22,394
  Other comprehensive income:                
    Derivative financial instruments   —   —   (30)   (30)
      Total comprehensive income               22,364
  Distributions   (102,603)   (102,603)   —   (205,206)
Balance at December 31, 2006   $50,697   50,696   —   101,393

See accompanying notes to financial statements.

128     The Macerich Company


SDG MACERICH PROPERTIES, L.P.

NOTES TO FINANCIAL STATEMENTS

Years ended December 31, 2006, 2005 and 2004

(Dollars in thousands)

(1)    General

Simon managed properties:    
  South Park Mall   Moline, Illinois
  Valley Mall   Harrisonburg, Virginia
  Granite Run Mall   Media, Pennsylvania
  Eastland Mall and Convenience Center   Evansville, Indiana
  Lake Square Mall   Leesburg, Florida
  North Park Mall   Davenport, Iowa
Macerich managed properties:    
  Lindale Mall   Cedar Rapids, Iowa
  Mesa Mall   Grand Junction, Colorado
  South Ridge Mall   Des Moines, Iowa
  Empire Mall and Empire East   Sioux Falls, South Dakota
  Rushmore Mall   Rapid City, South Dakota
  Southern Hills Mall   Sioux City, Iowa

The Macerich Company    129
2007   $78,293
2008   67,347
2009   55,933
2010   44,548
2011   33,208
Thereafter   89,232
    $368,561

(2)    Summary of Significant Accounting Policies


130     The Macerich Company
Buildings and improvements   35-39 years
Equipment and furnishings   5-7 years
Tenant improvements   Initial term of related lease

The Macerich Company    131

132     The Macerich Company

(3) Mortgage Notes Payable and Fair Value of Financial Instruments

On May 10, 2006, the Partnership repaid all of its existing mortgage notes payable on their maturity date with the proceeds from seven different mortgage notes payable totaling $796,550. All of the new mortgage notes payable are at fixed interest rates with maturities of June 1, 2016. Each of the seven non-recourse mortgage notes is collateralized by different shopping center properties. Mortgage notes payable at December 31, 2006 consist of the following:

Property Pledged as Collateral

   Original Principal Balance

   Interest Rate

   Type of Payments

   Balance at
December 31, 2006
Eastland Mall   $168,000   5.794%   Interest only   $168,000
Granite Run Mall   122,000   5.834%   Principal and interest   121,190
Valley Mall   47,500   5.834%   Principal and interest   47,184
Empire Mall   176,300   5.794%   Interest only   176,300
Mesa Mall   87,250   5.794%   Interest only   87,250
Rushmore Mall   94,000   5.794%   Interest only   94,000
Southern Hills Mall   101,500   5.794%   Interest only   101,500
    $796,550           $795,424

Total interest expense capitalized in 2006 was $207.

The above mortgage notes payable matures as follows:

Year ending December 31,

2007   $2,075
2008   2,175
2009   2,335
2010   2,479
2011   2,627
Thereafter   783,733
    $795,424

At December 31, 2005, mortgage notes payable consisted of $357,100 of debt that required monthly interest payments at fixed rates of interest ranging from 7.24% to 8.28% (weighted average rate of 7.53%) and $267,900 of debt that required monthly interest payments at variable rates of interest (based on LIBOR) with rates ranging from 4.709% to 4.839% at December 31, 2005. The balance at December 31, 2005 also included $1,329 of unamortized debt premium that was recorded on debt assumed by the Partnership when the properties were initially acquired in 1998 and was being amortized to interest expense using a level yield method.

The Macerich Company    133

The variable rate debt at December 31, 2005 totaling $267,900 was covered by two separate interest rate cap agreements that effectively prevented the variable interest rate from exceeding rates ranging from 10.63% to 11.83%. The Partnership's exposure to market risk due to changes in interest rates relates to long-term variable rate debt obligations. Through its risk management strategy, the Partnership manages exposure to interest rate market risk by interest rate protection agreements to effectively cap a portion of variable rate debt. The Partnership's intent is to minimize its exposure to potential significant increases in interest rates. The Partnership does not enter into interest rate protection agreements for speculative purposes.

The fair value of the fixed-rate debt of $795,424 and $357,100 at December 31, 2006 and 2005, respectively, based on an interest rates of 5.70% and 6.13%, respectively, is estimated to be $801,352 and $359,144, respectively. The carrying value of the variable-rate debt of $267,900 at December 31, 2005, and the Partnership's other financial instruments at December 31, 2006 and 2005 are estimated to approximate their fair values.

(4)    Related Party Transactions

Management fees incurred in 2006, 2005, and 2004 totaled $2,063, $2,042, and $2,028, respectively, for the Simon-managed properties and $2,101, $2,302, and $2,012, respectively, for the Macerich-managed properties, both based on a fee of 4% of gross receipts, as defined. In addition to the management fees, Macerich charged the Partnership an additional $627, $521, and $620 for shared services fees in 2006, 2005, and 2004 respectively. In 2005, the Partnership paid a development fee of $336 to an affiliate of Simon in connection with a development project at Valley Mall.

Due from affiliates and due to affiliates on the accompanying balance sheets represent amounts due to or from the Partnership to Simon or Macerich or an affiliate of Simon or Macerich in the normal course of operations of the shopping center properties.

(5)    Contingent Liabilities

The Partnership is not currently involved with any litigation other than routine and administrative proceedings arising in the ordinary course of business. On the basis of consultation with counsel, management believes that these items will not have a material adverse impact on the Partnership's financial statements taken as a whole.

(6)    Subsequent Event

In January 2007, the Partnership sold a portion of the shopping center at Eastland Mall that had previously been occupied by a major tenant to another major tenant. The sale of the land and building resulted in a loss of approximately $4,800 which was recognized at the time of the sale in 2007.

134     The Macerich Company

THE MACERICH COMPANY
NOTES TO FINANCIAL STATEMENTS
Schedule III —Real Estate and Accumulated Depreciation
December 31, 2006
(Dollars in thousands)

 
   Initial Cost to Company
    
   Gross Amount at Which Carried at Close of Period
    
    
Shopping Centers Entities

   Land

   Building and
Improvements

   Equipment
and
Furnishings

   Cost
Capitalized
Subsequent to
Acquisition

   Land

   Building and
Improvements

   Furniture,
Fixtures and
Equipment

   Construction
in Progress

   Total

   Accumulated
Depreciation

   Total Cost
Net of
Accumulated
Depreciation
Black Canyon Auto Park   $20,600   $ —   $ —   $820   $20,600   $ —   $ —   $820   $21,420   $ —   $21,420
Black Canyon Retail   —   —   —   215   —   93   —   122   215   —   215
Borgata   3,667   28,080   —   5,058   3,666   28,729   88   4,322   36,805   3,575   33,230
Capitola Mall   11,312   46,689   —   7,191   11,309   53,321   185   377   65,192   15,965   49,227
Carmel Plaza   9,080   36,354   —   14,471   9,080   50,346   233   246   59,905   9,712   50,193
Casa Grande (Promenade at)   15,089   —   —   8,456   —   —   —   23,545   23,545   —   23,545
Chandler Fashion Center   24,188   223,143   —   4,244   24,188   226,913   445   29   251,575   29,368   222,207
Chesterfield Towne Center   18,517   72,936   2   22,919   18,517   92,837   2,807   213   114,374   40,952   73,422
Coolidge Holding   —   —   —   52   —   —   —   52   52   —   52
Danbury Fair Mall   130,367   316,951   —   17,990   130,367   319,811   313   14,817   465,308   15,831   449,477
Deptford Mall   48,370   194,250   —   —   48,370   194,250   —   —   242,620   420   242,200
Eastview Commons   3,999   8,609   —   (1)   3,999   8,608   —   —   12,607   687   11,920
Eastview Mall   51,090   166,281   —   2,690   51,090   168,968   —   3   220,061   8,779   211,282
Estrella Falls   10,550   —   —   1,313   —   —   —   11,863   11,863   —   11,863
Fiesta Mall   19,445   99,116   —   10,839   20,483   107,869   56   992   129,400   7,230   122,170
Flagstaff Mall   5,480   31,773   —   24,689   5,480   32,781   152   23,529   61,942   4,947   56,995
FlatIron Crossing   21,823   286,809   —   11,638   21,823   293,385   59   5,003   320,270   32,284   287,986
FlatIron Peripheral   6,205   —   —   (50)   6,155   —   —   —   6,155   —   6,155
Freehold Raceway Mall   164,986   362,841   —   5,764   164,986   364,997   204   3,404   533,591   19,410   514,181
Fresno Fashion Fair   17,966   72,194   —   39,023   17,966   109,967   1,250   —   129,183   22,871   106,312
Great Northern Mall   12,187   62,657   —   3,330   12,187   65,576   246   165   78,174   4,581   73,593
Greece Ridge Center   21,627   76,038   —   3,566   21,593   79,409   —   229   101,231   5,427   95,804
Green Tree Mall   4,947   14,925   332   28,750   4,947   43,179   828   —   48,954   32,970   15,984
La Cumbre Plaza   18,122   21,492   —   10,088   17,280   31,850   368   204   49,702   3,369   46,333
Macerich Cerritos Adjacent, LLC   —   6,448   —   (5,695)   —   753   —   —   753   115   638
Macerich Management Co.   —   2,237   26,562   29,431   390   5,454   50,052   2,334   58,230   23,396   34,834
Macerich Property Management Co., LLC   —   —   2,808   —   —   2,740   68   —   2,808   2,431   377
MACWH, LP   —   25,771   —   2,693   —   28,464   —   —   28,464   1,263   27,201
Marana   36,158   —   —   736   36,158   —   —   736   36,894   —   36,894
Marketplace Mall   —   102,856   —   1,505   —   104,055   —   306   104,361   6,432   97,929
Northgate Mall   8,400   34,865   841   28,112   13,414   56,260   1,016   1,528   72,218   33,941   38,277
Northridge Mall   20,100   101,170   —   9,135   20,100   109,793   335   177   130,405   11,061   119,344
Oaks, The   32,300   117,156   —   43,024   34,505   124,750   303   32,922   192,480   15,880   176,600

The Macerich Company    135

THE MACERICH COMPANY
NOTES TO FINANCIAL STATEMENTS
Schedule III —Real Estate and Accumulated Depreciation (Continued)
December 31, 2006
(Dollars in thousands)

 
   Initial Cost to Company
    
   Gross Amount at Which Carried at Close of Period
    
    
Shopping Centers Entities

   Land

   Building and
Improvements

   Equipment
and
Furnishings

   Cost
Capitalized
Subsequent to
Acquisition

   Land

   Building and
Improvements

   Furniture,
Fixtures and
Equipment

   Construction
in Progress

   Total

   Accumulated
Depreciation

   Total Cost
Net of
Accumulated
Depreciation
Pacific View   $8,697   $8,696   $ —   $114,179   $11,153   $119,154   $1,071   $194   $131,572   $22,033   $109,539
Panorama Mall   4,373   17,491   —   2,587   4,373   19,885   193   —   24,451   2,221   22,230
Paradise Valley Mall   24,565   125,996   —   16,850   24,565   129,798   1,187   11,861   167,411   17,214   150,197
Pittsford Plaza   9,022   47,362   —   716   9,022   47,944   —   134   57,100   2,700   54,400
Prescott Gateway   5,733   49,778   —   3,941   5,733   53,651   68   —   59,452   8,587   50,865
Prescott Peripheral   —   —   —   5,605   1,345   4,260   —   —   5,605   256   5,349
Paradise Village Ground Leases   8,880   2,489   —   4,690   15,063   785   —   211   16,059   280   15,779
PVOP II   1,150   1,790   —   3,183   2,300   3,528   295   —   6,123   1,007   5,116
Queens Center   21,460   86,631   8   282,357   37,160   349,342   3,311   643   390,456   43,291   347,165
Rimrock Mall   8,737   35,652   —   9,743   8,737   44,851   544   —   54,132   13,067   41,065
Rotterdam Square   7,018   32,736   —   1,170   7,018   33,691   215   —   40,924   2,729   38,195
Salisbury, The Centre at   15,290   63,474   31   20,961   15,284   83,521   951   —   99,756   21,881   77,875
Santa Monica Place   26,400   105,600   —   20,730   26,400   109,567   1,408   15,355   152,730   21,359   131,371
SanTan Village Mall   7,827   —   —   42,990   —   576   —   50,241   50,817   —   50,817
Shoppingtown Mall   11,927   61,824   —   1,239   11,927   62,837   55   171   74,990   3,899   71,091
Somersville Town Center   4,096   20,317   1,425   15,326   4,099   36,290   661   114   41,164   20,321   20,843
South Plains Mall   23,100   92,728   —   9,187   23,100   99,677   1,519   719   125,015   23,759   101,256
South Towne Center   19,600   78,954   —   14,548   19,453   91,828   726   1,095   113,102   25,282   87,820
Superstition Springs Power Center   1,618   4,420   —   (23)   1,618   4,397   —   —   6,015   551   5,464
The Macerich Partnership, L.P.   —   2,534   —   5,025   216   1,614   5,285   444   7,559   489   7,070
Towne Mall   6,652   31,184   —   212   6,652   31,337   59   —   38,048   2,400   35,648
Tucson La Encantada   12,800   19,699   —   54,624   12,800   74,087   236   —   87,123   10,414   76,709
Twenty Ninth Street   50   37,793   64   197,645   26,115   155,186   756   53,495   235,552   30,820   204,732
Valley River   24,854   147,715   —   7,162   24,853   147,714   —   7,164   179,731   4,438   175,293
Valley View Center   17,100   68,687   —   50,795   20,753   110,797   1,673   3,359   136,582   28,617   107,965
Victor Valley, Mall at   15,700   75,230   —   15,589   15,061   91,166   120   172   106,519   7,493   99,026
Village Center   2,250   4,459   —   9,471   4,500   11,669   11   —   16,180   3,260   12,920
Village Crossroads   3,100   4,493   —   8,740   6,200   10,133   —   —   16,333   1,306   15,027
Village Fair North   3,500   8,567   —   13,745   7,000   18,800   12   —   25,812   2,979   22,833
Village Plaza   3,423   8,688   —   206   3,423   8,872   22   —   12,317   1,281   11,036
Village Square I   —   2,844   —   353   358   2,835   4   —   3,197   379   2,818
Village Square II   —   8,492   —   4,476   4,389   8,577   2   —   12,968   1,345   11,623
Vintage Faire Mall   14,902   60,532   —   21,522   14,298   80,888   1,013   757   96,956   24,049   72,907
Westcor / Queen Creek   —   —   —   242   —   —   —   242   242   —   242
Westside Pavilion   34,100   136,819   —   36,559   34,100   152,240   2,028   19,110   207,478   37,415   170,063
Wilton Mall   19,743   67,855   —   1,379   19,743   68,515   23   696   88,977   3,903   85,074
    $1,104,242   $4,033,170   $32,073   $1,329,720   $1,147,464   $4,975,170   $82,456   $294,115   $6,499,205   $743,922   $5,755,283

136     The Macerich Company

Schedule III. Real Estate and Accumulated Depreciation (Continued)

Depreciation of the Company's investment in buildings and improvements reflected in the statements of income are calculated over the estimated useful lives of the asset as follows:

Buildings and improvements   5-40 years
Tenant improvements   5-7 years
Equipment and furnishings   5-7 years

The changes in total real estate assets for the three years ended December 31, 2006 are as follows:

 
   2006

   2005

   2004
Balances, beginning of year   $6,160,595   $4,149,776   $3,662,359
Additions   839,445   2,016,081   524,877
Dispositions and retirements   (500,835)   (5,262)   (37,460)
Balances, end of year   $6,499,205   $6,160,595   $4,149,776

The changes in accumulated depreciation for the three years ended December 31, 2006 are as follows:

 
   2006

   2005

   2004
Balances, beginning of year   $722,099   $575,223   $475,634
Additions   224,273   148,116   104,431
Dispositions and retirements   (202,450)   (1,240)   (4,842)
Balances, end of year   $743,922   $722,099   $575,223

The Macerich Company    137

PACIFIC PREMIER RETAIL TRUST
NOTES TO FINANCIAL STATEMENTS
Schedule III—Real Estate and Accumulated Depreciation
December 31, 2006
(Dollars in thousands)

 
   Initial Cost to Company
    
   Gross Amount at Which Carried at Close of Period
    
    
Shopping Centers Entities

   Land

   Building and
Improvements

   Equipment
and
Furnishings

   Cost
Capitalized
Subsequent to
Acquisition

   Land

   Building and
Improvements

   Furniture,
Fixtures and
Equipment

   Construction
in Progress

   Total

   Accumulated
Depreciation

   Total Cost
Net of
Accumulated
Depreciation
Cascade Mall   $8,200   $32,843   $ —   $3,676   $8,200   $36,303   $214   $2   $44,719   $7,656   $37,063
Creekside Crossing   620   2,495   —   208   620   2,703   —   —   3,323   545   2,778
Cross Court Plaza   1,400   5,629   —   405   1,400   6,034   —   —   7,434   1,295   6,139
Kitsap Mall   13,590   56,672   —   3,385   13,486   59,991   170   —   73,647   12,973   60,674
Kitsap Place Mall   1,400   5,627   —   2,888   1,400   8,515   —   —   9,915   1,499   8,416
Lakewood Mall   48,025   112,059   —   53,435   48,025   155,041   1,940   8,513   213,519   30,262   183,257
Los Cerritos Center   57,000   133,000   —   17,508   57,000   137,602   2,221   10,685   207,508   27,455   180,053
Northpoint Plaza   1,400   5,627   —   28   1,397   5,657   1   —   7,055   1,150   5,905
Redmond Towne Center   18,381   73,868   —   18,696   17,864   92,804   265   12   110,945   18,846   92,099
Redmond Office   20,676   90,929   —   15,235   20,676   106,164   —   —   126,840   19,816   107,024
Stonewood Mall   30,902   72,104   —   6,122   30,901   77,613   614   —   109,128   15,024   94,104
Washington Square Mall   33,600   135,084   —   55,939   33,600   187,426   1,637   1,960   224,623   31,791   192,832
Washington Square Too   4,000   16,087   —   673   4,000   16,279   57   424   20,760   3,284   17,476
    $239,194   $742,024   $ —   $178,198   $238,569   $892,132   $7,119   $21,596   $1,159,416   $171,596   $987,820

138     The Macerich Company

PREMIER RETAIL TRUST
December 31, 2006
(Dollars in thousands)

Schedule III. Real Estate and Accumulated Depreciation (Continued)

Depreciation of the Company's investment in buildings and improvements reflected in the statements of income are calculated over the estimated useful lives of the asset as follows:

Buildings and improvements   5-40 years
Tenant improvements   5-7 years
Equipment and furnishings   5-7 years

The changes in total real estate assets for the three years ended December 31, 2006 are as follows:

 
   2006

   2005

   2004
Balances, beginning of year   $1,136,940   $1,089,108   $1,069,573
Additions   22,476   47,832   19,535
Dispositions and retirements   —   —   —
Balances, end of year   $1,159,416   $1,136,940   $1,089,108

The changes in accumulated depreciation for the three years ended December 31, 2006 are as follows:

 
   2006

   2005

   2004
Balances, beginning of year   $145,186   $120,384   $96,557
Additions   26,410   24,802   23,850
Dispositions and retirements   —   —   (23)
Balances, end of year   $171,596   $145,186   $120,384

The Macerich Company    139

SDG MACERICH PROPERTIES, L.P.
December 31, 2006
(Dollars in thousands)

Schedule III. Real Estate and Accumulated Depreciation

 
    
   Initial Cost to Partnership
    
   Gross Book Value at
December 31, 2006
    
    
Shopping Center(1)

   Location

   Land

   Building and
Improvements

   Equipment
and
Furnishings

   Costs
Capitalized
Subsequent to
Acquisition

   Land

   Building and
Improvements

   Equipment
and
Furnishings

   Accumulated
Depreciation

   Total Cost
Net of
Accumulated
Depreciation
Mesa Mall   Grand Junction, Colorado   $11,155   44,635   —   5,761   11,155   50,206   190   (13,045)   48,506
Lake Square Mall   Leesburg, Florida   7,348   29,392   —   1,849   7,348   31,123   118   (7,427)   31,162
South Park Mall   Moline, Illinois   21,341   85,540   —   7,205   18,859   94,654   573   (20,176)   93,910
Eastland Mall   Evansville, Indiana   28,160   112,642   —   19,164   28,160   130,679   1,127   (29,887)   130,079
Lindale Mall   Cedar Rapids, Iowa   12,534   50,151   —   5,060   12,534   54,780   431   (13,403)   54,342
North Park Mall   Davenport, Iowa   17,210   69,042   —   10,507   14,947   81,043   769   (17,598)   79,161
South Ridge Mall   Des Moines, Iowa   11,524   46,097   —   9,145   12,110   54,428   228   (13,343)   53,423
Granite Run Mall   Media, Pennsylvania   26,147   104,671   —   4,746   26,147   108,822   595   (25,433)   110,131
Rushmore Mall   Rapid City, South Dakota   12,089   50,588   —   4,923   12,089   55,137   374   (14,762)   52,838
Empire Mall   Sioux Falls, South Dakota   23,706   94,860   —   15,371   23,067   110,558   312   (28,645)   105,292
Empire East   Sioux Falls, South Dakota   2,073   8,291   —   1,473   1,854   9,969   14   (1,984)   9,853
Southern Hills Mall   Sioux City, South Dakota   15,697   62,793   —   8,430   15,697   71,100   123   (16,675)   70,245
Valley Mall   Harrisonburg, Virginia   10,393   41,572   —   12,699   10,345   53,844   475   (11,712)   52,952
        $199,377   800,274   —   106,333   194,312   906,343   5,329   (214,090)   891,894

Depreciation and amortization of the Partnership's investment in shopping center properties reflected in the statements of operations are calculated over the estimated useful lives of the assets as follows:

Building and improvements:        
    Building and building improvements   35-39 years    
    Tenant improvements   Shorter of lease term or useful life    
Equipment and furnishings   5-7 years    
(1)
All of the shopping centers were acquired in 1998.

140     The Macerich Company

SDG MACERICH PROPERTIES, L.P.
December 31, 2006
(Dollars in thousands)

Schedule III. Real Estate and Accumulated Depreciation

The changes in total shopping center properties for the years ended December 31, 2006, 2005, and 2004 are as follows:  
  Balance at December 31, 2003   $ 1,060,601  
 
Acquisitions in 2004
 
 
—
 
  Additions in 2004     19,832  
  Disposals and retirements in 2004     (434 )
   
 
  Balance at December 31, 2004     1,079,999  
 
Acquisitions in 2005
 
 
—
 
  Additions in 2005     17,551  
  Disposals and retirements in 2005     (6,098 )
   
 
  Balance at December 31, 2005     1,091,452  
 
Acquisitions in 2006
 
 
—
 
  Additions in 2006     19,778  
  Disposals and retirements in 2006     (5,246 )
   
 
  Balance at December 31, 2006   $ 1,105,984  
   
 

 
 
 
 
 
The changes in accumulated depreciation for the years ended December 31, 2006, 2005, and 2004 are as follows:  
  Balance at December 31, 2003   $ 138,194  
 
Additions in 2004
 
 
27,410
 
  Disposals and retirements in 2004     (66 )
   
 
            
  Balance at December 31, 2004     165,538  
 
Additions in 2005
 
 
27,128
 
  Disposals and retirements in 2005     (1,396 )
   
 
            
  Balance at December 31, 2005     191,270  
 
Additions in 2006
 
 
28,058
 
  Disposals and retirements in 2006     (5,238 )
   
 
            
  Balance at December 31, 2006   $ 214,090  
   
 

   

See accompanying report of independent registered public accounting firm.

The Macerich Company    141


SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on February 27, 2007.

  THE MACERICH COMPANY

 
By
 
/s/ ARTHUR M. COPPOLA
Arthur M. Coppola
 President and Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Signature

   Capacity

   Date

 
 
 
 
 

/s/ ARTHUR M. COPPOLA
Arthur M. Coppola
 
President and Chief Executive Officer and Director
 
February 27, 2007

/s/ MACE SIEGEL
Mace Siegel
 
Chairman of the Board
 
February 27, 2007

/s/ DANA K. ANDERSON
Dana K. Anderson
 
Vice Chairman of the Board
 
February 27, 2007

/s/ EDWARD C. COPPOLA
Edward C. Coppola
 
Senior Executive Vice President and Chief Investment Officer and Director
 
February 27, 2007

/s/ JAMES COWNIE
James Cownie
 
Director
 
February 27, 2007

/s/ DIANA LAING
Diana Laing
 
Director
 
February 27, 2007
         

142     The Macerich Company


/s/ FREDERICK HUBBELL
Frederick Hubbell
 
Director
 
February 27, 2007

/s/ STANLEY MOORE
Stanley Moore
 
Director
 
February 27, 2007

/s/ DR. WILLIAM SEXTON
Dr. William Sexton
 
Director
 
February 27, 2007

/s/ THOMAS E. O'HERN
Thomas E. O'Hern
 
Executive Vice President, Treasurer and Chief Financial and Accounting Officer
 
February 27, 2007

The Macerich Company    143


EXHIBIT INDEX

Exhibit Number

   Description

   Sequentially
Numbered
Page
2.1**##   Agreement and Plan of Merger among the Company, the Operating Partnership, MACW, Inc., Wilmorite Properties, Inc. and Wilmorite Holdings, L.P. dated as of December 22, 2004.    

3.1*
 
Articles of Amendment and Restatement of the Company
 
 

3.1.1**
 
Articles Supplementary of the Company
 
 

3.1.2***
 
Articles Supplementary of the Company (Series A Preferred Stock)
 
 

3.1.3###
 
Articles Supplementary of the Company (Series C Junior Participating Preferred Stock)
 
 

3.1.4*******
 
Articles Supplementary of the Company (Series D Preferred Stock)
 
 

3.1.5******#
 
Articles Supplementary of the Company (reclassification of shares)
 
 

3.2**#####
 
Amended and Restated Bylaws of the Company (February 8, 2007)
 
 

4.1*****
 
Form of Common Stock Certificate
 
 

4.2******
 
Form of Preferred Stock Certificate (Series A Preferred Stock)
 
 

4.2.1*****
 
Form of Preferred Stock/Right Certificate (Series C Junior Participating Preferred Stock)
 
 

4.2.2********#
 
Form of Preferred Stock Certificate (Series D Preferred Stock)
 
 

4.3*****
 
Agreement dated as of November 10, 1998 between the Company and Computershare Investor Services, as successor to EquiServe Trust Company, N.A., as successor to First Chicago Trust Company of New York, as Rights Agent
 
 

10.1********
 
Amended and Restated Limited Partnership Agreement for the Operating Partnership dated as of March 16, 1994
 
 

10.1.1****
 
Amendment to Amended and Restated Limited Partnership Agreement for the Operating Partnership dated June 27, 1997
 
 

10.1.2******
 
Amendment to Amended and Restated Limited Partnership Agreement for the Operating Partnership dated November 16, 1997
 
 

10.1.3******
 
Fourth Amendment to Amended and Restated Limited Partnership Agreement for the Operating Partnership dated February 25, 1998
 
 

10.1.4******
 
Fifth Amendment to Amended and Restated Limited Partnership Agreement for the Operating Partnership dated February 26, 1998
 
 

144     The Macerich Company


10.1.5###
 
Sixth Amendment to Amended and Restated Limited Partnership Agreement for the Operating Partnership dated June 17, 1998
 
 

10.1.6###
 
Seventh Amendment to Amended and Restated Limited Partnership Agreement for the Operating Partnership dated December 23, 1998
 
 

10.1.7#######
 
Eighth Amendment to Amended and Restated Limited Partnership Agreement for the Operating Partnership dated November 9, 2000
 
 

10.1.8*******
 
Ninth Amendment to Amended and Restated Limited Partnership Agreement for the Operating Partnership dated July 26, 2002
 
 

10.1.9
 
Tenth Amendment to Amended and Restated Limited Partnership Agreement for the Operating Partnership dated October 26, 2006
 
 

10.1.10**###
 
Form of Eleventh Amendment to Amended and Restated Limited Partnership Agreement for the Operating Partnership
 
 

10.2
 
Form of Termination of Employment Agreement dated as of October 26, 2006
 
 

10.2.1
 
List of Omitted Termination of Employment Agreements
 
 

10.2.2
 
Employment Agreement between the Company and Tony Grossi dated November 1, 2006
 
 

10.2.3**#
 
Separation Agreement between the Company and David Contis dated October 5, 2006
 
 

10.3******
 
Amended and Restated 1994 Incentive Plan
 
 

10.3.1########
 
Amendment to the Amended and Restated 1994 Incentive Plan dated as of March 31, 2001
 
 

10.3.2*******#
 
Amendment to the Amended and Restated 1994 Incentive Plan (October 29, 2003)
 
 

10.3.3####
 
1999 Cash Bonus/Restricted Stock Program and Stock Unit Program under the Amended and Restated 1994 Incentive Plan (including the forms of the Award Agreements)
 
 

10.4#
 
1994 Eligible Directors' Stock Option Plan
 
 

10.4.1*******#
 
Amendment to 1994 Eligible Directors Stock Option Plan (October 29, 2003)
 
 

10.5*******#
 
Amended and Restated Deferred Compensation Plan for Executives (2003)
 
 

10.5.1**##
 
2005 Deferred Compensation Plan for Executives
 
 

10.6*******#
 
Amended and Restated Deferred Compensation Plan for Senior Executives (2003)
 
 

10.6.1**##
 
2005 Deferred Compensation Plan for Senior Executives
 
 

The Macerich Company    145


10.7**##
 
Eligible Directors' Deferred Compensation/Phantom Stock Plan (as amended and restated as of January 1, 2005)
 
 

10.8********
 
Executive Officer Salary Deferral Plan
 
 

10.8.1*******#
 
Amendment Nos. 1 and 2 to Executive Officer Salary Deferral Plan
 
 

10.8.2**##
 
Amendment No. 3 to Executive Officer Salary Deferral Plan
 
 

10.9********
 
Registration Rights Agreement, dated as of March 16, 1994, between the Company and The Northwestern Mutual Life Insurance Company
 
 

10.10********
 
Registration Rights Agreement, dated as of March 16, 1994, among the Company and Mace Siegel, Dana K. Anderson, Arthur M. Coppola and Edward C. Coppola
 
 

10.11********
 
Registration Rights Agreement, dated as of March 16, 1994, among the Company, Richard M. Cohen and MRII Associates
 
 

10.12******
 
Registration Rights Agreement dated as of February 25, 1998 between the Company and Security Capital Preferred Growth Incorporated
 
 

10.13********
 
Incidental Registration Rights Agreement dated March 16, 1994
 
 

10.14******
 
Incidental Registration Rights Agreement dated as of July 21, 1994
 
 

10.15******
 
Incidental Registration Rights Agreement dated as of August 15, 1995
 
 

10.16******
 
Incidental Registration Rights Agreement dated as of December 21, 1995
 
 

10.17******
 
List of Omitted Incidental/Demand Registration Rights Agreements
 
 

10.18###
 
Redemption, Registration Rights and Lock-Up Agreement dated as of July 24, 1998 between the Company and Harry S. Newman, Jr. and LeRoy H. Brettin
 
 

10.19********
 
Indemnification Agreement, dated as of March 16, 1994, between the Company and Mace Siegel
 
 

10.19.1********
 
List of Omitted Indemnification Agreements
 
 

10.20*******
 
Form of Registration Rights Agreement with Series D Preferred Unit Holders
 
 

10.20.1*******
 
List of Omitted Registration Rights Agreements
 
 

10.21**###
 
$650,000,000 Interim Loan Facility and $450,000,000 Term Loan Facility Credit Agreement dated as of April 25, 2005 among the Operating Partnership, the Company, Macerich WRLP Corp., Macerich WRLP LLC, Macerich WRLP II Corp., Macerich WRLP II LP, Macerich TWC II Corp., Macerich TWC II LLC, Macerich Walleye LLC, IMI Walleye LLC, Walleye Retail Investments LLC, Deutsche Bank Trust Company Americas and various lenders
 
 

146     The Macerich Company


10.21.1**######
 
First Amendment to $450,000,000 Term Loan Facility Credit Agreement dated as of July 20, 2006 among the Operating Partnership, the Company, Macerich WRLP Corp., Macerich WRLP LLC, Macerich WRLP II Corp., Macerich WRLP II LP, Macerich TWC II Corp., Macerich TWC II LLC, Macerich Walleye LLC, IMI Walleye LLC, Walleye Retail Investments LLC, the agent and various lenders party thereto
 
 

10.22**######
 
$1,500,000,000 Second Amended and Restated Revolving Loan Facility Credit Agreement dated as of July 20, 2006 among the Operating Partnership, the Company, Macerich WRLP Corp., Macerich WRLP LLC, Macerich WRLP II Corp., Macerich WRLP II LP, Macerich TWC II Corp., Macerich TWC II LLC, Macerich Walleye LLC, IMI Walleye LLC, Walleye Retail Investments LLC, Deutsche Bank Trust Company Americas and various lenders
 
 

10.22.1**###
 
Amended and Restated $250,000,000 Term Loan Facility Credit Agreement dated as of April 25, 2005 among the Operating Partnership, the Company, Macerich WRLP Corp., Macerich WRLP LLC, Macerich WRLP II Corp., Macerich WRLP II LP, Macerich TWC II Corp., Macerich TWC II LLC, Macerich Walleye LLC, IMI Walleye LLC, Walleye Retail Investments LLC, Deutsche Bank Trust Company Americas and various lenders
 
 

10.22.2**######
 
First Amendment to Amended and Restated $250,000,000 Term Loan Facility Credit Agreement dated as of July 20, 2006 among the Operating Partnership, the Company, Macerich WRLP Corp., Macerich WRLP LLC, Macerich WRLP II Corp., Macerich WRLP II LP, Macerich TWC II Corp., Macerich TWC II LLC, Macerich Walleye LLC, IMI Walleye LLC, Walleye Retail Investments LLC, the agent and various lenders party thereto
 
 

10.23##
 
Form of Incidental Registration Rights Agreement between the Company and various investors dated as of July 26, 2002
 
 

10.23.1##
 
List of Omitted Incidental Registration Rights Agreements
 
 

10.24*#
 
Tax Matters Agreement dated as of July 26, 2002 between The Macerich Partnership L.P. and the Protected Partners
 
 

10.24.1**###
 
Tax Matters Agreement (Wilmorite)
 
 

10.25#######
 
2000 Incentive Plan effective as of November 9, 2000 (including 2000 Cash Bonus/Restricted Stock Program and Stock Unit Program and Award Agreements)
 
 

10.25.1########
 
Amendment to the 2000 Incentive Plan dated March 31, 2001
 
 

10.25.2*******#
 
Amendment to 2000 Incentive Plan (October 29, 2003)
 
 

10.26#######
 
Form of Stock Option Agreements under the 2000 Incentive Plan
 
 

The Macerich Company    147


10.27****#
 
2003 Equity Incentive Plan
 
 

10.27.1*******#
 
Amendment to 2003 Equity Incentive Plan (October 29, 2003)
 
 

10.27.2****#
 
2003 Cash Bonus/Restricted Stock and Stock Unit Award Program under the 2003 Equity Incentive Plan
 
 

10.28*****#
 
Form of Restricted Stock Award Agreement under 2003 Equity Incentive Plan
 
 

10.29*****#
 
Form of Stock Unit Award Agreement under 2003 Equity Incentive Plan
 
 

10.30*****#
 
Form of Employee Stock Option Agreement under 2003 Equity Incentive Plan
 
 

10.31*****#
 
Form of Non-Qualified Stock Option Grant under 2003 Equity Incentive Plan
 
 

10.32***#
 
Form of Restricted Stock Award Agreement for Non-Management Directors
 
 

10.32.1
 
Form of LTIP Award Agreement under 2003 Equity Incentive Plan
 
 

10.33****#
 
Employee Stock Purchase Plan
 
 

10.33.1*****#
 
Amendment 2003-1 to Employee Stock Purchase Plan (October 29, 2003)
 
 

10.34
 
Form of Management Continuity Agreement
 
 

10.34.1
 
List of Omitted Management Continuity Agreements
 
 

10.35*******#
 
Indemnification Agreement between the Company and Mace Siegel dated October 29, 2003
 
 

10.35.1
 
List of Omitted Indemnification Agreements
 
 

10.36*******#
 
Registration Rights Agreement dated as of December 18, 2003 by the Operating Partnership, the Company and Taubman Realty Group Limited Partnership (Registration rights assigned by Taubman to three assignees).
 
 

10.37******
 
Partnership Agreement of S.M. Portfolio Ltd. Partnership
 
 

10.38**###
 
2005 Amended and Restated Agreement of Limited Partnership of MACWH, LP dated as of April 25, 2005
 
 

10.39**###
 
Registration Rights Agreement dated as of April 25, 2005 among the Company and the persons names on Exhibit A thereto
 
 

10.40**####
 
Description of Director and Executive Compensation Arrangements
 
 

21.1
 
List of Subsidiaries
 
 

23.1
 
Consent of Independent Registered Public Accounting Firm (Deloitte and Touche LLP)
 
 

23.2
 
Consent of Independent Registered Public Accounting Firm (KPMG LLP)
 
 

31.1
 
Section 302 Certification of Arthur Coppola, Chief Executive Officer
 
 

148     The Macerich Company


31.2
 
Section 302 Certification of Thomas O'Hern, Chief Financial Officer
 
 

32.1
 
Section 906 Certifications of Arthur Coppola and Thomas O'Hern
 
 

99.1**#######
 
Guidelines on Corporate Governance (as amended on April 27, 2006)
 
 


*
 
Previously filed as an exhibit to the Company's Registration Statement on Form S-11, as amended (No. 33-68964), and incorporated herein by reference.

**
 
Previously filed as an exhibit to the Company's Current Report on Form 8-K, event date May 30, 1995, and incorporated herein by reference.

***
 
Previously filed as an exhibit to the Company's Current Report on Form 8-K, event date February 25, 1998, and incorporated herein by reference.

****
 
Previously filed as an exhibit to the Company's Current Report on Form 8-K, event date June 20, 1997, and incorporated herein by reference.

*****
 
Previously filed as an exhibit to the Company's Current Report on Form 8-K, event date November 10, 1998, as amended, and incorporated herein by reference.

******
 
Previously filed as an exhibit to the Company's Annual Report on Form 10-K for the year ended December 31, 1997, and incorporated herein by reference.

*******
 
Previously filed as an exhibit to the Company's Current Report on Form 8-K, event date July 26, 2002 and incorporated herein by reference.

********
 
Previously filed as an exhibit to the Company's Annual Report on Form 10-K for the year ended December 31, 1996, and incorporated herein by reference.

#
 
Previously filed as an exhibit to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1994, and incorporated herein by reference.

##
 
Previously filed as an exhibit to the Company's Quarterly Report on Form 10-Q, for the quarter ended June 30, 2002, and incorporated herein by reference.

###
 
Previously filed as an exhibit to the Company's Annual Report on Form 10-K for the year ended December 31, 1998, and incorporated herein by reference.

####
 
Previously filed as an exhibit to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1999, and incorporated herein by reference.

#####
 
Previously filed as an exhibit to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2000, and incorporated herein by reference.

######
 
Previously filed as an exhibit to the Company's Annual Report on Form 10-K for the year ended December 31, 1999, and incorporated herein by reference.

#######
 
Previously filed as an exhibit to the Company's Annual Report on Form 10-K for the year ended December 31, 2000, and incorporated herein by reference.
     

The Macerich Company    149


########
 
Previously filed as an exhibit to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2001, and incorporated herein by reference.

*#
 
Previously filed as an exhibit to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2002, and incorporated herein by reference.

**#
 
Previously filed as an exhibit to the Company's Current Report on Form 8-K, event date October 5, 2006, and incorporated herein by reference.

***#
 
Previously filed as an Exhibit to the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2004, and incorporated herein by reference.

****#
 
Previously filed as an Exhibit to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2003, and incorporated herein by reference.

*****#
 
Previously filed as an Exhibit to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2003, and incorporated herein by reference.

******#
 
Previously filed as an Exhibit to the Company's Registration Statement on Form S-3, as amended (No. 333-88718), and incorporated herein by reference.

*******#
 
Previously filed as an Exhibit to the Company's Annual Report on Form 10-K for the year ended December 31, 2003, and incorporated herein by reference.

********#
 
Previously filed as an Exhibit to the Company's Registration Statement on Form S-3 (No. 333-107063), and incorporated herein by reference.

**##
 
Previously filed as an Exhibit to the Company's Annual Report on Form 10-K for the year ended December 31, 2004, and incorporated herein by reference.

**###
 
Previously filed as an exhibit to the Company's Current Report on Form 8-K, event date April 25, 2005, and incorporated herein by reference.

**####
 
Previously filed as an exhibit to the Company's Current Report on Form 8-K, event date January 26, 2006, and incorporated herein by reference.

**#####
 
Previously filed as an exhibit to the Company's Current Report on Form 8-K, event date February 8, 2007, and incorporated herein by reference.

**######
 
Previously filed as an exhibit to the Company's Current Report on Form 8-K, event date July 20, 2006, and incorporated herein by reference.

**#######
 
Previously filed as an exhibit to the Company's Current Report on Form 8-K, event date April 27, 2006, and incorporated herein by reference.

150     The Macerich Company



QuickLinks

Part I
Item 1. Business
The Shopping Center Industry
Business of the Company
Item 1A. Risk Factors
Item 1B. Unresolved Staff Comments
Item 2. Properties
Item 3. Legal Proceedings
Item 4. Submission of Matters to a Vote of Securities Holders
PART II
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Stock Performance Graph
Item 6. Selected Financial Data
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
Management's Overview and Summary
Critical Accounting Policies
Results of Operations
Comparison of Years Ended December 31, 2006 and 2005
Comparison of Years Ended December 31, 2005 and 2004
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Item 8. Financial Statements and Supplementary Data
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Item 9A. Controls and Procedures
Item 9A(T). Controls and Procedures
Item 9B. Other Information
Part III
Item 10. Directors and Executive Officers and Corporate Governance
Item 11. Executive Compensation
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholders Matters
Item 13. Certain Relationships and Related Transactions, and Director Independence
Item 14. Principal Accountant Fees and Services
PART IV
Item 15. Exhibits and Financial Statement Schedules
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Combined and Condensed Balance Sheets of Unconsolidated Joint Ventures as of December 31
REPORTS OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMS
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
SIGNATURES
EXHIBIT INDEX