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Macerich Co – ‘10-K’ for 12/31/00

On:  Thursday, 3/29/01, at 3:10pm ET   ·   For:  12/31/00   ·   Accession #:  912057-1-505482   ·   File #:  1-12504

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  As Of                Filer                Filing    For·On·As Docs:Size              Issuer               Agent

 3/29/01  Macerich Co                       10-K       12/31/00    8:1.7M                                   Merrill Corp/FA

Document/Exhibit                   Description                      Pages   Size 

 1: 10-K        Annual Report                                       HTML   1.01M 
 2: EX-10.1-7   Material Contract                                   HTML     15K 
 3: EX-10.30    Material Contract                                   HTML    424K 
 4: EX-10.33    Material Contract                                   HTML    218K 
 5: EX-10.34    Material Contract                                   HTML     29K 
 6: EX-21.1     Subsidiaries of the Registrant                      HTML     14K 
 7: EX-23.1     Consent of Experts or Counsel                       HTML      8K 
 8: EX-23.2     Consent of Experts or Counsel                       HTML      7K 

		SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549
/x/		Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the fiscal year ended December 31, 2000 or
/ /		Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
		For the transition period from            to
		Commission File Number 1-12504
FORM 10-K
		(Exact name of registrant as specified in its charter)
		Maryland (State or other jurisdiction of incorporation or organization) 401 Wilshire Boulevard, # 700 Santa Monica, California 90401 (Address of principal executive offices and zip code)
		95-4448705 (I.R.S. Employer Identification No.)
		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
		Securities registered pursuant to Section 12(g) of the Act: None
		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 periods that the registrant was required to file such report(s)) and (2) has been subject to such filing requirements for the past 90 days. Yes /x/ No / /.
		Indicate by a 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 the registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to the Form 10-K. / /
		As of February 27, 2001, the aggregate market value of the 21,646,000 shares of Common Stock held by non-affiliates of the registrant was $450 million based upon the closing price ($20.81) on the New York Stock Exchange composite tape on such date. (For this computation, the registrant has excluded the market value of all shares of its Common Stock reported as beneficially owned by executive officers and directors of the registrant and certain other shareholders; such exclusion shall not be deemed to constitute an admission that any such person is an "affiliate" of the registrant.) As of February 27, 2001, there were 33,630,270 shares of Common Stock outstanding.
		DOCUMENTS INCORPORATED BY REFERENCE
		Portions of the proxy statement for the annual stockholders meeting to be held in 2001 are incorporated by reference into Part III.

THE MACERICH COMPANY

Annual Report on Form 10-K

For The Year Ended December 31, 2000

Table of Contents

Part I

ITEM I. BUSINESS

General
The Macerich Company (the "Company") is involved in the acquisition, ownership, 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"). The Operating Partnership owns or has an ownership interest in 46 regional shopping centers and five community shopping centers aggregating approximately 42 million square feet of gross leasable area ("GLA"). These 51 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 three management companies, Macerich Property Management Company, a California corporation, Macerich Manhattan Management Company, a California corporation, and Macerich Management Company, a California corporation (collectively, 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 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

A. Stock Repurchase Program
On November 10, 2000, the Company's Board of Directors approved a stock repurchase program of up to 3.4 million shares of common stock. As of December 31, 2000, the Company repurchased 564,000 shares of its common stock at an average price of $19.02 per share.

B. Refinancings
On April 12, 2000, additional debt of $138.5 million was placed on the SDG Macerich Properties, L.P. portfolio. This debt, consisting of both fixed and floating interest rates, has a current average interest rate of 7.51% and matures May 15, 2006. The Company's share of the financing proceeds of $69.2 million was used to pay down the Company's line of credit.

On June 1, 2000, the Pacific Premier Retail Trust ("PPRT") joint venture refinanced the debt on Kitsap Mall. A $38.0 million loan at an effective interest rate of 8.60%, was paid in full and a new note was issued for $61.0 million bearing interest at a fixed rate of 8.06% and maturing June 1, 2010.

On August 31, 2000, the Company refinanced the debt on Vintage Faire Mall. The prior loan of $52.8 million, at a fixed interest rate of 7.65%, was paid in full and a new note was issued for $70.0 million bearing interest at a fixed rate of 7.89% and maturing September 1, 2010.

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On October 2, 2000, the Company refinanced the debt on Santa Monica Place. An $85.0 million floating rate loan was paid in full and a new note was issued for $85.0 million bearing interest at a fixed rate of 7.70% and maturing November 1, 2010.

On December 1, 2000, the PPRT joint venture refinanced the debt on Stonewood Mall. A $75.0 million floating rate loan was paid in full and a new note was issued for $77.8 million bearing interest at a fixed rate of 7.41% and maturing December 11, 2010.

C. Other Events
On September 30, 2000, Manhattan Village, a 551,847 square foot regional shopping center, 10% of which was owned by the Operating Partnership, was sold. The joint venture sold the property for $89.0 million, including a note receivable from the buyer for $79.0 million at an interest rate of 8.75% payable monthly, until its maturity date of September 30, 2001.

During 2000, the Company entered into a ten-year energy management and procurement contract with Enron Energy Services ("Enron"). Enron will manage the supply of electricity and natural gas and provide energy management services to the majority of the Centers.

During 2000, the Company invested $4.3 million in and became a founding member of MerchantWired, LLC, ("MerchantWired"). MerchantWired is providing a broadband communications network to retail property owners and retailers.

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, 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," 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, generally 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.

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The Company focuses on the acquisition, redevelopment, management and leasing of Regional Shopping Centers. 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 are difficult to develop because of the significant barriers to entry, including the limited availability of capital and suitable development sites, the presence of existing Regional Shopping Centers in most markets, a limited number of Anchors, and the associated development costs and risks. Consequently, the Company believes that few new Regional Shopping Centers will be built in the next five years.

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.

Although a variety of retail formats compete for consumer purchases, the Company believes that Regional Shopping Centers will continue to be a preferred shopping destination. The combination of a climate controlled shopping environment, a dominant location, and a diverse tenant mix has resulted in Regional Shopping Centers generating higher tenant sales than are generally achieved at smaller retail formats. Further, the Company believes that department stores located in Regional Shopping Centers will continue to provide a full range of current fashion merchandise at a limited number of locations in any one market, allowing them to command the largest geographical trade area of any retail format.

Community Shopping Centers
Community Shopping Centers are designed to attract local and neighborhood customers and are typically open air shopping centers, with one or more supermarkets, drugstores or discount department stores. National retailers such as Kids-R-Us at Bristol Shopping Center, Saks Fifth Avenue at Carmel Plaza and The Gap, Victoria's Secret and Express/Bath and Body at Villa Marina, provide the Company's Community Shopping Centers with the opportunity to draw from a much larger trade area than a typical supermarket or drugstore anchored Community Shopping Center.

BUSINESS OF THE COMPANY

Management and Operating Philosophy
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, construction, 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.

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Property Management and Leasing.  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.

The Company believes strongly in decentralized leasing and accordingly, most of its leasing managers are located on-site to better understand the market and the community in which a Center is located. Leasing managers are charged with more than the responsibility of leasing space; they continually assess and fine tune each Center's tenant mix, identify and replace under performing tenants and seek to optimize existing tenant sizes and configurations.

Acquisitions.  Since its initial public offering ("IPO"), the Company has acquired interests in shopping centers nationwide. These acquisitions were identified and consummated by the Company's staff of acquisition professionals who are strategically located in Santa Monica, Dallas, Denver, and Atlanta. 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. The Company focuses on assets that are or can be dominant in their trade area, have a franchise and where there is intrinsic value.

The Company made the following acquisitions in 1998: The Company along with a 50/50 joint venture partner, acquired a portfolio of twelve regional malls totaling 10.7 million square feet on February 27, 1998; South Plains Mall in Lubbock, Texas on June 19,1998; Westside Pavilion in Los Angeles, California on July 1, 1998; Village at Corte Madera in Corte Madera, California in June and July 1998; Carmel Plaza in Carmel, California on August 10, 1998; and Northwest Arkansas Mall in Fayetteville, Arkansas on December 15, 1998. Together, these properties are known as the "1998 Acquisition Centers."

On February 18, 1999, the Company, along with a joint venture partner, acquired a portfolio of three regional malls, the retail component of a mixed-use development, five contiguous properties and two non-contiguous community shopping centers totaling approximately 3.6 million square feet. The Company is a 51% owner of this portfolio. The second phase of this transaction, which closed on July 12, 1999, consisted of the acquisition of the office component of the mixed-use development. The two non-contiguous community shopping centers were subsequently sold in October and November of 1999. Additionally, the Company acquired Los Cerritos Center in Cerritos, California, on June 2, 1999 and Santa Monica Place in Santa Monica, California, on October 29, 1999. Together, these properties are known as the "1999 Acquisition Centers."

During 2000, market conditions, including the cost of capital and the lack of attractive opportunities, resulted in the first year subsequent to our IPO in which we had no acquisitions. Furthermore, management anticipates no acquisitions for 2001.

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

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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.

The Centers.  As of December 31, 2000, the Centers consist of 46 Regional Shopping Centers and five Community Shopping Centers aggregating approximately 42 million square feet of GLA. The 46 Regional Shopping Centers in the Company's portfolio average approximately 884,378 square feet of GLA and range in size from 2.1 million square feet of GLA at Lakewood Mall to 328,667 square feet of GLA at Panorama Mall. The Company's five Community Shopping Centers, Boulder Plaza, Bristol Shopping Center, Carmel Plaza, Great Falls Marketplace and Villa Marina Marketplace, have an average of 217,652 square feet of GLA. The 46 Regional Shopping Centers presently include 182 Anchors totaling approximately 23.1 million square feet of GLA and approximately 6,363 Mall and Freestanding Stores totaling approximately 18.7 million square feet of GLA.

Total revenues, including joint ventures at their pro rata share, increased to $486.1 million in 2000 from $461.2 million in 1999 primarily due to releasing space at higher rents. See "Management's Discussion and Analysis of Financial Condition and Results of Operations." No Center generated more than 10% of shopping center revenues during 1999 and 2000.

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:

(1)

Represents real estate tax and common area maintenance charges.

(2)

Excludes 1998 Acquisition Centers.

(3)

Excludes 1999 Acquisition Centers.

Competition
The 46 Regional Shopping Centers are generally located in developed areas in middle to upper income markets where there are relatively few other Regional Shopping Centers. In addition, 44 of the 46 Regional Shopping Centers contain more than 400,000 square feet of GLA. The Company intends to consider additional expansion and renovation projects to maintain and enhance the quality of the Centers and their competitive position in their trade areas.

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

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any of which under certain circumstances, could compete against the Company for an acquisition, an Anchor or a tenant. This results in competition for both acquisition of centers and for tenants 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 forms of retail, such as factory outlet centers, power centers, discount shopping clubs, mail-order services, internet shopping and home shopping networks that could adversely affect the Company's revenues.

Major Tenants
The Centers derived approximately 91.3% of their total rents for the year ended December 31, 2000 from Mall and Freestanding Stores. One tenant accounted for approximately 4.4% of annual base rents of the Company, and no other single tenant accounted for more than 3.0%, as of December 31, 2000.

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, 2000:

Mall and Freestanding Stores
Mall and Freestanding Store leases generally provide for tenants to pay rent comprised of a fixed base (or "minimum") rent and a percentage rent based on sales. In some cases, tenants pay only a fixed minimum rent, and in some cases, tenants pay only percentage rents. 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.

The Company uses tenant spaces 10,000 square feet and under for comparing rental rate activity. Tenant space 10,000 square feet and under in the portfolio at December 31, 2000, comprises 69.2% of all Mall and Freestanding Store space. 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, 10,000 square feet

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or under, commencing during 2000 was $32.95 per square foot, or 22% higher than the average base rent for all Mall and Freestanding Stores (10,000 square feet or under) at December 31, 2000 of $27.09 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:

(1)

Average base rent per square foot is based on Mall and Freestanding Store GLA for spaces 10,000 square feet or under occupied as of December 31 for each of the Centers owned by the Company in 1998 (excluding the 1998 Acquisition Centers), 1999 (excluding the 1999 Acquisition Centers), and 2000.

(2)

The 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. New Centers are excluded in the year of acquisition.

(3)

The average base rent on leases expiring during the year represents the final year minimum rent, on a cash basis, for all tenant leases 10,000 square feet or under expiring during the year. On a comparable space basis, average initial rents, excluding the impact of straight lining of rent, on leases 10,000 square feet or under commencing in 2000 was $34.26 compared to expiring rents of $28.56. The average base rent on leases expiring in 1998 excludes the 1998 Acquisition Centers and the average for 1999 excludes the 1999 Acquisition Centers.

Bankruptcy and/or Closure of Retail Stores
The bankruptcy and/or closure of an Anchor, or its sale to a less desirable retailer, could adversely affect customer traffic in a Center and thereby reduce the income generated by that Center. Furthermore, the closing of an Anchor could, under certain circumstances, allow certain other Anchors or other tenants to terminate their leases or cease operating their stores at the Center or otherwise adversely affect occupancy at the Center.

Retail stores at the Centers other than Anchors may also seek the protection of the bankruptcy laws and/or close stores, which could result in the termination of such tenants' leases and thus cause a reduction in the cash flow generated by the Centers. Although no single retailer accounts for greater than 4.4% of total rents, the bankruptcy and/or closure of stores could result in decreased occupancy levels, reduced rental income or otherwise adversely impact the Centers. Although certain tenants have filed for bankruptcy, the Company does not believe such filings and any subsequent closures of their stores will have a material adverse impact on its operations.

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Lease Expirations
The following table shows scheduled lease expirations (for Centers owned as of December 31, 2000) of Mall and Freestanding Stores 10,000 square feet or under for the next ten years, assuming that none of the tenants exercise renewal options:

(1)

Includes joint ventures at pro rata share

(2)

For leases 10,000 square feet or 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 8.7% of the Company's total rent for the year ended December 31, 2000.

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The following table identifies each Anchor, each parent company that owns multiple Anchors and the number of square feet owned or leased by each such Anchor or parent company in the Company's portfolio at December 31, 2000:

(1)

J.C. Penney closed their store at Crossroads-Boulder on January 31, 2001. The Company is contemplating various redevelopment opportunities for the vacant site.

(2)

Montgomery Ward filed for bankruptcy on December 28, 2000 and announced the closing of all of its stores, including the seven located at the Centers.

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ENVIRONMENTAL MATTERS

Under various federal, state and local laws, ordinances and regulations, a current or prior owner or operator of real estate may be liable for the costs of removal or remediation of certain hazardous or toxic substances on, under or in such property. Such laws often impose such liability without regard to whether the owner or operator knew of, or was responsible for, the presence of such hazardous or toxic substances. The costs of investigation, removal or remediation of such substances may be substantial, and the presence of such substances, or the failure to properly remediate such substances, may adversely affect the owner's or operator's ability to sell or rent such property or to borrow using such property as collateral. Persons or entities who arrange for the disposal or treatment of hazardous or toxic substances may also be liable for the costs of removal or remediation of a release of such substances at a disposal or treatment facility, whether or not such facility is owned or operated by such person or entity. Certain environmental laws impose liability for release of asbestos-containing materials ("ACMs") into the air and third parties may seek recovery from owners or operators of real properties for personal injury associated with exposure to ACMs. In connection with the ownership (direct or indirect), operation, management and development of real properties, the Company may be considered an owner or operator of such properties or as having arranged for the disposal or treatment of hazardous or toxic substances and therefore potentially liable for removal or remediation costs, as well as certain other related costs, including governmental fines and injuries to persons and property.

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 are reasonably possible to result in costs associated with future investigation or remediation, or in environmental liability:

•

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

•

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

•

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

PCE has been 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

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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, had been 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 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 a concentration of 1.2 ppb, which is below the MCL. 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 $187,976 and $149,466 have already been incurred by the joint venture for remediation, and professional and legal fees for the years ending December 31, 2000 and 1999, respectively. An additional $70,590 remains reserved by the joint venture as of December 31, 2000. The joint venture has been sharing costs on a 50/50 basis with a former owner of the property and intends to look to additional responsible parties for recovery.

The Company acquired Fresno Fashion Fair in December 1996. Asbestos has been 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 ("PEL") of .1 fcc. The accounting for this acquisition includes a reserve of $3.3 million to cover future removal of this asbestos, as necessary. The Company incurred $25,939 and $90,876 in remediation costs for the years ending December 31, 2000 and 1999, respectively.

INSURANCE

The Company has comprehensive liability, fire, flood, extended coverage and rental loss insurance with respect to the Centers. The Company or the joint venture, as applicable, also currently carries earthquake insurance covering the Centers located in California. Management believes that such insurance provides adequate coverage.

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

The Company and the Management Companies employ approximately 1,652 persons, including eight executive officers, personnel in the areas of acquisitions and business development (6), property management (263), leasing (76), redevelopment/construction (25), financial services (49) and legal affairs (33). In addition, in an effort to minimize operating costs, the Company generally maintains its own security staff (607) and maintenance staff (585). Approximately 14 of these employees are represented by a union. The Company believes that relations with its employees are good.

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ITEM 2. PROPERTIES

The following table sets forth certain information about each of the Centers as of December 31, 2000:

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13

a)

Excluding Pacific Premier Retail Trust Properties, SDG Macerich Properties, L.P. Properties and Major Redevelopment Properties

b)

Includes five contiguous freestanding properties

c)

Excluding Major Redevelopment Properties

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(1)

The land underlying forty of the Centers 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. All or part of the land underlying the remaining Centers is owned by third parties and leased to the Company, property partnership or limited liability company pursuant to long-term ground leases. Under the terms of a typical ground lease, the Company, property partnership or 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, property partnership or limited liability company has an option or right of first refusal to purchase the land. The termination dates of the ground leases range from 2000 to 2070.

(2)

Includes GLA attributable to Anchors (whether owned or non-owned) and Mall and Freestanding Stores as of December 31, 2000.

(3)

Sales are based on reports by retailers leasing Mall and Freestanding Stores for the year ending December 31, 2000 for tenants which have occupied such stores for a minimum of twelve months. In prior years, this sales per square foot calculation included all non anchor tenants except theaters. In 2000, in order to move towards a consensus in industry practice, sales per square foot are based on tenants 10,000 square feet and under, excluding theaters, that occupied their space for the entire year.

(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/redevelopment opportunities for these vacant sites.

(6)

Montgomery Ward filed for bankruptcy on December 28, 2000 and announced the closing of all of its stores including the seven located at the Centers.

(7)

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

(8)

Certain spaces have been intentionally held off the market and remain vacant because of major 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.

(9)

J.C. Penney closed its store at Crossroads Mall in Boulder, Colorado on January 31, 2001. The Company is contemplating various redevelopment opportunities for this vacant site.

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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. All mortgage debt is nonrecourse to the Company. The information set forth below is as of December 31, 2000.

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Notes:

(1)

The annual debt service payment represents the payment of principal and interest. In addition, contingent interest, as defined in the loan agreement, may be due to the extent that 35% of the gross receipts (as defined in the loan agreement) exceeds a base amount specified therein. Contingent interest recognized was $416,814, $385,556 and $387,101 for the years ended December 31, 2000, 1999 and 1998.

(2)

On October 2, 2000, the Company refinanced this loan with a 10 year fixed rate $85.0 million loan bearing interest at 7.70%. The prior loan bore interest at LIBOR plus 1.75%.

(3)

On August 31, 2000, the Company refinanced the debt on Vintage Faire. The prior loan was paid in full and a new note was issued for $70.0 million bearing interest at a fixed rate of 7.89% and maturing September 2010. The Company incurred a loss on early extinguishment of the prior debt in 2000 of $983,745.

(4)

Reflects the Company's pro rata share of debt.

(5)

In connection with the acquisition of this Center, the joint venture assumed $39.4 million of debt. At acquisition, this debt was recorded at the fair value of $41.5 million which included an unamortized premium of $2.1 million. This premium was being amortized as interest expense over the life of the loan using the effective interest method. The joint venture's monthly debt service was $349,000 and was calculated using an 8.60% interest rate. At December 31, 1999, the joint venture's unamortized premium was $1.4 million. On June 1, 2000, the joint venture paid off in full the old debt and a new note was issued for $61.0 million bearing interest at a fixed rate of 8.06% and maturing June 2010. The new loan is interest only until December 31, 2001. Effective January 1, 2002, monthly principal and interest of $450,150 will be payable through maturity. The new debt is cross-collateralized by Kitsap Mall and Kitsap Place.

(6)

In connection with the acquisition of this property, the joint venture assumed $127.0 million of collateralized fixed rate notes (the "Notes"). The Notes bear interest at an average fixed rate of 7.20% and mature in August 2005. The Notes require the joint venture to deposit all cash flow from the property operations with a trustee to meet its obligations under the Notes. Cash in excess of the required amount, as defined, is released. Included in cash and cash equivalents is $750,000 of restricted cash deposited with the trustee at December 31, 2000 and at December 31, 1999.

(7)

On July 28, 2000, the joint venture placed a $16.1 million floating rate note on the property bearing interest at LIBOR plus 2.25% and maturing July 2002. At December 31, 2000, the total interest rate was 9.0%.

(8)

Concurrent with the acquisition, the joint venture placed $76.7 million of debt and obtained a construction loan for an additional $16.0 million. Principal is drawn on the construction loan as costs are incurred. As of December 31, 2000 and December 31, 1999, $15.0 million and $6.7 million, respectively; of principal has been drawn under the construction loan.

(9)

On December 1, 2000, the joint venture refinanced the debt on Stonewood Mall. The prior loan was paid in full and a new note was issued for $77.8 million bearing interest at a fixed rate of 7.41% and maturing December 11, 2010. The joint venture incurred a loss on early extinguishment of the old debt in 2000 of $375,000.

(10)

In connection with the acquisition of these Centers, the joint venture assumed $485.0 million of mortgage notes payable which are secured by the properties. At acquisition, the $300.0 million fixed rate portion of this debt reflected a fair value of $322.7 million, which included an unamortized premium of $22.7 million. This premium is being amortized as interest expense over the life of the loan using the effective interest method. At December 31, 2000 and December 31, 1999, the unamortized balance of the debt premium was $16.1 million and $18.6 million, respectively. This debt is due in May 2006 and requires monthly payments of $1.9 million. $184.5 million of this debt is due in May 2003 and requires monthly interest payments at a variable weighted average rate (based on LIBOR) of 7.21% and 6.96% at December 31, 2000 and December 31, 1999, respectively. This variable rate debt is covered by an interest rate cap

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agreement which effectively prevents the interest rate from exceeding 11.53%. On April 12, 2000, the joint venture issued $138.5 million of additional mortgage notes which are secured by the properties and are due in May 2006. $57.1 million of this debt requires fixed monthly interest payments of $387,000 at a weighted average rate of 8.13% while the floating rate notes of $81.4 million require monthly interest payments at variable weighted average rate (based on LIBOR) of 7.08%. This variable rate debt is covered by an interest rate cap agreement which effectively prevents the interest rate from exceeding 11.83%.

The Company has a credit facility of $150 million with a maturity of May, 2002, bearing interest at LIBOR plus 1.15% at December 31, 2000. The line of credit was extended in March 2001 with the new interest rate on such credit facility fluctuating between 1.35% and 1.80% over LIBOR. As of December 31, 2000 and December 31, 1999, $59.0 million and $57.4 million of borrowings were outstanding under this line of credit at interest rates of 7.90% and 7.65%, respectively.

Additionally, as of December 31, 2000, the Company issued $10.8 million in letters of credit guaranteeing performance by the Company of certain obligations. The Company does not believe that these letters of credit will result in a liability to the Company.

During January 1999, the Company entered into a bank construction loan agreement to fund $89.2 million of costs related to the redevelopment of Pacific View. The loan bore interest at LIBOR plus 2.25% through 2000. In January 2001, the interest rate was reduced to LIBOR plus 1.75% and the loan matures in February 2002. Principal was drawn as construction costs were incurred. As of December 31, 2000 and 1999, $88.3 and $72.7 million, respectively, of principal has been drawn under the loan.

In addition, the Company had a note payable of $30.6 million due in February 2000 payable to the seller of the acquired portfolio. The note bore interest at 6.5%. The loan was paid in full on February 18, 2000.

During 1997, the Company issued and sold $161.4 million of convertible subordinated debentures (the "Debentures") due 2002. The Debentures, which were sold at par, bear interest at 7.25% annually (payable semi-annually) and are convertible into common stock at any time, on or after 60 days, from the date of issue at a conversion price of $31.125 per share. In November and December 2000, the Company purchased and retired $10.6 million of the Debentures. The Company recorded a gain on early extinguishment of debt of $1.0 million related to the transaction. The Debentures mature on December 15, 2002 and are callable by the Company after June 15, 2002 at par plus accrued interest.

ITEM 3. LEGAL PROCEEDINGS.

The Company, the Operating Partnership, the Management Companies and their respective affiliates are not 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 of the Company–Environmental Matters."

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

None.

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Part II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

The common stock of the Company is listed and traded on the New York Stock Exchange ("NYSE") under the symbol "MAC". The common stock began trading on March 10, 1994 at a price of $19 per share. In 2000, the Company's shares traded at a high of $24³/4 and a low of $18⁷/16.

As of February 27, 2001, there were approximately 534 stockholders of record. The following table shows high and low closing prices per share of common stock during each quarter in 1999 and 2000 and dividends/distributions per share of common stock declared and paid by quarter:

The Company has issued 3,627,131 shares of its Series A cumulative convertible redeemable preferred stock ("Series A Preferred Stock"), and 5,487,471 shares of its Series B cumulative convertible redeemable preferred stock ("Series B Preferred Stock"). The Series A Preferred Stock and Series B Preferred Stock can be converted into shares of common stock on a one-to-one basis. There is no established public trading market for either the Series A Preferred Stock or the Series B Preferred Stock. All of the outstanding shares of the Series A Preferred Stock are held by Security Capital Preferred Growth Incorporated. All of the outstanding shares of the Series B Preferred Stock are held by Ontario Teachers' Pension Plan Board. The Series A Preferred Stock and Series B Preferred Stock were issued on February 25, 1998 and June 16, 1998, respectively. The following table shows the dividends per share of preferred stock declared and paid for each quarter in 1999 and 2000. Preferred stock dividends are accrued quarterly and paid in arrears. 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 and Series B Preferred Stock have not been declared and/or paid.

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ITEM 6. SELECTED FINANCIAL DATA.

The following sets forth selected financial data for the Company on a historical basis. The following data should be read in conjunction with the 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.

The Selected Financial Data is presented on a consolidated basis. The limited partnership interests in the Operating Partnership (not owned by the REIT) are reflected as minority interest. Centers and entities in which the Company does not have a controlling ownership interest (Panorama Mall, North Valley Plaza, Broadway Plaza, Manhattan Village, MerchantWired, LLC, Pacific Premier Retail Trust, SDG Macerich Properties, L.P. and West Acres Shopping Center) are referred to as the "Joint Venture Centers", and along with the Management Companies, are reflected in the selected financial data under the equity method of accounting. Accordingly, the net income from the Joint Venture Centers and the Management Companies that is allocable to the Company is included in the statement of operations as "Equity in income (loss) of unconsolidated joint ventures and Management Companies."

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