What We Know

macerich 2007 annual report what we know macerich 2007 annual report WE KNOW WHAT SHOPPERS ARE LOOKING FOR what we know | 01 02 | macerich 2007 annual report WE KNOW WHAT RETAILERS NEED TO SUCCEED what we know | 03 macerich 2007 annual report 04 | macerich 2007 annual report WE KNOW WHAT MAKES AN ADDRESS A DESTINATION what we know | 05 06 | macerich 2007 annual report WE KNOW HOW TO FIND ADVANTAGE IN ANY ECONOMIC CYCLE what we know | 07 08 | macerich 2007 annual report we know quality quality drives the macerich approach, in everything from our focus on attractive, high-quality u.s. markets to strong relationships with retailers that have both solid business strategies and enduring connections with consumers. our involved, engaged people pursue quality in every discipline. across all areas of development and operations, quality is the macerich filter. it both defines and differentiates our company. what we know | 09 financial highlights (ALL AMOUNTS IN THOUSANDS , EXCEPT PER SHARE AND PER SQUARE FOOT AMOUNTS ) 2007 2006 2005 2004 2003 operating data Total revenues $ 813,272 $ 749,619 $ 660,147 $ 495,175 $ 438,117 Shopping center and operating expenses $ 256,426 $ 233,669 $ 203,829 $ 146,465 $ 136,881 Management company expenses1 $ 73,761 $ 56,673 $ 52,840 $ 44,080 $ 32,031 REIT general and administrative expenses $ 16,600 $ 13,532 $ 12,106 $ 11,077 $ 8,482 Net income (loss) available to common stockholders $ 73,704 $ 217,404 $ (93,614) $ 82,493 $ 113,218 Net income (loss) available to common stockholders per share-diluted $ 1.02 $ 3.05 $ (1.57) $ 1.40 $ 2.09 other data FFO-diluted2 $ 407,927 $ 383,122 $ 336,831 $ 299,172 $ 269,132 Cash distributions declared per common share $ 2.93 $ 2.75 $ 2.63 $ 2.48 $ 2.32 Portfolio occupancy at year-end 93.5% 93.6% 93.5% 92.5% 93.3% Average mall sales per square foot—mall and freestanding stores $ 472 $ 452 $ 417 $ 391 $ 361 balance sheet data Investment in real estate before accumulated depreciation $ 7,078,802 $ 6,356,156 $ 6,017,546 $ 4,149,776 $ 3,662,359 Total assets $ 7,937,097 $ 7,373,676 $ 6,986,005 $ 4,637,096 $ 4,145,593 Total mortgage and notes payable $ 5,762,958 $ 4,993,879 $ 5,424,730 $ 3,230,120 $ 2,682,598 Minority interest3 $ 547,693 $ 597,156 $ 474,590 $ 221,315 $ 237,615 Common stockholders’ equity plus preferred equity $ 1,233,344 $ 1,478,066 $ 778,612 $ 1,012,467 $ 1,052,419 1 Effective July 1, 2003, the Company began consolidating the accounts of Macerich Management Company. 2 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 “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Funds from Operations” in our Form 10-K/A included herein. 3 “Minority interest” reflects the ownership interest in The Macerich Partnership, L.P. or other entities not owned by the REIT (Macerich). 10 | macerich 2007 annual report to our stockholders at macerich, we see clear opportunities to move Across our shopping centers, total annual portfolio sales per forward, even as today’s economic uncertainties are posing challenges square foot increased to $472 today, up 4.4% from $452 at year-end to many American busi nesses. The current environment, in my view, will 2006. Our sales performance reflects the rising quality of our portfolio, differentiate companies that are prepared not only to weather economic where nine of our centers posted sales over $700 per square foot, and down cycles, but also to take advantage of openings that arise when the sales in our top 50 centers averaged over $550 per square foot. marketplace is tested. Macerich’s emphasis on heightened value helped us continue This is certainly true in the retail real estate sector, where Macerich to realize significant embedded growth across the company in 2007 – is well-positioned to prosper from what can only be described as a with a positive releasing spread of 28.6%, the highest in a string of relentless focus on quality. This is our formula: quality assets in out- six strong years. In all, the company executed 1.3 million square feet stand ing markets, plus quality retailers – with both financial wherewithal of store leases, with average rent in the portfolio up nearly 5% at and consistently compelling offerings – all supported by talented and $39.41, compared to $37.68 for 2006. While our stock price recently passionate people who value strong, quality relationships. has reflected the market’s broader unease that is shaping the current We’re proud of both sides of our balance sheet, with tremendous business climate, we remain very pleased with Macerich’s performance. quality on the asset side and equal amounts of foresight and strategic planning in the capitalization of our business. macerich is committed to continually enhancing our portfolio, which is centered on exceptional properties in attractive U.S. markets in many respects, 2007 was a very good year for Macerich with high barriers to entry. We’re focused on adding value to this robust, marked by strong fundamentals, including growth in FFO per share all-weather set of assets year after year. diluted to $4.62 compared to $4.35 in 2006; very strong leasing activity The past year was one of the most productive in Macerich history in in terms of volume of deals and spreads; and continued strong portfolio terms of increasing the value of our portfolio through new develop ment occupancy of 93.5%. and redevelopment projects delivered on time and on budget. what we know | 11 Three views of SanTan Village, Gilbert, AZ In all, Macerich opened seven significant projects across the our strategically diverse and productive country – capped by the grand opening of the 1.3-million-square-foot pipeline remains a key differen tiator for Macerich, and we expect SanTan Village in Gilbert, Arizona. Redefining the concept of a regional 2008 to be another exciting year. Starting with the grand reopening shopping center with its all-outdoor design, SanTan Village combines of Danbury Fair in Connecticut, projects coming on line this year many once disparate real estate elements – from large-format stores include a planned Costco at Lakewood Center in Southern California; and traditional fashion department stores to lifestyle-inspired boutiques, a lifestyle center addition at Vintage Faire in Modesto, California; and everyday uses and special amenities – all within a mixed-use, master- the major redevelopment and expansion of The Oaks in Thousand planned development. Ultimately, SanTan Village is planned to grow Oaks, California. to approximately 3 million square feet of space, with timing driven by Looking ahead to 2009, we’re working toward exciting projects market needs and retailer demand. The project is next set to grow with at Santa Monica Place; Scottsdale Fashion Square, where Barneys New a just-announced Macy’s. York will anchor a new luxury expansion; Northgate in upscale Marin Reinforcing the market dominance of Freehold Raceway Mall in County in Northern California, which will undergo a dramatic architec- central New Jersey, we completed a full renovation of this 1.7-million- tural and merchandise transformation; and Paradise Valley Mall in square-foot, five-anchor regional shopping center and added close North Phoenix, where Costco plans to join this well-situated property. to 96,000 square feet in a compelling lifestyle expansion. In 2011, we look forward to a planned Neiman Marcus opening at Also in 2007, we opened the first phase of the Promenade at Broadway Plaza in Walnut Creek, California. Casa Grande in fast-growing Pinal County, Arizona, and Macerich As always, our pipeline projects are keyed to market demand and introduced the first phase of a 435,000-square-foot lifestyle expansion, come on line when both retailers and communities are ready. This is cer- The Marketplace at Flagstaff Mall in Northern Arizona, among other tainly the case in Arizona, where we plan to begin opening the Estrella Falls project renovations. power center in Goodyear in 2008 and the Prasada power centers in Sur- prise in 2009 – all designed to prime the pump for the regional shop ping 12 | macerich 2007 annual report Danbury Fair, Danbury, CT Promenade at Casa Grande, Casa Grande, AZ centers we plan for these markets.

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