The Macerich Company Annual Report 19 99 The Macerich Company Macerich owns interests in 47 regional malls and five community shopping A Retail Evolution centers in 20 states across the U.S. The Macerich Company transforms With a total of approximately 42 the shopping experience for customers million square feet of leasable area, all across the United States. By working Macerich is the fourth largest mall closely with our financial partners, owner in the nation and the largest retailers, consumers and local commu- owner of malls in the Western U.S., The Company’s malls are among the nities, we have advanced the develop- which includes the economically most desirable in the U.S. for merchants ment of the town center through a vibrant Pacific Rim states of California, as well as consumers. Average occupancy consistent strategy of focused acquisi- Oregon and Was h i n g t o n . of 92% in 1999 ranked Macerich tions and renovations. In this 1999 As a real estate investment trust among the top mall owners in the annual report, we discuss the applica- (REIT), the Company has concentrated nation. New lease signings averaging tion of this strategy and the results its investments in high quality shopping $29.76 per square foot in 1999 were we have achieved. We also present a malls that dominate their market the highest in the Company’s history. timeline history of the town center and a r e a s , adding value to them through The Company achieved a record the evolution of two key Macerich renovation and redevelopment. high in Funds From Operation in 1999, pr o p e r ties, highlighting changes in the Macerich is a pioneer in establishing the fifth year in a row of double-digit way our culture gathers to shop, and the mall as the “town center.” Macerich growth. The dividend to stockholders how Macerich transforms properties acquires malls that are located in the was increased again in 1999, as it has to serve this ever-present need. co m m e r c i a l core and are central to the every year since 1994, when Macerich life of their communities. Consumers became a public company. The made an estimated 250 million visits Co m p a n y ’ s portfolio of properties, to Macerich’s malls in 1999. which was built through acquisition and redevelopment, has quadrupled since 1994. Macerich stock is traded on the New York Stock Exchange under the symbol “MAC.” 967.3 $327.4 774.7 $283.9 $221.2 626 $155.1 385 295 $102.5 19 95 96 97 98 99 19 95 96 97 98 99 TOTAL REVENUES LEASE SIGNINGS (in millions) (square feet in thousands) The 35% compounded annual growth For mall and freestanding space rate in total revenues reflects the (10,000 square feet and under), Company’s substantial portfolio leasing activity has gained momentum growth since its 1994 IPO. and was robust in 1999. Macerich had another strong year in terms of acquisitions, occupancy, new lease signings and 1 growth in total Funds From Operations (FFO). Our internal growth, which helped fuel our 1999 results, will benefit from our recent acquisitions, as we capitalize on the intrinsic value of these assets. For additional financial and other information about Macerich, we have included in this Annual Report for your review our Form 10-K for the year ended December 31, 1999. 1999 1998 1997 1996 1995 (All amounts in thousands, except per share and property data) Operating Data: Total revenues $ 327,444 $ 283,861 $ 221,214 $ 155,059 $ 102,469 Shopping center expenses $ 100,327 $ 89,991 $ 70,901 $ 50,792 $ 31,580 REIT general and administrative expenses $ 5,488 $ 4,373 $ 2,759 $ 2,378 $ 2,011 Earnings before interest, income taxes, depreciation, amortization, minority interest, equity in income (loss) of unconsolidated entities, extraordinary items, gain (loss) on sale of assets and preferred dividends (EBITDA) $ 221,629 $ 189,497 $ 147,554 $ 101,889 $ 68,878 Net income $ 129,011 $ 44,075 $ 22,046 $ 18,911 $ 11,303 Net income per share – diluted $ 2.99 $ 1.06 $ 0.85 $ 0.89 $ 0.73 Other Data: FFO – diluted (1) $ 164,302 $ 120,518 $ 83,427 $ 62,428 $ 44,938 Cash distributions declared per common share $ 1.965 $ 1.865 $ 1.78 $ 1.70 $ 1.66 FFO per share – diluted (1) $ 2.698 $ 2.426 $ 2.172 $ 1.874 $ 1.669 Portfolio occupancy at year end 92.8% 93.2% 91.8% 91.6% 92.0% Average tenant sales per square foot – mall & freestanding stores $ 336 $ 319 $ 317 $ 290 $ 284 Balance Sheet Data: Investment in real estate (before accumulated depreciation) $ 2,174,535 $ 2,213,125 $ 1,607,429 $ 1,273,085 $ 833,998 Total assets $ 2,404,293 $ 2,322,056 $ 1,505,002 $ 1,187,753 $ 763,398 Total mortgage, notes and debentures payable $ 1,561,127 $ 1,507,118 $ 1,122,959 $ 789,239 $ 485,193 Minority interest (2) $ 157,599 $ 165,524 $ 100,463 $ 112,242 $ 95,740 Stockholders’ equity $ 620,286 $ 577,413 $ 216,295 $ 237,749 $ 158,345 (1) “FFO” represents net income (loss) (computed in accordance with generally accepted accounting principles (GAAP)), excluding gains (or losses) from debt restructuring and sales or write-down of assets, plus depreciation and amortization (excluding depreciation on personal property and amortization of loan and financial instrument costs), and after adjustments for unconsolidated entities. Adjustments for unconsolidated entities are calculated on the same basis. FFO does not represent cash flow from operations as defined by GAAP and is not necessarily indicative of cash available to fund all cash flow needs. (2)“Minority Interest” reflects the ownership interest in The Macerich Partnership, L.P. not owned by the REIT (Macerich). Forward-Looking Statements. This Annual Report contains or incorporates statements that constitute forward-looking statements. Those statements appear in a number of places in this Annual Report and include statements regarding, among other matters, the Company’s growth and acquisition opportunities, the Company’s acquisition strategy, 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, among others, general industry, economic and business conditions, which will, among other things, affect demand for retail space or retail goods, availability and creditworthiness of current and prospective tenants, lease rents, availability and cost of financing and operating expenses; adverse changes in the real estate markets including, among other things, competition with other companies, retail formats and technology, risks of real estate development and acquisitions; governmental actions and initiatives; and environmental and safety requirements. The Company will not update any forward-looking information to reflect actual results or changes in the factors affecting the forward-looking information. 2 1999 was a superb year for Macerich. Dividends have grown at a compounded In these days when investors place annual rate of 4.3% during this period, such a high capitalization on many our FFO per share at about a 12% companies that have no earnings and compounded annual rate. few tangible assets, Macerich represents At the same time, the quality of a very different kind of value, the our dividend has consistently improved. sort that is built on the ownership of In 1996 we paid out 91% of our FFO dominant, high-quality properties and in dividends. The following year it a consistent record of year- a f t e r- y e a r was 82%. In 1998 it was 77% and in growth in Funds From Operations 1999 we distributed 73% of our FFO ( F F O ) and dividends. as dividends. Macerich as a REIT is obligated by tax law to pay a certain Double-Digit Earnings Growth, A g a i n minimum percentage of its income as Last year, our FFO, the most relevant d i v i d e n d s .B e c a u s eF F Og r o w t hh a sb e e n measure of earnings for a Real Estate more than double the rate of dividend Investment Trust (REIT), increased gr o w t h , we expect to reach a point in a by 36.3% to $164.3 million. FFO per few years when the rate of growth of share on a comparable basis increased our dividend will accelerate. by 12.2% to $2.70. Macerich has averaged double-digit growth in FFO I nvestment in Future Growth $2.70 per share every year since we became In addition to paying dividends we $2.43 a public corporation in 1994. have been investing our retained capital Our stockholders and partners in attractive core assets, high quality $2.17 ha v e benefited directly from this earn- malls that dominate their regional ings growth. The Board of Directors market areas. Macerich is different $1.87 increased the quarterly cash dividend from many real estate investors. We $1.67 on November 10, 1999 from $.485 prefer to buy existing properties that per share to $.51, a 5.2% increase.