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

FORM 10-K/A
Amendment No. 1

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2007

Commission File No. 1-12504

THE MACERICH COMPANY
(Exact name of registrant as specified in its charter)

MARYLAND
(State or other jurisdiction
of incorporation or organization)		   95-4448705
(I.R.S. Employer
Identification Number)

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

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

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

Title of each class
 
Name of each exchange on which registered
Common Stock, $0.01 Par Value
Preferred Share Purchase Rights		   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/A or any amendment on to this Form 10-K/A. o

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

Large accelerated filer ý   Accelerated filer o

Non-accelerated filer o
(Do not check if a smaller reporting company)
 
Smaller reporting company o

         Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

         YES o                NO ý

         The aggregate market value of voting and non-voting common equity held by non-affiliates of the registrant was approximately $3.8 billion as of the last business day of the registrant's most recent completed second fiscal 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 13, 2008: 72,336,763 shares

DOCUMENTS INCORPORATED BY REFERENCE

         Portions of the proxy statement for the annual stockholders meeting to be held in 2008 are incorporated by reference into Part III of this Form 10-K/A


EXPLANATORY NOTE
(All dollars in thousands)

        This Amendment No. 1 on Form 10-K/A (the "Amended Filing") of The Macerich Company (the "Company") for the fiscal year ended December 31, 2007 is being filed to restate the consolidated balance sheets as of December 31, 2007 and 2006 and the consolidated statements of operations, common stockholders' equity, and cash flows for each of the three years during the period ended December 31, 2007.

        Subsequent to the filing of the Company's Annual Report on Form 10-K for the year ended December 31, 2007 ("2007 Form 10-K"), management determined that the consolidated financial statements as of December 31, 2007 and December 31, 2006, and for each of the three years during the period ended December 31, 2007 required restatement to correctly account for the convertible preferred units ("CPUs") issued to prior owners in connection with the acquisition of the Wilmorite portfolio. (See Note 12—Acquisitions to the accompanying consolidated financial statements contained in this Amended Filing). The Company improperly applied purchase accounting to 100% of the Wilmorite acquisition and therefore minority interests in the Wilmorite portfolio were improperly recorded at fair value at the time of acquisition and presented outside of permanent equity as Class A participating and non-participating convertible preferred securities in the consolidated balance sheets with the periodic distributions reflected as preferred dividends as a reduction of net income available to common stockholders within the consolidated statements of operations. Upon further consideration, the Company determined that these interests represent a minority interest in MACWH, LP, a subsidiary of The Macerich Partnership, L.P. and successor in interest to Wilmorite Holdings, L.P., which in turn holds the Wilmorite portfolio. Accordingly, the Company should only have applied purchase accounting to the extent of its proportionate interest in MACWH, LP. The Company has corrected the accounting for these interests by recording a reduction in these interests of $195,905 from fair value to predecessor basis in the consolidated balance sheets with the earnings and dividends paid attributable to these interests reported as minority interests in consolidated joint ventures in the consolidated statements of operations. The adjustment also includes a reduction in depreciation expense from the 100% stepped up property basis previously reported.

        In addition, because the participating CPUs were redeemable at the option of the CPU holders for the portion of the Wilmorite portfolio that consisted of Eastview Commons, Eastview Mall, Greece Ridge Center, Marketplace Mall and Pittsford Plaza, collectively referred to as the "Rochester Properties" (assets of MACWH, LP), they are subject to EITF Topic D-98, "Classification and Measurement of Redeemable Securities" and accounted for as redeemable minority interest at the greater of their redemption value or amount that would result from applying Accounting Research Bulletin No. 51 "Consolidated Financial Statements" consolidation accounting. The Company recognized the redeemable minority interest at historical cost within purchase accounting and subsequently adjusted the carrying value of the redeemable minority interest or redemption value changes at the end of each reporting period as a reduction of net income available to common stockholders within the consolidated statements of operations.

        The restatement resulted in a decrease in property, net of $134,018 and $137,404, a decrease in investments in unconsolidated joint ventures of $50,019 and $51,083, an increase in minority interest of $208,993 and $209,973, decreases in Class A participating and non-participating CPUs of $230,245 and $235,287, additional paid-in capital of $210,736 and $207,035, and accumulated deficit of $47,951 and $43,862 at December 31, 2007 and 2006, respectively, an increase in net income available to common stockholders of $2,043 for the year ended December 31, 2007, and a decrease in net income available to common stockholders of $10,618 and $146,202 for the years ended December 31, 2006 and 2005, respectively.

        The Company also identified other errors related to classification of preferred dividends and classification of the impact for the adoption of Interpretation No. 48, "Accounting for Uncertainty in Income Taxes—an interpretation of FASB Statement No. 109" ("FIN 48"), within the consolidated statements of common stockholders' equity. During the years the Company was in an accumulated


deficit position, the preferred dividends should have been classified as a reduction in additional paid-in capital as opposed to increasing the accumulated deficit. As a result of this error, additional paid-in capital and accumulated deficit were overstated for the years ended December 31, 2007, 2006 and 2005 by $10,058, $10,083, and $9,649, respectively, and the cumulative effect of the classification error attributable to the years prior to January 1, 2005 was $47,681. The impact of the adoption of FIN 48 should have been classified as an increase to the accumulated deficit as opposed to a decrease to the additional paid-in capital for the year ended December 31, 2007 by $1,574.

        For a more detailed description of the restatement, see Note 25 to the accompanying consolidated financial statements contained in this Amended Filing.

        This Amended Filing reflects a retrospective adjustment of the consolidated financial statements for the discontinued operations of the "Rochester Properties" from the Wilmorite portfolio to conform to the new discontinued operations presentation initially presented in the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2008, filed on May 19, 2008.

        For the convenience of the reader, this Amended Filing sets forth the Annual Report on Form 10-K in its entirety. The Company has updated the disclosures presented in its 2007 Form 10-K to reflect the effects of the restatement and discontinued operations. Other than amending the disclosures relating to the restatement and conforming the presentation of discontinued operations in the items discussed below, no attempt has generally been made in this Amended Filing to amend or update other disclosures presented in the 2007 Form 10-K. Among other things, forward-looking statements made in the 2007 Form 10-K have not been revised to reflect events that occurred or facts that became known to the Company after the filing of the 2007 Form 10-K, and such forward-looking statements should be read in their historical context. Accordingly, this Amended Filing should be read in conjunction with the Company's filings with the United States Securities and Exchange Commission ("SEC") subsequent to the filing of the 2007 Form 10-K.

        The following items have been amended as a result of the restatement and to conform the presentation of discontinued operations:

        Pursuant to the rules of the SEC, Item 15, Part IV has also been amended to contain the currently dated certifications from the Company's principal executive officer and principal financial officer as required by Section 302 and 906 of the Sarbanes-Oxley Act of 2002. The certifications of the Company's principal executive officer and principal financial officer are attached to this Amended Filing as Exhibits 31.1, 31.2, and 32.1. On May 19, 2008, the Company filed its Quarterly Report on Form 10-Q for the quarter ended March 31, 2008 and prospectively corrected the quarterly consolidated financial statements with respect to the quarter ended March 31, 2007 in such report. In addition to the updated Selected Quarterly Financial Data included in Part II, Item 8 of this Amended Filing, the Company plans to prospectively correct the quarterly consolidated financial statements with respect to the quarters ended June 30, 2007 and September 30, 2007 in conjunction with the filing of the 2008 quarterly reports for the respective quarters.


THE MACERICH COMPANY
ANNUAL REPORT ON FORM 10-K/A
FOR THE YEAR ENDED DECEMBER 31, 2007
INDEX

 
    
   Page
Part I    

Item 1.
 
Business
 
1
Item 1A.   Risk Factors   14
Item 1B.   Unresolved Staff Comments   21
Item 2.   Properties   22
Item 3.   Legal Proceedings   31
Item 4.   Submission of Matters to a Vote of Security Holders   31

Part II
 
 

Item 5.
 
Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
 
32
Item 6.   Selected Financial Data   34
Item 7.   Management's Discussion and Analysis of Financial Condition and Results of Operations   38
Item 7A.   Quantitative and Qualitative Disclosures About Market Risk   54
Item 8.   Financial Statements and Supplementary Data   55
Item 9.   Changes in and Disagreements With Accountants on Accounting and Financial Disclosure   55
Item 9A.   Controls and Procedures   55
Item 9A(T).   Controls and Procedures   59
Item 9B.   Other Information   59

Part III
 
 

Item 10.
 
Directors and Executive Officers and Corporate Governance
 
60
Item 11.   Executive Compensation   60
Item 12.   Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters   60
Item 13.   Certain Relationships and Related Transactions, and Director Independence   61
Item 14.   Principal Accountant Fees and Services   61

Part IV
 
 

Item 15.
 
Exhibits and Financial Statement Schedules
 
62

Signatures
 
152


PART I

IMPORTANT FACTORS RELATED TO FORWARD-LOOKING STATEMENTS

        This Annual Report on Form 10-K/A of the Macerich Company (the "Company") contains or incorporates statements that constitute forward-looking statements within the meaning of the federal securities laws. Any statements that do not relate to historical or current facts or matters are forward-looking statements. You can identify some of the forward-looking statements by the use of forward-looking words, such as "may," "will," "could," "should," "expects," "anticipates," "intends," "projects," "predicts," "plans," "believes," "seeks," and "estimates" and variations of these words and similar expressions. Statements concerning current conditions may also be forward-looking if they imply a continuation of current conditions. Forward-looking statements appear in a number of places in this Form 10-K/A and include statements regarding, among other matters:

        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 the industry to differ materially from the Company's future results, performance or achievements, or those of the industry, expressed or implied in such forward-looking statements. You are urged to carefully review the disclosures we make concerning risks and other factors that may affect our business and operating results, including those made in "Item 1A. Risk Factors" of this Annual Report on Form 10-K/A, as well as our other reports filed with the Securities and Exchange Commission. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this document. The Company does not intend, and undertakes no obligation, to update any forward-looking information to reflect events or circumstances after the date of this document or to reflect the occurrence of unanticipated events.

ITEM 1.    BUSINESS

General

        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, 2007, the Operating Partnership owned or had an ownership interest in 74 regional shopping centers and 20 community shopping centers aggregating approximately 80.7 million square feet of gross leasable area ("GLA"). These 94 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,

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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 Annual Report on Form 10-K/A include the Company, those entities owned or controlled by the Company and predecessors of the Company, unless the context indicates otherwise.

        Financial information regarding the Company for each of the last three fiscal years is contained in the Company's Consolidated Financial Statements included in Item 15. Exhibits and Financial Statement Schedules.

Recent Developments

        On March 16, 2007, the Company repurchased 807,000 common shares for $75.0 million concurrent with the offering of convertible senior notes (See "Financing Activity"). These shares were repurchased pursuant to the Company's stock repurchase program authorized by the Company's Board of Directors on March 9, 2007. This repurchase program ended on March 16, 2007 because the maximum shares allowed to be repurchased under the program was reached.

        On September 5, 2007, the Company purchased the remaining 50% outside ownership interest in Hilton Village, a 96,546 square foot specialty center in Scottsdale, Arizona. The total purchase price of $13.5 million was funded by cash, borrowings under the Company's line of credit and the assumption of the $8.6 million mortgage note payable on the property.

        On December 17, 2007, the Company purchased a portfolio of fee simple and/or ground leasehold interests in 39 freestanding Mervyn's department stores located in the Southwest United States for $400.2 million. The purchase price was funded by cash and borrowings under the Company's line of credit. Concurrent with the acquisition, the Company entered into 39 individual agreements to leaseback the properties to Mervyns from terms of 14 to 20 years. The Company has designated the 27 freestanding Mervyn's stores located at shopping centers not owned or managed by the Company as available for sale.

        On January 1, 2008, MACWH, LP, a subsidiary of the Operating Partnership, at the election of the holders, redeemed the 3.4 million Class A participating convertible preferred units ("PCPUs"). As a result of the redemption, the Company received the 16.32% minority interest in the portion of the Wilmorite portfolio that included Danbury Fair Mall, Freehold Raceway Mall, Great Northern Mall, Rotterdam Square, Shoppingtown Mall, Towne Mall, Tysons Corner Center and Wilton Mall, collectively referred to as the "Non-Rochester Properties", for a total consideration of $224 million, in exchange for the Company's ownership interest in the portion of the Wilmorite portfolio that consisted of Eastview Commons, Eastview Mall, Greece Ridge Center, Marketplace Mall and Pittsford Plaza, collectively referred to as the "Rochester Properties." The Company recognized a gain of $99.3 million on the exchange based on the difference between the fair value of the additional interest acquired in the Non-Rochester Properties and the carrying value of the Rochester Properties, net of minority interest. This exchange is referred herein as the "Rochester Redemption."

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        On January 10, 2008, the Company in a 50/50 joint venture, acquired The Shops at North Bridge, a 680,933 square foot urban shopping center in Chicago, Illinois, for a total purchase price of $515.0 million. The Company's share of the purchase price was funded by the assumption of a pro rata share of the $205.0 million fixed rate mortgage on the Center and by borrowings under the Company's line of credit.

        On January 2, 2007, the Company paid off the $75.0 million loan on Paradise Valley Mall. The repayment was funded by the proceeds from the sale of Citadel Mall, Northwest Arkansas Mall and Crossroads Mall on December 29, 2006.

        On January 23, 2007, the Company exercised an earn-out provision under the loan agreement on Valley River Center and borrowed an additional $20.0 million at a fixed rate of 5.64%. The loan proceeds were used to pay down the Company's line of credit and for general corporate purposes.

        On March 16, 2007, the Company issued $950.0 million in convertible senior notes ("Senior Notes") that mature on March 15, 2012. The Senior Notes bear interest at 3.25%, payable semiannually, are senior unsecured debt of the Company and are guaranteed by the Operating Partnership. The Senior Notes had an initial conversion price of $111.48. The proceeds were used to payoff the $250 million term loan, and to pay down the Company's line of credit. (See "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations--Liquidity and Capital Resources").

        In connection with the issuance of the Senior Notes, the Company purchased two capped calls ("Capped Calls") from affiliates of the initial purchasers of the Senior Notes for approximately $59.9 million. The Capped Calls effectively increased the conversion price of the Senior Notes to approximately $130.06, which represented a 40% premium to the March 12, 2007 closing price of $92.90 per common share of the Company. The Capped Calls are expected to generally reduce the potential dilution upon exchange of the Senior Notes in the event the market value per share of the Company's common stock, as measured under the terms of the relevant settlement date, is greater than the strike price of the Capped Calls.

        On March 23, 2007, the Company used borrowings under the line of credit to pay off the $51.0 million interest only loan on Tucson La Encantada. On May 15, 2007, the Company placed a new $78.0 million loan on that property that bears interest at a fixed rate of 5.60% and matures on June 1, 2012. The loan proceeds were used to pay down the Company's line of credit and for general corporate purposes.

        On May 23, 2007, the Company borrowed an additional $72.5 million under the loan agreement on Deptford Mall at a fixed rate of 5.38%. The loan proceeds were used to pay down the Company's line of credit and for general corporate purposes.

        On July 2, 2007, the Company's joint venture in Scottsdale Fashion Square refinanced the loan on the property. The two existing loans on the property were replaced with a new $550.0 million loan bearing interest at a fixed rate of 5.66% and maturing July 8, 2013. The Company used its pro rata share of proceeds to pay down the Company's line of credit and for general corporate purposes.

        The first phase of SanTan Village Regional Center, in Gilbert, Arizona, opened on October 26, 2007. The 1.2 million square foot open-air super-regional shopping center opened with over 90% of the retail space committed, with Dillard's and more than 85 specialty retailers joining Harkins Theatres, which opened March 2007. The balance of the project, which includes Dick's Sporting Goods, Best Buy, Barnes & Noble and up to 13 restaurants, is expected to open in phases throughout 2008.

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        The first phase of The Promenade at Casa Grande, a 1 million square foot, 130 acre department store anchored hybrid center, located in Casa Grande, Arizona, opened on November 16, 2007. With ninety percent committed, the first phase of the project has approximately 550,000 square feet of mini-majors, including Dillard's, Target, J.C.Penney, Kohl's, Petsmart and Staples. The balance of the Center is expected to continue to open in phases throughout 2008.

        The first phase of The Marketplace at Flagstaff Mall, a 435,000 square foot lifestyle expansion, in Flagstaff, Arizona, began opening in phases on October 19, 2007. Phase I delivered approximately 267,538 square feet of new retail space including Best Buy, Home Depot, Linens n Things, Marshalls, Old Navy, Petco and Shoe Pavilion. Phase II, which will consist of village shops, an entertainment plaza and pad space, is expected to be completed in 2009-2010.

        On November 8, 2007, Freehold Raceway Mall opened the first phase of a combined expansion and renovation project that will add 96,000 square feet of new retail and restaurant uses to this regional center in New Jersey. The expansion, which is 85% committed, added nine new-to-market additions including: Borders, The Cheesecake Factory, P.F. Chang's, Jared The Galleria of Jewelry, The Territory Ahead, Ann Taylor, Chico's, Coldwater Creek and White House/Black Market. The balance of the project is expected to open throughout 2008.

        Scottsdale Fashion Square, the 2 million square foot luxury flagship, is undergoing a $130 million redevelopment and expansion. Phase I of the redevelopment and expansion began September 2007 with demolition of the vacant anchor space acquired as a result of the Federated-May merger and an adjacent parking structure. A 60,000 square foot Barneys New York, the high-end retailer's first Arizona location, will anchor an additional 100,000 square feet of up to 30 new luxury shops, which is planned to open in Fall 2009 in an urban setting on Scottsdale Road. New first-to-market deals include Salvatore Ferragamo, Grand Luxe Café, CH Carolina Herrera, and Michael Kors. First-to-market retailers opening in the Spring 2008 will include Bottega Veneta, Jimmy Choo and Marciano.

        Construction continues on the combined redevelopment, expansion and interior renovation of The Oaks, an upscale 1.0 million square foot super-regional shopping center in California's affluent Thousand Oaks. The market's first Nordstrom department store is under construction. Construction of a first-to-market, 138,000 square foot Nordstrom department store, two-level open-air retail, dining and entertainment venue and new multi-level parking structure at The Oaks continues on schedule toward a phased completion beginning Fall 2008.

        In December 2007, the Company received full entitlements to proceed with plans for a redevelopment of Santa Monica Place. The regional center will be redeveloped as an open-air shopping and dining environment that will connect with the popular Third Street Promenade. The Santa Monica Place redevelopment has started and is moving forward with a projected Fall 2009 completion.

The Shopping Center Industry

        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

4

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.

        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

        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 and Dispositions").

        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.

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        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 provides property management and leasing services for third parties. The Company currently manages four malls for third party owners on a fee basis. In addition, the Company manages four community centers for a related party.

        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 pursues 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").

        As of December 31, 2007, the Centers consist of 74 Regional Shopping Centers and 20 Community Shopping Centers aggregating approximately 80.7 million square feet of GLA. The 74 Regional Shopping Centers in the Company's portfolio average approximately 991,000 square feet of GLA and range in size from 2.2 million square feet of GLA at Tysons Corner Center to 323,455 square feet of GLA at Panorama Mall. The Company's 20 Community Shopping Centers have an average of approximately 249,000 square feet of GLA. After giving effect to the Rochester Redemption and the acquisition of The Shops at North Bridge (See Recent Developments), the Centers presently include 318 Anchors totaling approximately 41.6 million square feet of GLA and approximately 9,200 Mall and Freestanding Stores totaling approximately 35.1 million square feet of GLA.

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

        In making leasing decisions, the Company believes that retailers consider the following material factors relating to a center: quality, design and location, including consumer demographics; rental rates; type and quality of Anchors and retailers at the center; and management and operational experience and strategy of the center. The Company believes it is able to compete effectively for retail tenants in its local markets based on these criteria in light of the overall size, quality and diversity of its portfolio of Centers.

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        The Centers derived approximately 95.1% of their total minimum rents for the year ended December 31, 2007 from Mall and Freestanding Stores. One tenant accounted for approximately 3.3% of minimum rents of the Company, and no other single tenant accounted for more than 2.7% of minimum rents as of December 31, 2007.

        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, 2007:

Tenant
   Primary DBA's
   Number of Locations in the Portfolio
   % of Total Annual Minimum Rents as of December 31, 2007(1)
  
Mervyn's(2)   Mervyn's   45   3.3 %
The Gap, Inc.    Gap, Banana Republic, Old Navy   103   2.7 %
Limited Brands, Inc.    Victoria Secret, Bath and Body   146   2.3 %
Foot Locker, Inc.    Footlocker, Champs Sports, Lady Footlocker   161   2.0 %
AT&T Mobility, LLC(3)   AT&T Wireless, Cingular Wireless   33   1.5 %
Abercrombie & Fitch Co.    Abercrombie & Fitch   71   1.5 %
Luxottica Group S.P.A.    Lenscrafters, Sunglass Hut   150   1.2 %
Zale Corporation   Zales, Piercing Pagoda, Gordon's Jewelers   120   1.2 %
American Eagle Outfitters, Inc.    American Eagle Outfitters   57   1.0 %
Signet Group   Kay Jewelers, Weisfield Jewelers   76   1.0 %
(1)
The above table includes The Shops at North Bridge and excludes the Rochester Properties.

(2)
Fee simple and/or ground leasehold interests in thirty-nine Mervyn's stores were acquired on December 17, 2007.

(3)
Includes AT&T Mobility office headquarters located at Redmond Town Center.

        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 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, 2007 comprises 69.1% 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 2007 was $43.23 per square foot, or 26.4% higher than the average base rent for all Mall and Freestanding Stores at the consolidated Centers, 10,000 square feet and under, expiring during 2007 of $34.21 per square foot.

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        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:            
2007   $ 38.49   $ 43.23   $ 34.21
2006   $ 37.55   $ 38.40   $ 31.92
2005   $ 34.23   $ 35.60   $ 30.71

Joint Venture Centers:
 
 
 
 
 
 
2007   $ 38.72   $ 47.12   $ 34.87
2006   $ 37.94   $ 41.43   $ 36.19
2005   $ 36.35   $ 39.08   $ 30.18

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        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,
  
 
   2007
   2006
   2005
  
Consolidated Centers:              
Minimum Rents   8.0 % 8.1 % 8.3 %
Percentage Rents   0.4 % 0.4 % 0.5 %
Expense Recoveries(1)   3.8 % 3.7 % 3.6 %
   
 
 
 
    12.2 % 12.2 % 12.4 %
   
 
 
 

Joint Venture Centers:
 
 
 
 
 
 
 
Minimum Rents   7.3 % 7.2 % 7.4 %
Percentage Rents   0.5 % 0.6 % 0.5 %
Expense Recoveries(1)   3.2 % 3.1 % 3.0 %
   
 
 
 
    11.0 % 10.9 % 10.9 %
   
 
 
 

        The following tables show scheduled lease expirations (for Centers owned as of December 31, 2007) 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(1)
   Ending Base Rent per Square Foot of Expiring Leases(1)
2008   486   992,151   12.87 % $ 35.14
2009   332   630,841   8.18 % $ 38.93
2010   419   808,960   10.49 % $ 41.24
2011   404   1,020,218   13.23 % $ 37.76
2012   291   773,163   10.03 % $ 37.20
2013   210   499,179   6.47 % $ 41.65
2014   241   562,547   7.30 % $ 49.88
2015   253   686,474   8.90 % $ 46.69
2016   258   685,204   8.89 % $ 40.56
2017   219   664,921   8.62 % $ 38.92

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Joint Venture Centers (at 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(1)
   Ending Base Rent per Square Foot of Expiring Leases(1)
2008   493   497,910   12.42 % $ 37.61
2009   393   428,120   10.68 % $ 37.97
2010   416   425,003   10.60 % $ 41.88
2011   369   434,833   10.85 % $ 38.88
2012   301   322,453   8.05 % $ 41.55
2013   225   262,946   6.56 % $ 43.02
2014   221   266,419   6.65 % $ 42.88
2015   232   291,919   7.28 % $ 43.73
2016   288   356,072   8.88 % $ 47.29
2017   236   352,911   8.81 % $ 42.64

        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 4.9% of the Company's total minimum rent for the year ended December 31, 2007.

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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, 2007, giving effect to the Rochester Redemption and the acquisition of The Shops at North Bridge:

Name(1)
   Number of
Anchor Stores(1)
   GLA Owned
by Anchor(1)
   GLA Leased
by Anchor(1)
   Total GLA
Occupied by Anchor(1)
Macy's Inc.                 
  Macy's(2)   54   6,046,168   2,920,001   8,966,169
  Bloomingdale's   1   --   255,888   255,888
   
 
 
 
    Total   55   6,046,168   3,175,889   9,222,057
Sears Holdings Corporation                
  Sears   48   4,462,305   2,079,671   6,541,976
  Great Indoors, The   1   --   131,051   131,051
  K-Mart   1   --   86,479   86,479
   
 
 
 
    Total   50   4,462,305   2,297,201   6,759,506
J.C. Penney   45   2,351,211   3,664,424   6,015,635
Dillard's   26   3,574,852   918,235   4,493,087
Mervyn's(3)   45   233,282   3,365,571   3,598,853
Nordstrom(4)   13   699,127   1,526,369   2,225,496
Target(5)   13   1,125,041   564,279   1,689,320
The Bon-Ton Stores, Inc.                
  Younkers   6   --   609,177   609,177
  Bon-Ton, The   1   --   71,222   71,222
  Herberger's   4   188,000   214,573   402,573
   
 
 
 
    Total   11   188,000   894,972   1,082,972
Gottschalks   7   332,638   553,242   885,880
Boscov's   3   --   476,067   476,067
Wal-Mart   3   371,527   100,709   472,236
Neiman Marcus   3   120,000   321,450   441,450
Lord & Taylor   3   120,635   199,372   320,007
Home Depot   3   120,530   274,402   394,932
Kohl's   3   165,279   114,359   279,638
Burlington Coat Factory   3   186,570   74,585   261,155
Dick's Sporting Goods(6)   3   --   257,241   257,241
Von Maur   3   186,686   59,563   246,249
Belk, Inc.                
  Belk   3   --   200,925   200,925
La Curacao   1   164,656   --   164,656
Barneys New York(7)   2   --   141,398   141,398
Lowe's   1   135,197   --   135,197
Best Buy   2   129,441   --   129,441
Saks Fifth Avenue   1   --   92,000   92,000
L.L. Bean   1   --   75,778   75,778
Sports Authority   1   --   52,250   52,250
Bealls   1   --   40,000   40,000
Richman Gordman 1/2 Price   1   --   60,000   60,000
Vacant(8)   12   --   1,426,844   1,426,844
   
 
 
 
Total   318   20,713,145   20,927,125   41,640,270
   
 
 
 
(1)
As a result of the Rochester Redemption on January 1, 2008, anchor tenants for the Rochester Properties are excluded from the above table. The Nordstrom anchor at The Shops at North Bridge acquired in January 2008 is included in the above table.

(2)
Macy's is scheduled to close their 300,196 square foot store at Valley View Center in March 2008.

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(3)
This includes 39 Mervyn's stores acquired on December 17, 2007. Mervyn's is scheduled to open a 150,000 square foot store at Inland Center in Fall 2008.

(4)
Nordstrom is scheduled to open a 138,000 square foot store at The Oaks in 2009.

(5)
Target is scheduled to open a 180,000 square foot store at Pacific View in Spring 2008.

(6)
Dick's Sporting Goods is scheduled to open a 70,000 square foot store at Arrowhead Towne Center in Fall 2008 and a 90,000 square foot store at Washington Square in Spring 2008.

(7)
Barneys New York is scheduled to open a 60,000 square foot store at Scottsdale Fashion Square in 2009.

(8)
The Company is contemplating various replacement tenant and/or redevelopment opportunities for these vacant sites.

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:


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 specific earthquake insurance on the Centers located in earthquake-prone zones, 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 $106.6 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

12


$10,000 deductible and a combined annual aggregate loss of $800 million. 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, 2007, the Company and the Management Companies employed 3,014 persons, including executive officers (11), personnel in the areas of acquisitions and business development (26), property management/marketing (489), leasing (200), redevelopment/development (81), financial services (281) and legal affairs (65). In addition, in an effort to minimize operating costs, the Company generally maintains its own security and guest services staff (1,842) and in some cases maintenance staff (19). Unions represent six of these employees. The Company primarily engages a third party to handle maintenance at the Centers. 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. Information provided on our website is not incorporated by reference into this Form 10-K/A.

        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.

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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 want to sell one or more of our Centers, we may not be able to dispose of it in the desired time period and may receive less consideration than we originally invested in the Center. Furthermore, real estate investments are relative illiquid. This characteristic tends to limit our ability to vary our portfolio promptly in response to changes in economic or other conditions.

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 eight 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.

We are in a competitive business.

        There are numerous owners and developers of real estate that compete with us in our trade areas. There are six other publicly traded mall companies and several large private mall companies, any of which under certain circumstances could compete against us for an acquisition, an Anchor or a tenant. In addition, private equity firms compete with us 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 adverse impact on our ability to lease space and on the level of rents 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,

14


factory outlet centers, discount shopping clubs and mail-order services that could adversely affect our revenues.

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.

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.

        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

15

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.

We have substantial debt that could affect our future operations.

        Our total outstanding loan indebtedness at December 31, 2007 was $7.6 billion (including $1.8 billion of our pro rata share of joint venture debt). As a result of this substantial indebtedness, we are required to use a material portion of our cash flow to service principal and interest on our debt, which limits the cash flow available for other business opportunities. In addition, we are subject to the risks normally associated with debt financing, including the risk that our cash flow from operations will be insufficient to meet required debt service and that rising interest rates could adversely affect our debt service costs. A majority of our Centers are mortgaged to secure payment of indebtedness, and if income from the Center is insufficient to pay that indebtedness, the Center could be foreclosed upon by the mortgagee resulting in a loss of income and a decline in our total asset value.

We depend on external financings for our growth and ongoing debt service requirements.

        We depend primarily on external financings, principally debt financings, to fund the growth of our business and to ensure that we can meet ongoing maturities of our outstanding debt. Our access to financing depends on the willingness of banks to lend to us and conditions in the capital markets in general. We cannot assure you that we will be able to obtain the financing we need for future growth or to meet our debt service as obligations mature, or that the financing available to us will be on acceptable terms.

Inflation may adversely affect our financial condition and results of operations.

        If inflation increases in the future, we may experience any or all of the following:

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.

16

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, 2007, 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.

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.

17

        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.

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. Furthermore, certain Joint Venture Centers have debt that could become recourse debt to us if the Joint Venture Center is unable to discharge such debt obligation.

Our holding company structure makes us 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 Partnership (other than some

18


non-recourse liabilities and some liabilities to the partners) exceed the fair value of the assets of the Operating Partnership. An inability to make cash distributions from the Operating Partnership could jeopardize our ability to maintain qualification as a REIT.

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 $106.6 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. 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.

        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

19

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 or a group of stockholders (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:


        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

20

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

21

ITEM 2.    PROPERTIES

        The following table sets forth certain information regarding the Centers and other locations that are wholly-owned or partly owned by the Company:

Company's
Ownership(1)
   Name of Center/
Location(2)
   Year of
Original
Construction/
Acquisition
   Year of Most
Recent
Expansion/
Renovation
   Total
GLA(3)
   Mall and
Freestanding GLA
   Percentage
of Mall and
Freestanding
GLA Leased
   Anchors
   Sales Per
Square
Foot(4)
  
WHOLLY OWNED:  
100 % Capitola Mall(5)
Capitola, California		   1977/1995   1988   586,653   196,936   92.7 % Gottschalks, Macy's, Mervyn's, Sears   $ 351  
100 % Chandler Fashion Center
Chandler, Arizona		   2001/2002   --   1,325,450   640,290   97.6 % Dillard's, Macy's, Nordstrom, Sears     653  
100 % Chesterfield Towne Center(6)
Richmond, Virginia		   1975/1994   2000   1,035,593   426,858   80.0 % Dillard's, Macy's, Sears, J.C. Penney     349  
100 % Danbury Fair Mall(6)(24)
Danbury, Connecticut		   1986/2005   1991   1,295,086   498,878   97.1 % J.C. Penney, Lord & Taylor, Macy's, Sears     589  
100 % Deptford Mall
Deptford, New Jersey		   1975/2006   1990   1,033,224   336,782   97.3 % Boscov's, J.C. Penney, Macy's, Sears     521  
100 % Fiesta Mall(7)
Mesa, Arizona		   1979/2004   2007   827,873   309,682   93.0 % Dillard's, Macy's, Sears     375  
100 % Flagstaff Mall
Flagstaff, Arizona		   1979/2002   2007   343,599   139,587   92.6 % Dillard's, J.C. Penney, Sears     382  
100 % FlatIron Crossing(6)
Broomfield, Colorado		   2000/2002   --   1,505,617   741,876   91.6 % Dillard's, Macy's, Nordstrom, Dick's Sporting Goods     472  
100 % Freehold Raceway Mall(24)
Freehold, New Jersey		   1990/2005   2007   1,654,364   862,740   96.5 % J.C. Penney, Lord & Taylor, Macy's, Nordstrom, Sears     520  
100 % Fresno Fashion Fair
Fresno, California		   1970/1996   2006   955,807   394,926   99.2 % Gottschalks, J.C. Penney, Macy's (two)     545  
100 % Great Northern Mall(6)(24)
Clay, New York		   1988/2005   --   893,970   563,982   94.7 % Macy's, Sears     268  
100 % Green Tree Mall
Clarksville, Indiana		   1968/1975   2005   797,126   291,541   77.7 % Dillard's, J.C. Penney, Sears, Burlington Coat Factory     411  
100 % La Cumbre Plaza(5)
Santa Barbara, California		   1967/2004   1989   495,736   178,736   88.3 % Macy's, Sears     446  
100 % Northgate Mall(5)
San Rafael, California		   1964/1986   1987   732,543   262,212   92.6 % Macy's, Mervyn's, Sears     397  
100 % Northridge Mall
Salinas, California		   1972/2003   1994   892,859   355,879   98.5 % J.C. Penney, Macy's, Mervyn's, Sears     350  
100 % Pacific View
Ventura, California		   1965/1996   2001   1,059,916   411,102   73.7 % J.C. Penney, Macy's, Sears, Target(8)     433  
100 % Panorama Mall
Panorama, California		   1955/1979   2005   323,455   158,455   92.9 % Wal-Mart     358  
100 % Paradise Valley Mall(6)
Phoenix, Arizona		   1979/2002   1990   1,222,507   417,079   92.1 % Dillard's, J.C. Penney, Macy's, Sears     368  
100 % Prescott Gateway
Prescott, Arizona		   2002/2002   2004   589,025   344,837   89.8 % Dillard's, Sears, J.C. Penney     276  
100 % Queens Center(5)
Queens, New York		   1973/1995   2004   961,559   406,792   97.7 % J.C. Penney, Macy's     845  
100 % Rimrock Mall
Billings, Montana		   1978/1996   1999   605,759   294,089   87.6 % Dillard's (two), Herberger's, J.C. Penney     380  
100 % Rotterdam Square(24)
Schenectady, New York		   1980/2005   1990   582,939   273,164   89.8 % Macy's, K-Mart, Sears     260  
100 % Salisbury, Centre at
Salisbury, Maryland		   1990/1995   2005   852,205   354,789   94.8 % Boscov's, J.C. Penney, Macy's, Sears     371  
100 % Somersville Towne Center
Antioch, California		   1966/1986   2004   502,709   174,487   92.5 % Sears, Gottschalks, Mervyn's, Macy's     405  
100 % South Plains Mall(5)
Lubbock, Texas		   1972/1998   1995   1,142,545   400,758   88.5 % Bealls, Dillard's (two), J.C. Penney, Mervyn's, Sears     370  
100 % South Towne Center
Sandy, Utah		   1987/1997   1997   1,268,136   491,624   95.6 % Dillard's, J.C. Penney, Mervyn's, Target, Macy's     433  
100 % Towne Mall(24)
Elizabethtown, Kentucky		   1985/2005   1989   353,232   182,360   91.2 % J.C. Penney, Belk, Sears     298  
100 % Twenty Ninth Street(5)
Boulder, Colorado		   1963/1979   2007   827,497   535,843   91.6 % Macy's, Home Depot     428  
100 % Valley River Center
Eugene, Oregon		   1969/2006   2007   910,841   334,777   89.6 % Sports Authority, Gottschalks, Macy's, J.C. Penney     463  

22

100 % Valley View Center
Dallas, Texas		   1973/1996   2004   1,635,449   577,552   95.9 % Dillard's, Macy's(9), J.C. Penney, Sears   $ 273  
100 % Victor Valley, Mall of
Victorville, California		   1986/2004   2001   543,295   269,446   94.7 % Gottschalks, J.C. Penney, Mervyn's, Sears     480  
100 % Vintage Faire Mall
Modesto, California		   1977/1996   2001   1,084,422   384,503   97.2 % Gottschalks, J.C. Penney, Macy's (two), Sears     562  
100 % Westside Pavilion
Los Angeles, California		   1985/1998   2007   739,746   381,618   95.8 % Nordstrom, Macy's     481  
100 % Wilton Mall at Saratoga(6)(24)
Saratoga Springs, New York		   1990/2005   1998   745,267   457,201   96.0 % The Bon-Ton, J.C. Penney, Sears     325  
               
 
               
    Total/Average Wholly Owned   30,326,004   13,051,381   92.7 %     $ 453  
               
 
               

JOINT VENTURES (VARIOUS PARTNERS):
 
33.3 % Arrowhead Towne Center
Glendale, Arizona		   1993/2002   2004   1,204,862   396,448   98.5 % Dick's Sporting Goods(10), Dillard's, Macy's, J.C. Penney, Sears, Mervyn's   $ 611  
50 % Biltmore Fashion Park
Phoenix, Arizona		   1963/2003   2006   608,934   303,934   78.4 % Macy's, Saks Fifth Avenue     821  
50 % Broadway Plaza(5)
Walnut Creek, California		   1951/1985   1994   697,981   252,484   97.8 % Macy's (two), Nordstrom     768  
50.1 % Corte Madera, Village at
Corte Madera, California		   1985/1998   2005   439,573   221,573   90.4 % Macy's, Nordstrom     875  
50 % Desert Sky Mall
Phoenix, Arizona		   1981/2002   2007   893,457   282,962   93.6 % Sears, Dillard's, Burlington Coat Factory, Mervyn's, La Curacao     323  
50 % Inland Center(5)
San Bernardino, California		   1966/2004   2004   987,872   204,198   95.0 % Macy's, Sears, Gottschalks, Mervyn's(11)     463  
15 % Metrocenter Mall(5)
Phoenix, Arizona		   1973/2005   2006   1,122,959   595,710   90.2 % Dillard's, Macy's, Sears     345  
50 % NorthPark Center(5)
Dallas, Texas		   1965/2004   2005   1,963,326   911,006   96.8 % Dillard's, Macy's, Neiman Marcus, Nordstrom, Barneys New York     694  
50 % Ridgmar
Fort Worth, Texas		   1976/2005   2000   1,277,280   403,307   82.0 % Dillard's, Macy's, J.C. Penney, Neiman Marcus, Sears     323  
50 % Scottsdale Fashion Square(12)
Scottsdale, Arizona		   1961/2002   2007   1,840,182   857,902   94.1 % Barneys New York(13) Dillard's, Macy's Nordstrom, Neiman Marcus     736  
33.3 % Superstition Springs Center(5)
Mesa, Arizona		   1990/2002   2002   1,285,839   439,300   98.7 % Burlington Coat Factory, Dillard's, Macy's, J.C. Penney, Sears, Mervyn's, Best Buy     425  
50 % Tysons Corner Center(5)(24)
McLean, Virginia		   1990/2005   2005   2,198,039   1,309,797   98.8 % Bloomingdale's, Macy's, L.L. Bean, Lord & Taylor, Nordstrom     721  
19 % West Acres
Fargo, North Dakota		   1972/1986   2001   970,707   418,152   99.2 % Macy's, Herberger's, J.C. Penney, Sears     475  
               
 
               
    Total/Average Joint Ventures (Various Partners)   15,491,011   6,596,773   94.5 %       596  
               
 
               

PACIFIC PREMIER RETAIL TRUST PROPERTIES:
 
51 % Cascade Mall
Burlington, Washington		   1989/1999   1998   587,174   262,938   90.7 % Macy's (two), J.C. Penney, Sears, Target     355  
51 % Kitsap Mall(5)
Silverdale, Washington		   1985/1999   1997   846,940   386,957   95.0 % Macy's, J.C. Penney, Kohl's, Sears     407  
51 % Lakewood Mall(5)(6)
Lakewood, California		   1953/1975   2001   2,088,228   980,244   96.0 % Home Depot, Target, J.C. Penney, Macy's, Mervyn's     441  
51 % Los Cerritos Center(6)
Cerritos, California		   1971/1999   1998   1,290,420   489,139   95.0 % Macy's, Mervyn's, Nordstrom, Sears     553  
51 % Redmond Town Center(5)(12)
Redmond, Washington		   1997/1999   2000   1,283,683   1,173,683   97.6 % Macy's     382  
51 % Stonewood Mall(5)
Downey, California		   1953/1997   1991   930,655   359,908   97.8 % J.C. Penney, Mervyn's, Macy's, Sears     449  

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51 % Washington Square
Portland, Oregon		   1974/1999   2005   1,455,317   520,290   88.1 % J.C. Penney, Macy's, Dick's Sporting Goods(10), Nordstrom, Sears   $ 709  
               
 
               
    Total/Average Pacific Premier Retail Trust Properties   8,482,417   4,173,159   95.1 %     $ 485  
               
 
               

SDG MACERICH PROPERTIES, L.P. PROPERTIES:
 
50 % Eastland Mall(5)
Evansville, Indiana		   1978/1998   1996   1,040,025   550,881   94.9 % Dillard's, J.C. Penney, Macy's   $ 371  
50 % Empire Mall(5)
Sioux Falls, South Dakota		   1975/1998   2000   1,363,110   617,588   96.1 % Macy's, J.C. Penney, Richman-Gordmans 1/2 Price, Kohl's, Sears, Target, Younkers     390  
50 % Granite Run Mall
Media, Pennsylvania		   1974/1998   1993   1,036,166   535,357   90.1 % Boscov's, J.C. Penney, Sears     287  
50 % Lake Square Mall
Leesburg, Florida		   1980/1998   1995   553,019   256,982   79.1 % Belk, J.C. Penney, Sears, Target     276  
50 % Lindale Mall
Cedar Rapids, Iowa		   1963/1998   1997   688,394   382,831   90.3 % Sears, Von Maur, Younkers     318  
50 % Mesa Mall
Grand Junction, Colorado		   1980/1998   2003   836,721   395,513   94.0 % Herberger's, J.C. Penney, Mervyn's, Sears, Target     433  
50 % NorthPark Mall
Davenport, Iowa		   1973/1998   2001   1,073,035   422,579   86.7 % J.C. Penney, Dillard's, Sears, Von Maur, Younkers     271  
50 % Rushmore Mall
Rapid City, South Dakota		   1978/1998   1992   832,582   427,922   94.2 % Herberger's, J.C. Penney, Sears, Target     361  
50 % Southern Hills Mall
Sioux City, Iowa		   1980/1998   2003   798,856   485,279   91.0 % Sears, Younkers, J.C. Penney     309  
50 % SouthPark Mall
Moline, Illinois		   1974/1998   1990   1,024,004   445,948   83.8 % J.C. Penney, Sears, Younkers, Von Maur, Dillard's     222  
50 % SouthRidge Mall
Des Moines, Iowa		   1975/1998   1998   869,390   480,638   83.1 % Sears, Younkers, J.C. Penney, Target     182  
50 % Valley Mall(6)
Harrisonburg, Virginia		   1978/1998   1992   505,792   190,714   87.2 % Belk, J.C. Penney, Target     270  
               
 
               
    Total/Average SDG Macerich Properties, L.P. Properties   10,621,094   5,192,232   89.9 %     $ 317  
               
 
               
    Total/Average Joint Ventures   34,594,522   15,962,164   93.2 %     $ 483  
               
 
               
    Total/Average before Community Centers   64,920,526   29,013,545   93.0 %     $ 469  
               
 
               

COMMUNITY / SPECIALTY CENTERS:
 
100 % Borgata, The
Scottsdale, Arizona		   1981/2002   2006   93,628   93,628   83.2 % --   $ 501  
50 % Boulevard Shops
Chandler, Arizona		   2001/2002   2004   180,823   180,823   100.0 % --     421  
75 % Camelback Colonnade
Phoenix, Arizona		   1961/2002   1994   624,101   544,101   99.7 % Mervyn's     330  
100 % Carmel Plaza
Carmel, California		   1974/1998   2006   111,150   111,150   81.5 % --     551  
50 % Chandler Festival
Chandler, Arizona		   2001/2002   --   503,735   368,538   98.6 % Lowe's     287  
50 % Chandler Gateway
Chandler, Arizona		   2001/2002   --   255,289   124,238   100.0 % The Great Indoors     396  
50 % Chandler Village Center
Chandler, Arizona		   2004/2002   2006   273,418   130,285   100.0 % Target     212  
100 % Flagstaff Mall, The Marketplace at
Flagstaff, Arizona		   2007/--   2007   267,538   147,008   100.0 % Home Depot     N/A  
100 % Hilton Village(5)(12)(23)
Scottsdale, Arizona		   1982/2002   --   96,546   96,546   97.1 % --     500  
24.5 % Kierland Commons
Scottsdale, Arizona		   1999/2005   2003   435,022   435,022   100.0 % --     755  
100 % Paradise Village Office Park II
Phoenix, Arizona		   1982/2002   --   46,834   46,834   97.2 % --     N/A  
34.9 % SanTan Village Power Center
Gilbert, Arizona		   2004/2004   2007   491,037   284,510   100.0 % Wal-Mart     268  

24

100 % Tucson La Encantada
Tucson, Arizona		   2002/2002   2005   250,624   250,624   89.5 % --   $ 672  
100 % Village Center
Phoenix, Arizona		   1985/2002   --   170,801   59,055   100.0 % Target     325  
100 % Village Crossroads
Phoenix, Arizona		   1993/2002   --   185,186   84,477   91.6 % Wal-Mart     286  
100 % Village Fair
Phoenix, Arizona		   1989/2002   --   271,417   207,817   97.1 % Best Buy     235  
100 % Village Plaza
Phoenix, Arizona		   1978/2002   --   79,754   79,754   96.8 % --     314  
100 % Village Square I
Phoenix, Arizona		   1978/2002   --   21,606   21,606   100.0 % --     185  
100 % Village Square II(5)
Phoenix, Arizona		   1978/2002   --   146,193   70,393   96.4 % Mervyn's     210  
               
 
               
    Total/Average Community / Specialty Centers   4,504,702   3,336,409   97.2 %       464  
               
 
               
    Total before major development and redevelopment properties and other assets   69,425,228   32,349,954   93.4 %       468  
               
 
               

MAJOR DEVELOPMENT AND REDEVELOPMENT PROPERTIES:
 
51.3 % Promenade at Casa Grande(14)
Casa Grande, Arizona		   2007/--   2007 ongoing   827,726   389,976     (15) Dillard's, J.C. Penney, Kohl's, Target     N/A  
84.7 % SanTan Village Regional Center(16)
Gilbert, Arizona		   2007/--   2007 ongoing   788,510   588,510     (15) Dillard's     N/A  
100 % Santa Monica Place(6)(17)
Santa Monica, California		   1980/1999   1990   556,933   273,683     (15) Macy's,     N/A  
100 % Shoppingtown Mall(6)(24)
Dewitt, New York		   1954/2005   2000   1,002,084   519,384     (15) J.C. Penney, Macy's, Sears     N/A  
100 % The Oaks(6)
Thousand Oaks, California		   1978/2002   1993   1,047,095   344,020     (15) J.C. Penney, Macy's (two), Nordstrom(18)     N/A  
               
 
               
    Total Major Development and Redevelopment Properties       4,222,348   2,115,573                
               
 
               

OTHER ASSETS:
 
100 % Mervyn's(19)   Various/2007       2,198,221   --   --   --     N/A  
100 % Paradise Village Investment Co. ground leases   Various/2002       165,968   165,968   80.9 % --     N/A  
30 % Wilshire Building   1978/2007       40,000   40,000   100.0 % --     N/A  
               
 
               
    Total Other Assets       2,404,189   205,968             N/A  
               
 
               
    Total before Rochester Properties       76,051,765   34,671,495                
               
 
               

ROCHESTER PROPERTIES(20)(24):
 
100 % Eastview Mall(25)
Victor, New York		   1971/2005   2003   1,686,690   789,608   N/A   The Bon-Ton, Home Depot, J.C. Penney, Macy's, Lord & Taylor, Sears, Target     N/A  
100 % Greece Ridge Center
Greece, New York		   1967/2005   1993   1,474,093   847,009   N/A   Burlington Coat Factory, The Bon-Ton, J.C. Penney, Macy's, Sears     N/A  
37.5 % Marketplace Mall, The(5)
Henrietta, New York		   1982/2005   1993   1,019,092   504,500   N/A   The Bon-Ton, J.C. Penney, Macy's, Sears     N/A  
63.6 % Pittsford Plaza
Pittsford, New York		   1965/2005   1982   476,167   389,717   N/A   —     N/A  
               
 
               
    Total Rochester Properties       4,656,042   2,530,834                
               
 
               
    Grand Total at December 31, 2007       80,707,807   37,202,329                
               
 
               

25

    January 2008 Acquisition                            
50 % North Bridge, The Shops at(5)(12)(21)
Chicago, Illinois		   1998/2008   --   680,933   420,933   98.5 % Nordstrom   $ 843  
               
 
               
    Post Rochester Redemption and Acquisition of The Shops at North Bridge       76,732,698   35,092,428   93.5 %     $ 471 (22)
               
 
               
(1)
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.

(2)
With respect to 73 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.

(3)
Includes GLA attributable to Anchors (whether owned or non-owned) and Mall and Freestanding Stores as of December 31, 2007.

(4)
Sales are based on reports by retailers leasing Mall and Freestanding Stores for the twelve months ended November 30, 2007 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.

(5)
Portions of the land on which the Center is situated are subject to one or more ground leases.

(6)
These properties have a vacant Anchor location. The Company is contemplating various replacement tenant and/or redevelopment opportunities for these vacant sites.

(7)
The former Macy's at Fiesta Mall was demolished in November 2007. The mall will begin construction on a new Dick's Sporting Goods and a new Best Buy both to open in Spring 2009.

(8)
Target is scheduled to open a 180,000 square foot store at Pacific View in Spring 2008.

(9)
Macy's is scheduled to close their 300,196 square foot store at Valley View Center in March 2008.

(10)
Dick's Sporting Goods is scheduled to open a 70,000 square foot store at Arrowhead Towne Center in Fall 2008 and a 90,000 square foot store at Washington Square in Spring 2008.

(11)
Mervyn's is scheduled to open a 150,000 square foot store at Inland Center in Fall 2008.

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

(13)
Barneys New York is scheduled to open a 60,000 square foot store at Scottsdale Fashion Square in 2009.

(14)
The Promenade at Casa Grande opened in November 2007. The Center will continue to go through further development throughout 2008.

(15)
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.

(16)
SanTan Village Regional Center opened in October 2007. The Center will continue to go through further development throughout 2008.

(17)
Santa Monica Place closed for redevelopment in January 2008. The Macy's will remain open during the redevelopment.

(18)
Nordstrom is scheduled to open a 138,000 square foot store at The Oaks in 2009.

(19)
The Company acquired 39 Mervyn's stores on December 17, 2007. 27 of these Mervyn's stores are located at Centers not owned or managed by the Company. With respect to 20 of these 27 stores, the underlying land controlled by the Company is owned in fee entirely by the Company. With respect to the remaining seven stores, the underlying land controlled by the Company is owned by third parties and leased to the Company pursuant to long-term ground leases. Under the terms of a typical ground lease, the 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 has an option or right to first refusal to purchase the land. The termination dates of the ground leases range from 2036 to 2057.

(20)
On January 1, 2008, these properties were exchanged as part of the Rochester Redemption.

(21)
The Shops at North Bridge was acquired on January 10, 2008.

(22)
Sales per square foot was $472 after giving effect to the Rochester Redemption, but including The Shops at North Bridge and excluding the Community/Specialty Centers.

(23)
On September 3, 2007, the Company purchased the remaining 50% interest in the property.

(24)
The Company's ownership interest reflects its legal ownership interest before minority interest in MACWH, LP, a subsidiary of the Operating Partnership, that owns these properties.

(25)
Eastview Mall includes the adjacent Eastview Commons.

26

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, 2007 (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:                                  
Capitola Mall(2)   Fixed   7.13 % $ 39,310   $ 4,558   5/15/11   $ 32,724   Any Time
Carmel Plaza   Fixed   8.18 %   26,253     2,421   5/1/09     25,642   Any Time
Chandler Fashion Center   Fixed   5.52 %   169,789     12,514   11/1/12     152,097   Any Time
Chesterfield Towne Center(3)   Fixed   9.07 %   55,702     6,580   1/1/24     1,087   Any Time
Danbury Fair Mall   Fixed   4.64 %   176,457     14,698   2/1/11     155,173   Any Time
Deptford Mall(4)   Fixed   5.41 %   172,500     9,382   1/15/13     172,500   8/1/09
Eastview Commons(5)   Fixed   5.46 %   8,814     792   9/30/10     7,942   Any Time
Eastview Mall(5)   Fixed   5.10 %   101,007     7,107   1/18/14     87,927   Any Time
Fiesta Mall   Fixed   4.98 %   84,000     4,152   1/1/15     84,000   Any Time
Flagstaff Mall   Fixed   5.03 %   37,000     1,863   11/1/15     37,000   Any Time
FlatIron Crossing   Fixed   5.26 %   187,736     13,223   12/1/13     164,187   Any Time
Freehold Raceway Mall   Fixed   4.68 %   177,686     14,208   7/7/11     155,678   Any Time
Fresno Fashion Fair   Fixed   6.52 %   63,590     5,244   8/10/08     62,974   Any Time
Great Northern Mall   Fixed   5.19 %   40,285     2,685   12/1/13     35,566   Any Time
Greece Ridge Center(5)(6)   Floating   5.97 %   72,000     4,298   11/6/08     72,000   Any Time
Hilton Village(7)   Fixed   5.27 %   8,530     448   2/1/12     8,600   5/8/09
La Cumbre Plaza(8)   Floating   6.48 %   30,000     1,944   8/9/08     30,000   Any Time
Marketplace Mall(5)   Fixed   5.30 %   39,345     3,204   12/10/17     24,353   Any Time
Northridge Mall   Fixed   4.94 %   81,121     5,438   7/1/09     70,991   Any Time
Pacific View   Fixed   7.23 %   88,857     7,780   8/31/11     83,045   Any Time
Panorama Mall(9)   Floating   6.00 %   50,000     2,999   2/28/10     50,000   Any Time
Paradise Valley Mall   Fixed   5.89 %   21,231     2,193   5/1/09     19,863   Any Time
Pittsford Plaza(5)   Fixed   5.02 %   24,596     1,914   1/1/13     20,673   Any Time
Pittsford Plaza(5)(10)   Fixed   6.52 %   9,148     596   1/1/13     9,148   Any Time
Prescott Gateway   Fixed   5.86 %   60,000     3,468   12/1/11     60,000   12/21/08
Promenade at Casa Grande(11)   Floating   6.35 %   79,964     5,078   8/16/09     79,964   Any Time
Queens Center   Fixed   7.10 %   90,519     7,595   3/1/09     88,651   Any Time
Queens Center(12)   Fixed   7.00 %   217,077     18,013   3/31/13     204,203   2/19/08
Rimrock Mall   Fixed   7.56 %   42,828     3,841   10/1/11     40,025   Any Time
Salisbury, Center at   Fixed   5.83 %   115,000     6,659   5/1/16     115,000   6/29/08
Santa Monica Place   Fixed   7.79 %   79,014     7,272   11/1/10     75,544   Any Time
Shoppingtown Mall   Fixed   5.01 %   44,645     3,828   5/11/11     38,968   Any Time
South Plains Mall   Fixed   8.29 %   58,732     5,448   3/1/09     57,557   Any Time
South Towne Center   Fixed   6.66 %   64,000     4,289   10/10/08     64,000   Any Time
Towne Mall   Fixed   4.99 %   14,838     1,206   11/1/12     12,316   Any Time
Tucson La Encantada(2)(13)   Fixed   5.84 %   78,000     4,555   6/1/12     78,000   Any Time
Twenty Ninth Street(14)   Floating   5.93 %   110,558     6,556   6/5/09     110,558   Any Time
Valley River Center(15)   Fixed   5.60 %   120,000     6,720   2/1/16     120,000   2/1/09
Valley View Center   Fixed   5.81 %   125,000     7,247   1/1/11     125,000   3/14/08
Victor Valley, Mall of   Fixed   4.60 %   51,211     3,645   3/1/08     50,850   Any Time
Village Fair North   Fixed   5.89 %   10,880     983   7/15/08     10,710   Any Time
Vintage Faire Mall   Fixed   7.91 %   64,386     6,099   9/1/10     61,372   Any Time
Westside Pavilion   Fixed   6.74 %   92,037     7,538   7/1/08     91,133   Any Time
Wilton Mall   Fixed   4.79 %   44,624     4,183   11/1/09     40,838   Any Time
           
                   
            $ 3,328,270                    
           
                   

27

Joint Venture Centers
(at Company's Pro Rata Share):		                          
Arrowhead Towne Center (33.3%)   Fixed   6.38 % $ 26,567   $ 2,240   10/1/11   $ 24,256   Any Time
Biltmore Fashion Park (50%)   Fixed   4.70 %   38,201     2,433   7/10/09     34,972   Any Time
Boulevard Shops (50%)(16)   Floating   5.93 %   10,700     635   12/17/10     10,700   Any Time
Broadway Plaza (50%)(2)   Fixed   6.68 %   29,963     3,089   8/1/08     29,315   Any Time
Camelback Colonnade (75%)(17)   Floating   5.79 %   31,125     1,802   10/9/08     31,125   Any Time
Cascade (51%)   Fixed   5.27 %   20,110     1,362   7/1/10     19,221   Any Time
Chandler Festival (50%)   Fixed   4.37 %   14,865     958   10/1/08     14,583   Any Time
Chandler Gateway (50%)   Fixed   5.19 %   9,389     658   10/1/08     9,223   Any Time
Chandler Village Center (50%)(18)   Floating   6.14 %   8,643     531   1/15/11     8,643   Any Time
Corte Madera, The Village at (50.1%)   Fixed   7.75 %   32,653     3,095   11/1/09     31,534   Any Time
Desert Sky Mall (50%)(19)   Floating   6.13 %   25,750     1,578   3/6/08     25,750   10/26/08
Eastland Mall (50%)   Fixed   5.80 %   84,000     4,836   6/1/16     84,000   6/22/08
Empire Mall (50%)   Fixed   5.81 %   88,150     5,104   6/1/16     88,150   11/29/08
Granite Run (50%)   Fixed   5.84 %   59,906     4,311   6/1/16     51,504   6/7/08
Inland Center (50%)   Fixed   4.69 %   27,000     1,270   2/11/09     27,000   Any Time
Kierland Greenway (24.5%)   Fixed   6.01 %   15,846     1,144   1/1/13     13,679   Any Time
Kierland Main Street (24.5%)   Fixed   4.99 %   3,808     251   1/2/13     3,502   Any Time
Kierland Tower Lofts (15%)(20)   Floating   6.63 %   6,659     441   12/14/08     6,659   Any Time
Kitsap Mall/Place (51%)   Fixed   8.14 %   29,209     2,755   6/1/10     28,143   Any Time
Lakewood Mall (51%)   Fixed   5.43 %   127,500     6,995   6/1/15     127,500   Any Time
Los Cerritos Center (51%)(21)   Floating   5.92 %   66,300     3,926   7/1/11     66,300   Any Time
Mesa Mall (50%)   Fixed   5.82 %   43,625     2,526   6/1/16     43,625   8/29/08
Metrocenter Mall (15%)(22)   Fixed   5.34 %   16,800     806   2/9/09     16,800   Any Time
Metrocenter Mall (15%)(23)   Floating   8.54 %   3,240     277   2/9/09     3,240   Any Time
NorthPark Center (50%)(24)   Fixed   5.95 %   93,504     7,133   5/10/12     82,181   Any Time
NorthPark Center (50%)(24)   Fixed   8.33 %   41,656     3,996   5/10/12     38,919   Any Time
NorthPark Land (50%)   Fixed   8.33 %   40,236     3,858   5/10/12     33,633   Any Time
NorthPark Land (50%)(25)   Floating   8.25 %   3,500     289   8/30/08     3,500   Any Time
Redmond Office (51%)(2)   Fixed   6.77 %   33,690     4,443   7/10/09     30,285   Any Time
Redmond Retail (51%)   Fixed   4.81 %   36,789     2,025   8/1/09     27,164   Any Time
Ridgmar (50%)   Fixed   6.11 %   28,700     1,800   4/11/10     28,700   Any Time
Rushmore (50%)   Fixed   5.82 %   47,000     2,721   6/1/16     47,000   8/2/08
SanTan Village Power Center (34.9%)   Fixed   5.33 %   15,705     837   2/1/12     15,705   Any Time
Scottsdale Fashion Square (50%)(26)   Fixed   5.66 %   275,000     15,563   7/8/13     275,000   10/30/09
Southern Hills (50%)   Fixed   5.82 %   50,750     2,938   6/1/16     50,750   8/2/08
Stonewood Mall (51%)   Fixed   7.44 %   37,735     3,298   12/11/10     36,244   Any Time
Superstition Springs Center (33.3%)(27)   Floating   5.37 %   22,498     1,208   9/9/08     22,498   3/9/08
Tysons Corner Center (50%)   Fixed   4.78 %   168,955     11,232   2/17/14     147,595   Any Time
Valley Mall (50%)   Fixed   5.85 %   23,302     1,678   6/1/16     20,046   6/22/08
Washington Square (51%)   Fixed   6.72 %   49,932     5,051   2/1/09     48,021   Any Time
Washington Square (51%)(28)   Floating   7.23 %   16,547     1,196   2/1/09     16,547   Any Time
West Acres (19%)   Fixed   6.41 %   13,039     850   10/1/16     5,684   Any Time
Wilshire Blvd. (30%)(29)   Fixed   6.35 %   1,864     118   1/1/33     42   1/1/08
           
                   
            $ 1,820,411                    
           
                   
(1)
The mortgage notes payable balances include the unamortized debt premiums (discounts). Debt premiums (discounts) represent the excess (deficiency) of the fair value of debt over 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

28

Property Pledged as Collateral
    
  
Danbury Fair Mall   $ 13,405  
Eastview Commons     573  
Eastview Mall     1,736  
Freehold Raceway Mall     12,373  
Great Northern Mall     (164 )
Hilton Village     (70 )
Marketplace Mall     1,650  
Paradise Valley Mall     392  
Pittsford Plaza     857  
Shoppingtown Mall     3,731  
Towne Mall     464  
Victor Valley, Mall of     54  
Village Fair North     49  
Wilton Mall     2,729  
   
 
    $ 37,779  
   
 
Property Pledged as Collateral
    
  
Arrowhead Towne Center   $ 413  
Biltmore Fashion Park     1,559  
Kierland Greenway     732  
Tysons Corner Center     3,468  
Wilshire Blvd.      (131 )
   
 
    $ 6,041  
   
 
(2)
Northwestern Mutual Life ("NML") is the lender of this loan. The funds advanced by NML are considered a related party as they are a joint venture partner with the Company in Broadway Plaza.

(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 $571 for the year ended December 31, 2007.

(4)
On May 23, 2007, the Company borrowed an additional $72,500 under the loan agreement at a fixed rate of 5.38%. The total interest rate at December 31, 2007 was 5.41%.

(5)
On January 1, 2008, these loans were transferred in connection with the Rochester Redemption. (See Note 26--Subsequent Events in the Company's Consolidated Financial Statements included herein).

(6)
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%. In November 2007, the loan was extended until November 6, 2008. At December 31, 2007, the total interest rate was 5.97%.

(7)
On September 5, 2007, the Company purchased the remaining 50% outside ownership interests in the property. The property has a loan that bears interest at a fixed rate of 5.27% and matures on February 1, 2012.

(8)
The floating rate loan bears interest at LIBOR plus 0.88%. In July 2007, the Company extended the maturity to August 9, 2008, and has an option to extend the maturity for an additional year. The Company has an

29

(9)
The floating rate loan bears interest at LIBOR plus 0.85% and matures in February 2010. There is an interest rate cap agreement on this loan which effectively prevents LIBOR from exceeding 6.65%. At December 31, 2007, the total interest rate was 6.00%.

(10)
On July 3, 2007, the Company placed a construction loan on the property that provides for borrowings of up to $15,000, bears interest at a fixed rate of 6.52% and matures on January 1, 2013.

(11)
The construction loan allows for total borrowings of up to $110,000, and bears interest at LIBOR plus a spread of 1.20% to 1.40% depending on certain conditions. The loan matures in August 2009, with two one-year extension options. At December 31, 2007, the total interest rate was 6.35%.

(12)
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.

(13)
On March 23, 2007, the Company paid off the $51,000 interest only loan on the property. On May 15, 2007, the Company placed a new $78,000 loan on the property that bears interest at a fixed rate of 5.84% and matures on June 1, 2012.

(14)
The construction loan allows for total borrowings of up to $115,000, and bears interest at LIBOR plus a spread of .80%. The loan matures in June 2009, with a one-year extension option. At December 31, 2007, the total interest rate was 5.93%.

(15)
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%. The total interest rate at December 31, 2007 was 5.60%.

(16)
Effective December 17, 2007, the existing loan agreement was amended to reduce the interest rate from LIBOR plus 1.25% to LIBOR plus .90% and to extend the maturity date to December 17, 2010. At December 31, 2007, the total interest rate was 5.93%.

(17)
This loan bears interest at LIBOR plus 0.69%, matures on October 9, 2008, and has two one-year extension options. The loan is covered by an interest rate cap agreement over the term which effectively prevents LIBOR from exceeding 8.54%. At December 31, 2007, the total interest rate was 5.79%.

(18)
Effective December 19, 2007, the existing loan agreement was amended to reduce the interest rate from LIBOR plus 1.65% to LIBOR plus 1.00% and to extend the maturity to January 15, 2011. At December 31, 2007, the total interest rate was 6.14%.

(19)
This loan bears interest at LIBOR plus 1.10%, matures in March 2008, and has three one-year extension options. The loan is covered by an interest rate cap agreement over the term which effectively prevents LIBOR from exceeding 7.65%. At December 31, 2007, the total interest rate was 6.13%.

(20)
This represents a construction loan not to exceed $49,472 and bears interest at LIBOR plus 1.75%. At December 31, 2007, the total interest rate was 6.63%.

(21)
This loan bears interest at LIBOR plus 0.55% and matures on July 1, 2011. The loan provides for additional borrowings of up to $70,000 until May 20, 2010 at a rate of LIBOR plus 0.90%. At December 31, 2007, the total interest rate was 5.92%.

(22)
This loan bears interest at LIBOR plus 0.94% and was set to mature on February 9, 2008 and had two one-year extension options. On February 9, 2008, the joint venture exercised one of the options and extended the loan to February 9, 2009. The joint venture entered into an interest rate swap agreement for $112.0 million to convert this loan from floating rate debt to fixed rate debt of 3.86%, which effectively limits the interest rate on this loan to 4.80% through February 15, 2008. In connection with the loan extension, the joint venture entered into an interest rate swap agreement for $133.6 million to convert both loans at this property from floating rate debt to fixed rate debt of 4.57%, which effectively limits the weighted average interest rates on these loans to 5.92% from February 15, 2008 through February 15, 2009.

(23)
This loan provides for total funding of up to $37,380, subject to certain conditions, and bears interest at LIBOR plus 3.45% and was set to mature February 9, 2008. On February 9, 2008, the joint venture extended the loan to February 9, 2009. The joint venture has two interest rate cap agreements throughout the term,

30

(24)
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.

(25)
This represents an interest-only line of credit that bears interest at the lender's prime rate and matures August 30, 2008. At December 31, 2007, the total interest rate was 8.25%.

(26)
On July 2, 2007, the joint venture replaced two existing loans on the property with a new $550.0 million loan, that bears interest at a fixed rate of 5.66% and matures July 8, 2013, of which the Company's pro rata share is $275.0 million.

(27)
This loan 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, 2007, the total interest rate was 5.37%.

(28)
This loan bears interest at LIBOR plus 2.00%. At December 31, 2007, the total interest rate was 7.23%.

(29)
On October 25, 2007, the Company acquired a 30% tenants-in-common interest in the Wilshire property. As part of the acquisition, the Company assumed a 30% pro rata interest in the loan on the property, which bears interest at a fixed rate of interest of 6.35% and matures on January 1, 2033.

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 SECURITY HOLDERS

        None

31


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 2007, the Company's shares traded at a high of $103.59 and a low of $69.44.

        As of February 8, 2008, there were approximately 961 stockholders of record. The following table shows high and low closing prices per share of common stock during each quarter in 2007 and 2006 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, 2007   $ 103.32   $ 85.76   $ 0.71
June 30, 2007     97.69     81.17     0.71
September 30, 2007     87.58     73.14     0.71
December 31, 2007     92.66     70.63     0.80

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

        At December 31, 2007, the Company had outstanding 3,067,131 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 pays 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 following table shows the dividends per share of Series A Preferred Stock declared and paid by quarter in 2007 and 2006:

 
   Series A Preferred
Stock Dividend
Quarter Ended
   Declared
   Paid
March 31, 2007   $ 0.71   $ 0.71
June 30, 2007     0.71     0.71
September 30, 2007     0.80     0.71
December 31, 2007     0.80     0.80

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

        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 Code.

32

Stock Performance Graph

        The following graph provides a comparison, from December 31, 2002 through December 31, 2007, 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 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.

GRAPHIC

Copyright © 2008, Standard & Poor's, a division of The McGraw-Hill Companies, Inc. All rights reserved. www.researchdatagroup.com/S&P.htm

 
   12/31/02
   12/31/03
   12/31/04
   12/31/05
   12/31/06
   12/31/07
The Macerich Company   $ 100.00   $ 154.38   $ 229.09   $ 255.36   $ 341.95   $ 290.34
S&P 500 Index     100.00     128.68     142.69     149.70     173.34     182.87
S&P Midcap 400 Index     100.00     135.62     157.97     177.81     196.16     211.81
NAREIT Equity Index     100.00     137.13     180.44     202.38     273.34     230.45

33

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/A. All amounts are in thousands except per share data.

 
   Years Ended December 31,
  
 
   2007(1)
   2006(1)
   2005(1)
   2004
   2003
  
 
   (Restated)

   (Restated)

   (Restated)

    
    
  
OPERATING DATA:                                
Revenues:                                
  Minimum rents(2)   $ 474,885   $ 438,261   $ 392,046   $ 294,846   $ 256,974  
  Percentage rents     26,104     23,876     23,744     15,655     10,646  
  Tenant recoveries     245,332     227,575     195,896     145,055     139,380  
  Management Companies(3)     39,752     31,456     26,128     21,549     14,630  
  Other     27,199     28,451     22,333     18,070     16,487  
   
 
 
 
 
 
  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 Companies' operating expenses(3)     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  
Depreciation and amortization     212,518     196,760     171,987     128,413     95,888  
Interest expense     250,127     260,705     228,061     134,549     121,105  
Loss on early extinguishment of debt     877     1,835     1,666     1,642     44  
   
 
 
 
 
 
  Total expenses     810,309     763,174     670,489     466,226     394,431  
Minority interest in consolidated joint ventures     (2,301 )   (1,860 )   (1,087 )   (184 )   (112 )
Equity in income of unconsolidated joint ventures and management companies(3)     81,458     86,053     76,303     54,881     59,348  
Income tax benefit (provision)(4)     470     (33 )   2,031     5,466     444  
Gain on sale of assets     12,146     (84 )   1,253     473     11,960  
   
 
 
 
 
 
  Income from continuing operations     94,736     70,521     68,158     89,585     115,326  
   
 
 
 
 
 
Discontinued operations:(5)                                
  (Loss) gain on sale of assets     (2,409 )   204,985     277     7,568     22,491  
  Income from discontinued operations     6,517     9,870     9,219     14,350     19,124  
   
 
 
 
 
 
    Total income from discontinued operations     4,108     214,855     9,496     21,918     41,615  
   
 
 
 
 
 
Income before minority interest and preferred dividends     98,844     285,376     77,654     111,503     156,941  
Minority interest in Operating Partnership     (13,036 )   (40,827 )   22,001     (19,870 )   (28,907 )
   
 
 
 
 
 
Net income     85,808     244,549     99,655     91,633     128,034  
Less preferred dividends     10,058     10,083     9,649     9,140     14,816  
Less adjustment of minority interest due to redemption value     2,046     17,062     183,620     —     —  
   
 
 
 
 
 
Net income (loss) available to common stockholders   $ 73,704   $ 217,404   $ (93,614 ) $ 82,493   $ 113,218  
   
 
 
 
 
 

Earnings per share ("EPS")—basic:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  Income from continuing operations   $ 1.01   $ 0.72   $ 0.80   $ 1.11   $ 1.49  
  Discontinued operations     0.02     2.35     (2.38 )   0.30     0.62  
   
 
 
 
 
 
  Net income (loss) available to common stockholders—basic   $ 1.03   $ 3.07   $ (1.58 ) $ 1.41   $ 2.11  
   
 
 
 
 
 
EPS—diluted:(6)(7)                                
  Income from continuing operations   $ 1.00   $ 0.80   $ 0.80   $ 1.10   $ 1.54  
  Discontinued operations     0.02     2.25     (2.37 )   0.30     0.55  
   
 
 
 
 
 
  Net income (loss) available to common stockholders—diluted   $ 1.02   $ 3.05   $ (1.57 ) $ 1.40   $ 2.09  
   
 
 
 
 
 

34

 
 
   As of December 31,
  
 
   2007(1)
   2006(1)
   2005(1)
   2004
   2003
  
 
   (Restated)

   (Restated)

   (Restated)

    
    
  
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 interest(8)   $ 547,693   $ 597,156   $ 474,590   $ 221,315   $ 237,615  
Series A Preferred Stock(9)   $ 83,495   $ 98,934   $ 98,934   $ 98,934   $ 98,934  
Common stockholders' equity   $ 1,149,849   $ 1,379,132   $ 679,678   $ 913,533   $ 953,485  
OTHER DATA:                                
Funds from operations ("FFO")—diluted(10)   $ 407,927   $ 383,122   $ 336,831   $ 299,172   $ 269,132  
Cash flows provided by (used in):                                
  Operating activities   $ 326,070   $ 211,850   $ 235,296   $ 213,197   $ 215,752  
  Investing activities   $ (865,283 ) $ (126,736 ) $ (131,948 ) $ (489,822 ) $ (341,341 )
  Financing activities   $ 355,051   $ 29,208   $ (20,349 ) $ 308,383   $ 115,703  
Number of centers at year end     94     91     97     84     78  
Weighted average number of shares outstanding—EPS basic     71,768     70,826     59,279     58,537     53,669  
Weighted average number of shares outstanding—EPS diluted(6)(7)     84,760     88,058     73,573     73,099     75,198  
Cash distribution declared per common share   $ 2.93   $ 2.75   $ 2.63   $ 2.48   $ 2.32  
(1)
The Selected Financial Data has been updated to reflect the Rochester Properties as discontinued operations and the restatement of the consolidated balance sheets as of December 31, 2007, 2006 and 2005, the consolidated statements of operations, common stockholders' equity and cash flows for the years ended December 31, 2007, 2006 and 2005. For a more detailed description of the restatement and reclassifications, see Note 25—Restatement of the Company's Notes to Consolidated Financial Statements.

(2)
Included in minimum rents is amortization of above and below market leases of $10.6 million, $12.2 million, $11.0 million, $9.2 million and $6.1 million for the years ended December 31, 2007, 2006, 2005, 2004, and 2003, respectively.

(3)
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 consolidated Macerich Management Company, in accordance with Financial Accounting Standards Board Interpretation No. 46R.

(4)
The Company's Taxable REIT Subsidiaries ("TRSs") are subject to corporate level income taxes (See Note 19 of the Company's Consolidated Financial Statements).

(5)
Discontinued operations include the following:

35

 
   Years Ended December 31,
 
   2007
   2006
   2005
   2004
   2003
 
   (Dollars in millions)
Revenues:                              
  Bristol Center   $ --   $ --   $ --   $ --   $ 2.5
  Westbar     --     --     --     4.8     5.7
  Arizona LifeStyle Galleries     --     --     --     0.3     --
  Scottsdale/101     0.1     4.7     9.8     6.9     --
  Park Lane Mall     --     1.5     3.1     3.0     3.1
  Holiday Village     0.2     2.9     5.2     4.8     5.3
  Greeley Mall     --     4.3     7.0     6.2     5.9
  Great Falls Marketplace     --     1.8     2.7     2.6     2.5
  Citadel Mall     --     15.7     15.3     15.4     16.1
  Northwest Arkansas Mall     --     12.9     12.6     12.7     12.5
  Crossroads Mall     --     11.5     10.9     11.2     12.2
  Mervyn's Stores     1.2     --     --     --     --
  Rochester Properties     83.1     80.0     51.7     --     --
   
 
 
 
 
  Total   $ 84.6   $ 135.3   $ 118.3   $ 67.9   $ 65.8
   
 
 
 
 

36

Income from operations:                              
  Bristol Center   $ --   $ --   $ --   $ --   $ 1.4
  Westbar     --     --     --     1.8     1.7
  Arizona LifeStyle Galleries     --     --     --     (1.0 )   --
  Scottsdale/101     --     0.3     (0.2 )   (0.3 )   --
  Park Lane Mall     --     --     0.8     0.9     1.0
  Holiday Village     0.2     1.2     2.8     1.9     2.4
  Greeley Mall     (0.1 )   0.6     0.9     0.5     1.2
  Great Falls Marketplace     --     1.1     1.7     1.6     1.5
  Citadel Mall     (0.1 )   2.5     1.8     2.0     3.0
  Northwest Arkansas Mall     --     3.4     2.9     3.1     3.2
  Crossroads Mall     --     2.3     3.2     3.9     3.7
  Mervyn's Stores     0.8     --     --     --     --
  Rochester Properties     5.7     (1.5 )   (4.7 )   --     --
   
 
 
 
 
  Total   $ 6.5   $ 9.9   $ 9.2   $ 14.4   $ 19.1
   
 
 
 
 
(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 in the Company's Notes to the Consolidated Financial Statements).

(7)
Includes the dilutive effect of share and unit-based compensation plans and convertible senior notes calculated using the treasury stock method and the dilutive effect of all other dilutive securities calculated using the "if converted" method.

(8)
"Minority Interest" reflects the ownership interest in the Operating Partnership and MACWH, LP not owned by the Company.

(9)
On October 18, 2007, the holder of the Series A Preferred Stock converted 560,000 shares to common shares.

(10)
The Company uses 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."

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ITEM 7.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

        The following Management's Discussion and Analysis of Financial Condition and Results of Operations has been updated to reflect the Rochester Properties as discontinued operations, the restatement of the consolidated balance sheets as of December 31, 2007 and 2006, and the restatement of the consolidated statements of operations, common stockholders' equity and cash flows for each of the three years during the period ended December 31, 2007. For a more detailed description of the restatement and reclassifications, see Note 25—Restatement of the Company's Notes to Consolidated Financial Statements.

Management's Overview and Summary

        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 Operating Partnership. As of December 31, 2007, the Operating Partnership owned or had an ownership interest in 74 regional shopping centers and 20 community shopping centers aggregating approximately 80.7 million square feet of GLA. These 94 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 REIT and conducts all of its operations through the Operating Partnership and the Company's Management Companies.

        The following discussion is based primarily on the consolidated financial statements of the Company for the years ended December 31, 2007, 2006 and 2005. It compares the results of operations and cash flows for the year ended December 31, 2007 to the results of operations and cash flows for the year ended December 31, 2006. Also included is a comparison of the results of operations and cash flows for the year ended December 31, 2006 to the results of operations and cash flows for the year ended December 31, 2005. This information should be read in conjunction with the accompanying consolidated financial statements and notes thereto.

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

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

        On January 11, 2005, the Company became a 15% owner in a joint venture that acquired Metrocenter Mall, a 1.1 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.

        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 435,022 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

38


$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 and the Operating Partnership acquired Wilmorite Properties, Inc., a Delaware corporation ("Wilmorite"), and Wilmorite Holdings, L.P., a Delaware limited partnership ("Wilmorite Holdings"). 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 $2.3 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 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, owned as of December 31, 2007 approximately 84% of Wilmorite Holdings, with the remaining 16% held by those limited partners of Wilmorite Holdings who elected to receive convertible preferred units or common units in Wilmorite Holdings rather than cash.

        On January 1, 2008, MACWH, LP, a subsidiary of the Operating Partnership, at the election of the holders, redeemed the 3.4 million PCPUs. As a result of the Rochester Redemption, the Company received the 16.32% minority interest in the Non-Rochester Properties, for a total consideration of $224 million, in exchange for the Company's ownership interest in the Rochester Properties. The Company recognized a gain of $99.3 million on the exchange based on the difference between the fair value of the additional interest acquired in the Non-Rochester Properties and the carrying value of the Rochester Properties, net of minority interest. The Company has classified the results of operations of the Rochester Properties for the years ended December 31, 2007, 2006, and 2005 as discontinued operations.

        The Wilmorite portfolio, exclusive of Tysons Corner Center and Tysons Corner Office (collectively referred herein as "Tysons Center") and the Rochester Properties, are referred to herein as the "2005 Acquisition Centers."

        On February 1, 2006, the Company acquired Valley River Center, an 910,841 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 payment at closing and a $7.0 million cash payment in 2007, in connection with development work by Federated at the 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.

39

        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 $240.1 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.

        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."

        On September 5, 2007, the Company purchased the remaining 50% outside ownership interest in Hilton Village, a 96,546 square foot specialty center in Scottsdale, Arizona. The total purchase price of $13.5 million was funded by cash, borrowings under the Company's line of credit and the assumption of a mortgage note payable. The Center was previously accounted for under the equity method as an investment in unconsolidated joint ventures.

        On December 17, 2007, the Company purchased a portfolio of ground leasehold interest and/or fee interests in 39 freestanding Mervyn's stores located in the Southwest United States. The purchase price of $400.2 million was funded by cash and borrowings under the Company's line of credit. At acquisition, management designated the 27 freestanding stores located at shopping centers not owned or managed by the Company as available for sale.

        Hilton Village and the 12 Mervyn's freestanding stores that have not been designated as available for sale are referred herein as the "2007 Acquisition Properties."

        The first phase of SanTan Village Regional Center, in Gilbert, Arizona, opened on October 26, 2007. The 1.2 million square foot open-air super-regional shopping center opened with over 90% of the retail space committed, with Dillard's and more than 85 specialty retailers joining Harkins Theatres, which opened March 2007. The balance of the project, which includes Dick's Sporting Goods, Best Buy, Barnes & Noble and up to 13 restaurants, is expected to open in phases throughout 2008.

        The first phase of The Promenade at Casa Grande, a 1 million square foot, 130 acre department store anchored hybrid center, located in Casa Grande, Arizona, opened on November 16, 2007. With ninety percent committed, the first phase of the project has approximately 550,000 square feet of mini-majors, including Dillard's, Target, J.C.Penney, Kohl's, Petsmart and Staples. The balance of the Center is expected to continue to open in phases throughout 2008.

        The first phase of The Marketplace at Flagstaff Mall, a 435,000 square foot lifestyle expansion in Flagstaff, Arizona, began opening in phases on October 19, 2007. Phase I delivered approximately 267,538 square feet of new retail space including Best Buy, Home Depot, Linens n Things, Marshalls, Old Navy, Petco and Shoe Pavilion. Phase II, which will consist of village shops, an entertainment plaza and pad space, is expected to be completed in 2009-2010.

40

        On November 8, 2007, Freehold Raceway Mall opened the first phase of a combined expansion and renovation project that will add 96,000 square feet of new retail and restaurant uses to this regional center in New Jersey. The expansion, which is 85% committed, added nine new-to-market additions including: Borders, The Cheesecake Factory, P.F. Chang's, Jared The Galleria of Jewelry, The Territory Ahead, Ann Taylor, Chico's, Coldwater Creek and White House/Black Market. The balance of the project is expected to open throughout 2008.

        Scottsdale Fashion Square, the 2 million square foot luxury flagship, is undergoing a $130 million redevelopment and expansion. Phase I of the redevelopment and expansion began September 2007 with demolition of the vacant anchor space acquired as a result of the Federated-May merger and an adjacent parking structure. A 60,000 square foot Barneys New York, the high-end retailer's first Arizona location, will anchor an additional 100,000 square feet of up to 30 new luxury shops, which is planned to open in Fall 2009 in an urban setting on Scottsdale Road. New first-to-market deals include Salvatore Ferragamo, Grand Luxe Café, CH Carolina Herrera, and Michael Kors. First-to-market retailers opening in the Spring 2008 will include Bottega Veneta, Jimmy Choo and Marciano.

        Construction continues on the combined redevelopment, expansion and interior renovation of The Oaks, an upscale 1.0 million square foot super-regional shopping center in California's affluent Thousand Oaks. The market's first Nordstrom department store is under construction. Construction of a first-to-market, 138,000 square foot Nordstrom Department Store, two-level open-air retail, dining and entertainment venue and new multi-level parking structure at The Oaks continues on schedule toward a phased completion beginning Fall 2008.

        In December 2007, the Company received full entitlements to proceed with plans for a redevelopment of Santa Monica Place. The regional center will be redeveloped as an open-air shopping and dining environment that will connect with the popular Third Street Promenade. The Santa Monica Place redevelopment has started and is moving forward with a projected Fall 2009 completion.

        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.

        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 generally accepted accounting principles ("GAAP") 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

41


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.

        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 line rent adjustment." Currently, 53% 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 certain tenants for their pro rata share of real estate taxes, insurance and other shopping center operating expenses are recognized as revenues in the period the applicable expenses are incurred. Other tenants pay a fixed rate and these tenant recoveries' revenues are recognized on a straight-line basis over the term of the related leases.

        The Company capitalizes costs incurred in redevelopment and development of properties in accordance with Statement of Financial Accounting Standards ("SFAS") No. 34 "Capitalization of Interest Cost" and SFAS No. 67 "Accounting for Costs and the Initial Rental Operations of Real Estate Properties." The costs of land and buildings under development include specifically identifiable costs. The capitalized costs include pre-construction costs essential to the development of the property, development costs, construction costs, interest costs, real estate taxes, salaries and related costs and other costs incurred during the period of development. Capitalized costs are allocated to the specific components of a project that are benefited. The Company considers a construction project as completed and held available for occupancy and ceases capitalization of costs when the areas under development have been substantially completed.

        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 useful lives of the assets as follows:

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

        The Company accounts for all acquisitions in accordance with SFAS No. 141, "Business Combinations." The Company first determines the value of the land and buildings utilizing an "as if

42

vacant" methodology. The Company then assigns a fair value to any debt assumed at acquisition. The balance of the purchase price is 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 minimum rents over the remaining terms of the leases.

        When the Company acquires a real estate property, 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.

        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.

        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

43

Results of Operations

        Many of the variations in the results of operations, discussed below, occurred due to the transactions described above including the 2007 Acquisition Properties, the 2006 Acquisition Centers, the 2005 Acquisition Centers and the Redevelopment Centers. For the comparison of the year ended December 31, 2007 to the year ended December 31, 2006, the "Same Centers" include all consolidated Centers, excluding the 2007 Acquisition Properties, the 2006 Acquisition Centers and the Redevelopment Centers. For the comparison of the year ended December 31, 2006 to the year ended December 31, 2005, the Same Centers include all consolidated Centers, excluding the 2006 Acquisition Centers, the 2005 Acquisition Centers and the Redevelopment Centers.

        For the comparison of the year ended December 31, 2007 to the year ended December 31, 2006, "Redevelopment Centers" include The Oaks, Twenty Ninth Street, Santa Monica Place, Westside Pavilion, The Marketplace at Flagstaff Mall, SanTan Village Regional Center and Promenade at Casa Grande. 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 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." 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 Consolidated Statements of Operations as equity in income from unconsolidated joint ventures.

Comparison of Years Ended December 31, 2007 and 2006

        Minimum and percentage rents (collectively referred to as "rental revenue") increased by $38.9 million, or 8.4%, from 2006 to 2007. The increase in rental revenue is attributed to an increase of $17.9 million from the 2006 Acquisition Centers, $13.8 million from the Redevelopment Centers, $6.7 million from the Same Centers and $0.5 million from the 2007 Acquisition Properties.

        The amortization of above and below market leases, which is recorded in rental revenue, decreased to $10.6 million in 2007 from $12.2 million in 2006. The decrease in amortization is primarily due to leases terminated in 2006. The amortization of straight-lined rents, included in rental revenue, was $6.9 million in 2007 compared to $4.7 million in 2006. Lease termination income, which is included in rental revenue, decreased to $9.8 million in 2007 from $13.2 million in 2006.

        Tenant recoveries increased $17.8 million, or 7.8%, from 2006 to 2007. The increase in tenant recoveries is attributed to an increase of $11.0 million from the 2006 Acquisition Centers, $4.3 million from the Redevelopment Centers, $2.4 million from the Same Centers and $0.1 million from the 2007 Acquisition Properties.

        Management Companies' revenues increased by $8.3 million from 2006 to 2007, primarily due to increased management fees received from the joint venture Centers, additional third party management contracts and increased development fees from joint ventures.

        Shopping center and operating expenses increased $22.8 million, or 9.7%, from 2006 to 2007. Approximately $9.6 million of the increase in shopping center and operating expenses is from the 2006 Acquisition Centers, $6.8 million is from the Redevelopment Centers, $6.1 million is from the Same Centers and $0.2 million is from the 2007 Acquisition Properties.

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        Management Companies' operating expenses increased to $73.8 million in 2007 from $56.7 million in 2006, in part as a result of the additional costs of managing the joint venture Centers and third party managed properties, higher compensation expense due to increased staffing and higher professional fees.

        REIT general and administrative expenses increased by $3.1 million in 2007 from 2006, primarily due to increased share and unit-based compensation expense in 2007.

        Depreciation and amortization increased $15.8 million in 2007 from 2006. The increase in depreciation and amortization is primarily attributed to an increase of $10.5 million at the Redevelopment Centers, $10.4 million at the 2006 Acquisition Centers and $0.2 million at the 2007 Acquisition Properties. This increase is offset in part by a decrease of $1.8 million at the Same Centers.

        Interest expense decreased $10.6 million in 2007 from 2006. The decrease in interest expense was primarily attributed to a decrease of $17.2 million from term loans, $16.1 million from the line of credit, $8.1 million from the Same Centers and $2.7 million from the Redevelopment Centers. The decrease in interest expense was offset in part by an increase of $27.3 million from the $950.0 million convertible senior notes issued on March 16, 2007 and $6.6 million from the 2006 Acquisition Centers. The decrease in interest on term loans was due to the repayment of the $250 million loan in 2007 and the repayment of the $619 million term loan in 2006. The decrease in interest on the line of credit was due to: (i) a decrease in average outstanding borrowings during 2007, in part, because of the issuance of the senior notes, (ii) a decrease in interest rates because of the $400 million swap and (iii) lower LIBOR rates and spreads. The decrease in interest from the Same Centers is due to: (i) the repayment of the $75.0 million loan on Paradise Valley Mall in January 2007, (ii) an increase in capitalized interest and (iii) a decrease in LIBOR rates on floating rate mortgages payable. The above interest expense items are net of capitalized interest, which increased to $32.0 million in 2007 from $14.9 million in 2006 due to an increase in redevelopment activity in 2007.

        The Company recorded a $0.9 million loss from the early extinguishment of the $250 million term loan in 2007. In 2006, the Company recorded a loss from the early extinguishment of debt of $1.8 million related to the pay off of the $619 million term loan.

        The equity in income of unconsolidated joint ventures decreased $4.6 million in 2007 from 2006. The decrease in equity in income of unconsolidated joint ventures is due in part to a $2.0 million loss on sale of assets at the SDG Macerich Properties, L.P. joint venture and additional interest expense and depreciation at other joint ventures due to the completion of development projects.

        The Company recorded a gain on sale of assets of $12.2 million in 2007 relating to land sales of $8.8 million and $3.4 million relating to sale of equipment and furnishings.

45

        The decrease of $210.7 million in income from discontinued operations is primarily related to the recognition of gain on the 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 these sales, the Company classified the results of operations for these properties to discontinued operations for all periods presented.

        The minority interest in the Operating Partnership represents the 15.0% weighted average interest of the Operating Partnership not owned by the Company during 2007 compared to the 15.8% not owned by the Company during 2006. The change in ownership interest is primarily due to the common stock offering by the Company in 2006, the conversion of partnership units and preferred shares into common shares in 2007 which is offset in part by the repurchase of 807,000 shares in 2007 (See Note 21--Stock Repurchase Program of the Company's Consolidated Financial Statements).

        Primarily as a result of the factors mentioned above, funds from operations ("FFO")--diluted increased 6.5% to $407.9 million in 2007 from $383.1 million in 2006. For the reconciliation of FFO and FFO--diluted to net income available to common stockholders, see "Funds from Operations."

        Cash flow from operations increased to $326.1 million in 2007 from $211.9 million in 2006. The increase was primarily due to changes in assets and liabilities in 2007 compared to 2006 and due to the results at the Centers as discussed above.

        Cash used in investing activities increased to $865.3 million in 2007 from $126.7 million in 2006. The increase in cash used in investing activities was primarily due to a $580.3 million decrease in cash proceeds from the sales of assets and a $220.9 million increase in capital expenditures.

        Cash flow provided by financing activities increased to $355.1 million in 2007 from $29.2 million in 2006. The increase in cash provided by financing activities was primarily attributed to the issuance of $950 million convertible senior notes issuance in 2007, offset in part by a decrease of $746.8 million in proceeds from the common stock offering in 2006 (See "Liquidity and Capital Resources") and the purchase of the Capped Calls in connection with the issuance of the convertible senior notes in 2007.

Comparison of Years Ended December 31, 2006 and 2005

        Rental revenue increased by $46.3 million or 11.1% from 2005 to 2006. Approximately $24.0 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. The increases are offset in part by a decrease in rental revenue of $0.5 million at the Redevelopment Centers.

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        The amount of straight-lined rents, included in rental revenue, was $4.7 million in 2006 compared to $4.5 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 $12.2 million in 2006 from $11.0 million in 2005. The increase in amortization is primarily due to the 2005 Acquisition Centers and the 2006 Acquisition Centers.

        Tenant recoveries increased $31.7 million or 16.2% from 2005 to 2006. Approximately $15.0 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 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 increased $29.8 million or 14.6% from 2005 to 2006. Approximately $17.2 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 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 increased by $1.4 million in 2006 from 2005, primarily due to increased share-based compensation expense in 2006.

        Depreciation and amortization increased $24.8 million in 2006 from 2005. The increase is primarily attributed to the 2005 Acquisition Centers of $11.5 million, the 2006 Acquisition Centers of $6.2 million and the Same Centers of $7.4 million.

        Interest expense increased $32.6 million in 2006 from 2005. Approximately $13.8 million of the increase relates to the term loan associated with the 2005 Acquisition Centers, $7.4 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 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.

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        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.

        The equity in income of unconsolidated joint ventures increased $9.8 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.

        The increase of $205.3 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.

        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.

        Primarily as a result of the factors mentioned above, 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."

        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.

        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").

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        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 in cash provided by financing activities 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 in 2006 compared to 2005.

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.

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

 
   2007
   2006
   2005
 
   (Dollars in thousands)
Consolidated Centers:                  
Acquisitions of property and equipment   $ 387,899   $ 580,542   $ 1,571,332
Development, redevelopment and expansion of Centers     545,926     184,315     77,254
Renovations of Centers     31,065     51,406     51,092
Tenant allowances     27,959     26,976     21,765
Deferred leasing charges     21,611     21,610     21,836
   
 
 
    $ 1,014,460   $ 864,849   $ 1,743,279
   
 
 
Joint Venture Centers (at Company's pro rata share):                  
Acquisitions of property and equipment   $ 24,828   $ 28,732   $ 736,451
Development, redevelopment and expansion of Centers     33,492     48,785     79,400
Renovations of Centers     10,495     8,119     32,243
Tenant allowances     15,066     13,795     8,922
Deferred leasing charges     4,181     4,269     5,113
   
 
 
    $ 88,062   $ 103,700   $ 862,129
   
 
 

        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 2008 for development, redevelopment, expansion and renovations. In January 2008, in a 50/50 joint venture, the Company acquired The Shops at North Bridge, a 680,933 square foot urban shopping center in Chicago, Illinois, for a total purchase price of $515.0 million. The Company's pro rata share of the purchase price was funded by the assumption of a pro rata share of the $205.0 million fixed rate mortgage on the Center and by borrowings under the Company's line of credit.

        Capital for major expenditures, developments and/or 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, 2007 was $7.6 billion (including $1.8 billion of its pro rata share of joint venture debt). This equated to a debt to Total

49


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 53.7% at December 31, 2007. The majority of the Company's debt consists of fixed-rate conventional mortgages payable collateralized by individual properties.

        The Company 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 warrants 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 March 16, 2007, the Company issued $950 million in convertible senior notes ("Senior Notes") that mature on March 15, 2012. The Senior Notes bear interest at 3.25%, payable semiannually, are senior to unsecured debt of the Company and are guaranteed by the Operating Partnership. Prior to December 14, 2011, upon the occurrence of certain specified events, the Senior Notes will be convertible at the option of holder into cash, shares of the Company's common stock or a combination of cash and shares of the Company's common stock, at the election of the Company, at an initial conversion rate of 8.9702 shares per $1,000 principal amount. On and after December 15, 2011, the Senior Notes will be convertible at any time prior to the second business day preceding the maturity date at the option of the holder at the initial conversion rate. The initial conversion price of approximately $111.48 per share represented a 20% premium over the closing price of the Company's common stock on March 12, 2007. The initial conversion rate is subject to adjustment under certain circumstances. Holders of the Senior Notes do not have the right to require the Company to repurchase the Senior Notes prior to maturity except in connection with the occurrence of certain fundamental change transactions.

        In connection with the issuance of the Senior Notes, the Company purchased two capped calls ("Capped Calls") from affiliates of the initial purchasers of the Senior Notes. The Capped Calls effectively increase the conversion price of the Senior Notes to approximately $130.06, which represented a 40% premium to the March 12, 2007 closing price of $92.90 per common share of the Company.

        The Company has a $1.5 billion revolving line of credit that matures on April 25, 2010 with a one-year extension option. The interest rate fluctuates between LIBOR plus 0.75% to LIBOR plus 1.10% 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. On March 16, 2007, the Company repaid $541.5 million of borrowings outstanding from the proceeds of the Senior Notes (See Note 10--Bank and Other Notes Payable of the Company's Consolidated Financial Statements). As of December 31, 2007 and 2006, borrowings outstanding were $1,015.0 million and $934.5 million, respectively, at an average interest rate, net of the $400.0 million swapped portion, of 6.19% and 6.60%, 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, the Company modified these unsecured notes and reduced the interest rate to LIBOR plus 1.50%. On March 16, 2007, the Company repaid the notes from the proceeds of the Senior Notes (See Note 10--Bank and Other Notes Payable of the Company's Consolidated Financial Statements).

        On April 25, 2005, 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

50


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, 2007 and 2006, the entire loan was outstanding with an interest rate of 6.30%.

        At December 31, 2007, the Company was in compliance with all applicable loan covenants.

        At December 31, 2007, the Company had cash and cash equivalents available of $85.3 million.

        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."

        In addition, certain joint ventures also have debt that could become recourse debt to the Company or its subsidiaries, in excess of the Company'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, 2007 (in thousands):

Property
   Recourse
Debt
   Maturity
Date
Boulevard Shops   $ 4,280   12/17/2010
Chandler Village Center     4,375   1/15/2011
   
   
    $ 8,655    
   
   

        Additionally, as of December 31, 2007, the Company is contingently liable for $6.4 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.

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        The following is a schedule of long-term contractual obligations (as of December 31, 2007) 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)   $ 6,087,693   $ 455,713   $ 2,390,249   $ 2,014,591   $ 1,227,140
Operating lease obligations(1)     670,038     14,771     29,624     29,250     596,393
Purchase obligations(1)     103,419     103,419     --     --     --
Other long-term liabilities(2)     393,102     393,102     --     --     --
   
 
 
 
 
    $ 7,254,252   $ 967,005   $ 2,419,873   $ 2,043,841   $ 1,823,533
   
 
 
 
 
(1)
See Note 15—Commitments and Contingencies of the Company's Consolidated Financial Statements.

(2)
Amount includes $1,906 of unrecognized tax benefit associated with FIN 48.

Funds From Operations

        The Company uses 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 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

52


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 (loss) available to common stockholders to FFO and FFO--diluted (dollars in thousands):

 
   2007
   2006
   2005
   2004
   2003
  
Net income (loss)--available to common stockholders   $ 73,704   $ 217,404   $ (93,614 ) $ 82,493   $ 113,218  
Adjustments to reconcile net income to FFO--basic:                                
  Minority interest in the Operating Partnership     13,036     40,827     (22,001 )   19,870     28,907  
  Gain on sale of consolidated assets     (9,771 )   (241,732 )   (1,530 )   (8,041 )   (34,451 )
  Adjustment of minority interest due to redemption value     2,046     17,062     183,620     —     —  
  Add: Gain on undepreciated assets--consolidated assets     8,047     8,827     1,068     939     1,054  
  Add: Minority interest share of gain on sale of consolidated joint ventures     760     36,831     239     --     --  
  Gain on sale of assets from unconsolidated entities (pro rata)     (400 )   (725 )   (1,954 )   (3,353 )   (155 )
  Add: Gain on sale of undepreciated assets--from unconsolidated entities (pro rata)     2,793     725     2,092     3,464     387  
  Depreciation and amortization on consolidated centers     227,091     226,797     200,098     144,828     109,569  
  Depreciation and amortization on joint ventures and from management companies (pro rata)     88,807     82,745     73,247     61,060     45,133  
  Less: depreciation on personal property and amortization of loan costs and interest rate caps     (8,244 )   (15,722 )   (14,724 )   (11,228 )   (9,346 )
   
 
 
 
 
 
FFO--basic     397,869     373,039     326,541     290,032     254,316  
Additional adjustments to arrive at FFO--diluted:                                
  Impact of convertible preferred stock     10,058     10,083     9,649     9,140     14,816  
  Impact of non-participating convertible preferred units     --     --     641     --     --  
   
 
 
 
 
 
FFO--diluted   $ 407,927   $ 383,122   $ 336,831   $ 299,172   $ 269,132  
   
 
 
 
 
 
Weighted average number of FFO shares outstanding for:                                
FFO--basic(1)     84,467     84,138     73,250     72,715     67,332  
Adjustments for the impact of dilutive securities in computing FFO--diluted:                                
  Convertible preferred stock     3,512     3,627     3,627     3,627     7,386  
  Non-participating convertible preferred units     --     --     197     --     --  
  Stock options     293     293     323     385     480  
   
 
 
 
 
 
FFO--diluted(2)     88,272     88,058     77,397     76,727     75,198  
   
 
 
 
 
 
(1)
Calculated based upon basic net income as adjusted to reach basic FFO. As of December 31, 2007, 2006, 2005, 2004 and 2003, 12.5 million, 13.2 million, 13.5 million, 14.2 million and 14.2 million of aggregate 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 share and unit-based compensation plans and convertible senior notes using the treasury stock 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"). 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. On October 18, 2007, 0.6 million shares of Series A 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 2007, 2006, 2005, 2004 and 2003 FFO--diluted as they are dilutive to that calculation.

53

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, 2007 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,
    
    
    
 
   2008
   2009
   2010
   2011
   2012
   Thereafter
   Total
   FV
CONSOLIDATED CENTERS:                                                
Long term debt:                                                
  Fixed rate(1)   $ 327,747   $ 355,615   $ 1,036,927   $ 718,914   $ 1,206,230   $ 1,160,003   $ 4,805,436   $ 4,821,439
  Average interest rate     6.02%     6.24%     6.49%     5.58%     4.09%     5.79%     5.57%      
  Floating rate     102,000     190,522     665,000     --     --     --     957,522     957,522
  Average interest rate     6.12%     6.11%     6.18%                       6.15%      
   
 
 
 
 
 
 
 
Total debt--Consolidated Centers   $ 429,747   $ 546,137   $ 1,701,927   $ 718,914   $ 1,206,230   $ 1,160,003   $ 5,762,958   $ 5,778,961
   
 
 
 
 
 
 
 

JOINT VENTURE CENTERS:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Long term debt (at Company's pro rata share):                                                
  Fixed rate   $ 70,356   $ 237,996   $ 122,203   $ 33,504   $ 169,206   $ 992,184   $ 1,625,449   $ 1,681,623
  Average interest rate     5.73%     5.89%     6.79%     6.11%     6.99%     5.56%     5.89%      
  Floating rate     83,331     25,988     19,343     66,300     --     --     194,962     194,962
  Average interest rate     5.89%     7.24%     6.03%     5.92%                 6.09%      
   
 
 
 
 
 
 
 
Total debt--Joint Venture Centers   $ 153,687   $ 263,984   $ 141,546   $ 99,804   $ 169,206   $ 992,184   $ 1,820,411   $ 1,876,585
   
 
 
 
 
 
 
 
(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, 2007 and 2006 was $4.8 billion and $3.8 billion, respectively. The average interest rate on fixed rate debt at December 31, 2007 and 2006 was 5.57% and 5.99%, respectively. The consolidated Centers' total floating rate debt at December 31, 2007 and 2006 was $1.0 billion and $1.2 billion, respectively. The average interest rate on floating rate debt at December 31, 2007 and 2006 was 6.15% and 6.59%, respectively.

        The Company's pro rata share of the Joint Venture Centers' fixed rate debt at December 31, 2007 and 2006 was $1.6 billion and $1.5 billion, respectively. The average interest rate on fixed rate debt at December 31, 2007 and 2006 was 5.89% and 5.84%, respectively. The Company's pro rata share of the Joint Venture Centers' floating rate debt at December 31, 2007 and 2006 was $195.0 million and $198.4 million, respectively. The average interest rate on the floating rate debt at December 31, 2007 and 2006 was 6.09% and 6.33%, 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, "Accounting for Derivative Instruments and Hedging Activities" (See "Note 5--Derivative Instruments and Hedging Activities" of the Company's Consolidated Financial Statements).

54

        The following are outstanding derivatives at December 31, 2007 (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%   12/15/2008   100%     --  
La Cumbre Plaza     30,000   Cap   7.12%   8/9/2008   100%     --  
Metrocenter Mall     37,380   Cap   7.25%   2/15/2009   15%     --  
Metrocenter Mall     11,500   Cap   5.25%   2/15/2009   15%     --  
Panorama Mall     50,000   Cap   6.65%   3/1/2008   100%     --  
Superstition Springs Center     67,500   Cap   8.63%   9/9/2008   33.33%     --  
Metrocenter Mall     112,000   Swap   3.86%   2/15/2009   15%     20  
Metrocenter Mall     133,597   Swap   4.57%   2/15/2009   15%     (154 )
The Operating Partnership     450,000   Swap   4.80%   4/25/2010   100%     (11,377 )
The Operating Partnership     400,000   Swap   5.33%   4/25/2011   100%     (16,147 )
(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 $11.5 million per year based on $1.1 billion outstanding of floating rate debt at December 31, 2007.

        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.

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 control over financial reporting will prevent all errors 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.

55

        Based on their evaluation as of December 31, 2007, the Company's Chief Executive Officer and Chief Financial Officer have concluded that the Company's disclosure controls and procedures (as defined in Rule 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 Chief Executive Officer and Chief Financial Officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

        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, 2007. 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 concluded that, as of December 31, 2007, its internal control over financial reporting was effective based on these criteria.

        The Company's independent registered public accounting firm, Deloitte & Touche LLP, has issued an attestation report on the Company's internal control over financial reporting, which is included herein. In such report, Deloitte & Touche LLP notes that it has identified a material weakness in the operation of the Company's review and analysis of the relevant terms and conditions underlying the convertible preferred units issued to prior owners of Wilmorite holdings in connection with the acquisition of the Wilmorite portfolio because effective controls were not maintained by the Company to provide for an appropriate evaluation and determination of whether these interests represent minority interests.

        The decision to restate our consolidated financial statements as of December 31, 2007 and December 31, 2006 and for each of the three years during the period ended December 31, 2007 to correctly account for the minority interests issued to prior owners in connection with the Company's acquisition of Wilmorite and Wilmorite Holdings in April 2005 as more fully described in Note 25 to the consolidated financial statements does not cause our management to change its conclusion that our internal control over financial reporting was effective as of December 31, 2007. The Company does acknowledge a deficiency in its internal control over financial reporting related to the Wilmorite acquisition. Specifically, management has determined that at the time of the Wilmorite acquisition, the Company did not maintain a sufficient complement of personnel with an appropriate level of technical accounting knowledge and experience to review, analyze and monitor the application of generally accepted accounting principles related to the Wilmorite acquisition. However, the Company has taken action to increase the level of technical accounting knowledge and experience of its internal accounting personnel. Consequently, the Company has concluded that it has cured the prior deficiency in its internal control over financial reporting.

        Consistent with the Company's historical practices with respect to significant transactions such as the Wilmorite acquisition, members of the Company's finance organization, including our Chief Financial Officer, engaged in detailed internal conversations to determine proper disclosure of the Wilmorite acquisition in our consolidated financial statements. The Company reached its conclusion

56


regarding the proper presentation of the Wilmorite acquisition in its consolidated financial statements only after it had fully considered all discussions regarding the appropriate disclosure of the transaction under generally accepted accounting principles. While the Company has determined that its prior accounting analysis was incorrect, the Company does not believe that the internal control deficiency was severe enough to constitute a material weakness at December 31, 2007. As a result, the Company does not concur with the conclusion of Deloitte & Touche LLP that such review and analysis constitutes a material weakness.

        There were no changes in the Company's internal control over financial reporting during the quarter ended December 31, 2007 that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.

57


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 Macerich Company's and subsidiaries' (the "Company's") internal control over financial reporting as of December 31, 2007, 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 included in the accompanying Management's Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on 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, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

        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.

        In our report dated February 27, 2008, we expressed an unqualified opinion on the effectiveness of internal control over financial reporting. As described in the following paragraphs, we subsequently identified a material weakness. Accordingly, our present opinion on the effectiveness of the Company's internal control over financial reporting as of December 31, 2007 expressed herein is different from that expressed in our previous report.

        A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company's annual or interim financial statements will not be prevented or detected on a timely basis.

58


We have identified the following material weakness that has not been identified as a material weakness in management's assessment:

        We identified a material weakness in the operation of the Company's review and analysis of the relevant terms and conditions underlying the convertible preferred units issued to prior owners of Wilmorite Holdings in connection with the acquisition of the Wilmorite portfolio. Specifically, effective controls were not maintained by the Company to provide for an appropriate evaluation and determination of whether these interests represent minority interests. The material restatement that resulted from this material weakness includes a decrease of property, net and investments in unconsolidated joint ventures of $134,018,000 and $50,019,000, respectively, an increase in minority interest of $208,993,000, decreases in Class A participating and non-participating convertible preferred units, additional paid-in capital, and accumulated deficit of $230,245,000, $210,736,000, and $47,951,000, respectively, a decrease of net income of $10,732,000, an increase of net income available to common stockholders of $2,043,000 as of and for the year ended December 31, 2007, and in the restatement of the consolidated balance sheets as of December 31, 2007 and 2006, the related consolidated statements of operations, common stockholders' equity, and of cash flows, for each of the three years in the period ended December 31, 2007, and the notes related thereto.

        This material weakness was considered in determining the nature, timing, and extent of audit tests applied in our audit of the consolidated financial statements and financial statement schedules of the Company as of and for the year ended December 31, 2007 and this report does not affect our report on such financial statements and financial statement schedules.

        In our opinion, because of the effect of the material weakness described above on the achievement of the objectives of the control criteria, the Company has not maintained, in all material respects, effective internal control over financial reporting as of December 31, 2007, based on the criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.

        The material weakness described above has not been disclosed or identified in Management's Report on Internal Control over Financial Reporting.

        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, 2007, of the Company and our report dated February 27, 2008 (June 3, 2008 as to the effects of the restatement described in Note 25 and the reclassification for discontinued operations described in Note 13) expressed an unqualified opinion, and included an explanatory paragraph relating to the restatement described in Note 25, on those financial statements and financial statement schedules.

/s/ DELOITTE & TOUCHE LLP

Deloitte & Touche LLP
Los Angeles, California

February 27, 2008 (June 3, 2008 as to the effects of the material weakness described above)

ITEM 9A(T).    CONTROLS AND PROCEDURES

        Not Applicable

ITEM 9B.    OTHER INFORMATION

        None

59


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 2008 Annual Meeting of Stockholders that is responsive to the information required by this Item.

        During 2007, there were no material changes to the procedures described in the Company's proxy statement relating to the 2007 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 2008 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 STOCKHOLDER 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 2008 Annual Meeting of Stockholders that is responsive to the information required by this Item.

        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").

60

        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, 2007.

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 options,
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   879,664 (2) $ 35.54   5,664,249 (3)
Equity Compensation Plans not approved by stockholders   15,000 (4) $ 30.75   --  
   
 
 
 
  Total   894,664   $ 35.46   5,664,249  
   
 
 
 
(1)
Weighted average exercise price of outstanding options does not include stock units or limited operating partnership units.

(2)
Represents 484,322 shares subject to outstanding options under the 1994 Plan and 2003 Plan, 272,967 shares which may be issued upon redemption of LTIP Units or operating partnership units under the 2003 Plan, and 114,875 shares underlying stock units, payable on a one-for-one basis, credited to stock unit accounts under the Director Phantom Stock Plan, and 7,500 shares subject to outstanding options under the Director Plan.

(3)
Of these shares, 4,827,349 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, 117,263 were available for the issuance of stock units under the Director Phantom Stock Plan and 719,637 were available for issuance under the Employee Stock Purchase Plan.

(4)
Represents 15,000 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 in equal installments 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" and "The Board of Directors and its Committees" in the Company's definitive proxy statement for its 2008 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 2008 Annual Meeting of Stockholders that is responsive to the information required by this Item.

61


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
 
63

 
 
 
 
Consolidated balance sheets of the Company as of December 31, 2007 (As Restated) and 2006 (As Restated)
 
64

 
 
 
 
Consolidated statements of operations of the Company for the years ended December 31, 2007 (As Restated), 2006 (As Restated) and 2005 (As Restated)
 
65

 
 
 
 
Consolidated statements of common stockholders' equity of the Company for the years ended December 31, 2007 (As Restated), 2006 (As Restated) and 2005 (As Restated)
 
66

 
 
 
 
Consolidated statements of cash flows of the Company for the years ended December 31, 2007 (As Restated), 2006 (As Restated) and 2005 (As Restated)
 
67

 
 
 
 
Notes to consolidated financial statements (As Restated)
 
69

 
 
2.
 
Financial Statements of Pacific Premier Retail Trust
 
 

 
 
 
 
Report of Independent Registered Public Accounting Firm
 
119

 
 
 
 
Consolidated balance sheets of Pacific Premier Retail Trust as of December 31, 2007 and 2006
 
120

 
 
 
 
Consolidated statements of operations of Pacific Premier Retail Trust for the years ended December 31, 2007, 2006 and 2005
 
121

 
 
 
 
Consolidated statements of stockholders' equity of Pacific Premier Retail Trust for the years ended December 31, 2007, 2006 and 2005
 
122

 
 
 
 
Consolidated statements of cash flows of Pacific Premier Retail Trust for the years ended December 31, 2007, 2006 and 2005
 
123

 
 
 
 
Notes to consolidated financial statements
 
124

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

 
 
 
 
Report of Independent Registered Public Accounting Firm
 
133

 
 
 
 
Balance sheets of SDG Macerich Properties, L.P. as of December 31, 2007 and 2006
 
134

 
 
 
 
Statements of operations of SDG Macerich Properties, L.P. for the years ended December 31, 2007, 2006 and 2005
 
135

 
 
 
 
Statements of cash flows of SDG Macerich Properties, L.P. for the years ended December 31, 2007, 2006 and 2005
 
136

 
 
 
 
Statements of partners' equity of SDG Macerich Properties, L.P. for the years ended December 31, 2007, 2006 and 2005
 
137

 
 
 
 
Notes to financial statements
 
138

 
 
4.
 
Financial Statement Schedules
 
 

 
 
 
 
Schedule III--Real estate and accumulated depreciation of the Company (As Restated)
 
144

 
 
 
 
Schedule III--Real estate and accumulated depreciation of Pacific Premier Retail Trust
 
148

 
 
 
 
Schedule III--Real estate and accumulated depreciation of SDG Macerich Properties, L.P
 
150

(b)
 
1.
 
Exhibits
 
 

 
 
 
 
The Exhibit Index attached hereto is incorporated by reference under this item
 
153

62


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, 2007 and 2006, 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, 2007. Our audits also included the financial statement schedules listed in the Index at Item 15(a)(4). These financial statements and financial statement schedules are the responsibility of the Company's management. Our responsibility is to express an opinion on the financial statements and financial statement schedules based on our audits. We did not audit the consolidated financial statements or the consolidated financial statement schedules 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 $38,947,000 and $50,696,000 in the Partnership's net assets at December 31, 2007 and 2006, respectively, and $7,324,000, $11,197,000 and $15,537,000 in the Partnership's net income for the three years ended December 31, 2007 are included in the accompanying consolidated financial statements. These 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 the 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 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, based on our report and the reports of other auditors, such consolidated financial statements present fairly, in all material respects, the financial position of The Macerich Company and subsidiaries as of December 31, 2007 and 2006, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2007, 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 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.

        As discussed in Note 25, the Company has restated its consolidated balance sheets as of December 31, 2007 and 2006 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, 2007.

        We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company's internal control over financial reporting as of December 31, 2007, 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, 2008 (June 3, 2008 as to the material weakness related to the Company's review and analysis of the relevant terms and conditions underlying certain convertible preferred units to provide for an appropriate evaluation and determination of whether such interests represent minority interests) expressed an adverse opinion on the Company's internal control over financial reporting.

/s/ DELOITTE & TOUCHE LLP

Deloitte & Touche LLP
Los Angeles, California

February 27, 2008 (June 3, 2008 as to the effects of the restatement described in Note 25 and the reclassification for discontinued operations described in Note 13)

63


THE MACERICH COMPANY

CONSOLIDATED BALANCE SHEETS

(Dollars in thousands, except share amounts)

 
   December 31,
  
 
   2007
   2006
  
 
   (As Restated)
  
ASSETS:              
Property, net   $ 6,187,473   $ 5,617,879  
Cash and cash equivalents     85,273     269,435  
Restricted cash     68,384     66,376  
Marketable securities     29,043     30,019  
Tenant and other receivables, net     137,498     117,855  
Deferred charges and other assets, net     386,802     307,825  
Loans to unconsolidated joint ventures     604     708  
Due from affiliates     5,729     4,282  
Investments in unconsolidated joint ventures     785,643     959,297  
Assets held for sale     250,648     —  
   
 
 
    Total assets   $ 7,937,097   $ 7,373,676  
   
 
 
LIABILITIES, MINORITY INTEREST, PREFERRED STOCK AND COMMON STOCKHOLDERS' EQUITY:              
Mortgage notes payable:              
  Related parties   $ 225,848   $ 151,311  
  Others     3,102,422     3,179,787  
   
 
 
    Total     3,328,270     3,331,098  
Bank and other notes payable     2,434,688     1,662,781  
Accounts payable and accrued expenses     97,086     86,127  
Other accrued liabilities     289,660     212,249  
Preferred dividends payable     6,356     6,199  
   
 
 
    Total liabilities     6,156,060     5,298,454  
   
 
 
Minority interest     547,693     597,156  
   
 
 
Commitments and contingencies              
Series A cumulative convertible redeemable preferred stock, $.01 par value, 3,627,131 shares authorized, 3,067,131 and 3,627,131 shares issued and outstanding at December 31, 2007 and 2006, respeectively     83,495     98,934  
   
 
 
Common stockholders' equity:              
  Common stock, $.01 par value, 145,000,000 shares authorized, 72,311,763 and 71,567,908 shares issued and outstanding at December 31, 2007 and 2006, respectively     723     716  
  Additional paid-in capital     1,367,566     1,443,050  
  Accumulated deficit     (193,932 )   (66,974 )
  Accumulated other comprehensive (loss) income     (24,508 )   2,340  
   
 
 
    Total common stockholders' equity     1,149,849     1,379,132  
   
 
 
    Total liabilities, minority interest, preferred stock and common stockholders' equity   $ 7,937,097   $ 7,373,676  
   
 
 

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

64


THE MACERICH COMPANY

CONSOLIDATED STATEMENTS OF OPERATIONS

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

 
   For The Years Ended December 31,
  
 
   2007
   2006
   2005
  
 
   (As Restated)
  
Revenues:                    
  Minimum rents   $ 474,885   $ 438,261   $ 392,046  
  Percentage rents     26,104     23,876     23,744  
  Tenant recoveries     245,332     227,575     195,896  
  Management Companies     39,752     31,456     26,128  
  Other     27,199     28,451     22,333  
   
 
 
 
    Total revenues     813,272     749,619     660,147  
   
 
 
 
Expenses:                    
  Shopping center and operating expenses     256,426     233,669     203,829  
  Management Companies' operating expenses     73,761     56,673     52,840  
  REIT general and administrative expenses     16,600     13,532     12,106  
  Depreciation and amortization     212,518     196,760     171,987  
   
 
 
 
      559,305     500,634     440,762  
   
 
 
 
  Interest expense:                    
    Related parties     13,390     10,858     9,638  
    Other     236,737     249,847     218,423  
   
 
 
 
      250,127     260,705     228,061  
  Loss on early extinguishment of debt     877     1,835     1,666  
   
 
 
 
    Total expenses     810,309     763,174     670,489  
Minority interest in consolidated joint ventures     (2,301 )   (1,860 )   (1,087 )
Equity in income of unconsolidated joint ventures     81,458     86,053     76,303  
Income tax benefit (provision)     470     (33 )   2,031  
Gain (loss) on sale of assets     12,146     (84 )   1,253  
   
 
 
 
Income from continuing operations     94,736     70,521     68,158  
   
 
 
 
Discontinued operations:                    
  (Loss) gain on sale of assets     (2,409 )   204,985     277  
  Income from discontinued operations     6,517     9,870     9,219  
   
 
 
 
Total income from discontinued operations     4,108     214,855     9,496  
   
 
 
 
Income before minority interest and preferred dividends     98,844     285,376     77,654  
Less: minority interest in Operating Partnership     13,036     40,827     (22,001 )
   
 
 
 
Net income     85,808     244,549     99,655  
Less: preferred dividends     10,058     10,083     9,649  
Less: adjustment of minority interest due to redemption value     2,046     17,062     183,620  
   
 
 
 
Net income (loss) available to common stockholders   $ 73,704   $ 217,404   $ (93,614 )
   
 
 
 
Earnings per common share—basic:                    
    Income from continuing operations   $ 1.01   $ 0.72   $ 0.80  
    Discontinued operations     0.02     2.35     (2.38 )
   
 
 
 
    Net income (loss) available to common stockholders   $ 1.03   $ 3.07   $ (1.58 )
   
 
 
 
Earnings per common share—diluted:                    
    Income from continuing operations   $ 1.00   $ 0.80   $ 0.80  
    Discontinued operations     0.02     2.25     (2.37 )
   
 
 
 
    Net income (loss) available to common stockholders   $ 1.02   $ 3.05   $ (1.57 )
   
 
 
 
Weighted average number of common shares outstanding:                    
    Basic     71,768,000     70,826,000     59,279,000  
   
 
 
 
    Diluted     84,760,000     88,058,000     73,573,000  
   
 
 
 

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

65


THE MACERICH COMPANY

CONSOLIDATED STATEMENTS OF COMMON STOCKHOLDERS' EQUITY

(Dollars in thousands, except per share data)

 
   Common Stock
    
    
    
    
    
  
 
    
    
   Accumulated
Other
Comprehensive
(Loss) income
    
   Total
Common
Stockholders'
Equity
  
 
   Shares
   Par
Value
   Additional
Paid-in
Capital
   Accumulated
Deficit
   Unamortized
Restricted
Stock
  
Balance December 31, 2004 (As Previously Reported)   58,785,694   $ 586   $ 1,029,940   $ (103,489 ) $ 1,092   $ (14,596 ) $ 913,533  
Restatement adjustment   —     —     (47,681 )   47,681     —     —     —  
   
 
 
 
 
 
 
 
Balance January 1, 2005 (Restated)   58,785,694     586     982,259     (55,808 )   1,092     (14,596 )   913,533  
   
 
 
 
 
 
 
 
Comprehensive income (loss):                                          
  Net income (Restated)   —     —     —     99,655     —     —     99,655  
  Reclassification of deferred losses   —     —     —     —     1,351     —     1,351  
  Interest rate swap/cap agreements   —     —     —     —     (2,356 )   —     (2,356 )
   
 
 
 
 
 
 
 
  Total comprehensive income (loss) (Restated)   —     —     —     99,655     (1,005 )   —     98,650  
Issuance of restricted stock   260,898     3     12,393     —     —     —     12,396  
Unvested restricted stock   (260,898 )   (3 )   —     —     —     (12,393 )   (12,396 )
Amortization of share and unit-based plans   247,371     3     —     —     —     11,525     11,528  
Exercise of stock options   182,237     2     4,595     —     —     —     4,597  
Adjustment of minority interest due to redemption value (Restated)   —     —     (183,620 )   —     —     —     (183,620 )
Distributions paid ($2.63) per share   —     —     —     (158,104 )   —     —     (158,104 )
Preferred dividends (Restated)   —     —     (9,649 )   —     —     —     (9,649 )
Conversion of Operating Partnership Units   726,250     8     21,587     —     —     —     21,595  
Adjustment to reflect minority interest on a pro rata basis for period end ownership percentage of Operating Partnership Units (Restated)   —     —     (18,852 )   —     —     —     (18,852 )
   
 
 
 
 
 
 
 
Balance December 31, 2005 (Restated)   59,941,552     599     808,713     (114,257 )   87     (15,464 )   679,678  
   
 
 
 
 
 
 
 
Comprehensive income:                                          
  Net income (Restated)   —     —     —     244,549     —     —     244,549  
  Reclassification of deferred losses   —     —     —     —     1,510     —     1,510  
  Interest rate swap/cap agreements   —     —     —     —     743     —     743  
   
 
 
 
 
 
 
 
  Total comprehensive income (Restated)   —     —     —     244,549     2,253     —     246,802  
Amortization of share and unit-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 )
Adjustment of minority interest due to redemption value (Restated)   —     —     (17,062 )   —     —     —     (17,062 )
Distributions paid ($2.75) per share   —     —     —     (197,266 )   —     —     (197,266 )
Preferred dividends (Restated)   —     —     (10,083 )   —     —     —     (10,083 )
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 for period end ownership percentage of Operating Partnership Units (Restated)   —     —     (101,214 )   —     —     —     (101,214 )
   
 
 
 
 
 
 
 
Balance December 31, 2006 (Restated)   71,567,908     716     1,443,050     (66,974 )   2,340     —     1,379,132  
   
 
 
 
 
 
 
 
Comprehensive income:                                          
  Net income (Restated)   —     —     —     85,808     —     —     85,808  
  Reclassification of deferred losses   —     —     —     —     967     —     967  
  Interest rate swap/cap agreements   —     —     —     —     (27,815 )   —     (27,815 )
   
 
 
 
 
 
 
 
  Total comprehensive income (loss) (Restated)   —     —     —     85,808     (26,848 )   —     58,960  
Amortization of share and unit-based plans   215,132     2     21,407     —     —     —     21,409  
Exercise of stock options   23,500     —     672     —     —     —     672  
Employee stock purchases   13,184     —     881     —     —     —     881  
Adjustment of minority interest due to redemption value (Restated)   —     —     (2,046 )   —     —     —     (2,046 )
Distributions paid ($2.93) per share   —     —     —     (211,192 )   —     —     (211,192 )
Preferred dividends (Restated)   —     —     (10,058 )   —     —     —     (10,058 )
Conversion of partnership units and Class A non-participating convertible preferred units   739,039     7     20,757     —     —     —     20,764  
Repurchase of common shares   (807,000 )   (8 )   (74,962 )   —     —     —     (74,970 )
Conversion of preferred shares to common shares   560,000     6     15,433     —     —     —     15,439  
Purchase of capped calls on convertible senior notes   —     —     (59,850 )   —     —     —     (59,850 )
Change in accounting principle due to adoption of FIN 48 (Restated)   —     —     —     (1,574 )   —     —     (1,574 )
Adjustment to reflect minority interest on a pro rata basis for period end ownership percentage of Operating Partnership Units (Restated)   —     —     12,282     —     —     —     12,282  
   
 
 
 
 
 
 
 
Balance December 31, 2007 (Restated)   72,311,763   $ 723   $ 1,367,566   $ (193,932 ) $ (24,508 ) $ —   $ 1,149,849  
   
 
 
 
 
 
 
 

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

66


THE MACERICH COMPANY

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in thousands)

 
   For The Years Ended December 31,
  
 
   2007
   2006
   2005
  
 
   (As Restated)
  
Cash flows from operating activities:                    
  Net income (loss) available to common stockholders   $ 73,704   $ 217,404   $ (93,614 )
  Preferred dividends     10,058     10,083     9,649  
  Adjustment of minority interest due to redemption value     2,046     17,062     183,620  
   
 
 
 
  Net income     85,808     244,549     99,655  
  Adjustments to reconcile net income to net cash provided by operating activities:                    
    Loss on early extinguishment of debt     877     1,835     1,666  
    (Gain) loss on sale of assets     (12,146 )   84     (1,253 )
    Loss (gain) on sale of assets of discontinued operations     2,409     (204,985 )   (277 )
    Depreciation and amortization     238,645     232,220     205,965  
    Amortization of net premium on mortgage and bank and other notes payable     (9,883 )   (11,835 )   (10,193 )
    Amortization of share and unit-based plans     12,344     9,607     8,286  
    Minority interest in Operating Partnership     13,036     40,827     (22,001 )
    Minority interest in consolidated joint ventures     18,557     18,354     10,049  
    Equity in income of unconsolidated joint ventures     (81,458 )   (86,053 )   (76,303 )
    Distributions of income from unconsolidated joint ventures     4,118     4,106     9,010  
    Changes in assets and liabilities, net of acquisitions and dispositions:                    
      Tenant and other receivables, net     (20,001 )   (22,319 )   (6,400 )
      Other assets     (33,375 )   8,303     31,517  
      Accounts payable and accrued expenses     23,959     (14,000 )   5,181  
      Due from affiliates     (1,477 )   (24 )   (14,276 )
      Other accrued liabilities     84,657     (8,819 )   (5,330 )
   
 
 
 
  Net cash provided by operating activities     326,070     211,850     235,296  
   
 
 
 
Cash flows from investing activities:                    
  Acquisitions of property, development, redevelopment and property improvements     (1,043,800 )   (822,903 )   (171,842 )
  Payment of acquisition deposits     (51,943 )   —     —  
  Issuance of note receivable     —     (10,000 )   —  
  Purchase of marketable securities     —     (30,307 )   —  
  Maturities of marketable securities     1,322     444     —  
  Deferred leasing costs     (34,753 )   (29,688 )   (21,837 )
  Distributions from unconsolidated joint ventures     274,303     187,269     155,537  
  Contributions to unconsolidated joint ventures     (38,769 )   (31,499 )   (101,429 )
  Repayments of loans to unconsolidated joint ventures     104     707     5,228  
  Proceeds from sale of assets     30,261     610,578     6,945  
  Restricted cash     (2,008 )   (1,337 )   (4,550 )
   
 
 
 
  Net cash used in investing activities     (865,283 )   (126,736 )   (131,948 )
   
 
 
 

67

THE MACERICH COMPANY

CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

(Dollars in thousands)

Cash flows from financing activities:                    
  Proceeds from mortgages and bank and other notes payable     2,296,530     1,912,179     483,127  
  Payments on mortgages and bank and other notes payable     (1,535,017 )   (2,329,827 )   (286,369 )
  Deferred financing costs     (2,482 )   (6,886 )   (4,141 )
  Purchase of Capped Calls     (59,850 )   —     —  
  Repurchase of common stock     (74,970 )   —     —  
  Proceeds from share and unit-based plans     1,553     463     4,597  
  Net proceeds from stock offering     —     746,805     —  
  Dividends and distributions     (245,991 )   (269,419 )   (202,078 )
  Dividends to preferred stockholders / preferred unit holders     (24,722 )   (24,107 )   (15,485 )
   
 
 
 
  Net cash provided by (used in) financing activities     355,051     29,208     (20,349 )
   
 
 
 
  Net (decrease) increase in cash     (184,162 )   114,322     82,999  
Cash and cash equivalents, beginning of year     269,435     155,113     72,114  
   
 
 
 
Cash and cash equivalents, end of year   $ 85,273   $ 269,435   $ 155,113  
   
 
 
 
Supplemental cash flow information:                    
  Cash payments for interest, net of amounts capitalized   $ 280,820   $ 282,987   $ 244,474  
   
 
 
 
Non-cash transactions:                    
  Accrued development costs included in accounts payable and accrued expenses and other accrued liabilities   $ 54,308   $ 25,754   $ 9,697  
   
 
 
 
  Acquisition of property by issuance of bank notes payable   $ —   $ —   $ 1,198,503  
   
 
 
 
  Acquisition of property by assumption of mortgage notes payable   $ 4,300   $ —   $ 809,542  
   
 
 
 
  Acquisition of property by issuance of convertible preferred units and common units   $ —   $ —   $ 45,197  
   
 
 
 
  Accrued preferred dividends payable   $ 6,356   $ 6,199   $ 5,970  
   
 
 
 

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

68


THE MACERICH COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars and shares 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, 2007, the Company was the sole general partner of and held an 85% 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 15% limited partnership interest of the Operating Partnership not owned by the Company is reflected in these consolidated 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, Westcor Partners of Colorado, LLC, a Colorado limited liability company, MACW Mall Management, Inc., a New York corporation, and MACW Property Management, LLC, a single member New York limited liability company. These last two management companies are collectively referred to herein as the "Wilmorite Management Companies." The three Westcor management companies are collectively referred to herein as the "Westcor Management Companies." All seven of the management companies are collectively referred to herein as the "Management Companies."

2. Summary of Significant Accounting Policies:

        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.

        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.

69

THE MACERICH COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

2. Summary of Significant Accounting Policies: (Continued)

        Certain prior year amounts have been reclassified to conform to the current year presentation. The Company reclassified loss on early extinguishment of debt to be included in total expenses in the consolidated statements of operations.

        Included in tenant and other receivables are allowances for doubtful accounts of $2,417 and $2,700 at December 31, 2007 and 2006, respectively. Also included in tenant and other receivables are accrued percentage rents of $10,067 and $11,086 at December 31, 2007 and 2006, respectively.

        On March 31, 2006, the Company received a note receivable that is secured by a deed of trust, bears interest at 5.5% and matures on March 31, 2031. The note is included in tenant and other receivables and had a balance of $9,661 and $9,876 at December 31, 2007 and 2006, respectively.

        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-line rent adjustment." Rental income was increased by $6,894, $4,653 and $4,533 due to the straight-line rent adjustment during the years ended December 31, 2007, 2006 and 2005, respectively. Percentage rents are recognized and accrued when tenants' specified sales targets have been met.

        Estimated recoveries from certain tenants for their pro rata share of real estate taxes, insurance and other shopping center operating expenses are recognized as revenues in the period the applicable expenses are incurred. Other tenants pay a fixed rate and these tenant recoveries are recognized into revenue on a straight-line basis over the term of the related leases.

        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.

        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.

70

THE MACERICH COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

2. Summary of Significant Accounting Policies: (Continued)

        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

        The Company accounts for all acquisitions in accordance with Statement of Financial Accounting Standards ("SFAS") No. 141, "Business Combinations." The Company first determines the value of the land and buildings utilizing an "as if vacant" methodology. The Company then assigns a fair value to any debt assumed at acquisition. The balance of the purchase price is 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.

        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

71

THE MACERICH COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

2. Summary of Significant Accounting Policies: (Continued)

marketable securities is amortized into interest income on a straight-line basis over the term of the notes, which approximates the effective interest method.

        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

        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 a discounted 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, 2007 or 2006.

        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 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.

72

THE MACERICH COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

2. Summary of Significant Accounting Policies: (Continued)

        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 2007, 2006 or 2005.

        Mervyn's represented 3.3% and Limited Brands, Inc. represented 3.5% and 4.1% of the minimum rents for the years ended December 31, 2007, 2006 and 2005, respectively. No other retailer represented more than 2.7%, 2.9% and 3.6% of the minimum rents during the years ended December 31, 2007, 2006 and 2005, respectively.

        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 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 and Unit-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. The Company adopted FIN 47 on January 1, 2005. As a result of the Company's adoption, the Company recorded an additional liability of $615 in 2005.

        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 adoption of SFAS No. 155 on January 1, 2007 did not have a material impact on the Company's consolidated 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

73

THE MACERICH COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

2. Summary of Significant Accounting Policies: (Continued)


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. The Company adopted FIN 48 on January 1, 2007. See Note 19--Income Taxes for the impact of the adoption of FIN 48 on the Company's results of operations and 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. The adoption of SAB No. 108 did not have a material impact on the Company's consolidated results of operations or financial condition.

        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. In February 2008, the FASB issued FASB Staff Position SFAS 157-1, Application of FASB Statement No. 157 to FASB Statement No. 13 and Other Accounting Pronouncements That Address Fair Value Measurements for Purposes of Lease Classification or Measurement under Statement 13 ("FSP FAS 157-1") and FSP SFAS 157-2, Effective Date of SFAS No. 157 ("FSP FAS 157-2"). FSP FAS 157-2 defers the effective date of SFAS No. 157 for all non-financial assets and non-financial liabilities, except those that are recognized or disclosed at fair value in the financial statements on a recurring basis. FSP FAS 157-1 also excludes from the scope of SFAS No. 157 certain leasing transactions accounted for under SFAS No. 13, Accounting for Leases. The Company adopted SFAS 157 and FSP FAS 157-1 on a prospective basis effective January 1, 2008. The adoption of SFAS No. 157 and FSP FAS 157-1 did not have a material impact on the Company's results of operations or financial condition.

        In February 2007, the FASB issued SFAS No. 159, "The Fair Value Option for Financial Assets and Financial Liabilities--Including an amendment of FASB Statement No. 115." SFAS No. 159 permits, at the option of the reporting entity, measurement of certain assets and liabilities at fair value. The Company adopted SFAS No. 159 on January 1, 2008. The adoption of SFAS No. 159 did not have a material effect on the Company's results of operations or financial condition as the Company did not elect to apply the fair value option to eligible financial instruments on that date.

        In December 2007, the FASB issued SFAS No. 141 (revised), "Business Combinations." SFAS No. 141(R) requires all assets and assumed liabilities, including contingent liabilities, in a business combination to be recorded at their acquisition-date fair value rather than at historical costs. The Company is required to adopt SFAS No. 141 (R) on January 1, 2009. The Company is currently evaluating the impact of adoption on the Company's results of operations and financial condition.

        In December 2007, the FASB issued SFAS No. 160, "Noncontrolling Interests in Consolidated Financial Statements--an amendment to ARB No. 51". SFAS No. 160 clarifies the accounting for noncontrolling interest or minority interest in a subsidiary included in consolidated financial statements. The Company is required to adopt SFAS No. 160 on January 1, 2009 and the Company is currently evaluating the impact of the adoption on the Company's results of operations and financial condition.

74

THE MACERICH COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

3. Earnings per Share ("EPS"):

        The computation of basic earnings per share is based on net income available to common stockholders and the weighted average number of common shares outstanding for the years ended December 31, 2007, 2006 and 2005. The computation of diluted earnings per share includes the dilutive effect of share and unit-based compensation plans and convertible senior notes calculated using the treasury stock method and the dilutive effect of all other dilutive securities calculated using the "if converted" method. The OP Units and MACWH, LP common units not held by the Company have been included in the diluted EPS calculation since they may be redeemed on a one-for-one basis for common stock or cash, at the Company's option.

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

 
   2007
   2006
   2005
  
 
   Net
Income
   Shares
   Per
Share
   Net
Income
   Shares
   Per
Share
   Net
Income
   Shares
   Per
Share
  
Net income   $ 85,808             $ 244,549             $ 99,655            
Less: preferred dividends     10,058               10,083               9,649            
Less: adjustment of minority interest due to redemption
value		     2,046               17,062               183,620            
   
           
           
           

Basic EPS:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income (loss) available to common stockholders     73,704   71,768   $ 1.03     217,404   70,826   $ 3.07     (93,614 ) 59,279   $ (1.58 )

Diluted EPS(1):
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Conversion of partnership units     13,036   12,699           40,827   13,312           (22,001 ) 13,971        
Share and unit-based plans     —   293           —   293           —   323        
Convertible preferred stock(2)     —   —           10,083   3,627           —   —        
   
 
       
 
       
 
       
Net income (loss) available to common stockholders   $ 86,740   84,760   $ 1.02   $ 268,314   88,058   $ 3.05   $ (115,615 ) 73,573   $ (1.57 )
   
 
       
 
       
 
       
(1)
The convertible senior notes (See Note 10—Bank and Other Notes Payable) are excluded from diluted EPS for 2007 as their effect would be antidilutive to net income available to common stockholders.

(2)
The preferred stock (See Note 22--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 to net income for 2007 and 2005. The amount of preferred stock excluded from diluted EPS was 3,512,131 shares and 3,627,131 shares for the years ended December 31, 2007 and 2005, respectively.

        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:

 
   2007
   2006
   2005
  
Income before discontinuing operations   $ 12,726   $ 9,556   $ 11,065  
Discontinued operations:                    
  (Loss) gain on sale of assets     (362 )   32,408     53  
  Income from discontinued operations     672     (1,137 )   (33,119 )
   
 
 
 
  Total minority interest in Operating Partnership   $ 13,036   $ 40,827   $ (22,001 )
   
 
 
 

75

THE MACERICH COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

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

        The Company had an 85%, 84% and an 82% ownership interest in the Operating Partnership as of December 31, 2007, 2006 and 2005, respectively. The remaining 15%, 16% and 18% limited partnership interest as of December 31, 2007, 2006 and 2005, respectively, was owned by certain of the Company's executive officers and directors, certain of their affiliates, and other outside investors in the form of OP Units. The OP Units may be redeemed on a one-for-one basis for common shares or cash, at the Company's option. The redemption value for each OP Unit as of any balance sheet date is the amount equal to the average of the closing quoted price per share of the Company's common stock, par value $.01 per share, as reported on the New York Stock Exchange for the ten trading days immediately preceding the respective balance sheet date. Accordingly, as of December 31, 2007 and 2006, the aggregate redemption value of the then-outstanding OP Units not owned by the Company was $904,150 and $1,107,097, respectively.

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, 2007 is as follows:

Joint Venture
   Operating 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%
Macerich SanTan Village Phase 2 SPE LLC—SanTan Village Power Center   34.9%
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%
Scottsdale Fashion Square Partnership   50.0%

76

THE MACERICH COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

4. Investments in Unconsolidated Joint Ventures: (Continued)

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   37.7%
Westcor/Queen Creek LLC   37.7%
Westcor/Queen Creek Medical LLC   37.7%
Westcor/Queen Creek Residential LLC   37.6%
Westcor/Surprise Auto Park LLC   33.3%
Westpen Associates   50.0%
WM Ridgmar, L.P.    50.0%
Wilshire Building--Tenants in Common   30.0%

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

        The Company has acquired the following investments in unconsolidated joint ventures during the years ended December 31, 2007, 2006 and 2005:

        On January 11, 2005, the Company became a 15% owner in a joint venture that acquired Metrocenter Mall, a 1.1 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 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.

77

THE MACERICH COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

4. Investments in Unconsolidated Joint Ventures: (Continued)

        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 435,022 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 Tysons Corner Center, a 2.2 million square foot super-regional mall in McLean, Virginia. The results of Tysons Corner Center are included below for the period subsequent to its date of acquisition.

        On September 5, 2007, the Company purchased the remaining 50% outside ownership interest in Hilton Village, a 96,546 square foot specialty center in Scottsdale, Arizona. The total purchase price of $13,500 was funded by cash, borrowings under the Company's line of credit and the assumption of a mortgage note payable. The Center was previously accounted for under the equity method as an investment in unconsolidated joint ventures.

        On October 25, 2007, the Company purchased a 30% tenants-in-common interest in the Wilshire Building, a 40,000 square foot strip center in Santa Monica, California. The total purchase price of $27,000 was funded by cash, borrowings under the Company's line of credit and the assumption of an $6,650 mortgage note payable. The results of the Wilshire Building 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.

78

THE MACERICH COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

4. Investments in Unconsolidated Joint Ventures: (Continued)

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

 
   2007
   2006
Assets(1):            
  Properties, net   $ 4,294,147   $ 4,251,765
  Other assets     456,919     429,028
   
 
  Total assets   $ 4,751,066   $ 4,680,793
   
 
Liabilities and partners' capital(1):            
  Mortgage notes payable(2)   $ 3,865,593   $ 3,515,154
  Other liabilities     183,884     140,889
  The Company's capital(3)     401,333     559,172
  Outside partners' capital     300,256     465,578
   
 
  Total liabilities and partners' capital   $ 4,751,066   $ 4,680,793
   
 

 
   SDG
Macerich
Properties, L.P.
   Pacific
Premier
Retail Trust
   Tysons
Corner
LLC
As of December 31, 2007:                  
Total Assets   $ 904,186   $ 1,026,973   $ 640,179
Total Liabilities   $ 826,291   $ 842,816   $ 364,554

As of December 31, 2006:
 
 
 
 
 
 
 
 
 
Total Assets   $ 924,720   $ 1,027,132   $ 644,545
Total Liabilities   $ 823,327   $ 848,070   $ 371,360

79

THE MACERICH COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

4. Investments in Unconsolidated Joint Ventures: (Continued)

Combined and Condensed Statements of Operations of Unconsolidated Joint Ventures:

 
   SDG
Macerich
Properties, L.P.
   Pacific
Premier
Retail Trust
   Tysons
Corner
LLC
   Other
Joint
Ventures
   Total
  
Year Ended December 31, 2007                                
Revenues:                                
  Minimum rents   $ 97,626   $ 125,558   $ 64,182   $ 238,350   $ 525,716  
  Percentage rents     5,614     7,409     2,170     19,907     35,100  
  Tenant recoveries     52,786     50,435     31,237     116,692     251,150  
  Other     2,955     4,237     2,115     22,871     32,178  
   
 
 
 
 
 
    Total revenues     158,981     187,639     99,704     397,820     844,144  
   
 
 
 
 
 
Expenses:                                
  Shopping center and operating expenses     63,985     52,766     25,883     135,123     277,757  
  Interest expense     46,598     49,524     16,682     108,006     220,810  
  Depreciation and amortization     29,730     30,970     20,547     88,374     169,621  
   
 
 
 
 
 
  Total operating expenses     140,313     133,260     63,112     331,503     668,188  
   
 
 
 
 
 
(Loss) gain on sale of assets     (4,020 )   --     --     6,959     2,939  
   
 
 
 
 
 
Net income   $ 14,648   $ 54,379   $ 36,592   $ 73,276   $ 178,895  
   
 
 
 
 
 
Company's equity in net income   $ 7,324   $ 27,868   $ 18,296   $ 27,970   $ 81,458  
   
 
 
 
 
 

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  
   
 
 
 
 
 

80

THE MACERICH COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

4. Investments in Unconsolidated Joint Ventures: (Continued)


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     3,397     3,852     817     18,272     26,338  
   
 
 
 
 
 
    Total revenues     155,070     169,899     52,288     297,941     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     356     --     --     15,161     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  
   
 
 
 
 
 

        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 $125,984 and $132,170 as of December 31, 2007 and 2006 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 $8,678, $9,082 and $9,422 for the years ended December 31, 2007, 2006 and 2005, 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 No. 133, "Accounting for Derivative Instruments and Hedging Activities," is formally designated as a cash flow hedge at the inception of the derivative contract. On an ongoing quarterly basis, the Company adjusts its balance sheet to reflect the current fair value of its derivatives. To the extent they are effective, changes in fair value of derivatives are recorded in comprehensive income. Ineffective portions, if any, are included in net income. No ineffectiveness was recorded in net income during the years ended December 31, 2007, 2006 or 2005. If any derivative instrument used for risk management does not meet the hedging criteria, it is

81

THE MACERICH COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

5. Derivative Instruments and Hedging Activities: (Continued)


marked-to-market each period in the consolidated statements of operations. As of December 31, 2007, three of the Company's derivative instruments were not designated as cash flow hedges. Changes in the market value of these derivative instruments are recorded in the consolidated statements of operations.

        As of December 31, 2007 and 2006, the Company had $286 and $1,252, respectively, reflected in other comprehensive income related to treasury rate locks settled in prior years. The Company reclassified $967, $1,510 and $1,351 for the years ended December 31, 2007, 2006 and 2005, respectively, related to treasury rate lock transactions settled in prior years from accumulated other comprehensive income to earnings. It is anticipated that the remaining $286 will be reclassified during 2008.

        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 (loss) income of ($27,815), $743 and ($2,356) related to the marking-to-market of interest rate swap and cap agreements for the years ended December 31, 2007, 2006 and 2005, respectively. The amount expected to be reclassified to interest expense in the next 12 months is immaterial.

6. Property:

        Property at December 31, 2007 and 2006 consists of the following:

 
   2007
   2006
  
Land   $ 1,146,096   $ 1,110,919  
Building improvements     5,121,442     4,641,407  
Tenant improvements     285,395     227,259  
Equipment and furnishings     83,199     82,456  
Construction in progress     442,670     294,115  
   
 
 
      7,078,802     6,356,156  
Less accumulated depreciation     (891,329 )   (738,277 )
   
 
 
    $ 6,187,473   $ 5,617,879  
   
 
 

        Depreciation expense for the years ended December 31, 2007, 2006 and 2005 was $177,360, $166,565 and $145,149, respectively.

        The Company recognized a gain (loss) on the sale of equipment and furnishings of $3,365, ($600) and ($55) during the years ended December 31, 2007, 2006 and 2005, respectively. In addition, the Company recognized a gain on the sale of land of $8,781, $516 and $1,308 during the years ended December 31, 2007, 2006 and 2005, respectively.

        The above schedule also includes the properties purchased in connection with the acquisition of Wilmorite, Valley River Center, Federated stores, Deptford Mall, Hilton Village and Mervyn's stores classified as held and used at December 31, 2007 (See Note 12--Acquisitions).

82

THE MACERICH COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

7. Marketable Securities:

        Marketable Securities at December 31, 2007 and 2006 consists of the following:

 
   2007
   2006
  
Government debt securities, at par value   $ 30,544   $ 31,866  
Less discount     (1,501 )   (1,847 )
   
 
 
      29,043     30,019  
Unrealized gain     2,183     514  
   
 
 
Fair value   $ 31,226   $ 30,533  
   
 
 

        Future contractual maturities of marketable securities at December 31, 2007 are as follows:

1 year or less   $ 1,436
2 to 5 years     3,961
6 to 10 years     25,147
   
    $ 30,544
   

        The proceeds from maturities and interest receipts from the marketable securities are restricted to the service of the $27,676 note on which the Company remains obligated following the sale of Greeley Mall in July 2006 (See Note 10—Bank and Other Notes Payable).

83

THE MACERICH COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

8. Deferred Charges And Other Assets:

        Deferred charges and other assets at December 31, 2007 and 2006 consist of the following:

 
   2007
   2006
  
Leasing   $ 139,343   $ 115,657  
Financing     47,406     40,906  
Intangible assets resulting from SFAS No. 141 allocations(1):              
  In-place lease values     201,863     207,023  
  Leasing commissions and legal costs     35,728     36,177  
   
 
 
      424,340     399,763  
Less accumulated amortization(2)     (175,353 )   (171,073 )
   
 
 
      248,987     228,690  
Other assets     137,815     79,135  
   
 
 
    $ 386,802   $ 307,825  
   
 
 

Year ending December 31,
    
    
2008   $ 38,741    
2009     15,406    
2010     13,048    
2011     10,627    
2012     8,920    
Thereafter     48,898    
   
 
    $ 135,640    
   
 

84

THE MACERICH COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

8. Deferred Charges And Other Assets: (Continued)

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

 
   2007
   2006
  
Above Market Leases              
Original allocated value   $ 65,752   $ 64,718  
Less accumulated amortization     (38,530 )   (36,058 )
   
 
 
    $ 27,222   $ 28,660  
   
 
 

Below Market Leases
 
 
 
 
 
 
 
Original allocated value   $ 156,667   $ 150,300  
Less accumulated amortization     (93,090 )   (77,261 )
   
 
 
    $ 63,577   $ 73,039  
   
 
 

        The allocated values of above and below 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,
   Above
Market
   Below
Market
2008   $ 10,841   $ 19,420
2009     4,592     10,978
2010     3,475     9,450
2011     2,388     7,086
2012     1,260     5,435
Thereafter     4,666     11,208
   
 
    $ 27,222   $ 63,577
   
 

85

THE MACERICH COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

9. Mortgage Notes Payable:

        Mortgage notes payable at December 31, 2007 and 2006 consist of the following:

 
   Carrying Amount of Mortgage Notes(a)
    
    
    
 
   2007
   2006
    
    
    
Property Pledged as Collateral
   Interest
Rate
   Monthly
Payment
Term(b)
   Maturity
Date
  Other
   Related Party
   Other
   Related Party
Borgata(c)   $ —   $ —   $ 14,885   $ —   5.39 % $ —   —
Capitola Mall     —     39,310     —     40,999   7.13 %   380   2011
Carmel Plaza     26,253     —     26,674     —   8.18 %   202   2009
Chandler Fashion Center     169,789     —     172,904     —   5.52 %   1,043   2012
Chesterfield Towne Center(d)     55,702     —     57,155     —   9.07 %   548   2024
Danbury Fair Mall     176,457     —     182,877     —   4.64 %   1,225   2011
Deptford Mall(e)     172,500     —     100,000     —   5.41 %   778   2013
Eastview Commons(f)     8,814     —     9,117     —   5.46 %   66   2010
Eastview Mall(f)     101,007     —     102,873     —   5.10 %   592   2014
Fiesta Mall     84,000     —     84,000     —   4.98 %   341   2015
Flagstaff Mall     37,000     —     37,000     —   5.03 %   153   2015
FlatIron Crossing     187,736     —     191,046     —   5.26 %   1,102   2013
Freehold Raceway Mall     177,686     —     183,505     —   4.68 %   1,184   2011
Fresno Fashion Fair     63,590     —     64,595     —   6.52 %   437   2008
Great Northern Mall     40,285     —     40,947     —   5.19 %   234   2013
Greece Ridge Center(g)     72,000     —     72,000     —   5.97 %   341   2008
Hilton Village(h)     8,530     —     —     —   5.27 %   37   2012
La Cumbre Plaza(i)     30,000     —     30,000     —   6.48 %   150   2008
Marketplace Mall(f)     39,345     —     40,473     —   5.30 %   267   2017
Northridge Mall     81,121     —     82,514     —   4.94 %   453   2009
Oaks, The(j)     —     —     92,000     —   6.05 %   —   —
Pacific View     88,857     —     90,231     —   7.23 %   649   2011
Panorama Mall(k)     50,000     —     50,000     —   6.00 %   241   2010
Paradise Valley Mall     21,231     —     22,154     —   5.89 %   183   2009
Paradise Valley Mall(l)     —     —     74,990     —   5.39 %   —   —
Pittsford Plaza(f)     24,596     —     25,278     —   5.02 %   159   2013
Pittsford Plaza(m)     9,148     —     —     —   6.52 %   47   2013
Prescott Gateway     60,000     —     60,000     —   5.86 %   289   2011
Promenade at Casa Grande(n)     79,964     —     7,304     —   6.35 %   419   2009
Queens Center     90,519     —     92,039     —   7.10 %   633   2009
Queens Center     108,539     108,538     110,313     110,312   7.00 %   1,501   2013
Rimrock Mall     42,828     —     43,452     —   7.56 %   320   2011
Salisbury, Center at     115,000     —     115,000     —   5.83 %   555   2016
Santa Monica Place     79,014     —     80,073     —   7.79 %   606   2010
Shoppingtown Mall     44,645     —     46,217     —   5.01 %   319   2011
South Plains Mall     58,732     —     59,681     —   8.29 %   454   2009
South Towne Center     64,000     —     64,000     —   6.66 %   353   2008
Towne Mall     14,838     —     15,291     —   4.99 %   100   2012
Tuscon La Encantada(o)     —     78,000     51,000     —   5.84 %   364   2012
Twenty Ninth Street(p)     110,558     —     94,080     —   5.93 %   528   2009
Valley River Center(q)     120,000     —     100,000     —   5.60 %   558   2016
Valley View Center     125,000     —     125,000     —   5.81 %   596   2011
Victor Valley, Mall of     51,211     —     52,429     —   4.60 %   304   2008
Village Fair North     10,880     —     11,210     —   5.89 %   82   2008
Vintage Faire Mall     64,386     —     65,363     —   7.91 %   508   2010
Westside Pavilion     92,037     —     93,513     —   6.74 %   628   2008
Wilton Mall     44,624     —     46,604     —   4.79 %   349   2009
   
 
 
 
             
    $ 3,102,422   $ 225,848   $ 3,179,787   $ 151,311              
   
 
 
 
             
(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

86

THE MACERICH COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

9. Mortgage Notes Payable: (Continued)

Property Pledged as Collateral
   2007
   2006
  
Borgata   $ —   $ 245  
Danbury Fair Mall     13,405     17,634  
Eastview Commons     573     776  
Eastview Mall     1,736     2,018  
Freehold Raceway Mall     12,373     15,806  
Great Northern Mall     (164 )   (191 )
Hilton Village     (70 )   —  
Marketplace Mall     1,650     1,813  
Paradise Valley Mall     —     2  
Paradise Valley Mall     392     685  
Pittsford Plaza     857     1,025  
Shoppingtown Mall     3,731     4,813  
Towne Mall     464     558  
Victor Valley, Mall of     54     377  
Village Fair North     49     146  
Wilton Mall     2,729     4,195  
   
 
 
    $ 37,779   $ 49,902  
   
 
 
(b)
This represents the monthly payment of principal and interest.

(c)
This loan was paid off in full on July 11, 2007.

(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 $571, $576 and $696 for the years ended December 31, 2007, 2006 and 2005, respectively.

(e)
On May 23, 2007, the Company borrowed an additional $72,500 under the loan agreement at a fixed rate of 5.38%. The total interest rate at December 31, 2007 and 2006 was 5.41% and 5.44%, respectively.

(f)
On January 1, 2008, these loans were transferred in connection with the Rochester Redemption (See Note 26—Subsequent Events).

(g)
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, 2007 and 2006, the total interest rate was 5.97% and 6.00%, respectively. In November 2007, the loan was extended until November 6, 2008. On January 1, 2008, the loan was transferred in connection with the Rochester Redemption (See Note 26—Subsequent Events).

(h)
On September 5, 2007, the Company purchased the remaining 50% outside ownership interests in the property. The property has a loan that bears interest at a fixed rate of 5.27% and matures on February 1, 2012.

(i)
The floating rate loan bears interest at LIBOR plus 0.88%.In July 2007, the Company extended the maturity to August 9, 2008, and has an option to extend the maturity for an additional year. The Company has an interest rate cap agreement over the loan term which effectively prevents LIBOR from exceeding 7.12%. At December 31, 2007 and 2006, the total interest rate was 6.48% and 6.23%, respectively.

(j)
The loan was paid off in full on February 2, 2007.

87

THE MACERICH COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

9. Mortgage Notes Payable: (Continued)

(k)
The floating rate loan bears interest at LIBOR plus 0.85% and matures in February 2010. There is an interest rate cap agreement on this loan which effectively prevents LIBOR from exceeding 6.65%. At December 31, 2007 and 2006, the total interest rate was 6.00% and 6.23%, respectively.

(l)
The loan was paid off in full on January 2, 2007.

(m)
On July 3, 2007, the Company obtained a construction loan that provides for borrowings of up to $15,000, bears interest at a fixed rate of 6.52% and matures on January 1, 2013. On January 1, 2008, the loan was assumed by the holders of the participating convertible preferred units as part of the Rochester Redemption (See Note 26—Subsequent Events).

(n)
The construction loan allows for total borrowings of up to $110,000, and bears interest at LIBOR plus a spread of 1.20% to 1.40% depending on certain conditions. The loan matures in August 2009, with two one-year extension options. At December 31, 2007 and 2006, the total interest rate was 6.35% and 6.75%, respectively.

(o)
On March 23, 2007, the Company paid off the $51,000 interest only loan on the property. On May 15, 2007, the Company placed a new $78,000 loan on the property that bears interest at a fixed rate of 5.84% and matures on June 1, 2012.

(p)
The construction loan allows for total borrowings of up to $115,000, and bears interest at LIBOR plus a spread of .80%. The loan matures in June 2009, with a one-year extension option. At December 31, 2007 and 2006, the total interest rate was 5.93% and 6.67%, respectively.

(q)
Concurrent with the acquisition of this property, the Company placed a $100,000 loan that bears interest at 5.58% and matures on February 1, 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%. The total interest rate at December 31, 2007 and 2006 was 5.60% and 5.58%, respectively.

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

        Total interest expense capitalized during 2007, 2006 and 2005 was $32,004, $14,927 and $9,994, 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 $3,437,032 and $3,854,913, at December 31, 2007 and 2006, respectively, based on current interest rates for comparable loans.

88

THE MACERICH COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

9. Mortgage Notes Payable: (Continued)

        The future maturities of mortgage notes payable and bank and other notes payable are as follows:

Year Ending December 31,
   Mortgage
Notes
Payable
   Bank and
Other Notes
Payable
   Total
2008   $ 417,454   $ 639   $ 418,093
2009     534,314     685     534,999
2010     226,405     1,465,729     1,692,134
2011     714,826     776     715,602
2012     262,728     950,821     1,213,549
Thereafter     1,134,764     24,026     1,158,790
   
 
 
      3,290,491     2,442,676     5,733,167
Debt premiums (discounts)     37,779     (7,988 )   29,791
   
 
 
    $ 3,328,270   $ 2,434,688   $ 5,762,958
   
 
 

10. Bank and Other Notes Payable:

        Bank and other notes payable consist of the following:

        On March 16, 2007, the Company issued $950,000 in convertible senior notes ("Senior Notes") that are to mature on March 15, 2012. The Senior Notes bear interest at 3.25%, payable semiannually, are senior unsecured debt of the Company and are guaranteed by the Operating Partnership. Prior to December 14, 2011, upon the occurrence of certain specified events, the Senior Notes will be convertible at the option of holder into cash, shares of the Company's common stock or a combination of cash and shares of the Company's common stock, at the election of the Company, at an initial conversion rate of 8.9702 shares per $1 principal amount. On and after December 15, 2011, the Senior Notes will be convertible at any time prior to the second business day preceding the maturity date at the option of the holder at the initial conversion rate. The initial conversion price of approximately $111.48 per share represented a 20% premium over the closing price of the Company's common stock on March 12, 2007. The initial conversion rate is subject to adjustment under certain circumstances. Holders of the Senior Notes do not have the right to require the Company to repurchase the Senior Notes prior to maturity except in connection with the occurrence of certain fundamental change transactions. The carrying value of the Senior Notes at December 31, 2007, includes an unamortized discount of $7,988 incurred at issuance and is amortized into interest expense over the term of the Senior Notes in a manner that approximates the effective interest method. As of December 31, 2007, the effective interest rate was 3.66%. The fair value of the Senior Notes is estimated to be approximately $809,305 at December 31, 2007 based on current market price.

        In connection with the issuance of the Senior Notes, the Company purchased two capped calls ("Capped Calls") from affiliates of the initial purchasers of the Senior Notes. The Capped Calls effectively increased the conversion price of the Senior Notes to approximately $130.06, which represents a 40% premium to the March 12, 2007 closing price of $92.90 per common share of the Company. The Capped Calls are expected to generally reduce the potential dilution upon exchange of

89

THE MACERICH COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

10. Bank and Other Notes Payable: (Continued)


the Senior Notes in the event the market value per share of the Company's common stock, as measured under the terms of the relevant settlement date, is greater than the strike price of the Capped Calls. If, however, the market value per share of the Company's common stock exceeds $130.06 per common share, then the dilution mitigation under the Capped Calls will be capped, which means there would be dilution from exchange of the Senior Notes to the extent that the market value per share of the Company's common stock exceeds $130.06. The cost of the Capped Calls was approximately $59,850 and was recorded as a charge to additional paid-in capital in 2007.

        The Company has a $1,500,000 revolving line of credit that matures on April 25, 2010 with a one-year extension option. The interest rate fluctuates from LIBOR plus 0.75% to LIBOR plus 1.10% depending on the Company's overall leverage. The Company has an interest rate swap agreement that effectively fixed the interest rate on $400,000 of the outstanding balance of the line of credit at 6.23% until April 25, 2011. As of December 31, 2007 and 2006, borrowings outstanding were $1,015,000 and $934,500 at an average interest rate, excluding the $400,000 swapped portion, of 6.19% and 6.60%, respectively.

        On May 13, 2003, the Company issued $250,000 in unsecured notes that were to mature in May 2007 with a one-year extension option and bore interest at LIBOR plus 2.50%. These notes were repaid in full on March 16, 2007, from the proceeds of the Senior Notes offering. At December 31, 2006, all of the notes were outstanding at an interest rate of 6.94%.

        On April 25, 2005, the Company obtained a five-year, $450,000 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 term loan at 6.30% from December 1, 2005 to April 25, 2010. As of December 31, 2007 and 2006, the entire term loan was outstanding with an effective interest rate of 6.50%.

        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 (See Note 7—Marketable Securities). As a result of this transaction, the debt was reclassified to bank and other notes payable. This note bears interest at an effective rate of 6.34% and matures in September 2013. As of December 31, 2007 and December 31, 2006, the note had a balance outstanding of $27,676 and $28,281, respectively. The fair value is estimated to be $29,730 and $29,288 at December 31, 2007 and 2006, respectively, based on current interest rates on comparable loans.

        As of December 31, 2007 and 2006, the Company was in compliance with all applicable loan covenants.

90

THE MACERICH COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

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

 
   2007
   2006
   2005
Management Fees                  
MMC   $ 10,727   $ 10,520   $ 11,096
Westcor Management Companies     7,088     6,812     6,163
Wilmorite Management Companies     1,608     1,551     747
   
 
 
    $ 19,423   $ 18,883   $ 18,006
   
 
 
Development and Leasing Fees                  
MMC   $ 535   $ 704   $ 1,866
Westcor Management Companies     9,995     5,136     2,295
Wilmorite Management Companies     1,364     79     772
   
 
 
    $ 11,894   $ 5,919   $ 4,933
   
 
 

        Certain mortgage notes on the properties are held by NML (See Note 9— Mortgage Notes Payable). Interest expense in connection with these notes was $13,390, $10,860 and $9,638 for the years ended December 31, 2007, 2006 and 2005, respectively. Included in accounts payable and accrued expenses is interest payable to these partners of $1,150 and $793 at December 31, 2007 and 2006, respectively.

        As of December 31, 2007 and 2006, the Company had loans to unconsolidated joint ventures of $604 and $708, respectively. Interest income associated with these notes was $46, $734 and $452 for the years ended December 31, 2007, 2006 and 2005, 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 $5,729 and $4,282 at December 31, 2007 and 2006, 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.

12. Acquisitions:

        The Company has completed the following acquisitions during the years ended December 31, 2007, 2006 and 2005:

        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

91

THE MACERICH COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

12. Acquisitions: (Continued)

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 3,426,609 Class A participating convertible preferred units ("PCPUs") valued at $213,786, 344,625 Class A non-participating convertible preferred units valued at $21,501 and 93,209 common units in Wilmorite Holdings valued at $5,815. 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. An affiliate of the Operating Partnership is the general partner, and together with other affiliates, owned as of December 31, 2007 approximately 84% of Wilmorite Holdings, with the remaining 16% 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 Company reflects its ownership in the Wilmorite portfolio on a consolidated basis, with the minority interests reflected at historical cost basis at the time of the acquisition. Since the PCPUs were redeemable at the option of the holders, the portion of the minority interest that relates to the PCPUs has been adjusted to the redemption value at each reporting date from the date of issuance to the date the units were redeemed with a corresponding adjustment of minority interest due to redemption value as a reduction to net income available to common stockholders.

        The PCPUs were redeemed on January 1, 2008, for the portion of the Wilmorite portfolio that included Eastview Mall, Eastview Commons, Greece Ridge Center, Marketplace Mall and Pittsford Plaza, collectively referred to as the "Rochester Properties" (See Note 13--Discontinued Operations).

        On an unaudited pro forma basis, reflecting the acquisition of Wilmorite as if it had occurred on January 1, 2005, the Company would have reflected net loss available to common stockholders of $95,021, net loss available to common stockholders on a diluted per share basis of $1.59 and total consolidated revenues of $832,152 for the year ended December 31, 2005.

92

THE MACERICH COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

12. Acquisitions: (Continued)

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

Assets:      
  Property   $ 1,655,438
  Investments in unconsolidated joint ventures     390,825
  Other assets     225,275
   
  Total assets     2,271,538
   
Liabilities:      
  Mortgage notes payable     809,542
  Other liabilities     130,191
  Minority interest     141,393
   
  Total liabilities     1,081,126
   
  Net assets acquired   $ 1,190,412
   

        On February 1, 2006, the Company acquired Valley River Center, a 910,841 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.

        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 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.

        On December 1, 2006, the Company acquired the Deptford Mall, a 1,033,224 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.

93

THE MACERICH COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

12. Acquisitions: (Continued)

        On September 5, 2007, the Company purchased the remaining 50% outside ownership interest in Hilton Village, a 96,546 square foot specialty center in Scottsdale, Arizona. The total purchase price of $13,500 was funded by cash, borrowings under the Company's line of credit and the assumption of a mortgage note payable. The Center was previously accounted for under the equity method as an investment in unconsolidated joint ventures. The results of Hilton Village's operations have been included in the Company's consolidated financial statements since the acquisition date.

        On December 17, 2007, the Company purchased a portfolio of ground leasehold and/or fee simple interests in 39 Mervyn's department stores located in the Southwest United States for $400,160. The purchase price was funded by cash and borrowings under the Company's line of credit. Concurrent with the acquisition, the Company entered into 39 individual agreements to leaseback the properties to Mervyn's for terms of 14 to 20 years. At acquisition, management identified 27 properties in the portfolio as available for sale. These properties are located at shopping centers not owned or managed by the Company. The results of operations from these properties have been included in income from discontinued operations since the acquisition date (See Note 13--Discontinued Operations). The results of operations of the 12 Mervyn's properties not designated as assets held for sale have been included in continuing operations of the Company's consolidated financial statements since the acquisition date.

13. Discontinued Operations:

        The following dispositions occurred during the years ended December 31, 2007, 2006 and 2005:

        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.

94

THE MACERICH COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

13. Discontinued Operations: (Continued)

        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 carrying value of the properties sold in 2006 at December 31, 2005 was $168,475.

        On December 17, 2007, the Company purchased a portfolio of fee simple and/or ground leasehold interests in 39 freestanding Mervyn's department stores located in the Southwest United States for $400,160. (See Note 12—Acquisitions). Upon closing of the acquisition, management designated the 27 stores located at shopping centers not owned or managed by the Company in the portfolio as available for sale. The results of operations from these properties have been included in income from discontinued operations since the acquisition date. The carrying value of these properties at December 31, 2007 was $250,648, and has been recorded as assets held for sale.

        On January 1, 2008, a subsidiary of the Operating Partnership, at the election of the holders, redeemed the 3,426,609 PCPUs. As a result of the redemption, the Company received the 16.32% minority interest in the portion of the Wilmorite portfolio that included Danbury Fair Mall, Freehold Raceway Mall, Great Northern Mall, Rotterdam Square, Shoppingtown Mall, Towne Mall, Tysons Corner Center and Wilton Mall, collectively referred to as the "Non-Rochester Properties", for a total consideration of $224,393, in exchange for the Company's ownership interest in the Rochester Properties, including approximately $18,000 in cash held at those properties. Included in the redemption consideration was the assumption of the remaining 16.32% interest in the indebtedness of the Non-Rochester Properties, which had an estimated fair value of $105,962. The Company determined the fair value of the debt using a present value model based upon the terms of equivalent debt and upon credit spreads made available to the Company. The fair value of the debt consisted of $71,032 of Level 2 inputs and $34,930 of Level 3 inputs in accordance with SFAS No. 157. The source of the Level 2 inputs involved the use of the nominal weekly average of the U.S. treasury rates. In addition, the Company also received additional consideration of $11,763, in the form of a note, for certain working capital adjustments, extraordinary capital expenditures, leasing commissions, tenant allowances, and decreases in indebtedness during the Company's period of ownership of the Rochester Properties. The Company recognized a gain of $99,263 on the exchange based on the difference between the fair value of the additional interest acquired in the Non-Rochester Properties and the carrying value of the Rochester Properties, net of minority interest. This exchange is referred herein as the "Rochester Redemption."

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

95

THE MACERICH COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

13. Discontinued Operations: (Continued)

        The Company has classified the results of operations for the years ended December 31, 2007, 2006 and 2005 for all of the above dispositions as discontinued operations.

        Loss on sale of assets from discontinued operations of $2,409 in 2007 consisted of additional costs related to properties sold in 2006.

        Revenues and income were as follows:

 
   2007
   2006
   2005
  
Revenues:                    
  Scottsdale/101   $ 56   $ 4,668   $ 9,777  
  Park Lane Mall     13     1,510     3,091  
  Holiday Village     175     2,900     5,156  
  Greeley Mall     (8 )   4,344     7,046  
  Great Falls Marketplace     —     1,773     2,680  
  Citadel Mall     45     15,729     15,278  
  Northwest Arkansas Mall     29     12,918     12,584  
  Crossroads Mall     (28 )   11,479     10,923  
  Mervyn's     1,224     —     —  
  Rochester Properties     83,096     80,037     51,677  
   
 
 
 
    $ 84,602   $ 135,358   $ 118,212  
   
 
 
 

Income from discontinued operations:
 
 
 
 
 
 
 
 
 
 
  Arizona Lifestyle Galleries   $ —   $ —   $ (4 )
  Scottsdale/101     14     344     (206 )
  Park Lane Mall     (31 )   44     839  
  Holiday Village     157     1,179     2,753  
  Greeley Mall     (84 )   574     873  
  Great Falls Marketplace     (2 )   1,136     1,668  
  Citadel Mall     (81 )   2,546     1,831  
  Northwest Arkansas Mall     16     3,429     2,903  
  Crossroads Mall     18     2,124     3,250  
  Mervyn's     797     —     —  
  Rochester Properties     5,713     (1,506 )   (4,688 )
   
 
 
 
    $ 6,517   $ 9,870   $ 9,219  
   
 
 
 

96

THE MACERICH COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

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,
    
2008   $ 452,391
2009     408,411
2010     374,993
2011     332,264
2012     279,389
Thereafter     1,356,462
   
    $ 3,203,910
   

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 in the lease. Ground rent expenses were $4,047, $4,235 and $3,860 for the years ended December 31, 2007, 2006 and 2005, respectively. No contingent rent was incurred for the years ended December 31, 2007, 2006 or 2005.

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

Year Ending December 31,
    
2008   $ 14,771
2009     14,798
2010     14,826
2011     14,850
2012     14,400
Thereafter     596,393
   
    $ 670,038
   

        As of December 31, 2007 and 2006, the Company was contingently liable for $6,361 and $6,087, 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).

        The Company has entered into a number of construction agreements related to its redevelopment and development activities. Obligations under these agreements are contingent upon the completion of the services within the guidelines specified in the agreement. At December 31, 2007, the Company had $103,419 in outstanding obligations, which it believes will be settled in 2008.

97

THE MACERICH COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

16. Share and Unit-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, with the exception of the market-indexed awards granted under the Long-Term Incentive Plan ("LTIP").

        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.

        The following summarizes the compensation cost under the share and unit-based plans:

 
   2007
   2006
   2005
LTIP units   $ 8,389   $ 685   $ --
Stock awards     12,231     14,190     11,528
Stock options     194     --     --
Phantom stock units     595     535     1,128
   
 
 
    $ 21,409   $ 15,410   $ 12,656
   
 
 

        The Company capitalized share and unit-based compensation costs of $9,065, $5,802 and $3,242 for the years ended December 31, 2007, 2006 and 2005, respectively.

        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, 2007, only stock awards, LTIP Units (as defined below), operating partnership units and stock options have been granted under the 2003 Plan. All stock options or other rights to acquire common stock 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

98

THE MACERICH COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

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

common stock that may be issued under the 2003 Plan is 6,000,000 shares. As of December 31, 2007, there were 4,827,349 shares available for issuance under the 2003 Plan.

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

        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 basis. Stock awards are subject to restrictions determined by the Company's compensation committee. As of December 31, 2007, there was $16,289 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 a result of the accelerated vesting, the Company recognized an additional $610 in compensation cost.

        The following table summarizes the activity of non-vested stock awards during the years ended December 31, 2007 2006 and 2005:

 
   Number of
Shares
   Weighted Average
Grant Date
Fair Value
Balance at January 1, 2005   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
  Granted   150,057   $ 92.36
  Vested   (201,311 ) $ 56.89
  Forfeited   (4,968 ) $ 76.25
   
     
Balance at December 31, 2007   336,072   $ 77.21
   
     

        The fair value of stock awards vested during the years ended December 31, 2007, 2006 and 2005 was $11,453, $23,302 and $13,267, respectively.

        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

99

THE MACERICH COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

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

LTIP, each award recipient is issued a new form of operating partnership units ("LTIP Units") in the Operating Partnership. Upon the occurrence of specified events and subject to the satisfaction of applicable vesting conditions, LTIP Units are ultimately redeemable for common stock, or cash at the Company's option, on a one-unit for one-share basis. LTIP Units receive cash dividends based on the dividend amount paid on the common stock. The 2006 LTIP provides for both market-indexed awards and service-based awards.

        The market-indexed LTIP Units vest over the service 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; whereas the service-based LTIP Units vest straight-line over the service period. The compensation cost is recognized under the graded attribution method for market-indexed LTIP awards and the straight-line method for the serviced based LTIP awards.

        The fair value of the market-based LTIP Units is 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 (for market-indexed awards), is 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 "derived service period" is determined with consideration of the risk free rate as of the grant date.

        The following table summarizes the activity of non-vested LTIP Units during the years ended December 31, 2007 and 2006:

 
   Number of
Units
   Weighted Average
Grant Date
Fair Value
Balance at January 1, 2006   --      
  Granted   215,709   $ 52.18
  Vested   --   $ --
  Forfeited   --   $ --
   
     
Balance at December 31, 2006   215,709   $ 52.18
  Granted   57,258   $ 64.35
  Vested   (85,580 ) $ 52.18
  Forfeited   --   $ --
   
     
Balance at December 31, 2007   187,387   $ 55.90
   
     

        The total unrecognized compensation cost of LTIP Units at December 31, 2007 was $5,866.

        On October 8, 2003, the Company granted 2,500 stock options to a Director 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.

100

THE MACERICH COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

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

        On September 4, 2007, the Company granted 100,000 stock options to an officer with a weighted average exercise price of $82.14 per share and a ten-year term. Options vest 331/3% on each of the three subsequent anniversaries of the date of the grant and are generally contingent upon the officer's continued employment with the Company. The Company has estimated the fair value of the stock option award at $17.87 per share using the Black-Scholes Option Pricing Model based upon the following assumptions: volatility of 22.83%, dividend yield of 3.46%, risk free rate of 4.56%, a current value $82.14 and an expected term of eight years. The assumptions for volatility and dividend yield were based on the Company's historical experience as a publicly traded company, the current value was based on the closing price on the date of grant, and the risk free rate was based upon the interest rate of the 10-year treasury bond on the date of grant.

        The Company recognizes compensation cost using the straight-line method over the three-year vesting period.

        The following table summarizes the activity of stock options:

 
   Number of
Options
   Weighted Average
Exercise Price
Balance at January 1, 2005   2,500   $ 39.43
  Granted   --   $ --
  Exercised   --   $ --
  Forfeited   --   $ --
   
     
Balance at December 31, 2005   2,500   $ 39.43
  Granted   --   $ --
  Exercised   --   $ --
  Forfeited   --   $ --
   
     
Balance at December 31, 2006   2,500   $ 39.43
  Granted   100,000   $ 82.14
  Exercised   --   $ --
  Forfeited   --   $ --
   
     
Balance at December 31, 2007   102,500   $ 81.10
   
     

        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 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

101

THE MACERICH COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

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

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. The aggregate number of phantom stock units that may be granted under the Directors' Phantom Stock Plan is 250,000. As of December 31, 2007, there were 117,263 units available for grant under the Directors' Phantom Stock Plan. As of December 31, 2007, there was $538 of unrecognized cost related to non-vested phantom stock units, which will vest over the next two years.

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

 
   Number of
Units
   Weighted Average
Grant Date
Fair Value
Balance at January 1, 2005   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   --   $ --
  Granted   13,491   $ 84.03
  Vested   (7,072 ) $ 84.19
  Forfeited   --   $ --
   
     
Balance at December 31, 2007   6,419   $ 83.86
   
     

        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, 2007 was 719,637.

        Prior to the adoption of the 2003 Plan, the Company had several other share-based plans. Under these plans, 404,322 stock options were outstanding as of December 31, 2007. 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, 2007, all of the outstanding shares are exercisable at a weighted average price of $23.81.

102

THE MACERICH COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

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

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, 2007, 2006 and 2005, these matching contributions made by the Company were $2,680, $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 $815, $712 and $595 to the plans during the years ended December 31, 2007, 2006 and 2005, respectively. Contributions are recognized as compensation in the periods they are made.

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.

103

THE MACERICH COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

19. Income Taxes: (Continued)

        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 (loss) available to common stockholders to taxable income available to common stockholders for the year ended December 31:

 
   2007
   2006
   2005
  
Net income (loss) available to common stockholders   $ 73,704   $ 217,404   $ (93,614 )
  Add: book depreciation and amortization available to common stockholders     224,483     239,043     180,926  
  Less: tax depreciation and amortization available to common stockholders     (196,134 )   (203,961 )   (161,108 )
  Book/tax difference on gain on divestiture of real estate     4,540     (82,502 )   253  
  Book/tax difference related to SFAS No. 141 purchase price allocation and market value debt adjustment (excluding SFAS 141 depreciation and amortization)     (8,326 )   (6,403 )   (16,962 )
  Book/tax difference related to adjustment of minority interests due to redemption value     2,046     17,062     183,620  
  Other book/tax differences, net(1)     6,661     7,903     (14,685 )
   
 
 
 
Taxable income available to common stockholders   $ 106,974   $ 188,546   $ 78,430  
   
 
 
 
(1)
Primarily due to differences relating to straight-line rents, prepaid rents, equity based compensation and investments in unconsolidated joint ventures and Taxable REIT Subsidiaries ("TRSs").

        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:

 
   2007
   2006
   2005
  
Ordinary income   $ 1.52   51.9 % $ 1.14   41.4 % $ 1.41   53.6 %
Qualified dividends     --   0.0 %   --   0.0 %   0.07   2.7 %
Capital gains     0.08   2.6 %   0.93   33.8 %   0.03   1.1 %
Unrecaptured Section 1250 gain     --   0.0 %   0.66   24.0 %   --   0.0 %
Return of capital     1.33   45.5 %   0.02   0.8 %   1.12   42.6 %
   
 
 
 
 
 
 
Dividends paid   $ 2.93   100.0 % $ 2.75   100.0 % $ 2.63   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

104

THE MACERICH COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

19. Income Taxes: (Continued)


consolidated financial statements. The Company's primary TRSs include Macerich Management Company and Westcor Partners, LLC.

        The income tax benefit (provision) of the TRSs for the years ended December 31, 2007, 2006 and 2005 is as follows:

 
   2007
   2006
   2005
  
Current   $ (8 ) $ (35 ) $ (1,171 )
Deferred     478     2     3,202  
   
 
 
 
Total income tax benefit (provision)   $ 470   $ (33 ) $ 2,031  
   
 
 
 

        Income tax benefit (provision) of the TRSs for the years ended December 31, 2007, 2006 and 2005 are reconciled to the amount computed by applying the Federal Corporate tax rate as follows:

 
   2007
   2006
   2005
  
Book income (loss) for Taxable REIT Subsidiaries   $ (3,812 ) $ 466   $ (3,729 )
   
 
 
 
Tax benefit (provision) at statutory rate on earnings from continuing operations before income taxes   $ 1,296   $ (158 ) $ 1,267  
Other     (826 )   125     764  
   
 
 
 
Income tax benefit (provision)   $ 470   $ (33 ) $ 2,031  
   
 
 
 

        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 TRSs relate primarily to differences in the book and tax bases of property and to operating loss carryforwards for federal and state income tax purposes. A valuation allowance for deferred tax assets is provided if the Company believes it is more likely than not that all or some portion of the deferred tax assets will not be realized. Realization of deferred tax assets is dependent on the TRSs generating sufficient taxable income in future periods. The net operating loss carryforwards are currently scheduled to expire through 2027, beginning in 2012.

105

THE MACERICH COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

19. Income Taxes: (Continued)

        The tax effects of temporary differences and carryforwards of the TRSs included in the net deferred tax assets at December 31, 2007 and 2006 are summarized as follows:

 
   2007
   2006
  
Net operating loss carryforwards   $ 14,875   $ 14,797  
Property, primarily differences in depreciation and amortization, the tax basis of land assets and treatment of certain other costs     (4,005 )   (5,095 )
Other     1,210     1,525  
   
 
 
Net deferred tax assets   $ 12,080   $ 11,227  
   
 
 

        The Company adopted the provisions of FIN 48 on January 1, 2007. The adoption of this standard did not have a material impact on the Company's results of operations or financial condition. At the adoption date of January 1, 2007, the Company had $1,574 of unrecognized tax benefit included in other accrued liabilities, all of which would affect the Company's effective tax rate if recognized, and which was recorded as a charge to accumulated deficit.

        The following is a reconciliation of the unrecognized tax benefits for the year ended December 31, 2007:

Unrecognized tax benefits at January 1, 2007   $ 1,574  
Gross increases for tax positions of current year     607  
Gross decreases for lapse of statute of limitations     (275 )
   
 
Unrecognized tax benefits at December 31, 2007   $ 1,906  
   
 

        The tax years 2004-2006 remain open to examination by the taxing jurisdictions to which the Company is subject. The Company does not expect that the total amount of unrecognized tax benefit will materially change within the next 12 months.

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 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. Stock Repurchase Program:

        On March 16, 2007, the Company repurchased 807,000 shares for $74,970 concurrent with the Senior Notes offering (See Note 10--Bank and Other Notes Payable). These shares were repurchased pursuant to the Company's stock repurchase program authorized by the Company's Board of Directors on March 9, 2007. This repurchase program ended on March 16, 2007 because the maximum shares allowed to be repurchased under the program was reached.

106

THE MACERICH COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

22. 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 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.

        On October 18, 2007, the holder of Series A Preferred Stock converted 560,000 shares to common shares.

        The total liquidation preference as of December 31, 2007 was $84,561.

23. 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.

24. Quarterly Financial Data (Unaudited):

        The following tables present the impact of the adjustments for restatement (See Note 25—Restatement) on the consolidated statements of operations and balance sheets for all quarters of 2007 and 2006 that were previously reported on Quarterly Reports on Form 10-Q and Annual Reports on Form 10-K for such quarters. The adjustments also include reclassification of the results of operations of the Rochester Properties to discontinued operations.

107

THE MACERICH COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

24. Quarterly Financial Data (Unaudited): (Continued)

RECONCILIATION OF CONSOLIDATED STATEMENTS OF OPERATIONS

 
   Quarter Ended
  
 
   December 31, 2007
   September 30, 2007
  
 
   Previously Reported
   Adjustments
   As Restated
   Previously Reported
   Adjustments
   As Restated
  
Total revenues   $ 244,925   $ (20,899 ) $ 224,026   $ 223,984   $ (21,860 ) $ 202,124  
Expenses:                                      
  Shopping center and operating expenses     73,460     (7,497 )   65,963     73,831     (7,257 )   66,574  
  Depreciation and amortization     58,579     (5,581 )   52,998     60,171     (5,683 )   54,488  
  Interest expense     73,928     (2,885 )   71,043     59,982     (3,644 )   56,338  
    Total expenses     230,369     (15,964 )   214,405     213,884     (16,584 )   197,300  
Minority interest in consolidated joint ventures     (1,491 )   775     (716 )   (721 )   271     (450 )
Income from continuing operations     50,356     (4,161 )   46,195     27,745     (5,005 )   22,740  
Total income (loss) from discontinued operations     659     1,370     2,029     (668 )   2,293     1,625  
Income before minority interest and preferred dividends     51,015     (2,791 )   48,224     27,077     (2,712 )   24,365  
Less: minority interest in Operating Partnership     6,740     276     7,016     3,070     372     3,442  
Net income     44,275     (3,067 )   41,208     24,007     (3,084 )   20,923  
Less: preferred dividends     5,908     (3,902 )   2,006     6,727     (3,825 )   2,902  
Less: adjustment of minority interest due to redemption value     —     (727 )   (727 )   —     (1,346 )   (1,346 )
Net income available to common stockholders     38,367     1,562     39,929     17,280     2,087     19,367  

Earnings per common share—basic:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  Income from continuing operations     0.52     —     0.52     0.25     (0.01 )   0.24  
  Discontinued operations     0.01     0.02     0.03     (0.01 )   0.04     0.03  
  Net income available to common stockholders     0.53     0.02     0.55     0.24     0.03     0.27  
Earnings per common share—diluted:                                      
  Income from continuing operations     0.52     —     0.52     0.25     (0.01 )   0.24  
  Discontinued operations     0.01     0.02     0.03     (0.01 )   0.04     0.03  
  Net income available to common stockholders     0.53     0.02     0.55     0.24     0.03     0.27  
 
 
   Quarter Ended
  
 
   June 30, 2007
   March 31, 2007
  
 
   Previously Reported
   Adjustments
   As Restated
   Previously Reported
   Adjustments
   As Restated
  
Total revenues   $ 215,788   $ (21,464 ) $ 194,324   $ 211,671   $ (18,873 ) $ 192,798  
Expenses:                                      
  Shopping center and operating expenses     68,774     (6,901 )   61,873     68,622     (6,606 )   62,016  
  Depreciation and amortization     60,404     (6,751 )   53,653     57,087     (5,708 )   51,379  
  Interest expense     62,261     (3,535 )   58,726     67,555     (3,535 )   64,020  
    Total expenses     214,370     (17,187 )   197,183     216,392     (14,971 )   201,421  
Minority interest in consolidated joint ventures     (27 )   110     83     (1,491 )   273     (1,218 )
Income from continuing operations     23,454     (4,167 )   19,287     9,265     (2,751 )   6,514  
Total (loss) income from discontinued operations     (1,486 )   1,733     247     (110 )   317     207  
Income before minority interest and preferred dividends     21,968     (2,434 )   19,534     9,155     (2,434 )   6,721  
Less: minority interest in Operating Partnership     2,398     (458 )   1,940     467     171     638  
Net income     19,570     (1,976 )   17,594     8,688     (2,605 )   6,083  
Less: preferred dividends     6,122     (3,547 )   2,575     6,122     (3,547 )   2,575  
Less: adjustment of minority interest due to redemption value     —     4,119     4,119     —     —     —  
Net income available to common stockholders     13,448     (2,548 )   10,900     2,566     942     3,508  

Earnings per common share—basic:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  Income from continuing operations     0.21     (0.01 )   0.20     0.04     0.01     0.05  
  Discontinued operations     (0.02 )   (0.03 )   (0.05 )   —     —     —  
  Net income available to common stockholders     0.19     (0.04 )   0.15     0.04     0.01     0.05  
Earnings per common share—diluted:                                      
  Income from continuing operations     0.21     (0.01 )   0.20     0.04     0.01     0.05  
  Discontinued operations     (0.02 )   (0.03 )   (0.05 )   —     —     —  
  Net income available to common stockholders     0.19     (0.04 )   0.15     0.04     0.01     0.05  

108

THE MACERICH COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

24. Quarterly Financial Data (Unaudited): (Continued)

 
   Quarter Ended
  
 
   December 31, 2006
   September 30, 2006
  
 
   Previously Reported
   Adjustments
   As Restated
   Previously Reported
   Adjustments
   As Restated
  
Total revenues   $ 233,796   $ (23,361 ) $ 210,435   $ 202,077   $ (19,169 ) $ 182,908  
Expenses:                                      
  Shopping center and operating expenses     68,806     (8,283 )   60,523     67,478     (6,718 )   60,760  
  Depreciation and amortization     55,312     (6,154 )   49,158     53,542     (6,236 )   47,306  
  Interest expense     70,385     (3,544 )   66,841     67,353     (3,551 )   63,802  
    Total expenses     213,897     (17,981 )   195,916     205,408     (16,505 )   188,903  
Minority interest in consolidated joint ventures     (1,793 )   1,711     (82 )   (870 )   234     (636 )
Income from continuing operations     46,981     (3,669 )   43,312     14,292     (2,430 )   11,862  
Total income from discontinued operations     134,835     1,157     135,992     47,776     (81 )   47,695  
Income before minority interest and preferred dividends     181,816     (2,512 )   179,304     62,068     (2,511 )   59,557  
Less: minority interest in Operating Partnership     27,690     (2,524 )   25,166     8,901     174     9,075  
Net income     154,126     12     154,138     53,167     (2,685 )   50,482  
Less: preferred dividends     6,197     (3,623 )   2,574     6,199     (3,624 )   2,575  
Less: adjustment of minority interest due to redemption value     —     17,062     17,062     —     —     —  
Net income available to common stockholders     147,929     (13,427 )   134,502     46,968     939     47,907  

Earnings per common share—basic:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  Income from continuing operations     0.48     —     0.48     0.10     0.01     0.11  
  Discontinued operations     1.59     (0.19 )   1.40     0.56     —     0.56  
  Net income available to common stockholders     2.07     (0.19 )   1.88     0.66     0.01     0.67  
Earnings per common share—diluted:                                      
  Income from continuing operations     0.51     —     0.51     0.10     0.01     0.11  
  Discontinued operations     1.47     (0.17 )   1.30     0.56     —     0.56  
  Net income available to common stockholders     1.98     (0.17 )   1.81     0.66     0.01     0.67  
 
 
   Quarter Ended
  
 
   June 30, 2006
   March 31, 2006
  
 
   Previously Reported
   Adjustments
   As Restated
   Previously Reported
   Adjustments
   As Restated
  
Total revenues   $ 193,091   $ (18,429 ) $ 174,662   $ 200,692   $ (19,078 ) $ 181,614  
Expenses:                                      
  Shopping center and operating expenses     63,998     (6,858 )   57,140     61,845     (6,599 )   55,246  
  Depreciation and amortization     56,010     (6,628 )   49,382     59,409     (8,495 )   50,914  
  Interest expense     68,148     (3,483 )   64,665     68,781     (3,384 )   65,397  
    Total expenses     203,573     (16,969 )   186,604     210,229     (18,478 )   191,751  
Minority interest in consolidated joint ventures     (541 )   (48 )   (589 )   (463 )   (92 )   (555 )
Income from continuing operations     6,620     (1,508 )   5,112     11,047     (812 )   10,235  
Total income from discontinued operations     29,792     (882 )   28,910     3,836     (1,578 )   2,258  
Income before minority interest and preferred dividends     36,412     (2,390 )   34,022     14,883     (2,390 )   12,493  
Less: minority interest in Operating Partnership     4,770     174     4,944     1,460     182     1,642  
Net income     31,642     (2,564 )   29,078     13,423     (2,572 )   10,851  
Less: preferred dividends     5,970     (3,503 )   2,467     5,970     (3,503 )   2,467  
Less: adjustment of minority interest due to redemption value     —     —     —     —     —     —  
Net income available to common stockholders     25,672     939     26,611     7,453     931     8,384  

Earnings per common share—basic:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  Income from continuing operations     0.01     0.02     0.03     0.06     0.03     0.09  
  Discontinued operations     0.35     (0.01 )   0.34     0.05     (0.02 )   0.03  
  Net income available to common stockholders     0.36     0.01     0.37     0.11     0.01     0.12  
Earnings per common share—diluted:                                      
  Income from continuing operations     0.01     0.02     0.03     0.06     0.03     0.09  
  Discontinued operations     0.35     (0.01 )   0.34     0.05     (0.02 )   0.03  
  Net income available to common stockholders     0.36     0.01     0.37     0.11     0.01     0.12  

109

THE MACERICH COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

24. Quarterly Financial Data (Unaudited): (Continued)

RECONCILIATION OF CONSOLIDATED BALANCE SHEETS

 
   December 31, 2007
   September 30, 2007
  
 
   Previously Reported
   Adjustments
   As Restated
   Previously Reported
   Adjustments
   As Restated
  
Property, net   $ 6,321,491   $ (134,018 ) $ 6,187,473   $ 6,045,958   $ (134,865 ) $ 5,911,093  
Investments in unconsolidated joint ventures     835,662     (50,019 )   785,643     818,723     (50,284 )   768,439  
Total assets     8,121,134     (184,037 )   7,937,097     7,459,960     (185,149 )   7,274,811  
Minority interest     338,700     208,993     547,693     330,573     209,218     539,791  
Class A participating convertible preferred units     213,786     (213,786 )   —     213,786     (213,786 )   —  
Class A non-participating convertible preferred units     16,459     (16,459 )   —     16,459     (16,459 )   —  
Additional paid-in capital     1,654,199     (286,633 )   1,367,566     1,630,093     (285,128 )   1,344,965  
Accumulated deficit     (317,780 )   123,848     (193,932 )   (298,095 )   121,006     (177,089 )
Total common stockholders' equity     1,312,634     (162,785 )   1,149,849     1,325,938     (164,122 )   1,161,816  
Total liabilities, minority interest, preferred stock and common stockholders' equity     8,121,134     (184,037 )   7,937,097     7,459,960     (185,149 )   7,274,811  
 
 
   June 30, 2007
   March 31, 2007
  
 
   Previously Reported
   Adjustments
   As Restated
   Previously Reported
   Adjustments
   As Restated
  
Property, net   $ 5,914,882   $ (135,712 ) $ 5,779,170   $ 5,806,357   $ (136,559 ) $ 5,669,798  
Investments in unconsolidated joint ventures     987,021     (50,550 )   936,471     987,435     (50,816 )   936,619  
Total assets     7,498,814     (186,262 )   7,312,552     7,391,217     (187,375 )   7,203,842  
Minority interest     342,961     210,454     553,415     352,465     205,813     558,278  
Class A participating convertible preferred units     213,786     (213,786 )   —     213,786     (213,786 )   —  
Class A non-participating convertible preferred units     16,459     (16,459 )   —     16,459     (16,459 )   —  
Additional paid-in capital     1,624,044     (283,834 )   1,340,210     1,618,303     (276,160 )   1,342,143  
Accumulated deficit     (264,360 )   117,363     (146,997 )   (226,886 )   113,217     (113,669 )
Total common stockholders' equity     1,370,972     (166,471 )   1,204,501     1,391,017     (162,943 )   1,228,074  
Total liabilities, minority interest, preferred stock and common stockholders' equity     7,498,814     (186,262 )   7,312,552     7,391,217     (187,375 )   7,203,842  

110

THE MACERICH COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

24. Quarterly Financial Data (Unaudited): (Continued)

 
   December 31, 2006
   September 30, 2006
  
 
   Previously Reported
   Adjustments
   As Restated
   Previously Reported
   Adjustments
   As Restated
  
Property, net   $ 5,755,283   $ (137,404 ) $ 5,617,879   $ 5,675,959   $ (138,252 ) $ 5,537,707  
Investments in unconsolidated joint ventures     1,010,380     (51,083 )   959,297     1,001,051     (51,347 )   949,704  
Total assets     7,562,163     (188,487 )   7,373,676     7,280,523     (189,599 )   7,090,924  
Minority interest     387,183     209,973     597,156     369,004     190,300     559,304  
Class A participating convertible preferred units     213,786     (213,786 )   —     213,786     (213,786 )   —  
Class A non-participating convertible preferred units     21,501     (21,501 )   —     21,501     (21,501 )   —  
Additional paid-in capital     1,717,498     (274,448 )   1,443,050     1,709,982     (249,677 )   1,460,305  
Accumulated deficit     (178,249 )   111,275     (66,974 )   (275,435 )   105,065     (170,370 )
Total common stockholders' equity     1,542,305     (163,173 )   1,379,132     1,436,447     (144,612 )   1,291,835  
Total liabilities, minority interest, preferred stock and common stockholders' equity     7,562,163     (188,487 )   7,373,676     7,280,523     (189,599 )   7,090,924  
 
 
   June 30, 2006
   March 31, 2006
  
 
   Previously Reported
   Adjustments
   As Restated
   Previously Reported
   Adjustments
   As Restated
  
Property, net   $ 5,644,885   $ (139,099 ) $ 5,505,786   $ 5,671,809   $ (139,945 ) $ 5,531,864  
Investments in unconsolidated joint ventures     995,374     (51,612 )   943,762     1,074,590     (51,880 )   1,022,710  
Total assets     7,185,246     (190,711 )   6,994,535     7,304,366     (191,825 )   7,112,541  
Minority interest     372,847     190,127     562,974     366,779     189,953     556,732  
Class A participating convertible preferred units     213,786     (213,786 )   —     213,786     (213,786 )   —  
Class A non-participating convertible preferred units     21,501     (21,501 )   —     21,501     (21,501 )   —  
Additional paid-in capital     1,704,734     (247,102 )   1,457,632     1,703,391     (244,636 )   1,458,755  
Accumulated deficit     (273,284 )   101,551     (171,733 )   (250,057 )   98,145     (151,912 )
Total common stockholders' equity     1,444,359     (145,551 )   1,298,808     1,461,053     (146,491 )   1,314,562  
Total liabilities, minority interest, preferred stock and common stockholders' equity     7,185,246     (190,711 )   6,994,535     7,304,366     (191,825 )   7,112,541  

25. Restatement:

        Subsequent to the filing of the Company's Annual Report on Form 10-K for the year ended December 31, 2007, management determined that the consolidated financial statements as of December 31, 2007 and December 31, 2006, and for each of the three years during the period ended December 31, 2007 required restatement to correctly account for the acquisition of Wilmorite and

111

THE MACERICH COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

25. Restatement: (Continued)


Wilmorite Holdings and the convertible preferred units ("CPUs") issued to prior owners in connection with the acquisition of the Wilmorite portfolio (see Note 12—Acquisitions). The Company improperly applied purchase accounting to 100% of the Wilmorite and Wilmorite Holdings acquisition and therefore minority interests in the Wilmorite portfolio were improperly recorded at fair value at the time of acquisition and presented outside of permanent equity as Class A participating and non-participating convertible preferred securities in the consolidated balance sheets with the periodic distributions reflected as preferred dividends as a reduction of net income available to common stockholders within the consolidated statements of operations. Upon further consideration, the Company determined that these interests represent a minority interest in MACWH, LP, which in turn holds the Wilmorite portfolio. Accordingly, the Company should only have applied purchase accounting to the extent of its proportionate interest in MACWH, LP. The Company has corrected the accounting for these interests by recording a reduction in these interests of $195,905 from fair value to predecessor basis in the consolidated balance sheets with the earnings and dividends paid attributable to these interests reported as minority interests in consolidated joint ventures in the consolidated statements of operations. The adjustment also includes a reduction in depreciation expense from the 100% stepped up property basis previously reported.

        In addition, because the PCPUs were redeemable for the Rochester Properties (assets of MACWH, LP) at the option of the holders, they are subject to EITF Topic D-98, "Classification and Measurement of Redeemable Securities" and accounted for as redeemable minority interest at the greater of their redemption value or amount that would result from applying Accounting Research Bulletin No. 51 "Consolidated Financial Statements" consolidation accounting. The Company recognized the redeemable minority interest at historical cost within purchase accounting and subsequently adjusted the carrying value of the redeemable minority interest or redemption value changes at the end of each reporting period as a reduction of net income available to common stockholders within the consolidated statements of operations.

        The restatement resulted in a decrease in property, net of $134,018 and $137,404, a decrease in investments in unconsolidated joint ventures of $50,019 and $51,083, an increase in minority interest of $208,993 and $209,973, decreases in Class A participating and non-participating convertible preferred units of $230,245 and $235,287, additional paid-in capital of $210,736 and $207,035, and accumulated deficit of $47,951 and $43,862 at December 31, 2007 and 2006, respectively, an increase in net income available to common stockholders of $2,043 for the year ended December 31, 2007, and a decrease in net income available to common stockholders of $10,618 and $146,202 for the years ended December 31, 2006 and 2005, respectively.

        The Company also identified other errors related to classification of preferred dividends and classification of the impact for the adoption of FIN 48 within the consolidated statements of common stockholders' equity. During the years the Company was in an accumulated deficit position, the preferred dividends should have been classified as a reduction in additional paid-in capital as opposed to increasing the accumulated deficit. As a result of this error, additional paid-in capital and accumulated deficit were overstated for the years ended December 31, 2007, 2006 and 2005 by $10,058, $10,083, and $9,649, respectively, and the cumulative effect of the classification error attributable to the years prior to January 1, 2005 was $47,681. The impact of the adoption of FIN 48 should have been

112

THE MACERICH COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

25. Restatement: (Continued)


classified as an increase to the accumulated deficit as opposed to a decrease to the additional paid-in capital for the year ended December 31, 2007 by $1,574.

        On May 19, 2008, the Company filed its Quarterly Report on Form 10-Q for the quarter ended March 31, 2008 and prospectively corrected the quarterly consolidated financial statements with respect to the quarter ended March 31, 2007 in such report. The Company plans to prospectively correct the quarterly consolidated financial statements with respect to the quarters ended June 30, 2007 and September 30, 2007 in conjunction with the filing of the 2008 quarterly reports for the respective quarters.

        The following tables summarize the effects of the above mentioned changes to the Company's consolidated financial statements:

 
   As Previously
Reported
   Restatement
Adjustment
   As Restated
  
Consolidated Balance Sheet as of December 31, 2007                    
Property, net   $ 6,321,491   $ (134,018 ) $ 6,187,473  
Investments in unconsolidated joint ventures     835,662     (50,019 )   785,643  
Total assets     8,121,134     (184,037 )   7,937,097  
Minority interest     338,700     208,993     547,693  
Class A participating convertible preferred units     213,786     (213,786 )   —  
Class A non-participating convertible preferred units     16,459     (16,459 )   —  
Additional paid-in capital     1,654,199     (286,633 )   1,367,566  
Accumulated deficit     (317,780 )   123,848     (193,932 )
Total common stockholders' equity     1,312,634     (162,785 )   1,149,849  
Total liabilities, minority interest, preferred stock and common stockholders' equity     8,121,134     (184,037 )   7,937,097  

Consolidated Balance Sheet as of December 31, 2006
 
 
 
 
 
 
 
 
 
 
Property, net     5,755,283     (137,404 )   5,617,879  
Investments in unconsolidated joint ventures     1,010,380     (51,083 )   959,297  
Total assets     7,562,163     (188,487 )   7,373,676  
Minority interest     387,183     209,973     597,156  
Class A participating convertible preferred units     213,786     (213,786 )   —  
Class A non-participating convertible preferred units     21,501     (21,501 )   —  
Additional paid-in capital     1,717,498     (274,448 )   1,443,050  
Accumulated deficit     (178,249 )   111,275     (66,974 )
Total common stockholders' equity     1,542,305     (163,173 )   1,379,132  
Total liabilities, minority interest, preferred stock and common stockholders' equity     7,562,163     (188,487 )   7,373,676  

113

THE MACERICH COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

25. Restatement: (Continued)

 
 
   As Previously
Reported
   Restatement
Adjustment
   Reclassification
Adjustments(1)
   As Restated
  
Consolidated Statement of Operations for the year ended December 31, 2007                          
Revenues:                          
  Minimum rents   $ 521,122   $ —   $ (46,237 ) $ 474,885  
  Percentage rents     26,816     —     (712 )   26,104  
  Tenant recoveries     273,913     —     (28,581 )   245,332  
  Other     34,765     —     (7,566 )   27,199  
Total revenues     896,368     —     (83,096 )   813,272  
Shopping center and operating expenses     284,687     —     (28,261 )   256,426  
Depreciation and amortization     236,241     (4,450 )   (19,273 )   212,518  
Interest expense:                          
  Other     250,336     —     (13,599 )   236,737  
Total expenses     875,015     (4,450 )   (60,256 )   810,309  
Minority interest in consolidated joint ventures     (3,730 )   (14,821 )   16,250     (2,301 )
Income from continuing operations     110,820     (10,371 )   (5,713 )   94,736  
Income from discontinued operations     804     —     5,713     6,517  
Total (loss) income from discontinued operations     (1,605 )   —     5,713     4,108  
Income before minority interest and preferred dividends     109,215     (10,371 )   —     98,844  
Less: minority interest in Operating Partnership     12,675     361     —     13,036  
Net income     96,540     (10,732 )   —     85,808  
Less: preferred dividends     24,879     (14,821 )   —     10,058  
Less: adjustment of minority interest due to redemption value     —     2,046     —     2,046  
Net income available to common stockholders     71,661     2,043     —     73,704  
Earnings per common share—basic:                          
  Income from continuing operations     1.02     0.03     (0.04 )   1.01  
  Discontinued operations     (0.02 )   —     0.04     0.02  
  Net income available to common stockholders     1.00     0.03     —     1.03  
Earnings per common share—diluted:                          
  Income from continuing operations     1.02     0.02     (0.04 )   1.00  
  Discontinued operations     (0.02 )   —     0.04     0.02  
  Net income available to common stockholders     1.00     0.02     —     1.02  

114

THE MACERICH COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

25. Restatement: (Continued)


Consolidated Statement of Operations for the year ended December 31, 2006
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenues:                          
  Minimum rents   $ 489,078   $ —   $ (50,817 ) $ 438,261  
  Percentage rents     24,667     —     (791 )   23,876  
  Tenant recoveries     254,526     —     (26,951 )   227,575  
  Other     29,929     —     (1,478 )   28,451  
Total revenues     829,656     —     (80,037 )   749,619  
Shopping center and operating expenses     262,127     —     (28,458 )   233,669  
Depreciation and amortization     224,273     (4,450 )   (23,063 )   196,760  
Interest expense:                          
  Other     263,809     —     (13,962 )   249,847  
Total expenses     831,272     (4,450 )   (63,648 )   763,174  
Minority interest in consolidated joint ventures     (3,667 )   (14,253 )   16,060     (1,860 )
Gain (loss) on sale of assets     38     —     (122 )   (84 )
Income from continuing operations     78,940     (9,803 )   1,384     70,521  
Gain on sale of assets     204,863     —     122     204,985  
Income from discontinued operations     11,376     —     (1,506 )   9,870  
Total income from discontinued operations     216,239     —     (1,384 )   214,855  
Income before minority interest and preferred dividends     295,179     (9,803 )   —     285,376  
Less: minority interest in Operating Partnership     42,821     (1,994 )   —     40,827  
Net income     252,358     (7,809 )   —     244,549  
Less: preferred dividends     24,336     (14,253 )   —     10,083  
Less: adjustment of minority interest due to redemption value     —     17,062     —     17,062  
Net income available to common stockholders     228,022     (10,618 )   —     217,404  
Earnings per common share—basic:                          
  Income from continuing operations     0.65     (0.15 )   0.22     0.72  
  Discontinued operations     2.57     —     (0.22 )   2.35  
  Net income available to common stockholders     3.22     (0.15 )   —     3.07  
Earnings per common share—diluted:                          
  Income from continuing operations     0.73     (0.14 )   0.21     0.80  
  Discontinued operations     2.46     —     (0.21 )   2.25  
  Net income available to common stockholders     3.19     (0.14 )   —     3.05  

115

THE MACERICH COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

25. Restatement: (Continued)


Consolidated Statement of Operations for the year ended December 31, 2005
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenues:                          
  Minimum rents   $ 423,759   $ —   $ (31,713 ) $ 392,046  
  Percentage rents     24,152     —     (408 )   23,744  
  Tenant recoveries     214,832     —     (18,936 )   195,896  
  Other     22,953     —     (620 )   22,333  
Total revenues     711,824     —     (51,677 )   660,147  
Shopping center and operating expenses     223,905     —     (20,076 )   203,829  
Depreciation and amortization     193,145     (2,967 )   (18,191 )   171,987  
Interest expense:                          
  Other     227,459     —     (9,036 )   218,423  
Total expenses     719,093     (2,967 )   (45,637 )   670,489  
Minority interest in consolidated joint ventures     (700 )   (9,449 )   9,062     (1,087 )
Income from continuing operations     69,952     (6,482 )   4,688     68,158  
Income from discontinued operations     13,907     —     (4,688 )   9,219  
Total income from discontinued operations     14,184     —     (4,688 )   9,496  
Income before minority interest and preferred dividends     84,136     (6,482 )   —     77,654  
Less: minority interest in Operating Partnership     12,450     (34,451 )   —     (22,001 )
Net income     71,686     27,969     —     99,655  
Less: preferred dividends     19,098     (9,449 )   —     9,649  
Less: adjustment of minority interest due to redemption value     —     183,620     —     183,620  
Net income (loss) available to common stockholders     52,588     (146,202 )   —     (93,614 )
Earnings per common share—basic:                          
  Income from continuing operations     0.70     (2.47 )   2.57     0.80  
  Discontinued operations     0.19     —     (2.57 )   (2.38 )
  Net income (loss) available to common stockholders     0.89     (2.47 )   —     (1.58 )
Earnings per common share—diluted:                          
  Income from continuing operations     0.69     (2.45 )   2.56     0.80  
  Discontinued operations     0.19     —     (2.56 )   (2.37 )
  Net income (loss) available to common stockholders     0.88     (2.45 )   —     (1.57 )
(1)
Reclassification adjustments include the reclassification of the results of operations of the Rochester Properties to discontinued operations. In addition, loss on the extinguishment of debt has been reclassified to be included in total expenses.

116

THE MACERICH COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

25. Restatement: (Continued)

 
   As Previously
Reported
   Restatement
Adjustment
   As Restated
  
Consolidated Statement of Cash Flows for the year ended December 31, 2007                    
Net income available to common stockholders   $ 71,661   $ 2,043   $ 73,704  
Preferred dividends     24,879     (14,821 )   10,058  
Adjustment of minority interest due to redemption value     —     2,046     2,046  
Net income     96,540     (10,732 )   85,808  
Depreciation and amortization     243,095     (4,450 )   238,645  
Minority interest in Operating Partnership     12,675     361     13,036  
Minority interest in consolidated joint ventures     3,736     14,821     18,557  

Consolidated Statement of Cash Flows for the year ended December 31, 2006
 
 
 
 
 
 
 
 
 
 
Net income available to common stockholders     228,022     (10,618 )   217,404  
Preferred dividends     24,336     (14,253 )   10,083  
Adjustment of minority interest due to redemption value     —     17,062     17,062  
Net income     252,358     (7,809 )   244,549  
(Gain) loss of sale of assets     (38 )   122     84  
Gain on sale of assets of discontinued operations     (204,863 )   (122 )   (204,985 )
Depreciation and amortization     236,670     (4,450 )   232,220  
Minority interest in Operating Partnership     42,821     (1,994 )   40,827  
Minority interest in consolidated joint ventures     4,101     14,253     18,354  

Consolidated Statement of Cash Flows for the year ended December 31, 2005
 
 
 
 
 
 
 
 
 
 
Net income (loss) available to common stockholders     52,588     (146,202 )   (93,614 )
Preferred dividends     19,098     (9,449 )   9,649  
Adjustment of minority interest due to redemption value     —     183,620     183,620  
Net income     71,686     27,969     99,655  
Depreciation and amortization     208,932     (2,967 )   205,965  
Minority interest in Operating Partnership     12,450     (34,451 )   (22,001 )
Minority interest in consolidated joint ventures     600     9,449     10,049  
Acquisition of property by issuance of convertible preferred units and common units     241,103     (195,906 )   45,197  

117

THE MACERICH COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

26. Subsequent Events:

        On January 1, 2008, MACWH, LP, at the election of the holders, redeemed the 3,426,609 PCPUs (See Note 13—Discontinued Operations). As a result of the redemption, the Company received the 16.32% minority interest in the Non-Rochester Properties for a total consideration of $224,393, in exchange for the Company's ownership interest in the Rochester Properties. The Company recognized a gain of $99,263 on the exchange based on the difference between the fair value of the additional interest acquired in the Non-Rochester Properties and the carrying value of the Rochester Properties, net of minority interest.

        On January 10, 2008, the Company in a 50/50 joint venture with the Alaska Permanent Fund Corporation acquired the Shops at North Bridge, a 680,933 square foot urban shopping center in Chicago, Illinois, for a total purchase price of $515,000. The Company's share of the purchase price was funded by the assumption of a pro rata share of the $205,000 fixed rate mortgage on the Center and by borrowings under the Company's line of credit.

        On February 9, 2008, the Company declared a dividend/distribution of $0.80 per share for common stockholders and OP Unit holders of record on February 22, 2008. In addition, the Company declared a dividend of $0.80 on the Company's Series A Preferred Stock. On February 9, 2008, MACWH, LP declared a distribution of $1.06 per unit for its non-participating convertible preferred unit holders and $0.80 per unit for its common unit holders of record on February 22, 2008. All dividends/distributions will be payable on March 7, 2008.

118


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, 2007 and 2006, and the related consolidated statements of operations, stockholders' equity, and cash flows for each of the three years in the period ended December 31, 2007. Our audits also included the financial statement schedules listed in the Index at Item 15(a)(4), as of and for the years ended December 31, 2007, 2006 and 2005. These financial statements and the financial statement schedules are the responsibility of the Trust's management. Our responsibility is to express an opinion on these financial statements and the financial statement schedules based on our audits.

        We conducted our audits in accordance with generally accepted auditing standards as established by the Auditing Standards Board 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 consolidated financial statements present fairly, in all material respects, the financial position of the Trust as of December 31, 2007 and 2006, and the results of its operations and its cash flows for each of the years ended December 31, 2007 in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, based on our audits such 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.

/s/ DELOITTE & TOUCHE LLP

Deloitte & Touche LLP
Los Angeles, California
February 27, 2008

119


PACIFIC PREMIER RETAIL TRUST

CONSOLIDATED BALANCE SHEETS

(Dollars in thousands, except share amounts)

 
   December 31,
  
 
   2007
   2006
  
ASSETS              
Property, net   $ 978,979   $ 987,820  
Cash and cash equivalents     17,078     8,939  
Restricted cash     1,485     1,319  
Tenant receivables, net     8,119     6,684  
Deferred rent receivable     9,792     9,999  
Deferred charges, net     10,021     10,243  
Other assets     1,499     2,128  
   
 
 
    Total assets   $ 1,026,973   $ 1,027,132  
   
 
 

LIABILITIES AND STOCKHOLDERS' EQUITY:
 
 
 
 
 
 
 
Mortgage notes payable:              
  Related parties   $ 66,059   $ 70,146  
  Others     753,180     760,736  
   
 
 
    Total     819,239     830,882  
Accounts payable     1,943     1,262  
Accrued interest payable     3,942     4,014  
Tenant security deposits     2,245     2,047  
Other accrued liabilities     14,247     9,093  
Due to related parties     1,200     772  
   
 
 
    Total liabilities     842,816     848,070  
   
 
 
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, 2007 and 2006     --     --  
  Series A and Series B common stock, $.01 par value, 219,611 shares authorized issued and outstanding at December 31, 2007 and 2006     2     2  
  Additional paid-in capital     320,555     307,613  
  Accumulated deficit     (136,400 )   (128,553 )
   
 
 
    Total common stockholders' equity     184,157     179,062  
   
 
 
    Total liabilities, preferred stock and common stockholders' equity   $ 1,026,973   $ 1,027,132  
   
 
 

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

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CONSOLIDATED STATEMENTS OF OPERATIONS

(Dollars in thousands)

 
   For the years ended December 31,
  
 
   2007
   2006
   2005
  
Revenues:                    
  Minimum rents   $ 125,558   $ 124,103   $ 116,421  
  Percentage rents     7,409     7,611     7,171  
  Tenant recoveries     50,435     48,739     42,455  
  Other     4,237     4,166     3,852  
   
 
 
 
      187,639     184,619     169,899  
   
 
 
 
Expenses:                    
  Maintenance and repairs     11,210     10,484     9,921  
  Real estate taxes     14,099     13,588     12,219  
  Management fees     6,474     6,382     6,005  
  General and administrative     4,568     4,993     3,498  
  Ground rent     1,456     1,425     1,811  
  Insurance     2,207     1,649     1,456  
  Marketing     611     648     696  
  Utilities     6,708     6,903     5,857  
  Security     5,238     5,184     5,074  
  Interest     49,524     50,981     49,476  
  Depreciation and amortization     30,970     29,554     27,567  
   
 
 
 
      133,065     131,791     123,580  
   
 
 
 
Income before minority interest and loss on early extinguishment of debt     54,574     52,828     46,319  
Minority interest     (195 )   (185 )   (145 )
Loss on early extinguishment of debt     --     --     (13 )
   
 
 
 
Net income available to common stockholders   $ 54,379   $ 52,643   $ 46,161  
   
 
 
 

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

121


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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, 2005   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  
Contributions from Macerich PPR Corp.    --   --     --     6,582     --     6,582  
Contributions from Ontario Teachers' Pension Plan Board   --   --     --     6,360     --     6,360  
Distributions paid to Macerich PPR Corp.    --   --     --     --     (31,609 )   (31,609 )
Distributions paid to Ontario Teachers' Pension Plan Board   --   --     --     --     (30,542 )   (30,542 )
Other distributions paid   --   --     --     --     (75 )   (75 )
Net income   --   --     --     --     54,379     54,379  
   
 
 
 
 
 
 
Balance December 31, 2007   219,611   625   $ 2   $ 320,555   $ (136,400 ) $ 184,157  
   
 
 
 
 
 
 

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

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CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in thousands)

 
   For the years ended December 31,
  
 
   2007
   2006
   2005
  
Cash flows from operating activities:                    
  Net income   $ 54,379   $ 52,643   $ 46,161  
  Adjustments to reconcile net income to net cash provided by operating activities:                    
    Depreciation and amortization     31,458     29,554     27,567  
    Minority interest     195     185     145  
    Loss on early extinguishment of debt     --     --     13  
    Changes in assets and liabilities:                    
      Tenant receivables, net     (1,435 )   (3,957 )   5,089  
      Deferred rent receivable     207     (103 )   (201 )
      Other assets     629     (449 )   (123 )
      Accounts payable     681     (15,926 )   14,377  
      Accrued interest payable     (72 )   (8 )   732  
      Tenant security deposits     198     195     272  
      Other accrued liabilities     4,959     1,188     96  
      Due to related parties     428     (192 )   38  
   
 
 
 
  Net cash provided by operating activities     91,627     63,130     94,166  
   
 
 
 
Cash flows from investing activities:                    
  Acquistions of property and improvements     (19,070 )   (22,669 )   (47,919 )
  Deferred leasing charges     (3,325 )   (3,657 )   (2,918 )
  Restricted cash     (166 )   452     347  
   
 
 
 
  Net cash used in investing activities     (22,561 )   (25,874 )   (50,490 )
   
 
 
 
Cash flows from financing activities:                    
  Proceeds from notes payable     --     130,000     291,000  
  Payments on notes payable     (11,643 )   (119,946 )   (155,627 )
  Contributions     12,942     --     --  
  Distributions     (61,851 )   (46,346 )   (184,166 )
  Dividends to preferred stockholders     (375 )   (375 )   (375 )
  Deferred financing costs     --     (142 )   (842 )
   
 
 
 
  Net cash used in financing activities     (60,927 )   (36,809 )   (50,010 )
   
 
 
 
  Net increase (decrease) in cash     8,139     447     (6,334 )
Cash and cash equivalents, beginning of year     8,939     8,492     14,826  
   
 
 
 
Cash and cash equivalents, end of year   $ 17,078   $ 8,939   $ 8,492  
   
 
 
 
Supplemental cash flow information:                    
  Cash payment for interest, net of amounts capitalized   $ 49,596   $ 50,981   $ 48,744  
   
 
 
 

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

123


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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, 2007 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:

        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.

        Included in tenant receivables are accrued percentage rents of $2,773 and $2,540 and an allowance for doubtful accounts of $59 and $442 at December 31, 2007 and 2006, respectively.

        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-line rent adjustment." Rental income was increased (decreased) by ($28), $104 and $200 in 2007, 2006 and 2005, respectively, due to the straight-line rent adjustment.

124

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands, except per share amounts)

2.    Summary of Significant Accounting Policies: (Continued)

Percentage rents are recognized on an accrual basis and are accrued when tenants' specified sales targets have been met.

        Estimated recoveries from certain tenants for their pro rata share of 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. Other tenants pay a fixed rate and these tenant recoveries are recognized into revenue on a straight-line basis over the term of the related leases.

        Costs related to the redevelopment, construction and improvement of properties are capitalized. Interest incurred 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 discounted 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, 2007 or 2006.

        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

125

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands, except per share amounts)

2.    Summary of Significant Accounting Policies: (Continued)

        Included in deferred charges are accumulated amortization of $12,167 and $12,209 at December 31, 2007 and 2006, respectively.

        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.

        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 10.1%, 10.6% and 10.7% of total minimum rents in place as of December 31, 2007, 2006 and 2005, respectively. No other tenant represented more than 10% of total minimum rents as of December 31, 2007, 2006 and 2005.

        The preparation of financial statements in conformity with generally accepted accounting principles ("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 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.

126

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands, except per share amounts)

2.    Summary of Significant Accounting Policies: (Continued)

        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 adoption of SFAS No. 155 on January 1, 2007 did not have a material impact on the Trust's consolidated 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. The Trust adopted FIN 48 on January 1, 2007. The adoption of FIN No. 48 did not 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. The adoption of SAB No. 108 on January 1, 2008 did not have a material impact on the Trust's consolidated results of operations or financial condition.

        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. In February 2008, the FASB issued FASB Staff Position SFAS 157-1, Application of FASB Statement No. 157 to FASB Statement No. 13 and Other Accounting Pronouncements That Address Fair Value Measurements for Purposes of Lease Classification or Measurement under Statement 13 ("FSP FAS 157-1"). FSP FAS 157-1 defers the effective date of Statement 157 for all non-financial assets and non-financial liabilities, except those that are recognized or disclosed at fair value in the financial statements on a recurring basis. FSP FAS 157-1 also excludes from the scope of SFAS 157 certain leasing transactions accounted for under Statement of Financial Accounting Standards No. 13, Accounting for Leases. The Trust adopted SFAS 157 and FSP FAS 157-1 on a prospective basis effective January 1, 2008. The adoption of SFAS 157 and FSP FAS 157-1 did not have a material impact on the Trust's results of operations or financial condition.

        In February 2007, the FASB issued SFAS No. 159, "The Fair Value Option for Financial Assets and Financial Liabilities--Including an amendment of FASB Statement No. 115." SFAS No. 159 permits, at the option of the reporting entity, to measure certain assets and liabilities at fair value. The Trust adopted SFAS No. 159 on January 1, 2008. The adoption of SFAS No. 159 did not have a material effect on the Trust's results of operations or financial condition as the Trust did not elect to apply the fair value option to eligible financial instruments on that date.

127

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands, except per share amounts)

2.    Summary of Significant Accounting Policies: (Continued)

        In December 2007, the FASB issued SFAS No. 141 (revised), "Business Combinations." SFAS No. 141(R) requires all assets and assumed liabilities, including contingent liabilities, in a business combination to be recorded at their acquisition-date fair value rather than at historical costs. The Trust is required to adopt SFAS No. 141 (R) on January 1, 2009 and does not expect its adoption to have a material effect on the Trust's results of operations and financial condition.

        In December 2007, the FASB issued SFAS No. 160, "Noncontrolling Interests in Consolidated Financial Statements--an amendment to ARB No. 51". SFAS No. 160 clarifies the accounting for noncontrolling or minority interest in a subsidiary included in consolidated financial statements. The Trust is required to adopt SFAS No. 160 on January 1, 2009 and does not expect its adoption to have a material effect on the Trust's results of operations and financial condition.

3.    Property:

        Property is summarized at December 31, 2007 and 2006 as follows:

 
   2007
   2006
  
Land   $ 238,569   $ 238,569  
Building improvements     871,610     867,778  
Tenant improvements     29,471     24,354  
Equipment and furnishings     7,992     7,119  
Construction in progress     30,133     21,596  
   
 
 
      1,177,775     1,159,416  
Less accumulated depreciation     (198,796 )   (171,596 )
   
 
 
    $ 978,979   $ 987,820  
   
 
 

        Depreciation expense for the years ended December 31, 2007, 2006 and 2005 was $27,911, $26,603 and $24,802, respectively.

128

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands, except per share amounts)

4.    Mortgage Notes Payable:

        Mortgage notes payable at December 31, 2007 and 2006 consist of the following:

 
   Carrying Amount of Mortage Notes
    
    
    
 
   2007
   2006
    
    
    
Property Pledged as Collateral
   Other
   Related Party
   Other
   Related Party
   Interest Rate
   Monthly Payment Term(a)
   Maturity Date
Cascade Mall   $ 39,432   $ --   $ 40,048   $ --   5.27 % 223   2010
Kitsap Mall/Kitsap Place(b)     57,272     --     58,024     --   8.14 % 450   2010
Lakewood Mall     250,000     --     250,000     --   5.43 % 1,127   2015
Los Cerritos Center(c)     130,000     --     130,000     --   5.92 % 640   2011
Redmond Town Center--Retail     72,136     --     73,362     --   4.81 % 301   2009
Redmond Town Center--Office     --     66,059     --     70,146   6.77 % 726   2009
Stonewood Mall     73,990     --     74,862     --   7.44 % 539   2010
Washington Square     97,905     --     101,131     --   6.72 % 825   2009
Washington Square(d)     32,445     --     33,309     --   7.23 % 204   2009
   
 
 
 
           
    $ 753,180   $ 66,059   $ 760,736   $ 70,146            
   
 
 
 
           
(a)
This represents the monthly payment of principal and interest.

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

(c)
This loan provides for additional borrowings of up to $70,000 until May 20, 2010 at a rate of LIBOR plus 0.90%. At December 31, 2007 and 2006, the total interest rate was 5.92% and 5.91%, respectively.

(d)
This loan bears interest at LIBOR plus 2.00% and matures February 1, 2009. At December 31, 2007 and 2006, the total interest rate was 7.23% and 7.35%, respectively.

        Most of the mortgage loan agreements contain a prepayment penalty provision for the early extinguishment of the debt. The related party mortgage note is payable to one of the Company's joint venture partners. See Note 5--Related Party Transactions.

        Total interest costs capitalized for the years ended December 31, 2007, 2006 and 2005 was $1,844, $668 and $942, respectively.

        The fair value of mortgage notes payable at December 31, 2007 and 2006 was estimated to be approximately $834,565 and $839,711, respectively, based on interest rates for comparable loans.

129

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands, except per share amounts)

4.    Mortgage Notes Payable: (Continued)

        The above debt matures as follows:

Year Ending December 31,
   Amount
2008   $ 12,384
2009     261,120
2010     165,735
2011     130,000
2012     --
Thereafter     250,000
   
    $ 819,239
   

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 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 2007, 2006 and 2005, the Trust incurred management fees of $6,474, $6,382 and $6,005, 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 $4,654, $4,875 and $5,125 during the years ended December 31, 2007, 2006 and 2005, respectively. Additionally, no interest costs were capitalized during the years ended December 31, 2007, 2006 and 2005, 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.

130

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands, except per share amounts)

6.    Income taxes: (Continued)

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

 
   2007
   2006
   2005
  
Net income   $ 54,379   $ 52,643   $ 46,161  
  Add: book depreciation and amortization     30,970     29,554     27,567  
  Less: tax depreciation and amortization     (29,274 )   (28,928 )   (26,979 )
    Other book/tax differences, net(1)     (128 )   184     (1,617 )
   
 
 
 
Taxable income   $ 55,947   $ 53,453   $ 45,132  
   
 
 
 

        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:

 
   2007
   2006
   2005
  
Ordinary income   $ 258.87   100.0 % $ 233.79   100.0 % $ 211.03   25.2 %
Qualified dividends     --   0.0 %   --   0.0 %   --   0.0 %
Capital gains     --   0.0 %   --   0.0 %   --   0.0 %
Return of capital         0.0 %       0.0 %   627.26   74.8 %
   
 
 
 
 
 
 
Dividends paid   $ 258.87   100.0 % $ 233.79   100.0 % $ 838.29   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:

Year Ending December 31,
   Amount
2008   $ 113,887
2009     100,189
2010     89,372
2011     78,026
2012     66,263
Thereafter     175,129
   
    $ 622,866
   

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

131

PACIFIC PREMIER RETAIL TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in thousands, except per share amounts)

8.    Redeemable Preferred Stock: (Continued)


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 $1,456, $1,425 and $1,811 for the years ended December 31, 2007, 2006 and 2005, respectively.

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

Year Ending December 31,
   Amount
2008   $ 1,413
2009     1,413
2010     1,413
2011     1,413
2012     1,413
Thereafter     63,179
   
    $ 70,244
   

132


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, 2007 and 2006, and the related statements of operations, cash flows, and partners' equity for each of the years in the three-year period ended December 31, 2007. 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, 2007 and 2006, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2007, 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.

/s/ KPMG LLP

KPMG LLP
Indianapolis, Indiana
February 25, 2008

133


SDG MACERICH PROPERTIES, L.P.

BALANCE SHEETS

December 31, 2007 and 2006

(Dollars in thousands)

 
   2007
   2006
Assets          

Properties:
 
 
 
 
 
  Land   $ 187,462   194,312
  Buildings and improvements     911,756   906,343
  Equipment and furnishings     6,298   5,329
   
 
      1,105,516   1,105,984
  Less accumulated depreciation     241,591   214,090
   
 
      863,925   891,894

Cash and cash equivalents
 
 
15,851
 
10,951
Tenant receivables, including accrued revenue, less allowance for doubtful accounts of $1,062 and $1,366     20,542   17,952
Deferred financing costs, net of accumulated amortization of $386 and $225     1,932   2,086
Prepaid real estate taxes and other assets     1,936   1,837
   
 
    $ 904,186   924,720
   
 

Liabilities and Partners' Equity
 
 
 
 
 

Mortgage notes payable
 
$
793,464
 
795,424
Accounts payable     4,463   4,182
Due to affiliates     331   589
Accrued real estate taxes     16,695   16,752
Accrued interest expense     3,730   2,290
Accrued management fee     346   303
Prepaid rent, security deposits, and other liabilities     7,262   3,787
   
 
    Total liabilities     826,291   823,327

Partners' equity
 
 
77,895
 
101,393
   
 
    $ 904,186   924,720
   
 

See accompanying notes to financial statements.

134


SDG MACERICH PROPERTIES, L.P.

STATEMENTS OF OPERATIONS

Years ended December 31, 2007, 2006, and 2005

(Dollars in thousands)

 
   2007
   2006
   2005
Revenues:              
  Minimum rents   $ 97,626   97,843   96,509
  Overage rents     5,614   4,855   4,783
  Tenant recoveries     52,786   51,480   50,381
  Other     2,955   3,437   3,397
   
 
 
      158,981   157,615   155,070
   
 
 
Expenses:              
  Property operations     23,736   23,025   22,642
  Depreciation of properties     29,730   28,058   27,128
  Real estate taxes     19,835   20,617   20,215
  Repairs and maintenance     9,165   8,324   8,193
  Advertising and promotion     5,035   4,862   5,119
  Management fees     4,182   4,164   4,344
  Provision for credit losses, net     499   567   810
  Interest on mortgage notes     46,598   44,393   34,758
  Other     1,533   1,211   1,143
   
 
 
      140,313   135,221   124,352
   
 
 
Gain (loss) on sale of property, net     (4,020 ) —   356
   
 
 
    Net income   $ 14,648   22,394   31,074
   
 
 

See accompanying notes to financial statements.

135


SDG MACERICH PROPERTIES, L.P.

STATEMENTS OF CASH FLOWS

Years ended December 31, 2007, 2006, and 2005

(Dollars in thousands)

 
   2007
   2006
   2005
  
Cash flows from operating activities:                
  Net income   $ 14,648   22,394   31,074  
  Adjustments to reconcile net income to net cash provided by operating activities:                
      Depreciation of properties     29,730   28,058   27,128  
      Amortization of debt premium     --   (1,329 ) (3,336 )
      Amortization of financing costs     161   572   1,159  
      Loss (gain) on sale of property     4,020   --   (356 )
      Change in tenant receivables     (2,590 ) 1,547   3,021  
      Other items, net     4,825   (1,133 ) 1,303  
   
 
 
 
        Net cash provided by operating activities     50,794   50,109   59,993  
   
 
 
 
Cash flows from investing activities:                
  Additions to properties     (16,371 ) (19,778 ) (17,551 )
  Proceeds from sale of land and building     10,590   --   5,058  
   
 
 
 
        Net cash used by investing activities     (5,781 ) (19,778 ) (12,493 )
   
 
 
 
Cash flows from financing activities:                
  Payments on mortgage notes payable     (1,960 ) (626,126 ) --  
  Proceeds from mortgage notes payable     --   796,550   --  
  Deferred financing costs     (7 ) (2,311 ) --  
  Distributions to partners     (38,146 ) (205,206 ) (42,700 )
   
 
 
 
        Net cash used by financing activities     (40,113 ) (37,093 ) (42,700 )
   
 
 
 
        Net change in cash and cash equivalents     4,900   (6,762 ) 4,800  
Cash and cash equivalents at beginning of year     10,951   17,713   12,913  
   
 
 
 
Cash and cash equivalents at end of year   $ 15,851   10,951   17,713  
   
 
 
 
Supplemental cash flow information:                
  Cash payments for interest   $ 45,298   44,822   36,639  

See accompanying notes to financial statements.

136


SDG MACERICH PROPERTIES, L.P.

STATEMENTS OF PARTNERS' EQUITY

Years ended December 31, 2007, 2006, and 2005

(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, 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  
  Net income     7,324   7,324   --   14,648  
  Distributions     (19,073 ) (19,073 ) --   (38,146 )
   
 
 
 
 
Balance at December 31, 2007   $ 38,948   38,947   --   77,895  
   
 
 
 
 

See accompanying notes to financial statements.

137


SDG MACERICH PROPERTIES, L.P.

NOTES TO FINANCIAL STATEMENTS

December 31, 2007 and 2006

(Dollars in thousands)

(1)    General

        On December 29, 1997, affiliates of Simon Property Group, Inc. (Simon) and The Macerich Company (Macerich) formed a limited partnership to acquire and operate a portfolio of 12 regional shopping centers. SDG Macerich Properties, L.P. (the Partnership) acquired the properties on February 27, 1998.

        Affiliates of Simon and Macerich each manage six of the shopping centers. The shopping centers and their locations are as follows:

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 shopping center leases generally provide for fixed annual minimum rent, overage rent based on sales, and reimbursement for certain operating expenses, including real estate taxes. For leases in effect at December 31, 2007, fixed minimum rents to be received in each of the next five years and thereafter are summarized as follows:

2008   $ 78,594
2009     66,103
2010     53,181
2011     41,382
2012     32,991
Thereafter     89,360
   
    $ 361,611
   

138

SDG MACERICH PROPERTIES, L.P.

NOTES TO FINANCIAL STATEMENTS (Continued)

December 31, 2007 and 2006

(Dollars in thousands)

(2)    Summary of Significant Accounting Policies

        All leases are classified as operating leases, and minimum rents are recognized monthly on a straight-line basis over the terms of the leases.

        Most retail tenants are also required to pay overage rents based on sales over a stated base amount during the lease year, generally ending on January 31. Overage rents are recognized as revenues based on reported and estimated sales for each tenant through December 31. Differences between estimated and actual amounts are recognized in the subsequent year.

        Tenant recoveries for real estate taxes and common area maintenance are adjusted annually based on actual expenses, and the related revenues are recognized in the year in which the expenses are incurred. Charges for other operating expenses are billed monthly with periodic adjustments based on estimated utility usage and/or a current price index, and the related revenues are recognized as the amounts are billed and as adjustments become determinable.

        All highly liquid debt instruments purchased with original maturities of three months or less are considered to be cash equivalents.

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

Buildings and improvements   7-39 years
Equipment and furnishings   5-7 years
Tenant improvements   Shorter of lease terms or useful life

        Improvements and replacements are capitalized when they extend the useful life, increase capacity, or improve the efficiency of the asset. All repairs and maintenance items are expensed as incurred. Interest incurred or imputed on development, redevelopment and construction projects is capitalized until the projects are ready for their intended purpose.

        Gains on sales of all properties are recognized in accordance with SFAS No. 66, Accounting for Sales of Real Estate ("SFAS 66"). The specific timing of the sale is measured against various criteria in SFAS 66 related to the terms of the transactions and any continuing involvement in the form of management or financial assistance from the Partnership associated with the properties. If the sales criteria are not met, the Partnership defers gain recognition and accounts for the continued operations of the property by applying the finance, installment or cost recovery methods, as appropriate, until the full accrual sales criteria are met.

        The Partnership assesses whether there has been an impairment in the value of a property 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 tenants' ability to

139

SDG MACERICH PROPERTIES, L.P.

NOTES TO FINANCIAL STATEMENTS (Continued)

December 31, 2007 and 2006

(Dollars in thousands)

(2)    Summary of Significant Accounting Policies (Continued)


perform their duties and pay rent under the terms of the leases. The Partnership would recognize an impairment loss if the estimated future income stream of a property is not sufficient to recover its investment. Such a loss would be the difference between the carrying value and the fair value of a property. Management believes no impairment in the net carrying values of its properties has occurred.

        Financing costs related to the proceeds of mortgage notes issued are amortized to interest expense over the remaining life of the notes.

        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 disclosures 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.

        As a partnership, the allocated share of income or loss for the year is includable in the income tax returns of the partners; accordingly, income taxes are not reflected in the accompanying financial statements.

        The Partnership 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. The Partnership requires that hedging derivative instruments are effective in reducing the risk exposure that they are designated to hedge. For derivative instruments associated with the hedge of an anticipated transaction, hedge effectiveness criteria also require that it be probable that the underlying transaction occurs. Any instrument that meets these hedging criteria is formally designated as a hedge at the inception of the derivative contract. When the terms of an underlying transaction are modified resulting in some ineffectiveness, the portion of the change in the derivative fair value related to ineffectiveness from period to period will be included in net income. If any derivative instrument used for risk management does not meet the hedging criteria, then it is marked-to-market each period and will be included in net income; however, the Partnership intends for all derivative transactions to meet all the hedge criteria and qualify as hedges.

        On an ongoing quarterly basis, the Partnership adjusts it balance sheet to reflect the current fair value of it derivatives. Changes in the fair value of derivatives are recorded each period in income or comprehensive income, depending on whether the derivative is designated and effective as part of a hedged transaction, and on the type of hedge transaction. To the extent that the change in value of a derivative does not perfectly offset the change in value of the instrument being hedged, the ineffective portion of the hedge is immediately recognized in income. Over time, the unrealized gains and losses

140

SDG MACERICH PROPERTIES, L.P.

NOTES TO FINANCIAL STATEMENTS (Continued)

December 31, 2007 and 2006

(Dollars in thousands)

(2)    Summary of Significant Accounting Policies (Continued)


held in accumulated other comprehensive income will be reclassified to income. This reclassification occurs when the hedged items are also recognized in income. The Partnership has a policy of only entering into contracts with major financial institutions based upon their credit ratings and other factors.

        To determine the fair value of derivative instruments, the Partnership uses standard market conventions and techniques such as discounted cash flow analysis, option pricing models, and termination cost at each balance sheet date. All methods of assessing fair value result in a general approximation of value, and such value may never actually be realized.

        Certain 2006 and 2005 balances have been reclassified to conform to 2007 presentation.

        SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets" ("SFAS No. 144") provides a framework for the evaluation of impairment of long-lived assets, the treatment of assets held for sale or to be otherwise disposed of, and the reporting of discontinued operations. SFAS No. 144 requires the Partnership to reclassify any material operations related to properties sold during the period to discontinued operations. There were no discontinued operations reported in 2007, 2006 or 2005.

(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 nonrecourse mortgage notes is collateralized by different shopping center properties. The debt that matured in 2006 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 4.71% to 4.84%. In addition, the remaining unamortized debt premium of $1,329 was amortized to interest expense in 2006. This premium was recorded when the matured debt was assumed by the Partnership when the properties were initially acquired in 1998.

        In connection with the variable rate mortgage notes that were repaid in 2006, the Company had two separate interest rate cap agreements that effectively prevented the variable interest rate from exceeding rates ranging from 10.63% to 11.83%. These interest rate cap agreements were terminated in connection with repayment of debt in 2006.

141

SDG MACERICH PROPERTIES, L.P.

NOTES TO FINANCIAL STATEMENTS (Continued)

December 31, 2007 and 2006

(Dollars in thousands)

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

        Mortgage notes payable at December 31, 2007 and 2006 consist of the following:

Property pledged as collateral
   Original
principal balance
   Interest rate
   Type of payments
   Balance at
December 31,
2007
   Balance at
December 31,
2006
Eastland Mall   $168,000   5.794 % Interest only   $ 168,000   168,000
Granite Run Mall   122,000   5.834 % Principal and interest     119,811   121,190
Valley Mall   47,500   5.834 % Principal and interest     46,603   47,184
Empire Mall   176,300   5.794 % Interest only     176,300   176,300
Mesa Mall   87,250   5.794 % Interest only     87,250   87,250
Rushmore Mall   94,000   5.794 % Interest only     94,000   94,000
Southern Hills Mall   101,500   5.794 % Interest only     101,500   101,500
   
         
 
    $796,550           $ 793,464   795,424
   
         
 

        Total interest expense capitalized in 2007 and 2006 was $301 and $207, respectively.

        The above mortgage notes payable mature as follows:

2008   $ 2,175
2009     2,335
2010     2,479
2011     2,627
2012     2,760
Thereafter     781,088
   
    $ 793,464
   

        The fair value of the fixed-rate debt of $793,464 and $795,424 at December 31, 2007 and 2006, respectively, based on interest rates for comparable loans of 5.45% and 5.70%, respectively, is estimated to be $812,185 and $801,352, respectively. The carrying value of the Partnership's other financial instruments at December 31, 2007 and 2006 are estimated to approximate their fair values.

(4)    Related Party Transactions

        Management fees incurred in 2007, 2006, and 2005 totaled $2,020, $2,063, and $2,042, respectively, for the Simon-managed properties and $2,162, $2,101, and $2,302, 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 $598, $627, and $521 for shared services fees in 2007, 2006, and 2005 respectively. In 2007, the Partnership paid a development fee of $91 to an affiliate of Macerich.

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

142

SDG MACERICH PROPERTIES, L.P.

NOTES TO FINANCIAL STATEMENTS (Continued)

December 31, 2007 and 2006

(Dollars in thousands)

(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)    Property Sales

        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.

        In December 2007, the Partnership sold three outlots of land at South Park Mall. The sale of the land resulted in a gain of approximately $780, which was recognized at the time of the sale in 2007.

(7)    Recent Accounting Pronouncements

        In July 2006, the FASB issued Interpretation No. 48, "Accounting for Uncertainty in Income Taxes," (FIN 48) which clarifies the accounting for uncertain income tax positions by prescribing the minimum recognition threshold a tax position is required to meet before being recognized in the financial statements. FIN 48 also provides guidance on derecognition, measurement, classification, interest and penalties, accounting for interim periods and disclosures for uncertain tax positions. FIN 48 is effective for fiscal years beginning after December 15, 2006. The Partnership adopted FIN 48 on January 1, 2007. The impact of FIN 48 did not have a material effect on the Partnership's financial position, results of operations, or cash flows.

        The tax years 2004-2006 remain open to examination by the taxing jurisdictions to which the Partnership is subject.

143

THE MACERICH COMPANY
NOTES TO FINANCIAL STATEMENTS
Schedule III--Real Estate and Accumulated Depreciation
December 31, 2007
(Dollars in thousands)

 
   Initial Cost to Company
    
   Gross Amount at Which Carried at Close of Period
    
    
 
   Cost
Capitalized
Subsequent to
Acquisition
    
   Total Cost
Net of
Accumulated
Depreciation
Shopping Centers Entities
   Land
   Building and
Improvements
   Equipment
and
Furnishings
   Land
   Building and
Improvements
   Furniture,
Fixtures and
Equipment
   Construction
in Progress
   Total
   Accumulated
Depreciation
Black Canyon Auto Park   $ 20,600   $ --   $ --   $ 39   $ --   $ --   $ --   $ 20,639   $ 20,639   $ --   $ 20,639
Black Canyon Retail     --     --     --     383     --     --     --     383     383     --     383
Borgata     3,667     28,080     --     7,128     3,667     34,949     137     122     38,875     5,043     33,832
Cactus Power Center     15,374     --           2,544     --     --     --     17,918     17,918     --     17,918
Capitola Mall     11,312     46,689     --     7,256     11,309     53,456     487     5     65,257     17,217     48,040
Carmel Plaza     9,080     36,354     --     15,307     9,080     51,421     240     --     60,741     11,611     49,130
Chandler Fashion Center     24,188     223,143     --     5,457     24,188     228,002     562     36     252,788     36,263     216,525
Chesterfield Towne Center     18,517     72,936     2     24,969     18,517     91,825     2,887     3,195     116,424     42,569     73,855
Coolidge Holding     --     --     --     55     --     --     --     55     55     --     55
Danbury Fair Mall     120,509     291,103     --     43,695     120,509     316,781     1,306     16,711     455,307     23,055     432,252
Deptford Mall     48,370     194,250     --     (5,226 )   56,821     180,530     43     --     237,394     6,202     231,192
Eastview Commons     3,805     7,803     --     5     3,805     7,808     --     --     11,613     1,028     10,585
Eastview Mall     47,417     150,989     --     4,336     47,417     155,241     --     84     202,742     12,628     190,114
Estrella Falls     10,550     --     --     7,421     --     --     --     17,971     17,971     --     17,971
Fiesta Mall     19,445     99,116     --     35,424     20,483     113,055     60     20,387     153,985     10,615     143,370
Flagstaff Mall     5,480     31,773     --     8,938     5,480     40,520     187     4     46,191     6,060     40,131
FlatIron Crossing     21,823     286,809     --     13,497     21,823     293,831     67     6,408     322,129     40,792     281,337
FlatIron Peripheral     6,205     --     --     (50 )   6,155     --     --     --     6,155     --     6,155
Freehold Raceway Mall     152,847     330,998     --     70,716     163,624     374,920     756     15,261     554,561     28,733     525,828
Fresno Fashion Fair     17,966     72,194     --     39,560     17,966     110,461     1,273     20     129,720     27,121     102,599
Great Northern Mall     10,295     57,696     --     3,832     10,295     61,019     309     200     71,823     6,597     65,226
Greece Ridge Center     19,904     68,866     --     5,169     19,870     74,047     --     22     93,939     8,101     85,838
Green Tree Mall     4,947     14,925     332     28,982     4,947     43,293     946     --     49,186     32,095     17,091
Hilton Village     --     19,067     --     956     --     20,015     8     --     20,023     1,555     18,468
Houghton Road Corridor     --     --     --     1,390     --     --     --     1,390     1,390     --     1,390
La Cumbre Plaza     18,122     21,492     --     14,983     17,280     36,477     124     716     54,597     4,741     49,856
Macerich Cerritos Adjacent, LLC     --     6,448     --     (5,692 )   --     756     --     --     756     135     621
Macerich Management Co.      --     2,237     26,562     30,235     390     5,158     45,277     8,209     59,034     22,434     36,600
Macerich Property Management Co., LLC     --     --     2,808     (997 )   --     1,743     68     --     1,811     1,601     210
MACWH, LP     --     25,771     --     4,303     --     28,897     849     328     30,074     2,485     27,589
Marketplace Mall     --     99,133     --     2,246     --     101,325     --     54     101,379     9,826     91,553

144

THE MACERICH COMPANY
NOTES TO FINANCIAL STATEMENTS (Continued)
Schedule III--Real Estate and Accumulated Depreciation
December 31, 2007
(Dollars in thousands)

 
   Initial Cost to Company
    
   Gross Amount at Which Carried at Close of Period
    
    
 
   Cost
Capitalized
Subsequent to
Acquisition
    
   Total Cost
Net of
Accumulated
Depreciation
Shopping Centers Entities
   Land
   Building and
Improvements
   Equipment
and
Furnishings
   Land
   Building and
Improvements
   Furniture,
Fixtures and
Equipment
   Construction
in Progress
   Total
   Accumulated
Depreciation
Mervyn's   19,876   118,089   --   --   19,876   115,086   --   3,003   137,965   172   137,793
Northgate Mall   8,400   34,865   841   26,168   13,414   53,245   1,017   2,598   70,274   32,917   37,357
Northridge Mall   20,100   101,170   --   10,092   20,100   110,694   376   192   131,362   15,195   116,167
Oaks, The   32,300   117,156   --   123,179   34,505   131,907   340   105,883   272,635   19,591   253,044
Pacific View   8,697   8,696   --   110,073   7,854   118,112   1,210   290   127,466   25,549   101,917
Panorama Mall   4,373   17,491   --   3,380   4,373   20,333   210   328   25,244   2,987   22,257
Paradise Valley Mall   24,565   125,996   --   19,047   24,565   130,977   526   13,540   169,608   20,867   148,741
Paradise Village Ground Leases   8,880   2,489   --   4,592   15,063   786   --   112   15,961   300   15,661
Pittsford Plaza   8,411   44,819   --   11,273   8,412   55,993   --   98   64,503   4,525   59,978
Prasada   6,365   --       4,794   --   --   --   11,159   11,159   --   11,159
Prescott Gateway   5,733   49,778   --   4,844   5,733   54,568   54   --   60,355   10,102   50,253
Prescott Peripheral   --   --   --   5,599   1,345   4,254   --   --   5,599   372   5,227
Promenade at Casa Grande   15,089   --   --   86,030   1,914   45,559   --   53,646   101,119   315   100,804
PVOP II   1,150   1,790   --   3,465   2,300   3,810   295   --   6,405   1,275   5,130
Queens Center   21,460   86,631   8   284,062   37,160   351,593   3,385   23   392,161   53,067   339,094
Rimrock Mall   8,737   35,652   --   10,866   8,737   45,900   618   --   55,255   14,624   40,631
Rotterdam Square   5,978   30,010   --   1,278   5,978   31,023   265   --   37,266   3,861   33,405
Salisbury, The Centre at   15,290   63,474   31   21,962   15,284   84,489   984   --   100,757   24,510   76,247
Santa Monica Place   26,400   105,600   --   47,340   40,446   109,538   1,408   27,948   179,340   24,375   154,965
SanTan Village Regional Center   7,827   --   --   149,085   6,981   108,804   604   40,523   156,912   1,284   155,628
Shoppingtown Mall   10,195   57,283   --   3,965   10,195   58,465   162   2,621   71,443   5,468   65,975
Somersville Town Center   4,096   20,317   1,425   14,582   4,099   35,534   661   126   40,420   18,840   21,580
South Plains Mall   23,100   92,728   --   10,215   23,100   100,512   1,558   873   126,043   26,881   99,162
South Towne Center   19,600   78,954   --   15,572   19,454   92,604   736   1,332   114,126   27,983   86,143
Superstition Springs Power Center   1,618   4,420   --   (18 ) 1,618   4,402   --   --   6,020   676   5,344
The Macerich Partnership, L.P.    --   2,534   --   6,179   212   1,953   5,290   1,258   8,713   733   7,980

145

THE MACERICH COMPANY
NOTES TO FINANCIAL STATEMENTS (Continued)
Schedule III--Real Estate and Accumulated Depreciation
December 31, 2007
(Dollars in thousands)

 
   Initial Cost to Company
    
   Gross Amount at Which Carried at Close of Period
    
    
 
   Cost
Capitalized
Subsequent to
Acquisition
    
   Total Cost
Net of
Accumulated
Depreciation
Shopping Centers Entities
   Land
   Building and
Improvements
   Equipment
and
Furnishings
   Land
   Building and
Improvements
   Furniture,
Fixtures and
Equipment
   Construction
in Progress
   Total
   Accumulated
Depreciation
The Shops at Tangerine (Marana)     36,158     --     --     2,527     36,158     --     --     2,527     38,685     --     38,685
Towne Mall     5,722     28,745     --     467     5,722     29,142     70     --     34,934     3,481     31,453
The Marketplace at Flagstaff Mall     --     --     --     50,749     --     35,840     5     14,904     50,749     226     50,523
Tucson La Encantada     12,800     19,699     --     55,149     12,800     74,612     236     --     87,648     13,590     74,058
Twenty Ninth Street     50     37,793     64     204,934     23,599     218,225     1,017     --     242,841     39,099     203,742
Valley River     24,854     147,715     --     8,536     24,854     156,209     42     --     181,105     9,404     171,701
Valley View Center     17,100     68,687     --     50,080     20,754     109,789     1,776     3,548     135,867     31,832     104,035
Victor Valley, Mall at     15,700     75,230     --     26,169     15,061     100,304     716     1,018     117,099     10,505     106,594
Village Center     2,250     4,459     --     9,890     4,500     12,028     28     43     16,599     4,090     12,509
Village Crossroads     3,100     4,493     --     8,859     6,200     10,171     --     81     16,452     1,668     14,784
Village Fair North     3,500     8,567     --     13,872     7,000     18,889     11     39     25,939     3,563     22,376
Village Plaza     3,423     8,688     --     680     3,423     8,963     22     383     12,791     1,588     11,203
Village Square I     --     2,844     --     381     358     2,835     4     28     3,225     458     2,767
Village Square II     --     8,492     --     4,559     4,389     8,634     3     25     13,051     1,612     11,439
Vintage Faire Mall     14,902     60,532     --     25,115     14,298     83,288     1,095     1,868     100,549     26,872     73,677
Wadell Center West     12,056     --           (2,319 )   --     --     --     9,737     9,737     --     9,737
Westcor / Queen Creek     --     --     --     262     --     --     --     262     262     --     262
Westside Pavilion     34,100     136,819     --     53,012     34,100     174,847     2,746     12,238     223,931     42,672     181,259
Wilton Mall     17,710     62,525     --     4,132     17,256     66,670     143     298     84,367     5,693     78,674
   
 
 
 
 
 
 
 
 
 
 
    $ 1,122,088   $ 4,063,102   $ 32,073   $ 1,861,539   $ 1,146,816   $ 5,406,117   $ 83,199   $ 442,670   $ 7,078,802   $ 891,329   $ 6,187,473
   
 
 
 
 
 
 
 
 
 
 

146

THE MACERICH COMPANY

NOTES TO FINANCIAL STATEMENTS (Continued)

Schedule III—Real Estate and Accumulated Depreciation

December 31, 2007

(Dollars in thousands)

        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, 2007 are as follows:

 
   2007
   2006
   2005
  
Balances, beginning of year   $ 6,356,156   $ 6,017,546   $ 4,149,776  
Additions     764,972     839,445     1,873,032  
Dispositions and retirements     (42,326 )   (500,835 )   (5,262 )
   
 
 
 
Balances, end of year   $ 7,078,802   $ 6,356,156   $ 6,017,546  
   
 
 
 

        The changes in accumulated depreciation for the three years ended December 31, 2007 are as follows:

 
   2007
   2006
   2005
  
Balances, beginning of year   $ 738,277   $ 719,842   $ 575,223  
Additions     178,424     220,885     145,859  
Dispositions and retirements     (25,372 )   (202,450 )   (1,240 )
   
 
 
 
Balances, end of year   $ 891,329   $ 738,277   $ 719,842  
   
 
 
 

147

PACIFIC PREMIER RETAIL TRUST

NOTES TO FINANCIAL STATEMENTS

Schedule III--Real Estate and Accumulated Depreciation

December 31, 2007

(Dollars in thousands)

 
   Initial Cost to Company
    
   Gross Amount at Which Carried at Close of Period
    
    
 
   Cost
Capitalized
Subsequent to
Acquisition
    
   Total Cost
Net of
Accumulated
Depreciation
Shopping Centers Entities
   Land
   Building and
Improvements
   Equipment
and
Furnishings
   Land
   Building and
Improvements
   Furniture,
Fixtures and
Equipment
   Construction
in Progress
   Total
   Accumulated
Depreciation
Cascade Mall   $ 8,200   $ 32,843   $ --   $ 4,295   $ 8,200   $ 36,796   $ 342   $ --   $ 45,338   $ 8,876   $ 36,462
Creekside Crossing     620     2,495     --     232     620     2,727     --     --     3,347     619     2,728
Cross Court Plaza     1,400     5,629     --     397     1,400     6,026     --     --     7,426     1,388     6,038
Kitsap Mall     13,590     56,672     --     3,577     13,486     60,181     172     --     73,839     14,749     59,090
Kitsap Place Mall     1,400     5,627     --     2,936     1,400     8,563     --     --     9,963     1,671     8,292
Lakewood Mall     48,025     112,059     --     56,161     48,025     156,634     2,225     9,361     216,245     35,071     181,174
Los Cerritos Center     57,000     133,000     --     20,345     57,000     138,947     2,316     12,082     210,345     31,443     178,902
Northpoint Plaza     1,400     5,627     --     682     1,397     6,312     --     --     7,709     1,329     6,380
Redmond Towne Center     18,381     73,868     --     19,671     17,864     93,779     253     24     111,920     22,007     89,913
Redmond Office     20,676     90,929     --     15,234     20,675     106,164     --     --     126,839     22,538     104,301
Stonewood Mall     30,902     72,104     --     7,155     30,902     78,465     794     --     110,161     17,426     92,735
Washington Square Mall     33,600     135,084     --     65,154     33,600     190,210     1,833     8,195     233,838     37,963     195,875
Washington Square Too     4,000     16,087     --     718     4,000     16,277     57     471     20,805     3,716     17,089
   
 
 
 
 
 
 
 
 
 
 
    $ 239,194   $ 742,024   $ --   $ 196,557   $ 238,569   $ 901,081   $ 7,992   $ 30,133   $ 1,177,775   $ 198,796   $ 978,979
   
 
 
 
 
 
 
 
 
 
 

148

PACIFIC PREMIER RETAIL TRUST

NOTES TO FINANCIAL STATEMENTS (Continued)

Schedule III—Real Estate and Accumulated Depreciation

December 31, 2007

(Dollars in thousands)

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, 2007 are as follows:

 
   2007
   2006
   2005
Balances, beginning of year   $ 1,159,416   $ 1,136,940   $ 1,089,108
Additions     18,359     22,476     47,832
Dispositions and retirements     —     —     —
   
 
 
Balances, end of year   $ 1,177,775   $ 1,159,416   $ 1,136,940
   
 
 

        The changes in accumulated depreciation for the three years ended December 31, 2007 are as follows:

 
   2007
   2006
   2005
Balances, beginning of year   $ 171,596   $ 145,186   $ 120,384
Additions     27,200     26,410     24,802
Dispositions and retirements     —     —     —
   
 
 
Balances, end of year   $ 198,796   $ 171,596   $ 145,186
   
 
 

149

SDG MACERICH PROPERTIES, L.P.

NOTES TO FINANCIAL STATEMENTS

Schedule III—Real Estate and Accumulated Depreciation

December 31, 2007

(Dollars in thousands)

 
    
    
    
    
    
   Gross book value at December 31, 2007
    
    
 
    
   Initial cost to partnership
   Costs
capitalized
subsequent
to
acquisition
    
    
 
    
    
   Total cost
net of
accumulated
depreciation
Shopping Center(1)
   Location
   Land
   Building
and
improvements
   Equipment
and
furnishings
   Land
   Building
and
improvements
   Equipment
and
furnishings
   Accumulated
depreciation
Mesa Mall   Grand Junction, Colorado   $ 11,155   44,635   —   8,473   11,155   52,757   351   (14,776 ) 49,487
Lake Square Mall   Leesburg, Florida     7,348   29,392   —   2,460   7,348   31,609   243   (8,314 ) 30,886
South Park Mall   Moline, Illinois     21,341   85,540   —   6,335   18,742   93,893   581   (23,070 ) 90,146
Eastland Mall   Evansville, Indiana     28,160   112,642   —   6,407   21,427   124,596   1,186   (33,591 ) 113,618
Lindale Mall   Cedar Rapids, Iowa     12,534   50,151   —   5,502   12,534   55,159   494   (15,169 ) 53,018
North Park Mall   Davenport, Iowa     17,210   69,042   —   11,171   14,947   81,710   766   (20,278 ) 77,145
South Ridge Mall   Des Moines, Iowa     11,524   46,097   —   14,149   12,110   58,984   676   (14,154 ) 57,616
Granite Run Mall   Media, Pennsylvania     26,147   104,671   —   5,751   26,147   109,847   575   (28,374 ) 108,195
Rushmore Mall   Rapid City, South Dakota     12,089   50,588   —   6,144   12,089   56,287   445   (16,679 ) 52,142
Empire Mall   Sioux Falls, South Dakota     23,706   94,860   —   15,995   23,067   111,134   360   (32,402 ) 102,159
Empire East   Sioux Falls, South Dakota     2,073   8,291   —   1,493   1,854   9,989   14   (2,426 ) 9,431
Southern Hills Mall   Sioux City, Iowa     15,697   62,793   —   8,721   15,697   71,382   132   (18,739 ) 68,472
Valley Mall   Harrisonburg, Virginia     10,393   41,572   —   13,264   10,345   54,409   475   (13,619 ) 51,610
       
 
 
 
 
 
 
 
 
        $ 199,377   800,274   —   105,865   187,462   911,756   6,298   (241,591 ) 863,925
       
 
 
 
 
 
 
 
 
(1)
All of the shopping centers were acquired in 1998.

150

SDG MACERICH PROPERTIES, L.P.

NOTES TO FINANCIAL STATEMENTS (Continued)

Schedule III--Real Estate and Accumulated Depreciation

December 31, 2007

(Dollar in thousands)

        Depreciation and amortization of the Partnership's investment in shopping center properties reflected in the statement 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

        The changes in total shopping center properties for the years ended December 31, 2007, 2006, and 2005 are as follows:


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  
Acquisitions in 2007     --  
Additions in 2007     16,371  
Disposals and retirements in 2007     (16,839 )
   
 
Balance at December 31, 2007   $ 1,105,516  
   
 

        The changes in accumulated depreciation for the years ended December 31, 2007, 2006, and 2005 are as follows:


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  
Additions in 2007     29,730  
Disposals and retirements in 2007     (2,229 )
   
 
Balance at December 31, 2007   $ 241,591  
   
 

See accompanying report of independent registered public accounting firm.

151


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 June 3, 2008.

    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 (Principal Executive Officer)   June 3, 2008

/s/  MACE SIEGEL      
Mace Siegel
 
Chairman of the Board
 
June 3, 2008

/s/  DANA K. ANDERSON      
Dana K. Anderson
 
Vice Chairman of the Board
 
June 3, 2008

/s/  EDWARD C. COPPOLA      
Edward C. Coppola
 
Senior Executive Vice President and Chief Investment Officer and Director
 
June 3, 2008

/s/  JAMES COWNIE      
James Cownie
 
Director
 
June 3, 2008

/s/  DIANA LAING      
Diana Laing
 
Director
 
June 3, 2008

/s/  FREDERICK HUBBELL      
Frederick Hubbell
 
Director
 
June 3, 2008

/s/  STANLEY MOORE      
Stanley Moore
 
Director
 
June 3, 2008

/s/  DR. WILLIAM SEXTON      
Dr. William Sexton
 
Director
 
June 3, 2008

/s/  THOMAS E. O'HERN      
Thomas E. O'Hern
 
Executive Vice President, Treasurer and Chief Financial and Accounting Officer (Principal Financial and Accounting Officer)
 
June 3, 2008

152


EXHIBIT INDEX

Exhibit
Number
   Description
   Sequentially
Numbered
Page
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
 
 

4.4**########
 
Indenture, dated as of March 16, 2007, among the Company, the Operating Partnership and Deutsche Bank Trust Company Americas (includes form of the Notes and Guarantee)
 
 

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
 
 

153


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**########
 
Eleventh Amendment to Amended and Restated Limited Partnership Agreement for the Operating Partnership dated as of March 16, 2007
 
 

10.1.11**###
 
Form of Twelfth 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(1)
 
 

10.2.1####
 
List of Omitted Termination of Employment Agreements(1)
 
 

10.2.2####
 
Employment Agreement between the Company and Tony Grossi dated November 1, 2006(1)
 
 

10.2.3**#
 
Separation Agreement between the Company and David Contis dated October 5, 2006(1)
 
 

10.3******
 
Amended and Restated 1994 Incentive Plan(1)
 
 

10.3.1########
 
Amendment to the Amended and Restated 1994 Incentive Plan dated as of March 31, 2001(1)
 
 

10.3.2*******#
 
Amendment to the Amended and Restated 1994 Incentive Plan (October 29, 2003)(1)
 
 

10.4#
 
1994 Eligible Directors' Stock Option Plan(1)
 
 

10.4.1*******#
 
Amendment to 1994 Eligible Directors Stock Option Plan (October 29, 2003)(1)
 
 

10.5*******#
 
Amended and Restated Deferred Compensation Plan for Executives (2003)(1)
 
 

10.5.1**##
 
2005 Deferred Compensation Plan for Executives(1)
 
 

154


10.6*******#
 
Amended and Restated Deferred Compensation Plan for Senior Executives (2003)(1)
 
 

10.6.1**##
 
2005 Deferred Compensation Plan for Senior Executives(1)
 
 

10.7**##
 
Eligible Directors' Deferred Compensation/Phantom Stock Plan (as amended and restated as of January 1, 2005)(1)
 
 

10.8********
 
Executive Officer Salary Deferral Plan(1)
 
 

10.8.1*******#
 
Amendment Nos. 1 and 2 to Executive Officer Salary Deferral Plan(1)
 
 

10.8.2**##
 
Amendment No. 3 to Executive Officer Salary Deferral Plan(1)
 
 

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
 
 

155


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
 
 

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***##
 
First Amendment dated as of July 3, 2007 to the $1,500,000 Second Amended and Restated Revolving Loan Facility Credit Agreement
 
 

10.22.2**###
 
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
 
 

10.22.3**######
 
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 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
 
 

156


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)(1)
 
 

10.25.1########
 
Amendment to the 2000 Incentive Plan dated March 31, 2001(1)
 
 

10.25.2*******#
 
Amendment to 2000 Incentive Plan (October 29, 2003)(1)
 
 

10.26#######
 
Form of Stock Option Agreements under the 2000 Incentive Plan(1)
 
 

10.27****#
 
2003 Equity Incentive Plan(1)
 
 

10.27.1*******#
 
Amendment to 2003 Equity Incentive Plan (October 29, 2003)(1)
 
 

10.27.2***##
 
Amended and Restated Cash Bonus/Restricted Stock and LTIP Unit Award Program under the 2003 Equity Incentive Plan(1)
 
 

10.28***###
 
Form of Restricted Stock Award Agreement under 2003 Equity Incentive Plan(1)
 
 

10.29*****#
 
Form of Stock Unit Award Agreement under 2003 Equity Incentive Plan(1)
 
 

10.30***###
 
Form of Employee Stock Option Agreement under 2003 Equity Incentive Plan(1)
 
 

10.31*****#
 
Form of Non-Qualified Stock Option Grant under 2003 Equity Incentive Plan(1)
 
 

10.32***#
 
Form of Restricted Stock Award Agreement for Non-Management Directors(1)
 
 

10.32.1####
 
Form of LTIP Award Agreement under 2003 Equity Incentive Plan (Performance Vesting)(1)
 
 

10.32.2***##
 
Form of LTIP Award Agreement under 2003 Equity Incentive Plan (Time Vesting)(1)
 
 

10.32.3***###
 
Form of Stock Appreciation Right under 2003 Equity Incentive Plan(1)
 
 

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(1)
 
 

10.34.1####
 
List of Omitted Management Continuity Agreements(1)
 
 

10.35*******#
 
Indemnification Agreement between the Company and Mace Siegel dated October 29, 2003
 
 

157


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**########
 
Registration Rights Agreement, dated as of March 16, 2007, among the Company, J.P. Morgan Securities Inc. and Deutsche Bank Securities Inc.
 
 

10.41**####
 
Description of Director and Executive Compensation Arrangements(1)
 
 

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
 
 

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)
 
 

99.2**########
 
Capped Call Confirmation dated as of March 12, 2007 by and among the Company, Deutsche Bank AG, London Branch and Deutsche Bank AG, New York Branch
 
 

99.2.1**########
 
Amendment to Capped Call Confirmation dated as of March 15, 2007, by and among the Company, Deutsche Bank AG, London Branch and Deutsche Bank AG, New York Branch
 
 

99.3**########
 
Capped Call Confirmation dated as of March 12, 2007 by and between the Company and JPMorgan Chase Bank, National Association
 
 

158


99.3.1**########
 
Amendment to Capped Call Confirmation dated as of March 15, 2007 by and between the Company and JPMorgan Chase Bank, National Association
 
 
*   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 Annual Report on Form 10-K for the year ended December 31, 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 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.
########   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.

159

***#   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.
**########   Previously filed as an exhibit to the Company's Current Report on Form 8-K, event date March 16, 2007, 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, 2007, 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, 2007, and incorporated herein by reference.
(1)   Represents a management contract, or compensatory plan, contract or arrangement required to be filed pursuant to Regulation S-K.

160



QuickLinks

EXPLANATORY NOTE (All dollars in thousands)
THE MACERICH COMPANY ANNUAL REPORT ON FORM 10-K/A FOR THE YEAR ENDED DECEMBER 31, 2007 INDEX
PART I
IMPORTANT FACTORS RELATED TO FORWARD-LOOKING STATEMENTS
PART II
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
PART III
PART IV
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
THE MACERICH COMPANY CONSOLIDATED BALANCE SHEETS (Dollars in thousands, except share amounts)
THE MACERICH COMPANY CONSOLIDATED STATEMENTS OF OPERATIONS (Dollars in thousands, except share and per share amounts)
THE MACERICH COMPANY CONSOLIDATED STATEMENTS OF COMMON STOCKHOLDERS' EQUITY (Dollars in thousands, except per share data)
THE MACERICH COMPANY CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollars in thousands)
THE MACERICH COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars and shares in thousands, except per share amounts)
REPORTS OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMS
PACIFIC PREMIER RETAIL TRUST CONSOLIDATED BALANCE SHEETS (Dollars in thousands, except share amounts)
PACIFIC PREMIER RETAIL TRUST CONSOLIDATED STATEMENTS OF OPERATIONS (Dollars in thousands)
PACIFIC PREMIER RETAIL TRUST CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (Dollars in thousands, except share data)
PACIFIC PREMIER RETAIL TRUST CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollars in thousands)
PACIFIC PREMIER RETAIL TRUST NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Dollars in thousands, except per share amounts)
Report of Independent Registered Public Accounting Firm
SDG MACERICH PROPERTIES, L.P. BALANCE SHEETS December 31, 2007 and 2006 (Dollars in thousands)
SDG MACERICH PROPERTIES, L.P. STATEMENTS OF OPERATIONS Years ended December 31, 2007, 2006, and 2005 (Dollars in thousands)
SDG MACERICH PROPERTIES, L.P. STATEMENTS OF CASH FLOWS Years ended December 31, 2007, 2006, and 2005 (Dollars in thousands)
SDG MACERICH PROPERTIES, L.P. STATEMENTS OF PARTNERS' EQUITY Years ended December 31, 2007, 2006, and 2005 (Dollars in thousands)
SDG MACERICH PROPERTIES, L.P. NOTES TO FINANCIAL STATEMENTS December 31, 2007 and 2006 (Dollars in thousands)
SIGNATURES
EXHIBIT INDEX