SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES AND EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported) January 5, 1998
(December 19,1997)
THE MACERICH COMPANY
(Exact Name of Registrant as Specified in Charter)
Maryland 1-12504 95-4448705
(State or Other Jurisdiction (Commission (IRS Employer
of Incorporation) File Number) Identification No.)
233 Wilshire Boulevard, Suite 700, Santa Monica, CA 90401
(Address of Principal Executive Offices)
Registrant's telephone number, including area code (310) 394-6911)
N/A
(Former Name or Former Address, if Changed Since Last Report)
Item 2. Acquisition or Disposition of Assets
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On December 19, 1997, a majority owned subsidiary of The
Macerich Company (the "Registrant")acquired The Citadel, in Colorado Springs,
Colorado, a super regional mall containing approximately 1,094,000 square feet.
The seller of the asset was TriState Joint Venture ("Seller"), a Maryland joint
venture partnership, comprised of an affiliate of Teachers Insurance and Annuity
Association and an affiliate of The Rouse Company. The assets acquired include,
among other things, real property, the buildings and improvements located
thereon, certain lease interests, tangible and intangible personal property and
rights related thereto.
The purchase price was approximately $108 million, and was
determined in good faith arms length negotiations between Registrant and the
Seller. In negotiating the purchase price the Registrant considered, among other
factors, the mall's historical and projected cash flow, the nature and term of
existing tenancies and leases, the current operating costs, the expansion
availability, the physical condition of the property, and the terms and
conditions of available financing. No independent appraisals were obtained by
the Registrant. The purchase price was funded by a concurrently placed loan of
$75.6 million plus $32.4 million in cash. The Registrant intends to continue
operating the mall as currently operated and leasing the space therein to
national and local retailers.
Earnings before interest, taxes, depreciation and amortization
for the mall for 1996 was approximately $8.7 million.
The description contained herein of the transaction described
above does not purport to be complete and is qualified in its entirety by
reference to the Purchase Agreement which is filed as Exhibit 2.1 hereto.
2
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
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(a) Financial Statements of Stonewood Mall
Report of Independent Accountants F-1
Statement of Revenues and
Certain Expenses for the year
ended December 31, 1996 and for the
six months ended June 30, 1997 and 1996 F-2
Notes to Financial Statements F-3 thru F-6
(b) Pro Forma Financial Information
Condensed Combined Statements of Operations for
of the Macerich Company for the year ended
December 31, 1996 F-7
Condensed Combined Statements of Operations
of the Macerich Company for the nine months ended
September 30, 1997 F-8
Condensed Combined Balance Sheet as of
September 30, 1997 F-9
(c) Exhibits
2.1 Agreement of Purchase and Sale dated November 12, 1997 between MR
Citadel Limited Partnership and TriState Joint Venture
3
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of
1934, The Macerich Company has duly caused this report to be signed on its
behalf by the undersigned, hereunto duly authorized, in the City of Santa
Monica, State of California, on January 5, 1998.
THE MACERICH COMPANY
By: /s/Thomas E. O'Hern
Thomas E. O'Hern
Senior Vice President and
Chief Financial Officer
4
EXHIBIT INDEX
Exhibit No. Document Page
2.1 Agreement of Purchase and Sale dated
November 12, 1997, between TriState Joint
Venture and MR Citadel Limited Partnership
5
STONEWOOD CENTER MALL
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STATEMENT OF REVENUES AND CERTAIN EXPENSES For The Year Ended
December 31, 1996
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REPORT OF INDEPENDENT ACCOUNTANTS
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To the Directors of The Macerich Company
We have audited the accompanying statement of revenues and certain expenses of
Stonewood Center Mall (the "Mall") for the year ended December 31, 1996. This
statement is the responsi- bility of the Mall's management. Our responsibility
is to express an opinion on this statement based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the statement is free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the statement. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall presentation of the statement. We believe that our audit
provides a reasonable basis for our opinion.
The accompanying statement was prepared for the purpose of complying with the
rules and regulations of the Securities and Exchange Commission (for inclusion
in the Form 8-K of The Macerich Company) described in Note 2 and is not intended
to be a complete presentation of the Mall's revenues and expenses.
In our opinion, the statement referred to above presents fairly, in all material
respects, the revenues and certain expenses described in Note 2 of the Mall for
the year ended December 31, 1996, in conformity with generally accepted
accounting principles.
Newport Beach, California
September 30, 1997
F-1
STONEWOOD CENTER MALL
STATEMENTS OF REVENUES AND CERTAIN EXPENSES
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Year Ended
December 31, Six Months Ended June 30,
1996 1997 1996
(Unaudited)
Revenues:
Minimum rents $8,491,205 $4,321,963 $3,940,281
Percentage rents 468,528 235,604 238,582
Tenant recoveries 2,868,260 1,428,417 1,358,427
Other incomec 234,738 71,895 77,089
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12,062,731 6,057,879 5,614,379
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Certain expenses:
Operating expenses 1,948,483 911,006 778,941
Property taxes 925,452 468,087 471,427
General and administrative 328,350 130,758 162,297
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3,202,285 1,509,851 1,412,665
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Revenues in excess of certain expenses $8,860,446 $4,548,028 $4,201,714
========= ========= =========
The accompanying notes are an integral part of this statement.
F-2
STONEWOOD CENTER MALL
NOTES TO FINANCIAL STATEMENTS
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1. Description Of The Property:
The statements of revenues and certain expenses relate to the operations of
Stonewood Center Mall (the "Mall") located in Downey, California which is a
926,823-square foot (unaudited) regional shopping mall. The Mall was acquired on
August 6, 1997 by Macerich Partnership, L.P. (the "Operating Partnership") from
Stonewood Center Limited Partnership (a California Limited Partnership) (the
"Prior Owners" or the "Company") for an aggregate purchase price of $92 million.
The Macerich Company, a Maryland Corporation, owns 68% of the Operating
Partnership.
2. Significant Accounting Policies:
Basis Of Presentation:
Operating revenues and expenses are presented on the accrual basis of
accounting. Retail spaces rented under operating leases generally range
from 2 to 10 years. Minimum rent revenues are recognized as rents
become due according to the lease agreement for which amounts
approximate revenues had they been recorded on a straight-line basis.
Some tenants are also charged for certain operating expenses that are
subject to recovery by the Mall, including real estate taxes, insurance
and common area costs.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from
these estimates.
There are owners and developers of real estate that compete with the
Company in its trade areas. This results in competition for tenants to
occupy space. The existence of competi- tion could have a material
impact on the Company's ability to lease space and on the level of rent
that can be achieved.
The accompanying statements of revenues and certain expenses is not
representative of the actual operations for the year ended December 31,
1996 because certain expenses, which may not be comparable to those
expected to be incurred by the Operating Partner- ship in the proposed
future operations of the Mall, have been excluded. Expenses excluded
consist of mortgage interest, depreciation and amortization, management
fees and other legal and administrative costs not directly related to
future operations of the property.
F-3
STONEWOOD CENTER MALL
NOTES TO FINANCIAL STATEMENTS - Continued
2. Significant Accounting Policies, Continued:Interim Statements:
The interim financial data for the six-month periods ended June 30,
1997 and 1996 are unaudited; however, in the opinion of management, the
interim data includes all adjust- ments, consisting of normal recurring
adjustments and eliminations necessary for a fair presentation of the
results of the periods under the basis of presentation described above.
The results of revenues and direct operating expenses for the six-month
periods ended June 30, 1997 and 1996 are not necessarily indicative of
the results for the full year.
3. Operating Leases:
The minimum lease payments, excluding average rents, on noncancelable
operating leases to be received in future years as of December 31, 1996
are as follows:
1997 $8,397,623
1998 8,418,265
1999 8,005,299
2000 7,328,469
2001 5,288,820
Thereafter 21,044,183
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$58,482,659
In addition to minimum rents, certain leases provide for contingent
rent payments based on a percent of base income, as defined. This
additional rent was approximately $468,528 in 1996.
F-4
STONEWOOD CENTER MALL
NOTES TO FINANCIAL STATEMENTS - Continued
4. Ground Lease:Under an existing noncancellable operating ground lease
agreement, the Company is committed to pay the following minimum rents:
Years Ending December 31,
1997 $129,954
1998 129,954
1999 129,954
2000 129,954
2001 129,954
Thereafter 12,198,078
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$12,847,848
Rent expense associated with the ground lease was $129,954 in 1996. The
annual ground rent expense is adjusted every five years by the
proportionate change in CPI. On January 1, 2008, the base rent then in
effect shall be increased by 50%. The lease expires on December 31,
2051.
F-5
STONEWOOD CENTER MALL
NOTES TO FINANCIAL STATEMENTS - Continued
5. Related Party Transaction:
Hughes/Purcell (the "Company") which, through common ownership is
related to the Prior Owners of the Mall, is reimbursed for certain
leasing fees for services performed by the Company on behalf of the
Mall. During 1996, the Company was reimbursed approximately $44,123 for
such leasing fees. In addition, although not reflected in the
accompanying financial statement, the Company was also reimbursed
$522,757 for management fees.
F-6
The following unaudited pro forma statement of operations has been
prepared for the year ended December 31, 1996. This statement gives
effect to the acquisitions of South Towne Center , Stonewood Mall
and the Citadel (the "Acquisition Centers")
as if the acquisitions were completed on January 1, 1996. This
statement does not purport to be indicative of the results of
operations that actually would have resulted if the Registrant had
owned those malls throughout the period presented. This statement
should be read in conjunction with the financial statements and notes
thereto included elsewhere herein.
The Macerich Company
Unaudited Pro Forma
Condensed Combined Statement of Operations
(all amounts in thousands)
Company results Pro forma Pro forma Pro forma
for the year ended South Towne Center Stonewood Mall Citadel Mall
December 31, 1996 Acquisition Acquisition Acquisition
(A)
Revenues:
Minimum Rents 99,061 5,220 8,491 8,052
Percentage Rents 6,142 1,400 469 585
Tenant Recoveries 47,648 2,022 2,868 3,265
Other 2,208 996 235 696
--------- -------- ------ -------
Total revenues 155,059 9,638 12,063 12,598
Shopping center expenses 50,792 3,099 3,202 3,933
REIT general and administrative expenses 2,378
Depreciation and amortization (B) 32,591 1,885 1,769 2,077
Interest expense 42,353 6,615 (c) 6,210 (c) (E) 7,873
--------- -------- ------ -------
Net income (loss) before minority interest,
extraordinary items and
uncombined joint ventures and management companies 26,945 (1,961) 882 (1,285)
Minority interest (D) (10,975) 720 (324) 472
Income from uncombined joint
ventures and management companies 3,256 0 0
Extraordinary loss on early extinguishment of debt (315)
--------- -------- ------ -------
Net income 18,911 (1,241) 558 (813)
--------- -------- ------ -------
--------- -------- ------ -------
Net income per share - before extraordinary items $0.92
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---------
Net income per share $0.91
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Weighted average number of shares of common stock outstanding 20,781
Pro Forma Results
(Including the
Acquisition Malls)
December 31, 1996
Revenues:
Minimum Rents 120,824
Percentage Rents 8,596
Tenant Recoveries 55,803
Other 4,135
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Total revenues 189,358
Shopping center expenses 61,026
REIT general and administrative expenses 2,378
Depreciation and amortization (B) 38,322
Interest expense 63,051
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Net income (loss) before minority interest,
extraordinary items and
uncombined joint ventures and management companies 24,581
Minority interest (D) (10,107)
Income from uncombined joint
ventures and management companies 3,256
Extraordinary loss on early extinguishment of debt (315)
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Net income 17,415
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Net income per share - before extraordinary items $0.85
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Net income per share $0.84
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Weighted average number of shares of common stock outstanding 20,781
(A) This information should be read in conjunction with The Macerich
Company's (the "Company") report on Form 10-K for the period ended
December 31, 1996.
(B) Depreciation on the Acquisition malls is computed on the straight-line method over the estimated useful life of 39 years.
(c) Interest expense is calculated assuming the entire purchase price was debt at a rate of LIBOR plus 1.25% .
(D) Minority interest represents the limited partners ownership interest in
the Operating Partnership.
(E) Interest expense is calculated based on a property loan of $75,600 at 7.2% plus other debt of $32,400 at LIBOR plus 1.5%
F-7
The following unaudited pro forma statement of operations has been
prepared for the nine months ended September 30, 1997 . This
statement gives effect to the acquisitions of South Towne Center,
Stonewood Mall and Citadel Mall (the "Acquisition Centers")
as if the acquisitions were completed on January 1, 1997. This
statement does not purport to be indicative of the results of
operations that actually would have resulted if the Registrant had
owned those malls throughout the period presented. This statement
should be read in conjunction with the financial statements and notes
thereto included elsewhere herein.
The Macerich Company
Unaudited Pro Forma
Condensed Combined Statement of Operations
(all amounts in thousands)
Company results Pro forma Pro forma Pro forma
for the nine Adjustment- Adjustment- Adjustment-
months ended South Towne Center Stonewood Mall Citadel Mall
Sept. 30, 1997 Acquisition Acquisition Acquisition
(A) (B) (B) (C)
Revenues:
Minimum Rents 101,228 1,419 5,182 5,770
Percentage Rents 6,434 92 59 226
Tenant Recoveries 49,558 508 1,713 2,751
Other 2,465 19 86 97
-------- ------- ----- ------
Total revenues 159,685 2,038 7,040 8,844
Shopping center expenses 51,830 728 1,732 3,260
REIT general and administrative expenses 2,099
Depreciation and amortization 29,815 471 (D) 1,179 (D) 1,558 (D)
Interest expense 47,402 1,654 (E) 4,447 (E) 5,905 (G)
-------- ------- ----- ------
Net income (loss) before minority interest, uncombined
joint ventures and extraordinary loss 28,539 (815) (318) (1,879)
Gain on sale of asset 1,620
Minority interest (F) (7,195) 260 104 615
Income (loss) from uncombined joint
ventures and management companies (7,608)
Extraordinary loss on early retirement of debt (563)
-------- ------- ----- ------
Net income 14,793 (555) (214) (1,264)
-------- ------- ----- ------
-------- ------- ----- ------
Net income per share before extraordinary items $0.59
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Net income per share $0.57
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Weighted average number of shares outstanding 25,886
Pro forma Result
(Including the
Acquisition Centers)
for the nine
months ended
Sept. 30, 1997
Revenues:
Minimum Rents 113,599
Percentage Rents 6,811
Tenant Recoveries 54,530
Other 2,667
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Total revenues 177,607
Shopping center expenses 57,550
REIT general and administrative expenses 2,099
Depreciation and amortization 33,023
Interest expense 59,408
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Net income (loss) before minority interest, uncombined
joint ventures and extraordinary loss 25,527
Gain on sale of asset 1,620
Minority interest (F) (6,216)
Income (loss) from uncombined joint
ventures and management companies (7,608)
Extraordinary loss on early retirement of debt (563)
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Net income 12,760
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Net income per share before extraordinary items $0.51
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--------
Net income per share $0.49
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Weighted average number of shares outstanding 25,886
(A) This information should be read in conjunction with The Macerich
Company's (the "Company") report on Form 10-Q for the period ended
September 30, 1997.
(B) Reflects results of operations on South Towne Center from January 1 to
March 26, 1997. The mall was acquired on March 27, 1997. Stonewood Mall
was acquired on August 6, 1997. The pro forma results above include
Stonewood Mall from January 1 to
to August 6, 1997.
(C) Reflects Citadel Mall for the period of January 1 to September 30, 1997. The Company acquired the mall on December 19, 1997.
(D) Depreciation on the Acquisition malls is computed on the straight-line method over the estimated useful life of 39 years.
(E) Interest expense is calculated assuming the entire purchase price was debt at a rate of LIBOR plus 1.25% .
(F) Minority interest represents the 38% ownership interest in the Operating Partnership not owned by the Company
(G) Interest expense is calculated based on a property loan of $75,600 at 7.2% plus other debt of $32,400 at LIBOR plus 1.5%
F-8
The Macerich Company
Unaudited Pro Forma
Condensed Combined Balance Sheet
(all amounts in thousands)
Pro forma Condensed
Pro forma Balance Sheet
The Macerich Adjustment- (Including Stonewood,
Company Citadel Citadel and South Towne
as reported Mall Mall Acquisitions)
Sept. 30, 1997 Acquisition Sept. 30, 1997
Gross property 1,476,325 108,000 1,584,325
Total assets 1,366,282 108,000 1,474,282
Mortgages and loans 988,936 108,000 1,096,936
Minority interest 102,996 102,996
Common stock 257 257
Additional paid in capital 219,850 219,850
Total liabilities and shareholder equity 1,366,282 108,000 1,474,282
F-9