MACERICH : Management's Discussion and Analysis of Financial Condition and Results of Operations (form 10-Q)

November 06, 2020 at 02:14 pm EST

IMPORTANT INFORMATION RELATED TO FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q 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,"
"estimates," "scheduled" 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-Q and include statements regarding, among
other matters:
•expectations regarding the Company's growth;
•the Company's beliefs regarding its acquisition, redevelopment, development,
leasing and operational activities and opportunities, including the performance
and financial stability of its retailers;
•the Company's acquisition, disposition and other strategies;
•regulatory matters pertaining to compliance with governmental regulations;
•the Company's capital expenditure plans and expectations for obtaining capital
for expenditures;
•the Company's expectations regarding income tax benefits;
•the Company's expectations regarding its financial condition or results of
operations; and
•the Company's expectations for refinancing its indebtedness, entering into and
servicing debt obligations and entering into joint venture arrangements.
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. Such factors include, among others, general
industry, as well as national, regional and local economic and business
conditions, which will, among other things, affect demand for retail space or
retail goods, availability and creditworthiness of current and prospective
tenants, anchor or tenant bankruptcies, closures, mergers or consolidations,
lease rates, terms and payments, interest rate fluctuations, availability, terms
and cost of financing and operating expenses; adverse changes in the real estate
markets including, among other things, competition from other companies, retail
formats and technology, risks of real estate development and redevelopment,
acquisitions and dispositions; the continuing adverse impact of the novel
coronavirus ("COVID-19") on the U.S., regional and global economies and the
financial condition and results of operations of the Company and its tenants;
the liquidity of real estate investments, governmental actions and initiatives
(including legislative and regulatory changes); environmental and safety
requirements; and terrorist activities or other acts of violence which could
adversely affect all of the above factors. You are urged to carefully review the
disclosures we make concerning these risks and other factors that may affect our
business and operating results, including those made in "Item 1A. Risk Factors"
of this Quarterly Report on Form 10-Q and in our Annual Report on Form 10-K for
the year ended December 31, 2019, as well as our other reports filed with the
Securities and Exchange Commission (the "SEC"), which disclosures are
incorporated herein by reference. 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,
unless required by law to do so.
Management's Overview and Summary
The Company is involved in the acquisition, ownership, development,
redevelopment, management and leasing of regional and community/power 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. (the "Operating Partnership"). As of September 30, 2020, the
Operating Partnership owned or had an ownership interest in 47 regional shopping
centers, five community/power shopping centers and other assets aggregating
approximately 51 million square feet of gross leasable area. These 52 regional
and community/power shopping centers are referred to hereinafter as the
"Centers," unless the context otherwise requires. The property management,
leasing and redevelopment of the Company's portfolio is provided by the
Company's seven management companies (collectively referred to herein as the
"Management Companies"). 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 Management Companies.
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The following discussion is based primarily on the consolidated financial
statements of the Company for the three and nine months ended September 30, 2020
and 2019. It compares the results of operations for the three months ended
September 30, 2020 to the results of operations for the three months ended
September 30, 2019. It also compares the results of operations and cash flows
for the nine months ended September 30, 2020 to the results of operations and
cash flows for the nine months ended September 30, 2019.
This information should be read in conjunction with the accompanying
consolidated financial statements and notes thereto.
Financing Activities:
On January 10, 2019, the Company replaced the existing loan on Fashion Outlets
of Chicago with a new $300.0 million loan that bears interest at an effective
rate of 4.61% and matures on February 1, 2031. The Company used the net proceeds
to pay down its line of credit and for general corporate purposes.
On February 22, 2019, the Company's joint venture in The Shops at Atlas Park
entered into an agreement to increase the total borrowing capacity of the
existing loan on the property from $57.8 million to $80.0 million, and to extend
the maturity date to October 28, 2021, including extension options. Concurrent
with the loan modification, the joint venture borrowed an additional $18.4
million. The Company used its $9.2 million share of the additional proceeds to
pay down its line of credit and for general corporate purposes.
On June 3, 2019, the Company's joint venture in SanTan Village Regional Center
replaced the existing loan on the property with a new $220.0 million loan that
bears interest at an effective rate of 4.34% and matures on July 1, 2029. The
Company used its share of the additional proceeds to pay down its line of credit
and for general corporate purposes.
On June 27, 2019, the Company replaced the existing loan on Chandler Fashion
Center with a new $256.0 million loan that bears interest at an effective rate
of 4.18% and matures on July 5, 2024. The Company used its share of the
additional proceeds to pay down its line of credit and for general corporate
purposes.
On July 25, 2019, the Company's joint venture in Fashion District Philadelphia
amended the existing term loan on the joint venture to allow for additional
borrowings up to $100.0 million at LIBOR plus 2.00%. Concurrent with the
amendment, the joint venture borrowed an additional $26.0 million. On August 16,
2019, the joint venture borrowed an additional $25.0 million. The Company used
its share of the additional proceeds to pay down its line of credit and for
general corporate purposes.
On September 12, 2019, the Company's joint venture in Tysons Tower placed a new
$190.0 million loan on the property that bears interest at an effective rate of
3.38% and matures on November 11, 2029. The Company used its share of the
proceeds to pay down its line of credit and for general corporate purposes.
On October 17, 2019, the Company's joint venture in West Acres placed a
construction loan on the property that allows for borrowing of up to $6.5
million, bears interest at an effective rate of 3.72% and matures on October 10,
2029. The joint venture intends to use the proceeds from the loan to fund the
expansion of the property.
On December 3, 2019, the Company replaced the existing loan on Kings Plaza
Shopping Center with a new $540.0 million loan that bears interest at an
effective rate of 3.71% and matures on January 1, 2030. The Company used the
additional proceeds to pay down its line of credit and for general corporate
purposes.
On December 18, 2019, the Company's joint venture in One Westside placed a
$414.6 million construction loan on the redevelopment project (See
"Redevelopment and Development Activities"). The loan bears interest at LIBOR
plus 1.70%, which can be reduced to LIBOR plus 1.50% upon the completion of
certain conditions, and matures on December 18, 2024. The joint venture intends
to use the loan proceeds to fund the completion of the project.
On September 15, 2020, the Company closed on a loan extension agreement for the
$191.0 million loan on Danbury Fair Mall. Under the extension agreement, the
original loan maturity date of October 1, 2020 was extended to April 1, 2021.
The loan amount and interest rate are unchanged following the extension.
The Company's joint venture has secured a commitment for a $95.0 million loan on
Tysons VITA, the residential tower at Tysons Corner Center. This ten-year loan
will bear interest only payments for the loan term at a fixed interest rate at
3.30%, and is expected to close in November 2020. The Company's share of the
proceeds will be approximately $47.0 million and will be used for general
corporate purposes.
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The Company has agreed to terms with the lender of the $103.9 million loan on
Fashion Outlets of Niagara on a three-year extension to October 2023, and
anticipates closing during the fourth quarter of 2020. The Company expects that
the loan amount and interest rate will remain unchanged following the extension.
During the second quarter of 2020 and in July 2020, the Company secured
agreements with its mortgage lenders on 19 mortgage loans to defer approximately
$47.2 million of both second and third quarter of 2020 debt service payments at
the Company's pro rata share during the COVID-19 pandemic. Of the deferred
payments, $8.8 million was repaid in the three months ended September 30, 2020,
with an additional $28.1 million repayable by the end of 2020 and the balance
repayable in the first quarter of 2021.
Redevelopment and Development Activities:
The Company's joint venture with Hudson Pacific Properties is redeveloping One
Westside into 584,000 square feet of creative office space and 96,000 square
feet of dining and entertainment space. The entire creative office space has
been leased to Google and is expected to be completed in 2022. The total cost of
the project is estimated to be between $500.0 million and $550.0 million, with
$125.0 million to $137.5 million estimated to be the Company's pro rata share.
The Company has funded $69.9 million of the total $279.7 million incurred by the
joint venture as of September 30, 2020. The joint venture expects to fund the
remaining costs of the development with its new $414.6 million construction loan
(See "Financing Activities").
The Company has a 50/50 joint venture with Simon Property Group to develop Los
Angeles Premium Outlets, a premium outlet center in Carson, California that is
planned to open with approximately 400,000 square feet, followed by an
additional 165,000 square feet in the second phase. The Company has funded $37.3
million of the total $74.5 million incurred by the joint venture as of
September 30, 2020.
In connection with the closures and lease rejections of several Sears stores
owned or partially owned by the Company, the Company anticipates spending
between $130.0 million to $160.0 million at the Company's pro rata share to
redevelop the Sears stores. The anticipated openings of such redevelopments are
expected to occur over several years. The estimated range of redevelopment costs
could increase if the Company or its joint venture decides to expand the scope
of the redevelopments. The Company has funded $36.5 million at its pro rata
share as of September 30, 2020.
Other Transactions and Events:
In March 2020, the COVID-19 outbreak was declared a pandemic by the World Health
Organization. As a result, all of the markets that the Company operates in were
subject to stay-at-home orders, and the majority of its properties were
temporarily closed in part or completely. As of October 7, 2020, all of the
Company's properties are open and operating, including Queens Center and Kings
Plaza in New York City, which re-opened in early September 2020 after being
closed since March 2020, and nine indoor California malls that had previously
re-opened in May and early June 2020, but were closed for a second time in July
2020 pursuant to a statewide mandate. Those nine indoor California malls include
Fresno Fashion Fair, Inland Center, Pacific View, The Mall at Victor Valley, The
Oaks and Vintage Faire Mall, each of which re-opened in late August 2020, and
Lakewood Center, Los Cerritos Center and Stonewood Center, each of which
re-opened on October 7, 2020.
The Company continues to work with all of its stakeholders to mitigate the
impact of COVID-19. The Company has developed and implemented a long list of
operational protocols based on Centers for Disease Control and Prevention
recommendations designed to ensure the safety of its employees, tenants, service
providers and shoppers. Those measures include among others: the use of
sophisticated air filtration systems to increase air circulation and outside air
flow and ventilation, significantly intensified cleaning and sanitizing
procedures with special focus on high-touch and traffic areas, highly visible
and accessible self-service sanitizing stations, providing masks at all
properties as needed and requiring mask-wearing at nearly all properties in
compliance with state and local requirements, touchless entries, social distance
queuing including the use of digital technologies, path of travel guidelines
including vertical transportation and deliveries, furniture placement and the
use of sophisticated traffic-counting technology to ensure that its properties
adhere to any relevant regulatory capacity constraints. The Company's indoor
properties feature vast interior common areas, most with two to three story
ceiling clearances, ample floor space and a comfortable environment to practice
effective social distancing even during peak retail periods. The Company
provides round-the-clock security to enforce policies and regulations, to
discourage congregation and to encourage proper distancing. Each property
deploys robust messaging to inform all of the Company's stakeholders of its
operating standards and requirements within a multi-media platform that includes
abundant on premise signage, digital and social messaging, and information
within its property and corporate websites. The Company believes that, due to
the quality of design and construction of its malls, it will be able to continue
to provide a safe indoor environment for its employees, tenants, service
providers and shoppers. Although the Company has incurred, and will continue to
incur, some incremental costs associated with COVID-19 operating protocols and
programs, these costs have not been, and are not anticipated to be, significant.
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While the ultimate adverse impact of this outbreak is unknown at this time, the
Company's financial condition and the results of its operations have been
negatively impacted, as certain tenants delayed rent payments during the third
quarter of 2020 and some tenants have continued to request delayed or reduced
rent payments for October and beyond. See "Outlook" in Results of Operations for
a further discussion of the forward-looking impact of COVID-19 and the Company's
strategic plan to mitigate the anticipated negative impact on its financial
condition and results of operations.
In March 2020, the Company declared a reduced second quarter dividend of $0.50
per share of its common stock, which was paid on June 3, 2020 in a combination
of cash and shares of common stock, at the election of the stockholder, subject
to a limitation that the aggregate amount of cash payable to holders of the
Company's common stock would not exceed 20% of the aggregate amount of the
dividend, or $0.10 per share, for all stockholders of record on April 22, 2020.
The amount of the dividend represents a reduction from the Company's first
quarter dividend, and was paid in a combination of cash and shares of common
stock to preserve liquidity in light of the impact and uncertainty arising out
of the COVID-19 outbreak. On July 24, 2020, the Company declared a further
reduced third quarter cash dividend of $0.15 per share of its common stock,
which was paid in cash on September 8, 2020 to stockholders of record on August
19, 2020. On October 29, 2020, the Company's Board declared a fourth quarter
cash dividend of $0.15 per share of its common stock, which will be paid on
December 3, 2020 to stockholders of record on November 9, 2020. The Company may
continue to pay dividends at reduced levels during 2021 and beyond to reduce
leverage for the Company and to support the Company's redevelopment plans. The
dividend amount will be reviewed by the Board on a quarterly basis. See
"Liquidity and Capital Resources" for a further discussion of the Company's
anticipated liquidity needs, and the measures taken by the Company to meet those
needs.
Inflation:
In the last five 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 throughout 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. In addition, approximately 5% to 15% of
the leases for spaces 10,000 square feet and under 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. The Company has generally entered 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, which places the
burden of cost control on the Company. Additionally, certain leases require the
tenants to pay their pro rata share of operating expenses.
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 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,
capitalization of costs and fair value measurements. The Company's significant
accounting policies are described in more detail in Note 2-Summary of
Significant Accounting Policies in the Company's Notes to the Consolidated
Financial Statements. However, the following policies are deemed to be critical.
Acquisitions:
The Company allocates the estimated fair value of acquisitions to land,
building, tenant improvements and identified intangible assets and liabilities,
based on their estimated fair values. In addition, any assumed mortgage notes
payable are recorded at their estimated fair values. The estimated fair value of
the land and buildings is determined utilizing an "as if vacant" methodology.
Tenant improvements represent the tangible assets associated with the existing
leases valued on a fair value basis at the acquisition date prorated over the
remaining lease terms. The tenant improvements are classified as an asset under
property 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 any
below-market fixed rate renewal options. Above or below-market leases are
classified in deferred charges and other assets or in other accrued liabilities,
depending on whether the
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contractual terms are above or below-market, and the asset or liability is
amortized to minimum rents over the remaining terms of the leases. The remaining
lease terms of below-market leases may include certain below-market fixed-rate
renewal periods. In considering whether or not a lessee will execute a
below-market fixed-rate lease renewal option, the Company evaluates economic
factors and certain qualitative factors at the time of acquisition such as
tenant mix in the Center, the Company's relationship with the tenant and the
availability of competing tenant space. The initial allocation of purchase price
is based on management's preliminary assessment, which may change when final
information becomes available. Subsequent adjustments made to the initial
purchase price allocation are made within the allocation period, which does not
exceed one year. The purchase price allocation is described as preliminary if it
is not yet final. The use of different assumptions in the allocation of the
purchase price of the acquired assets and liabilities assumed could affect the
timing of recognition of the related revenues and expenses.
The Company immediately expenses costs associated with business combinations as
period costs and capitalizes costs associated with asset acquisitions.
Asset Impairment:
The Company assesses whether an indicator of impairment in the value of its
properties exists by considering expected future operating income, trends and
prospects, as well as the effects of demand, competition and other economic
factors. Such factors include projected rental revenue, operating costs and
capital expenditures as well as estimated holding periods and capitalization
rates. If an impairment indicator exists, 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 or a
contracted sales price, with the carrying value of the related assets. The
Company generally holds and operates its properties long-term, which decreases
the likelihood of their carrying values not being recoverable. Properties
classified as held for sale are measured at the lower of the carrying amount or
fair value less cost to sell.
The Company reviews its investments in unconsolidated joint ventures for a
series of operating losses and other factors that may indicate that a decrease
in the value of its investments has occurred which is other-than-temporary. The
investment in each unconsolidated joint venture is evaluated periodically, and
as deemed necessary, for recoverability and valuation declines that are
other-than-temporary.
Fair Value of Financial Instruments:
The fair value hierarchy distinguishes between market participant assumptions
based on market data obtained from sources independent of the reporting entity
and the reporting entity's own assumptions about market participant assumptions.
Level 1 inputs utilize quoted prices in active markets for identical assets or
liabilities that the Company has the ability to access. Level 2 inputs are
inputs other than quoted prices included in Level 1 that are observable for the
asset or liability, either directly or indirectly. Level 2 inputs may include
quoted prices for similar assets and liabilities in active markets, as well as
inputs that are observable for the asset or liability (other than quoted
prices), such as interest rates, foreign exchange rates and yield curves that
are observable at commonly quoted intervals. Level 3 inputs are unobservable
inputs for the asset or liability, which is typically based on an entity's own
assumptions, as there is little, if any, related market activity. In instances
where the determination of the fair value measurement is based on inputs from
different levels of the fair value hierarchy, the level in the fair value
hierarchy within which the entire fair value measurement falls is based on the
lowest level input that is significant to the fair value measurement in its
entirety. The Company's assessment of the significance of a particular input to
the fair value measurement in its entirety requires judgment, and considers
factors specific to the asset or liability.
The Company calculates the fair value of financial instruments and includes this
additional information in the Notes to the 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 Company records its Financing Arrangement (See Note 12-Financing Arrangement
in the Company's Notes to the Consolidated Financial Statements) obligation at
fair value on a recurring basis with changes in fair value being recorded as
interest (income) expense in the Company's consolidated statements of
operations. The fair value is determined based on a discounted cash flow model,
with the significant unobservable inputs including the multiple of net operating
income, discount rate, and market rents. The fair value of the Financing
Arrangement obligation is sensitive to these significant unobservable inputs and
a change in these inputs may result in a significantly higher or lower fair
value measurement.



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Results of Operations
Many of the variations in the results of operations, discussed below, occurred
because of the transactions affecting the Company's properties described in
Management's Overview and Summary above, including the Redevelopment Properties
and the Disposition Properties (as defined below).
For purposes of the discussion below, the Company defines "Same Centers" as
those Centers that are substantially complete and in operation for the entirety
of both periods of the comparison. Non-Same Centers for comparison purposes
include those Centers or properties that are going through a substantial
redevelopment often resulting in the closing of a portion of the Center
("Redevelopment Properties"), those properties that have recently transitioned
to or from equity method joint ventures to or from consolidated assets and
properties that have been disposed of ("Disposition Properties"). The Company
moves a Center in and out of Same Centers based on whether the Center is
substantially complete and in operation for the entirety of both periods of the
comparison. Accordingly, the Same Centers consist of all consolidated Centers,
excluding the Redevelopment Properties and the Disposition Properties, for the
periods of comparison.
For the comparison of the three and nine months ended September 30, 2020 to the
three and nine months ended September 30, 2019, the Redevelopment Properties are
Paradise Valley Mall and certain ground up developments. For the comparison of
the three and nine months ended September 30, 2020 to the three and nine months
ended September 30, 2019, there are no Disposition Properties.
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 of
unconsolidated joint ventures.
The Company considers tenant annual sales per square foot (for tenants in place
for a minimum of twelve months or longer and 10,000 square feet and under),
occupancy rates (excluding large retail stores or "Anchors") and releasing
spreads (i.e. a comparison of initial average base rent per square foot on
leases executed during the trailing twelve months to average base rent per
square foot at expiration for the leases expiring during the trailing twelve
months based on the spaces 10,000 square feet and under) to be key performance
indicators of the Company's internal growth.
Tenant sales per square foot decreased from $800 for the twelve months ended
September 30, 2019 to $718 for the twelve months ended September 30, 2020. Given
the widespread closure of the majority of the Company's tenants during April and
portions of May through September 2020 as a result of COVID-19 (See "Other
Transactions and Events" in Management's Overview and Summary), the tenant sales
metric is computed to exclude the period of COVID-19 closure for each tenant.
The leased occupancy rate decreased from 93.8% at September 30, 2019 to 90.8% at
September 30, 2020. Releasing spreads remained positive as the Company was able
to lease available space at higher average rents than the expiring rental rates,
resulting in a releasing spread of $2.61 per square foot ($55.83 on new and
renewal leases executed compared to $53.22 on leases expiring), representing a
4.9% increase for the trailing twelve months ended September 30, 2020. The
Company continues to renew or replace leases that are scheduled to expire in
2020 and 2021, however, the Company cannot be certain of the impact that
COVID-19 will have on its ability to sign, renew or replace leases expiring in
2020 or beyond. The leases that are scheduled to expire in the year 2020
represent 0.9 million square feet of the Centers, accounting for 14.0% of the
gross leasable area ("GLA") of mall stores and freestanding stores within spaces
less than or equal to 10,000 square feet. These calculations exclude Centers
under development or redevelopment and property dispositions (See "Redevelopment
and Development Activities" in Management's Overview and Summary), and include
square footage of Centers owned by joint ventures at the Company's share. As of
September 30, 2020, the Company had entered into leases for approximately 70% of
the square footage expiring in 2020, and was in the process of negotiating and
documenting leases for an additional 16% of its square footage expiring in 2020.
The Company has entered into 66 leases for new stores totaling over 350,000
square feet that have opened or are planned for opening in 2020. While there may
be additional new store openings in 2020, any such leases are not yet executed.
In total, the Company has entered into 190 leases for new stores that have yet
to open, totaling over 1.7 million square feet. After speaking with each
prospective tenant of such new stores, only nine tenants have currently
indicated they no longer plan to or are uncertain about their ability to open
their new store, which equates to only 62,000 square feet of the total 1.7
million square foot pipeline of new store leases. The balance of the 181 leases
are planned to open primarily in 2020 and 2021.
During the trailing twelve months ended September 30, 2020, the Company signed
179 new leases and 404 renewal leases comprising approximately 2.2 million
square feet of GLA, of which 1.4 million square feet is related to the
consolidated Centers. The average tenant allowance was $19.18 per square foot.
The majority of the Company's COVID-19 related lease amendments are excluded
from these numbers.


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Outlook
As a result of COVID-19 (See "Other Transactions and Events" in Management's
Overview and Summary) and subsequent government mandates, all but a few of the
Company's Centers closed in March 2020, except for the continued operation of
essential retail and services. In total, approximately 74% of the gross leasable
area, which was previously occupied prior to the COVID-19 closures, was closed
during this time. As of October 7, 2020, all of the Company's properties are now
open and operating, including Queens Center and Kings Plaza in New York City,
which re-opened in early September 2020 after being closed since March 2020, and
nine indoor California malls that had previously re-opened in May and early June
2020, but were closed for a second time in July 2020 pursuant to a statewide
mandate. Those nine indoor California malls include Fresno Fashion Fair, Inland
Center, Pacific View, The Mall at Victor Valley, The Oaks and Vintage Faire
Mall, each of which re-opened in late August 2020, and Lakewood Mall, Los
Cerritos Center and Stonewood Mall, each of which re-opened on October 7, 2020.
The Company collected approximately 61% of rents billed for the three months
ended June 30, 2020, and 80% of rents billed for the three months ended
September 30, 2020. The Company has collected approximately 81% of rents billed
for October 2020. The Company continues to make meaningful progress in its
negotiations with national and local tenants to secure rental payments, despite
a significant portion of the Company's tenants requesting rental assistance,
whether in the form of deferral or rent reduction. For example (in each case,
based on gross rent), of the nearly 200 national tenants in the Company's
portfolio, the Company has agreed to repayment terms with and/or received
payments from approximately 76%, the Company is negotiating terms with another
17%, approximately 2% have filed bankruptcy and have either liquidated or plan
to liquidate their entire store fleet and the balance are unresolved at this
time. The lease amendments negotiated by the Company have resulted in a
combination of rent payment deferrals extending into 2021 and rent abatements.
The majority of the Company's leases require continued payment of rent by the
Company's tenants during the period of government mandated closures caused by
COVID-19. Many of the Company's leases contain co-tenancy clauses, which provide
for reduced rent and/or termination rights if Anchors close and/or occupancy
falls below threshold levels. The Company does not believe that the temporary
closures of Anchors or other tenants during the COVID-19 stay-at-home mandates
have triggered co-tenancy clauses within its leases. However, the Company
expects that certain Anchor or small tenant closures will become permanent
following the re-opening of the Company's properties, and co-tenancy clauses
within certain leases may be triggered as a result. The Company does not
anticipate the negative impact of such clauses on lease revenue will be
significant.
During 2020, there have been 39 bankruptcy filings involving the Company's
tenants, totaling 304 leases and involving approximately 6.0 million square feet
and $83.9 million of annual leasing revenue at the Company's share. The Company
anticipates that there may likely be further bankruptcy filings by tenants at
the Company's properties, which are accelerated as a result of general
conditions caused by COVID-19.
As previously disclosed by the Company in its prior filings with the SEC, the
Company has submitted recovery claims under its insurance coverage due to
business interruption from COVID-19. As of September 30, 2020, the Company does
not believe it is likely that it will be able to collect on these claims given
the facts and circumstances regarding the COVID-19 pandemic.
The Company has experienced, and expects to continue to experience, a negative
impact to its leasing revenue, its rate of rent collections from tenants, and
the occupancy rates at its properties due to COVID-19. For the quarter ended
September 30, 2020, leasing revenue decreased by 18% compared to the quarter
ended September 30, 2019. As of September 30, 2020, the leased occupancy rate
decreased to 90.8% from 93.8% at September 30, 2019. The Company anticipates a
further decline to occupancy rates from tenant bankruptcies and pre-lease
termination abandonments by certain tenants. In addition, the volume of leasing
transactions declined significantly in the second quarter of 2020 and remained
relatively low throughout the third quarter of 2020.
During this period of disrupted rent collections due to COVID-19, the Company
has taken numerous measures to preserve its liquidity, including among others:
•The Company has drawn the majority of the remaining capacity on its $1.5
billion revolving line of credit. As of September 30, 2020, the Company had
$630.2 million of cash, including its pro rata share from its unconsolidated
joint ventures. The Company will incur additional interest expense during the
period that it continues to carry higher than normal cash balances on its
consolidated balance sheet. The period of continued cash retention is uncertain
at this time.
•The Company paid a reduced quarterly dividend of $0.50 per share of its common
stock on June 3, 2020, in a combination of 20% cash and 80% of shares of the
Company's common stock. On July 24, 2020, the Company's Board declared a further
reduced third quarter cash dividend of $0.15 per share of its common stock,
which was paid in cash on September 8, 2020 to stockholders of record on August
19, 2020. On October 29, 2020, the Company's Board declared a fourth quarter
cash dividend of $0.15 per share of its common stock, which will be paid on
December 3, 2020 to stockholders of
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record on November 9, 2020. When combined with the cash portion of the second
quarter dividend of $0.10 per share and if the third and fourth quarter cash
dividend rate of $0.15 per share of its common stock was to be paid in the first
quarter of 2021, the Company would retain approximately $370 million of cash.
•The Company anticipates spending approximately $100 million less in 2020 on
redevelopment relative to its original pre-COVID-19 plans.
•The Company has reduced planned capital expenditures at its properties by 65%
down to approximately $15 million at the Company's share in 2020.
•The Company expects amounts to be incurred during 2020 for tenant allowances
and deferred leasing charges to be substantially less than 2019.
•The Company reduced its controllable shopping center expenses by approximately
35% to 45% during the period of 2020 that its properties were substantially
closed.
•During the second quarter of 2020 and in July 2020, the Company secured
agreements with its mortgage lenders on 19 mortgage loans to defer approximately
$47.2 million of both second and third quarter of 2020 debt service payments at
the Company's pro rata share during the COVID-19 pandemic. Of the deferred
payments, $8.8 million was repaid in the three months ended September 30, 2020,
with an additional $28.1 million repayable by the end of 2020 and the balance
repayable in the first quarter of 2021.
Given the continued disruption and uncertainties from COVID-19 and the impact on
the capital markets, the Company does not anticipate it will be able to
refinance its near-term maturing mortgages. As a result, the Company has secured
a short-term extension of its near-term maturing non-recourse mortgage loan on
Danbury Fair Mall, and it is in the process of securing extensions of the
mortgage loans on Fashion Outlets of Niagara, FlatIron Crossing, Green Acres
Mall and Green Acres Commons (See "Financing Activities" in Management's
Overview and Summary).
Comparison of Three Months Ended September 30, 2020 and 2019
Revenues:
Leasing revenue decreased by $38.8 million, or 18.1%, from 2019 to 2020. The
decrease in leasing revenue is attributed to decreases of $38.0 million from the
Same Centers and $0.8 million from the Redevelopment Properties. Leasing revenue
includes the amortization of above and below-market leases, the amortization of
straight-line rents, lease termination income and the provision for bad debts.
The amortization of above and below-market leases decreased from $2.4 million in
2019 to $0.6 million in 2020. The amortization of straight-line rents increased
from $3.2 million in 2019 to $5.5 million in 2020. Lease termination income
increased from $0.7 million in 2019 to $4.3 million in 2020. Provision for bad
debts increased from $2.9 million in 2019 to $10.6 million in 2020. The increase
in bad debt expense is a result of the Company assessing collectability by
tenant and determining that it was no longer probable that substantially all
leasing revenue would be collected from certain tenants, which includes tenants
that have declared bankruptcy, tenants at risk of filing bankruptcy or other
tenants where collectability was no longer probable. The decrease in leasing
revenue and increase in bad debt at the Same Centers is primarily the result of
COVID-19 (See "Other Transactions and Events" in Management's Overview and
Summary).
Other income decreased from $6.9 million in 2019 to $4.3 million in 2020. The
decrease is primarily a decline in parking garage income due to the closures of
properties as a result of COVID-19 (See "Other Transactions and Events" in
Management's Overview and Summary).
Management Companies' revenue decreased from $10.0 million in 2019 to $6.0
million in 2020. The decrease in Management Companies' revenue is primarily due
to a decrease in development fees from unconsolidated joint ventures.
Shopping Center and Operating Expenses:
Shopping center and operating expenses decreased $4.6 million, or 6.7%, from
2019 to 2020. The decrease in shopping center and operating expenses is
attributed to decreases of $4.1 million from the Same Centers and $0.5 million
from the Disposition Properties. The decrease in shopping center and operating
expenses at the Same Centers is primarily the result of COVID-19 (See "Other
Transactions and Events" in Management's Overview and Summary).
Leasing Expenses:
Leasing expenses decreased from $7.2 million in 2019 to $5.5 million in 2020.

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Management Companies' Operating Expenses:
Management Companies' operating expenses decreased $2.5 million from 2019 to
2020 primarily due to a decrease in compensation and consulting expense.
REIT General and Administrative Expenses:
REIT general and administrative expenses increased $2.3 million from 2019 to
2020 primarily due to an increase in compensation and consulting expense.
Depreciation and Amortization:
Depreciation and amortization decreased $4.2 million from 2019 to 2020. The
decrease in depreciation and amortization is attributed to a decrease of $4.5
million from the Same Centers offset in part by a $0.3 million increase from the
Redevelopment Properties.
Interest (Income) Expense:
Interest (income) expense increased $22.4 million from 2019 to 2020. The
increase in interest (income) expense is attributed to an increase of $20.6
million from the Financing Arrangement (See Note 12-Financing Arrangement in the
Company's Notes to the Consolidated Financial Statements), $1.5 million from the
increased borrowings under the Company's revolving line of credit and $0.3
million from the Same Centers. The increase in interest (income) expense from
the Financing Arrangement is primarily due to the change in fair value of the
underlying properties and the mortgage notes payable on the underlying
properties.
Equity in (Loss) Income of Unconsolidated Joint Ventures:
Equity in (loss) income of unconsolidated joint ventures decreased $27.1 million
from 2019 to 2020. The decrease in equity in (loss) income of unconsolidated
joint ventures is primarily due to a decrease in leasing revenue and other
income as a result of COVID-19 (See "Other Transactions and Events" in
Management's Overview and Summary). Leasing revenue includes a provision for bad
debt which increased from $0.7 million in 2019 to $7.5 million in 2020.
Gain (loss) on Sale or Write Down of Assets, net:
The gain (loss) on sale or write down of assets, net increased from a loss of
$0.1 million in 2019 to a gain of $11.8 million in 2020. The change in gain
(loss) on sale or write down of assets, net is primarily due to land sales in
2020 of $13.3 million offset in part by $1.4 million write-down of non-real
estate assets.
Net (Loss) Income:
Net (loss) income decreased $72.6 million from 2019 to 2020. The decrease in net
(loss) income is primarily the result of COVID-19 (See "Other Transactions and
Events" in Management's Overview and Summary).
Funds From Operations ("FFO"):
Primarily as a result of the factors mentioned above, FFO attributable to common
stockholders and unit holders-diluted, excluding financing expense in connection
with Chandler Freehold decreased 37.4% from $133.2 million in 2019 to $83.4
million in 2020. For a reconciliation of net income attributable to the Company,
the most directly comparable GAAP financial measure, to FFO attributable to
common stockholders and unit holders, excluding financing expense in connection
with Chandler Freehold and FFO attributable to common stockholders and unit
holders-diluted, excluding financing expense in connection with Chandler
Freehold, see "Funds From Operations ("FFO")" below.
Comparison of Nine Months Ended September 30, 2020 and 2019
Revenues:
Leasing revenue decreased by $81.3 million, or 12.8%, from 2019 to 2020. The
decrease in leasing revenue is attributed to decreases of $79.6 million from the
Same Centers and $1.7 million from the Redevelopment Properties. Leasing revenue
includes the amortization of above and below-market leases, the amortization of
straight-line rents, lease termination income and the provision for bad debts.
The amortization of above and below-market leases decreased from $7.0 million in
2019 to $1.4 million in 2020. Straight-line rents decreased from $7.1 million in
2019 to $5.9 million in 2020. Lease termination income increased from $3.9
million in 2019 to $7.0 million in 2020. Provision for bad debts increased from
$6.8 million in 2019 to $39.2 million in 2020. The increase in bad debt expense
is a result of the Company assessing collectability by tenant and
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determining that it was no longer probable that substantially all leasing
revenue would be collected from certain tenants, which includes tenants that
have declared bankruptcy, tenants at risk of filing bankruptcy or other tenants
where collectability was no longer probable. The decrease in leasing revenue and
increase in bad debt at the Same Centers is primarily the result of COVID-19
(See "Other Transactions and Events" in Management's Overview and Summary).
Other income decreased from $20.1 million in 2019 to $16.6 million in 2020. The
decrease is primarily a decline in parking garage income due to the closures of
properties as a result of COVID-19 (See "Other Transactions and Events" in
Management's Overview and Summary).
Management Companies' revenue decreased from $29.3 million in 2019 to $19.8
million in 2020 due to a decrease in development fees and interest income due to
the collection of notes receivable in 2019.
Shopping Center and Operating Expenses:
Shopping center and operating expenses decreased $10.5 million, or 5.2%, from
2019 to 2020. The decrease in shopping center and operating expenses is
attributed to decreases of $9.2 million from the Same Centers, $0.9 million from
the Disposition Properties and $0.4 million from the Redevelopment Properties.
The decrease in shopping center and operating expenses at the Same Centers is
primarily the result of COVID-19 (See "Other Transactions and Events" in
Management's Overview and Summary).
Leasing Expenses:
Leasing expenses decreased from $22.3 million in 2019 to $19.6 million in 2020.
Management Companies' Operating Expenses:
Management Companies' operating expenses decreased $4.5 million from 2019 to
2020 due to a decrease in compensation and consulting expense.
REIT General and Administrative Expenses:
REIT general and administrative expenses increased $5.8 million from 2019 to
2020 primarily due to an increase in compensation and consulting expense.
Depreciation and Amortization:
Depreciation and amortization decreased $5.5 million from 2019 to 2020. The
decrease in depreciation and amortization is attributed to decreases of $6.3
million from the Same Centers offset in part by a $0.8 million increase from the
Redevelopment Properties.
Interest (Income) Expense:
Interest (income) expense decreased $25.0 million from 2019 to 2020. The
decrease in interest (income) expense was attributed to a decrease of $32.8
million from the Financing Arrangement (See Note 12-Financing Arrangement in the
Company's Notes to the Consolidated Financial Statements), offset in part by
increases of $5.3 million from the Same Centers and $2.5 million from increased
borrowings under the Company's revolving line of credit. The decrease in
interest (income) expense from the Financing Arrangement is primarily due to the
change in fair value of the underlying properties and the mortgage notes payable
on the underlying properties.
Equity in (Loss) Income of Unconsolidated Joint Ventures:
Equity in (loss) income of unconsolidated joint ventures decreased $51.1 million
from 2019 to 2020. The decrease in equity in (loss) income of unconsolidated
joint ventures is primarily due to a decrease in leasing revenue and other
income as a result of COVID-19 (See "Other Transactions and Events" in
Management's Overview and Summary). Leasing revenue includes a provision for bad
debt which increased from $2.3 million in 2019 to $22.2 million in 2020.
Gain (loss) on Sale or Write Down of Assets, net:
Gain (loss) on sale or write down of assets, net increased $13.3 million from
2019 to 2020. The increase in gain (loss) on sale or write down of assets, net
is primarily due to the $36.7 million of impairment losses, $4.2 million
write-down of non-real estate assets and $1.2 million write-down of development
costs in 2020, offset in part by the $13.3 million gain in land sales in 2020
and $16.1 million in the write-down of development costs in 2019. The impairment
losses were due to the reduction in the estimated holding periods of Wilton Mall
and Paradise Valley Mall.

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Net (Loss) Income:
Net (loss) income decreased $113.4 million from 2019 to 2020. The decrease in
net (loss) income is primarily the result of COVID-19 (See "Other Transactions
and Events" in Management's Overview and Summary).
Funds From Operations ("FFO"):
Primarily as a result of the factors mentioned above, FFO attributable to common
stockholders and unit holders-diluted, excluding financing expense in connection
with Chandler Freehold decreased 31.4% from $388.8 million in 2019 to $266.6
million in 2020. For a reconciliation of net (loss) income attributable to the
Company, the most directly comparable GAAP financial measure, to FFO
attributable to common stockholders and unit holders, excluding financing
expense in connection with Chandler Freehold and FFO attributable to common
stockholders and unit holders-diluted, excluding financing expense in connection
with Chandler Freehold, see "Funds From Operations ("FFO")" below.
Operating Activities:
Cash provided by operating activities decreased $206.9 million from 2019 to
2020. The decrease is primarily due to a $128.7 million increase in tenant and
other receivables, a $30.0 million decrease in other accrued liabilities and to
the other changes in assets and liabilities and the results, as discussed above.
The increase in tenant and other receivables and the decrease in other accrued
liabilities is primarily attributed to a decrease in rents collected and a
decrease in prepaid rent as a result of COVID-19 (See "Other Transactions and
Events" in Management's Overview and Summary).
Investing Activities:
Cash used in investing activities increased $139.4 million from 2019 to 2020.
The increase in cash used in investing activities is primarily attributed to
decreases in proceeds from notes receivable of $65.8 million and distributions
from unconsolidated joint ventures of $207.6 million offset in part by a
decrease in contributions to unconsolidated joint ventures of $48.8 million and
a decrease of $58.5 million in development, redevelopment, expansion and
renovation of properties. The decrease in proceeds from notes receivable is due
to the collection of the note receivable from the Lennar Corporation in 2019
(See Note 16-Related Party Transactions in the Company's Notes to the
Consolidated Financial Statements).
Financing Activities:
Cash provided by financing activities increased $815.8 million from 2019 to
2020. The increase in cash provided by financing activities is primarily due to
a decrease in payments on mortgages, bank and other notes payable of $995.3
million and a decrease in dividends and distributions of $204.2 million which
are offset by a decrease in proceeds from mortgages, bank and other notes
payable of $416.0 million. The decreases in payments on mortgages, bank and
other notes payable, dividends and distributions and the proceeds from
mortgages, bank and other notes payable are attributed to the Company's plan to
increase liquidity in connection with COVID-19 (See "Other Transactions and
Events" in Management's Overview and Summary).
Liquidity and Capital Resources
The Company has historically met its liquidity needs for its operating expenses,
debt service and dividend requirements for the next twelve months through cash
generated from operations, distributions from unconsolidated joint ventures,
working capital reserves and/or borrowings under its line of credit. As a result
of the uncertain environment resulting from the COVID-19 pandemic (See "Other
Transactions and Events" in Management's Overview and Summary), the Company has
taken a number of measures to enhance liquidity. These actions ensure that funds
are available to meet the Company's obligations for a sustained period of time
as the extent and duration of the pandemic's impact becomes clearer. These
measures include (i) reduction of the Company's controllable operating expenses,
(ii) reduction of planned capital and development expenditures, (iii) reduction
of the cash component of its dividend in the second quarter and its third and
fourth quarter cash dividends, (iv) negotiated deferrals of debt service
payments on nineteen mortgage loans totaling $47.2 million, and (v) deferral of
real estate taxes to the extent such relief is available. In addition, during
the first quarter, the Company borrowed $550 million on its line of credit. As
of September 30, 2020, the Company had approximately $630 million of cash,
including the unconsolidated joint ventures at the Company's pro rata share.



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The following tables summarize capital expenditures incurred at the Centers (at the Company's pro rata share):

For

the Nine Months Ended September


                                                                                        30,
(Dollars in thousands)                                                       2020                 2019
Consolidated Centers:
Acquisitions of property, building improvement and equipment            $      8,852          $   19,330
Development, redevelopment, expansions and renovations of Centers             28,120              83,142
Tenant allowances                                                              8,182              14,763
Deferred leasing charges                                                       2,162               1,977
                                                                        $     47,316          $  119,212
Joint Venture Centers:
Acquisitions of property, building improvement and equipment            $      5,866          $    7,793
Development, redevelopment, expansions and renovations of Centers             86,505             152,881
Tenant allowances                                                              1,992               6,922
Deferred leasing charges                                                       1,245               2,725
                                                                        $     95,608          $  170,321



The Company expects amounts to be incurred during the next twelve months for
tenant allowances and deferred leasing charges to be substantially less than
2019. The Company expects to incur approximately $30.0 million during the
remaining period of 2020 for development, redevelopment, expansion and
renovations. This amount excludes the Company's share of the remaining
development cost of One Westside, which is fully funded by a non-recourse
construction facility. Capital for these expenditures, developments and/or
redevelopments has been, and is expected to continue to be, obtained from a
combination of cash on hand, debt or equity financings, which are expected to
include borrowings under the Company's line of credit, from property financings
and construction loans, each to the extent available.
The Company has also generated liquidity in the past, and may continue to do so
in the future, through equity offerings and issuances, property refinancings,
joint venture transactions and the sale of non-core assets. Furthermore, the
Company has filed a shelf registration statement, which registered an
unspecified amount of common stock, preferred stock, depositary shares, debt
securities, warrants, rights, stock purchase contracts and units that may be
sold from time to time by the Company.
The Company paid a reduced quarterly dividend of $0.50 per share of its common
stock on June 3, 2020, in a combination of 20% cash and 80% of shares of the
Company's common stock. On July 24, 2020, the Company's Board declared a further
reduced third quarter cash dividend of $0.15 per share of its common stock,
which was paid in cash on September 8, 2020 to stockholders of record on August
19, 2020. On October 29, 2020, the Company's Board declared a fourth quarter
cash dividend of $0.15 per share of its common stock, which will be paid on
December 3, 2020 to stockholders of record on November 9, 2020. When combined
with the cash portion of the second quarter dividend of $0.10 per share and if
the third and fourth quarter cash dividend rate of $0.15 per share of its common
stock was to be paid in the first quarter of 2021, the Company would retain
approximately $370 million of cash.
The capital and credit markets can fluctuate and, at times, limit access to debt
and equity financing for companies. The Company has been able to access capital;
however, there is no assurance the Company will be able to do so in future
periods or on similar terms and conditions as a result of COVID-19. 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.
Increases in the Company's proportion of floating rate debt will cause it to be
subject to interest rate fluctuations in the future.
The Company's total outstanding loan indebtedness, which includes mortgages and
other notes payable, at September 30, 2020 was $8.7 billion (consisting of $5.9
billion of consolidated debt, less $359.3 million of noncontrolling interests,
plus $3.2 billion of its pro rata share of unconsolidated joint venture debt).
The majority of the Company's debt consists of fixed-rate
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conventional mortgage notes collateralized by individual properties. The Company
expects that all of the maturities during the next twelve months will be
refinanced, restructured, extended and/or paid off from the Company's line of
credit or cash on hand.
Given the continued disruption and uncertainties from COVID-19 and the impact on
the capital markets, the Company does not anticipate it will be able to
refinance its near-term maturing mortgages. As a result, the Company has secured
a short-term extension of its near-term maturing non-recourse mortgage loan on
Danbury Fair Mall, and it is in the process of securing extensions of the
mortgage loans on Fashion Outlets of Niagara, FlatIron Crossing, Green Acres
Mall and Green Acres Commons (See "Financing Activities" in Management's
Overview and Summary).
The Company believes that the pro rata debt provides useful information to
investors regarding its financial condition because it includes the Company's
share of debt from unconsolidated joint ventures and, for consolidated debt,
excludes the Company's partners' share from consolidated joint ventures, in each
case presented on the same basis. The Company has several significant joint
ventures and presenting its pro rata share of debt in this manner can help
investors better understand the Company's financial condition after taking into
account the Company's economic interest in these joint ventures. The Company's
pro rata share of debt should not be considered as a substitute for the
Company's total consolidated debt determined in accordance with GAAP or any
other GAAP financial measures and should only be considered together with and as
a supplement to the Company's financial information prepared in accordance with
GAAP.
The Company has a $1.5 billion revolving line of credit facility that bears
interest at LIBOR plus a spread of 1.30% to 1.90%, depending on the Company's
overall leverage level, and was to mature on July 6, 2020. On April 8, 2020, the
Company exercised its option to extend the maturity of the facility to July 6,
2021. The line of credit can be expanded, depending on certain conditions, up to
a total facility of $2.0 billion. All obligations under the facility are
unconditionally guaranteed only by the Company. Based on the Company's leverage
level as of September 30, 2020, the borrowing rate on the facility was LIBOR
plus 1.65%. The Company has four interest rate swap agreements that effectively
convert a total of $400.0 million of the outstanding balance from floating rate
debt of LIBOR plus 1.65% to fixed rate debt of 4.30% until September 30, 2021.
At September 30, 2020, total borrowings under the line of credit were $1.5
billion less unamortized deferred finance costs of $2.5 million with a total
interest rate of 2.65%. The Company's availability under the line of credit was
$19.7 million at September 30, 2020. The Company anticipates refinancing its
revolving line of credit in advance of its maturity date.
Cash dividends and distributions for the nine months ended September 30, 2020
were $155.2 million. A total of $65.1 million was funded by operations and the
remaining $90.1 million was funded from cash on hand.
At September 30, 2020, the Company was in compliance with all applicable loan
covenants under its agreements.
At September 30, 2020, the Company had cash and cash equivalents of $528.4
million.
Off-Balance Sheet Arrangements:
The Company accounts for its investments in joint ventures 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.
As of September 30, 2020, one of the Company's joint ventures had $150.5 million
of debt that could become recourse to the Company should the joint venture be
unable to discharge the obligation of the related debt. The Company intends to
repay $100.0 million of this loan during the fourth quarter of 2020, which will
reduce the recourse to the Company to $50.0 million.
Additionally, as of September 30, 2020, the Company was contingently liable for
$40.9 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.
Contractual Obligations:
The following is a schedule of contractual obligations as of September 30, 2020
for the consolidated Centers over the periods in which they are expected to be
paid (in thousands):
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                                                                             Payment Due by Period
                                                               Less than              1 - 3               3 - 5             More than
Contractual Obligations                     Total                1 year               years               years             five years
Long-term debt obligations (includes
expected interest payments)(1)          $ 6,794,726          $ 2,402,362          $   930,286          $ 583,838          $ 2,878,240
Lease liabilities(2)                        209,041                6,725               47,417             23,552              131,347
Purchase obligations(3)                       1,947                1,947                    -                  -                    -
Other long-term liabilities                 197,736              125,744               28,199             13,744               30,049
                                        $ 7,203,450          $ 2,536,778          $ 1,005,902          $ 621,134          $ 3,039,636

__________________________________________________________


(1)Interest payments on floating rate debt were based on rates in effect at
September 30, 2020.
(2)See Note 8-Leases in the Company's Notes to the Consolidated Financial
Statements.
(3)See Note 15-Commitments and Contingencies in the Company's Notes to the
Consolidated Financial Statements.

Funds From Operations ("FFO")
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 sales of properties, plus real estate related depreciation and
amortization, impairment write-downs of real estate and write-downs of
investments in an affiliate where the write-downs have been driven by a decrease
in the value of real estate held by the affiliate and after adjustments for
unconsolidated joint ventures. Adjustments for unconsolidated joint ventures are
calculated to reflect FFO on the same basis.
The Company accounts for its joint venture in Chandler Freehold as a financing
arrangement. In connection with this treatment, the Company recognizes financing
expense on (i) the changes in fair value of the financing arrangement
obligation, (ii) any payments to the joint venture partner equal to their pro
rata share of net income and (iii) any payments to the joint venture partner
less than or in excess of their pro rata share of net income. The Company
excludes from its definition of FFO the noted expenses related to the changes in
fair value and for the payments to the joint venture partner less than or in
excess of their pro rata share of net income.
The Company also presents FFO excluding financing expense in connection with
Chandler Freehold and loss on extinguishment of debt, net.
FFO and FFO on a 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. The Company believes that such
a presentation also provides investors with a meaningful measure of its
operating results in comparison to the operating results of other REITs. In
addition, the Company believes that FFO excluding financing expense in
connection with Chandler Freehold and non-routine costs associated with
extinguishment of debt provide useful supplemental information regarding the
Company's performance as they show a more meaningful and consistent comparison
of the Company's operating performance and allows investors to more easily
compare the Company's results. The Company further believes that FFO on a
diluted basis is a measure investors find most useful in measuring the dilutive
impact of outstanding convertible securities.
The Company believes that 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. The Company also cautions that FFO, as presented, may not be comparable
to similarly titled measures reported by other real estate investment trusts.

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Funds From Operations ("FFO") (Continued)
Management compensates for the limitations of FFO by providing investors with
financial statements prepared according to GAAP, along with this detailed
discussion of FFO and a reconciliation of net (loss) income to FFO and
FFO-diluted. Management believes that to further understand the Company's
performance, FFO should be compared with the Company's reported net (loss)
income and considered in addition to cash flows in accordance with GAAP, as
presented in the Company's consolidated financial statements.
The following reconciles net (loss) income attributable to the Company to FFO
and FFO-diluted attributable to common stockholders and unit holders-basic and
diluted, excluding financing expense in connection with Chandler Freehold and
loss on extinguishment of debt, net, for the three and nine months ended
September 30, 2020 and 2019 (dollars and shares in thousands):
                                                                              For the Three Months Ended               For the Nine Months Ended
                                                                                     September 30,                           September 30,
                                                                                2020                2019                2020                2019
Net (loss) income attributable to the Company

$ (22,191) $ 46,371 $ (39,785) $ 69,929 Adjustments to reconcile net (loss) income attributable to the Company to FFO attributable to common stockholders and unit holders-basic and diluted: Noncontrolling interests in the Operating Partnership

                           (1,618)             3,427               (2,912)             5,151

(Gain) loss on sale or write down of assets, net-consolidated assets

    (11,786)               131               28,784             15,506

Add: noncontrolling interests share of gain (loss) on sale or write down of assets-consolidated assets

                                                 929                  -                  929             (3,369)
Add: gain on sale of undepreciated assets-consolidated assets                   12,362                 81               12,402                615

Less: loss on write-down of non-real estate assets-consolidated assets

                                                                          (1,361)                 -               (4,154)                 -

Loss (gain) on sale or write down of assets-unconsolidated joint ventures, net(1)

                                                                    71                 (3)                  77                381

Depreciation and amortization-consolidated assets                               78,605             82,787              241,112            246,640

Less: noncontrolling interests in depreciation and amortization-consolidated assets

                                                (3,855)            (3,746)             (11,472)           (11,067)
Depreciation and amortization-unconsolidated joint ventures(1)                  50,775             45,465              146,702            141,670
Less: depreciation on personal property                                         (3,460)            (3,934)             (11,662)           (11,733)

FFO attributable to common stockholders and unit holders-basic and diluted

                                                                         98,471            170,579              360,021            453,723
Financing expense in connection with Chandler Freehold                         (15,104)           (37,337)             (93,437)           (64,906)

FFO attributable to common stockholders and unit holders, excluding financing expense in connection with Chandler Freehold-basic and diluted

                                                                         83,367            133,242              266,584            388,817
Loss on extinguishment of debt, net-consolidated assets                              -                  -                    -                351

FFO attributable to common stockholders and unit holders, excluding financing expense in connection with Chandler Freehold and loss on extinguishment of debt, net-basic and diluted

$ 83,367 $ 133,242 $ 266,584 $ 389,168 Weighted average number of FFO shares outstanding for: FFO attributable to common stockholders and unit holders-basic(2)

              160,509            151,784              155,694            151,740

Adjustments for impact of dilutive securities in computing FFO-diluted:


  Share and unit based compensation plans                                            -                  -                    -                  -
Weighted average number of FFO shares outstanding for FFO
attributable to common stockholders and unit holders-basic and
diluted(2)                                                                     160,509            151,784              155,694            151,740



(1)   Unconsolidated joint ventures are presented at the Company's pro rata
share.
(2)   Calculated based upon basic net income as adjusted to reach basic FFO.
Includes 10.9 million and 10.4 million OP Units for the three and nine months
ended September 30, 2020 and 2019, respectively.
The computation of FFO-diluted shares outstanding includes the effect of share
and unit-based compensation plans 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-diluted computation.
                                       41

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Table of Contents

Market Closed - Nyse Other stock markets 04:00:01 2024-04-25 pm EDT			5-day change	1st Jan Change
15.38 ^USD	-1.66%		+1.38%	-0.32%

Mar. 26	The Macerich Company Announces Not Stand for Re-Election of Peggy Alford as Director	CI
Mar. 25	North American Morning Briefing : Tech in Focus on -2-	DJ

The Macerich Company Announces Not Stand for Re-Election of Peggy Alford as Director	Mar. 26	CI
North American Morning Briefing : Tech in Focus on -2-	Mar. 25	DJ
Citigroup Upgrades Macerich to Neutral From Sell, Adjusts Price Target to $17 From $8	Mar. 22	MT
Macerich Insider Sold Shares Worth $860,045, According to a Recent SEC Filing	Feb. 23	MT
Transcript : The Macerich Company, Q4 2023 Earnings Call, Feb 07, 2024	Feb. 07
Macerich Q4 Funds from Operations, Revenue Up; Provides 2024 Outlook	Feb. 07	MT
The Macerich Company Reports Earnings Results for the Fourth Quarter and Full Year Ended December 31, 2023	Feb. 07	CI
North American Morning Briefing : Stock Futures -2-	Feb. 07	DJ
Macerich Says Jackson Hsieh Named CEO, President	Feb. 05	MT
The Macerich Company Announces CEO Changes	Feb. 05	CI
The Macerich Company Announces Board Changes	Feb. 05	CI
Macerich Co. Maintains Quarterly Dividend at $0.17 per Share, Payable March 4 to Shareholders of Record Feb. 16	Feb. 02	MT
The Macerich Company Declares Quarterly Cash Dividend, Payable on March 4, 2024	Feb. 02	CI
Goldman Sachs Adjusts Price Target on Macerich to $13 From $9, Maintains Sell Rating	Jan. 11	MT
Hudson Pacific Properties, Macerich Close $700 Million Sale of Los Angeles Assets	Jan. 03	MT
Morgan Stanley Boosts Price Target on Macerich to $12.50 From $8.50, Keeps Underweight Rating	Dec. 21	MT
Tranche Update on The Macerich Company's Equity Buyback Plan announced on February 13, 2017.	Nov. 06	CI
Transcript : The Macerich Company, Q3 2023 Earnings Call, Oct 31, 2023	23-10-31
Macerich's Q3 Funds From Operations Decline, Revenue Rises	23-10-31	MT
The Macerich Company Reports Earnings Results for the Third Quarter and Nine Months Ended September 30, 2023	23-10-31	CI
The Macerich Company Announces Quarterly Cash Dividend, Payable on December 1, 2023	23-10-31	CI
The Macerich Company Provides Earnings Guidance for the Year 2023	23-10-31	CI
Macerich Company Opens First SCHEELS Sporting Goods Store in Arizona	23-10-03	MT
Macerich's Chandler Fashion Center Outside Phoenix Announces Successful Opening of Arizona's First Schels	23-10-03	CI
North American Morning Briefing : Bond Yields Hold -2-	23-10-03	DJ

	1st Jan change	Capi.
THE MACERICH COMPANY	-0.32%	3.37B
SIMON PROPERTY GROUP, INC.	+0.06%	46.52B
KIMCO REALTY CORPORATION	-13.56%	12.49B
THE LINK REAL ESTATE INVESTMENT TRUST	-22.69%	11.04B
REGENCY CENTERS CORPORATION	-11.85%	10.99B
NNN REIT, INC.	-4.80%	7.52B
BRIXMOR PROPERTY GROUP INC.	-6.45%	6.56B
AGREE REALTY CORPORATION	-7.78%	5.86B
VICINITY CENTRES	-5.15%	5.72B
KITE REALTY GROUP TRUST	-6.39%	4.77B

The Macerich Company

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MAC

US5543821012

Commercial REITs

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