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, 2020, 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 March 31, 2021, the
Operating Partnership owned or had an ownership interest in 46 regional shopping
centers and five community/power shopping centers. These 51 regional and
community/power shopping centers (which include any related office space)
consist of approximately 50 million square feet of gross leasable area and are
referred to herein as the "Centers". The Centers consist of consolidated Centers
("Consolidated Centers") and unconsolidated joint venture Centers
("Unconsolidated Joint Venture 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 months ended March 31, 2021 and 2020. It
compares the results of operations for the three months ended March 31, 2021 to
the results of operations for the three months ended March 31, 2020. It also
compares the results of operations and cash flows for the three months ended
March 31, 2021 to the results of operations and cash flows for the three months
ended March 31, 2020.
This information should be read in conjunction with the accompanying
consolidated financial statements and notes thereto.
Dispositions:
On March 29, 2021, the Company sold Paradise Valley Mall in Phoenix, Arizona to
a newly formed joint venture for $100 million, resulting in a gain on sale of
assets of approximately $5.6 million. Concurrent with the sale, the Company
elected to reinvest into the new joint venture at a 5% ownership interest. The
Company used the $95.3 million of net proceeds from the sale to pay down its
line of credit (See "Liquidity and Capital Resources").
Financing Activities:
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 was further extended to July 1, 2021, based on certain conditions. The
loan amount and interest rate are unchanged following the extensions.
On November 17, 2020, the Company's joint venture in Tysons VITA, the
residential tower at Tysons Corner Center, placed a new $95.0 million loan on
the property that bears interest at an effective rate of 3.43% and matures on
December 1, 2030. Initial loan funding for the Company's joint venture was $90.0
million with future advance potential of up to $5.0 million. The Company used
its share of the initial proceeds of $45.0 million for general corporate
purposes.
On December 10, 2020, the Company made a loan (the "Partnership Loan") to the
Company's joint venture in Fashion District Philadelphia to fund the entirety of
a $100.0 million repayment to reduce the mortgage loan on Fashion District
Philadelphia from $301.0 million to $201.0 million. This mortgage loan now
matures on January 22, 2024, assuming exercise of a one-year extension option,
and bears interest at LIBOR plus 3.5%, with a LIBOR floor of 0.50%. The
partnership agreement for the joint venture was amended in connection with the
Partnership Loan, and pursuant to the amended agreement, the Partnership Loan
plus 15% accrued interest must be repaid prior to the resumption of 50/50 cash
distributions to the Company and its joint venture partner.
On December 15, 2020, the Company closed on a loan extension agreement for the
$101.5 million loan on Fashion Outlets of Niagara. Under the extension agreement
the original loan maturity date of October 6, 2020 was extended to October 6,
2023. The loan amount and interest rate are unchanged following the extension.
On December 29, 2020, the Company's joint venture closed on a one-year maturity
date extension for the FlatIron Crossing loan to January 5, 2022. The interest
rate increased from 3.85% to 4.10%, and the Company's joint venture repaid $15.0
million, $7.6 million at the Company's pro rata share, of the outstanding loan
balance at closing.
On January 22, 2021, the Company closed on a one-year extension for Green Acres
Mall's $258.2 million loan to February 3, 2022, which also includes a one-year
extension to February 3, 2023. The interest rate remained unchanged, and the
Company repaid $9 million of the outstanding loan balance at closing.
On March 25, 2021, the Company closed on a two-year extension on the Green Acres
Commons $124.6 million loan to March 29, 2023. The interest rate is LIBOR plus
2.75% and the Company repaid $4.7 million of the outstanding loan balance at
closing.
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, $28.1 million and $36.9 million was repaid in the three months and
twelve months ended December 31, 2020, respectively; and the remaining balance
was fully repaid during the first quarter of 2021.
On April 14, 2021, the Company terminated its existing credit facility and
entered into a new credit agreement, which provides for an aggregate $700
million facility, including a $525 million revolving loan facility that matures
on April 14, 2023, with a one-year extension option, and a $175 million term
loan facility that matures on April 14, 2024 (See "Liquidity and Capital
Resources").


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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 $85.8 million of the total $343.2 million incurred by the
joint venture as of March 31, 2021. The joint venture expects to fund the
remaining costs of the development with its $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 $39.6
million of the total $79.3 million incurred by the joint venture as of March 31,
2021.
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 $38.2 million at its pro rata
share as of March 31, 2021.
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. Following staggered re-openings during
2020, all Centers have been open and operating since October 7, 2020, and
government mandated restrictions have generally been eased during the first
quarter of 2021, including in the Company's key markets of California and New
York, which were the most capacity-restricted markets upon re-opening in 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.
On December 31, 2020, the Company and its joint venture partner, Seritage Growth
Properties ("Seritage"), entered into a distribution agreement. The joint
venture owned nine properties, including the former Sears parcels at the South
Plains Mall and the Arrowhead Towne Center. The joint venture distributed the
former Sears parcel at South Plains Mall to the Company and the former Sears
parcel at Arrowhead Towne Center to Seritage. The joint venture partners agreed
that the distributed properties were of equal value. The Company now owns 100%
of the former Sears parcel at South Plains Mall. Effective December 31, 2020,
the Company consolidates its 100% interest in the Sears parcel at South Plains
Mall in the Company's consolidated financial statements.
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

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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.The Company declared a further reduced cash dividend of $0.15 per share
of its common stock for the third and fourth quarters of 2020. On January 28,
2021, the Company declared a first quarter cash dividend of $0.15 per share of
its common stock, which was paid on March 3, 2021 to stockholders of record on
February 19, 2021. On April 29, 2021, the Company declared a second quarter cash
dividend of $0.15 per share of its common stock, which will be paid on June 3,
2021 to stockholders of record on May 7, 2021. The dividend amount will be
reviewed by the Board on a quarterly basis.
In connection with the commencement of separate "at the market" offering
programs, on each of February 1, 2021 and March 26, 2021, which are referred to
as the "February 2021 ATM Program" and the "March 2021 ATM Program,"
respectively, and collectively as the "ATM Programs," the Company entered into
separate equity distribution agreements with certain sales agents pursuant to
which the Company may issue and sell shares of its common stock having an
aggregate offering price of up to $500 million under each of the February 2021
ATM Program and the March 2021 ATM Program, or a total of $1 billion under the
ATM Programs.
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, including the ATM Programs and the Company's new credit facility.
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 3% to 18% 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:
Upon the acquisition of real estate properties, the Company evaluates whether
the acquisition is a business combination or asset acquisition. For both
business combinations and asset acquisitions, the Company allocates the purchase
price of properties to acquired tangible assets and intangible assets and
liabilities. For asset acquisitions, the Company capitalizes transaction costs
and allocates the purchase price using a relative fair value method allocating
all accumulated costs. For business combinations, the Company expenses
transaction costs incurred and allocates purchase price based on the estimated
fair value of each separately identified asset and liability. 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.

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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
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.
Remeasurement gains and losses are recognized when the Company becomes the
primary beneficiary of an existing equity method investment that is a variable
interest entity to the extent that the fair value of the existing equity
investment exceeds the carrying value of the investment, and remeasurement
losses to the extent the carrying value of the investment exceeds the fair
value. The fair value is determined based on a discounted cash flow model, with
the significant unobservable inputs including discount rate, terminal
capitalization rate and market rents.
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. A shortened
holding period increases the risk that the carrying value of a long-lived asset
is not 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 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 discount rate, terminal capitalization
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 Property (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 ("JV
Transition Centers") and properties that have been disposed of ("Disposition
Property"). 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, the JV Transition
Centers and the Disposition Property, for the periods of comparison.
For the comparison of the three months ended March 31, 2021 to the three months
ended March 31, 2020, the JV Transition Centers are Fashion District
Philadelphia and Sears South Plains. For the comparison of the three months
ended March 31, 2021 to the three months ended March 31, 2020, the Disposition
Property is Paradise Valley Mall.
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, 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.
As a result of continued loosening of government restrictions within the
Company's operating markets, combined with pent up demand and the positive
economic impact of fiscal stimulus, sales at the Company's Centers continue to
greatly improve. During the first quarter of 2021, comparable tenant sales
across the Company's portfolio were only 2.0% less than the pre-COVID-19 first
quarter of 2019, and were 1.9% higher than the pre-COVID-19 first quarter of
2019, excluding the capacity-restricted food and beverage category. During the
first quarter of 2021, comparable tenant sales within Arizona, the Company's
least restricted region, were 7.2% higher than the pre-COVID-19 first quarter of
2019 and 11.5% higher than the pre-COVID-19 first quarter of 2019, excluding the
capacity-restricted food and beverage category.
The leased occupancy rate decreased from 93.1% at March 31, 2020 to 88.5% at
March 31, 2021. Releasing spreads declined as the Company executed leases at an
average rent of $52.94 for new and renewal leases executed compared to $54.10 on
leases expiring, resulting in a releasing spread of $1.16 per square foot
representing a 2.1% decrease for the trailing twelve months ended March 31,
2021.
The Company continues to renew or replace leases that are scheduled to expire in
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 2021 or beyond.
These leases that are scheduled to expire in 2021 represent approximately 1.0
million square feet, accounting for 16.3% of the GLA of mall stores and
freestanding stores, for spaces 10,000 square feet and under. These calculations
exclude Centers under development or redevelopment and property dispositions
(See "Dispositions" and "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.
2021 lease expirations continue to be an important focal point for the Company.
The Company now has commitments on 70% of the remaining 2021 expiring square
footage with another 30% in the letter of intent stage, disregarding leases for
stores that have closed or for stores that tenants have indicated they intend to
close.
The Company has entered into 102 leases for new stores totaling approximately
617,000 square feet that have opened or are planned for opening in 2021. While
there may be additional new store openings in 2021, any such leases are not yet
executed.
During the trailing twelve months ended March 31, 2021, the Company signed 160
new leases and 394 renewal leases comprising approximately 2.0 million square
feet of GLA, of which 1.2 million square feet is related to the consolidated
Centers. The average tenant allowance was $16.22 per square foot. The Company's
COVID-19 related lease amendments are excluded from these numbers.

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Outlook
The Company has a long-term four-pronged business strategy that focuses on the
acquisition, leasing and management, redevelopment and development of Regional
Shopping Centers. Although the Company believes that overall regional shopping
center fundamentals in its markets appear to be improving, the Company expects
that its results for 2021 will be negatively impacted by the COVID-19 pandemic,
Anchor closures and tenant bankruptcies, among other factors.
All Centers have been open and operating since October 7, 2020, and government
mandated restrictions have been greatly eased for most of the Centers during
2021, including in the Company's key markets of California and New York, which
were the most capacity-restricted markets upon re-opening in 2020.
The Company's rent collections continue to significantly improve. The Company
collected approximately 97% of rents billed for the three months ended December
31, 2020 and approximately 95% of rents billed for the three months ended March
31, 2021. The Company continues to make significant 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. The majority of such requests were made in
2020. For example, of the nearly 200 national tenants in the Company's
portfolio, excluding tenants that have filed bankruptcy and vacated the
Company's properties, the Company has yet to reach agreement with only 1% of
those tenants, as measured based on total rent. The lease amendments negotiated
by the Company have resulted in a combination of rent payment deferrals 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. Additionally, many of the Company's leases contain
co-tenancy clauses. Certain Anchor or small tenant closures have become
permanent following the re-opening of the Company's Centers, 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 were 42 bankruptcy filings involving the Company's tenants,
totaling 322 leases and involving approximately 6.0 million square feet and
$85.4 million of annual leasing revenue at the Company's share. During 2021, the
pace of such filings has decreased substantially, as there were six bankruptcy
filings involving the Company's tenants, totaling 47 leases and involving
approximately 207,000 square feet and $6.9 million of annual leasing revenue at
the Company's share. This included two leases totaling 139,000 square feet with
a single department store retailer that quickly emerged from bankruptcy and
assumed both of its leases with the Company. Excluding this department store
retailer, bankruptcy filings during 2021 are only 68,000 square feet.
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 March 31, 2021, 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.
During the year ended December 31, 2020 and the first quarter of 2021, the
Company incurred $56.4 million and $28.9 million, respectively, of rent
abatements at the Company's share relating to 2020 rents as a result of
COVID-19. Additionally, the Company negotiated $32.9 million of rent deferrals
during the year ended December 31, 2020 and $0.6 million during the first
quarter 2021, each at the Company's share. As of March 31, 2021, $11.8 million
of the rent deferrals remain outstanding with $11.0 million scheduled to be
repaid during 2021 and the remainder scheduled for repayment in 2022. The
Company has experienced a significant decrease in requests for rent abatements
and deferrals as 2021 has progressed, and the Company expects these requests to
continue to decline as the economy reopens.
The Company has experienced, and expects to continue to experience, a negative
impact to its leasing revenue and the occupancy rates at its Centers due to
COVID-19. For the three months ended March 31, 2021, leasing revenue decreased
by approximately 17%, including joint ventures at the Company's share, compared
to the three months ended March 31, 2020. Included within this decline were
$28.9 million of retroactive rent abatements incurred in the first quarter of
2021 relating to 2020 rents. Excluding these retroactive rent abatements,
leasing revenue for the three months ended March 31, 2021 decreased 8% compared
to the three months ended March 31, 2020. As of March 31, 2021, the leased
occupancy rate decreased to 88.5% from 93.1% at March 31, 2020.
While the volume of leasing transactions declined significantly in the second
and third quarters of 2020, the Company experienced significant improvement
during the fourth quarter of 2020 and the first quarter of 2021 in leasing
activity. During the first quarter of 2021, the Company signed 181 leases for
700,000 square feet (excluding COVID-19 workout deals), which equals the leased
space that was signed during the first quarter of 2020. For the six months ended
March 31, 2021, the Company signed leases for nearly the same amount of space as
the pre-COVID-19 six-month period ended March 31, 2020. Further, the number of
new and renewal leases executed through mid-April 2021 is slightly greater than
the number of leases signed during the same pre-COVID-19 period in 2019, and
2019 was a high leasing volume year for the Company. The

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Company has entered into 102 leases for new stores totaling approximately
617,000 square feet that have opened or are planned for opening in 2021. The
Company is also negotiating nearly 100 other leases for new stores totaling
nearly 800,000 square feet. There is no assurance that these pending lease
negotiations will result in executed leases.
As a result of continued loosening of government restrictions within the
Company's operating markets, combined with pent up demand and the positive
economic impact of fiscal stimulus, sales at the Company's Centers continue to
greatly improve. During the first quarter of 2021, comparable tenant sales
across the Company's portfolio were only 2.0% less than the pre-COVID-19 first
quarter of 2019, and were 1.9% higher than the pre-COVID-19 first quarter of
2019, excluding the capacity-restricted food and beverage category. During the
first quarter of 2021, comparable tenant sales within Arizona, the Company's
least restricted region, were 7.2% higher than the pre-COVID-19 first quarter of
2019 and 11.5% higher than the pre-COVID-19 first quarter of 2019, excluding the
capacity-restricted food and beverage category.
During 2021, the Company expects to generate significant cash flow from
operations after recurring operating capital expenditures, leasing capital
expenditures and after dividend. This assumption does not include any potential
capital generated from dispositions, refinancings or issuances of common equity.
This surplus will be used to de-lever as well as to fund our development
pipeline.
Given the continued disruption and uncertainties from COVID-19 and the impact on
the capital markets, the Company has secured extensions of term from one to
three years of its near-term maturing non-recourse mortgage loans on Danbury
Fair Mall, Fashion Outlets of Niagara, FlatIron Crossing, Green Acres Mall and
Green Acres Commons (See "Financing Activities" in Management's Overview and
Summary).
On April 14, 2021, the Company repaid and terminated its existing credit
facility and entered into a new credit agreement, which provides for an
aggregate $700 million facility, including a $525 million revolving loan
facility that matures on April 14, 2023, with a one-year extension option, and a
$175 million term loan facility that matures on April 14, 2024. Concurrent with
the closing of this credit facility, the Company repaid $985.0 million of debt
(See "Liquidity and Capital Resources").
Rising interest rates could increase the cost of the Company's borrowings due to
its outstanding floating-rate debt and lead to higher interest rates on new
fixed-rate debt. In certain cases, the Company may limit its exposure to
interest rate fluctuations related to a portion of its floating-rate debt by
using interest rate cap and swap agreements. Such agreements, subject to current
market conditions, allow the Company to replace floating-rate debt with
fixed-rate debt in order to achieve its desired ratio of floating-rate to
fixed-rate debt. In today's decreasing interest rate environment, the swap
agreements that the Company has entered into have resulted in increases in
interest expense. Those swap agreements expire in September 2021.
Comparison of Three Months Ended March 31, 2021 and 2020
Revenues:
Leasing revenue decreased by $31.2 million, or 14.8%, from 2020 to 2021. The
decrease in leasing revenue is attributed to decreases of $34.2 million from the
Same Centers and $0.5 million from the Disposition Property offset in part by
increases of $3.5 million from the JV Transition Centers. 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 was $0.4 million in 2020 and
2021. Straight-line rents increased from $2.2 million in 2020 to $4.8 million in
2021. Lease termination income increased from $1.2 million in 2020 to $2.9
million in 2021. Provision for bad debts increased from $0.9 million in 2020 to
$3.2 million in 2021. 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 $9.3 million in 2020 to $5.3 million in 2021. The
decrease is primarily a decline in parking garage income as a result of COVID-19
(See "Other Transactions and Events" in Management's Overview and Summary).
Management Companies' revenue decreased from $7.0 million in 2020 to $5.6
million in 2021 due to a decrease in management fees and development fees.
Shopping Center and Operating Expenses:
Shopping center and operating expenses increased $5.4 million, or 7.7%, from
2020 to 2021. The increase in shopping center and operating expenses is
attributed to increases of $4.9 million from the JV Transition Centers and $0.5
million from the Same Centers.

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Leasing Expenses:
Leasing expenses decreased from $7.4 million in 2020 to $5.2 million in 2021 due
to a decrease in compensation expense.
Management Companies' Operating Expenses:
Management Companies' operating expenses decreased $1.4 million from 2020 to
2021 due to a decrease in compensation expense.
REIT General and Administrative Expenses:
REIT general and administrative expenses increased $1.3 million from 2020 to
2021 primarily due to an increase in consulting expense.
Depreciation and Amortization:
Depreciation and amortization decreased $3.8 million from 2020 to 2021. The
decrease in depreciation and amortization is attributed to decreases of $7.1
million from the Same Centers offset in part by increases of $3.1 million from
the JV Transition Centers and $0.2 million from the Disposition Property.
Interest Expense:
Interest expense increased $45.8 million from 2020 to 2021. The increase in
interest expense was attributed to an increase of $45.6 million from the
Financing Arrangement (See Note 12-Financing Arrangement in the Company's Notes
to the Consolidated Financial Statements), $1.8 million from the JV Transition
Centers and $0.9 million from the Company's revolving line of credit offset in
part by decreases of $2.5 million from the Same Centers. The increase in
interest 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 Income of Unconsolidated Joint Ventures:
Equity in income of unconsolidated joint ventures decreased $7.8 million from
2020 to 2021. The decrease in equity in income of unconsolidated joint ventures
is primarily due to a decrease in leasing revenue as a result of COVID-19 (See
"Other Transactions and Events" in Management's Overview and Summary).
Loss on Sale or Write Down of Assets, net:
Loss on sale or write down of assets, net decreased $15.4 million from 2020 to
2021. The decrease in loss on sale or write down of assets, net is primarily due
to the $36.7 million of impairment losses on Wilton Mall and Paradise Valley
Mall in 2020 and impairment loss of $27.3 million on Estrella Falls in 2021
offset in part by the gain of $4.2 million from the sale of Paradise Valley Mall
and $4.1 million on land sales. The impairment losses were due to the reduction
in the estimated holding periods of the properties.
Net (Loss) Income:
Net (loss) income decreased $76.5 million from 2020 to 2021. 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 38.4% from $122.7 million in 2020 to $75.6
million in 2021. 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 increased $2.5 million from 2020 to 2021.
The increase is primarily due to the changes in assets and liabilities and the
results, as discussed above.



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Investing Activities:
Cash provided by investing activities increased $115.1 million from 2020 to
2021. The increase in cash provided by investing activities is primarily
attributed to proceeds from the sale of assets of $100.3 million, proceeds from
notes receivable of $1.3 million, a decrease in contributions to unconsolidated
joint ventures of $8.2 million and a decrease of $11.6 million in development,
redevelopment, expansion and renovation of properties offset in part by an
increase in property improvements of $6.8 million.
Financing Activities:
Cash provided by financing activities increased $1.9 million from 2020 to 2021.
The increase in cash provided by financing activities is primarily due to net
proceeds from sales of common shares under the ATM Programs of $597 million and
a decrease in dividends and distributions of $88.0 million offset by a decrease
in proceeds from mortgages, bank and other notes payable of $660.0 million and a
decrease in payments on mortgages, bank and other notes payable of $15.3
million.
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 took
a number of measures to enhance liquidity. These actions helped to ensure that
funds were available to meet the Company's obligations for a sustained period of
time as the extent and duration of the pandemic's impact became clearer. These
measures included (i) reduction of the cash component of its dividend in the
second quarter of 2020 and reduction of the amount of its cash dividend in the
third and fourth quarter of 2020 and in the first quarter of 2021, (ii)
reduction of planned capital and development expenditures, (iii) negotiated
deferrals of debt service payments on nineteen mortgage loans totaling $47.2
million, (iv) reduction of the Company's controllable operating expenses, and
(v) deferral of real estate taxes to the extent such relief was available. In
addition, during the first quarter of 2020, the Company borrowed $660 million on
its line of credit. As of March 31, 2021, the Company had approximately $1.2
billion of cash, including the joint ventures at the Company's pro rata share,
and including proceeds raised under its ATM Programs and from the sale of
Paradise Valley Mall, both as described below.
The following tables summarize capital expenditures incurred at the Centers (at
the Company's pro rata share):

For the Three Months Ended March


                                                                                        31,
(Dollars in thousands)                                                       2021                 2020
Consolidated Centers:
Acquisitions of property, building improvement and equipment            $      3,670          $    2,381
Development, redevelopment, expansions and renovations of Centers              6,558              16,112
Tenant allowances                                                              4,696               1,081
Deferred leasing charges                                                         510                 910
                                                                        $     15,434          $   20,484
Joint Venture Centers:
Acquisitions of property, building improvement and equipment            $        842          $    1,844
Development, redevelopment, expansions and renovations of Centers             12,232              29,628
Tenant allowances                                                              2,550                 355
Deferred leasing charges                                                         815                 725
                                                                        $     16,439          $   32,552



The Company expects amounts to be incurred during the next twelve months for
tenant allowances and deferred leasing charges to be less than or comparable to
2020. The Company expects to incur less than $80.0 million during the remaining
period of 2021 for development, redevelopment, expansion and renovations. This
excludes the Company's share of the remaining development costs associated with
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

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a combination of cash on hand, debt 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.
On each of February 1, 2021 and March 26, 2021, the Company registered a
separate "at the market" offering program, pursuant to which the Company may
issue and sell shares of its common stock having an aggregate offering price of
up to $500 million under each ATM Program, or a total of $1.0 billion under the
ATM Programs, in amounts and at times to be determined by the Company. The
following table sets forth certain information with respect to issuances made
under each of the ATM Programs as of March 31, 2021.
 (Dollars and shares in
thousands)                                    February 2021 ATM Program                                    March 2021 ATM Program(1)
                                   Number of                                                   Number of
For the Three Months Ended:      Shares Issued    Net Proceeds     Sales Commissions         Shares Issued    Net Proceeds     Sales Commissions
March 31, 2021                       36,001     $     477,283    $            9,746               9,991     $     119,724    $            2,449
Total                                36,001     $     477,283    $            9,746               9,991     $     119,724    $            2,449


(1) The table does not reflect shares sold at the end of the quarter that did
not settle until April 2021 (See Note 14-Stockholders' Equity).
As of March 31, 2021, including sales of shares that did not settle until April
2021, the Company had approximately $12.7 million of gross sales of its common
stock available under the February 2021 ATM Program and approximately $335.6
million of gross sales of its common stock available under the March 2021 ATM
Program.
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 March 31, 2021 was $8.7 billion (consisting of $6.0
billion of consolidated debt, less $459.9 million of noncontrolling interests,
plus $3.1 billion of its pro rata share of unconsolidated joint venture debt).
The majority of the Company's debt consists of fixed-rate 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 has secured extensions of term from one to
three years of its near-term maturing non-recourse mortgage loans on Danbury
Fair Mall, 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.
On March 29, 2021, the Company sold Paradise Valley Mall to a newly formed joint
venture for $100 million. Concurrent with the sale, the Company elected to
reinvest into the joint venture at a 5% ownership interest. The Company received
$95.3 million of net proceeds (See "Dispositions").
For the quarter ended March 31, 2021, the Company had a $1.5 billion revolving
line of credit facility that bore 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 could be expanded,
depending on certain conditions, up to a total facility of $2.0 billion. All
obligations under the facility

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were unconditionally guaranteed only by the Company. Based on the Company's
leverage level as of March 31, 2021, 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 4.50% until
September 30, 2021. At March 31, 2021, total borrowings under the line of credit
were $1.48 billion less unamortized deferred finance costs of $1.3 million with
a total interest rate of 2.73%. The Company's availability under the line of
credit was $19.7 million at March 31, 2021.
On April 14, 2021, the Company terminated its existing credit facility and
entered into a new credit agreement, which provides for an aggregate $700
million facility, including a $525 million revolving loan facility that matures
on April 14, 2023, with a one-year extension option, and a $175 million term
loan facility that matures on April 14, 2024. The revolving loan facility can be
expanded up to $800 million, subject to receipt of lender commitments and other
conditions. Concurrently with entering into the new credit agreement, the
Company drew the $175 million term loan in its entirety and drew $320 million of
the amount available under the revolving loan facility. Simultaneously with
entering into the new credit agreement, the Company repaid $985.0 million of
debt, which included terminating and repaying all amounts outstanding under its
prior revolving line of credit facility. All obligations under the facility are
guaranteed unconditionally by the Company and are secured in the form of
mortgages on certain wholly-owned assets and pledges of equity interests held by
certain of the Company's subsidiaries. As of April 14, 2021, the borrowing rate
was LIBOR plus 2.75%.
Cash dividends and distributions for the three months ended March 31, 2021 were
$26.7 million, which were funded from cash on hand.
At March 31, 2021, the Company was in compliance with all applicable loan
covenants under its agreements.
At March 31, 2021, the Company had cash and cash equivalents of $1,083.8
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 March 31, 2021, one of the Company's joint ventures had $50.0 million of
debt that could become recourse to the Company should the joint venture be
unable to discharge the obligation of the related debt.
Additionally, as of March 31, 2021, 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. As of March 31, 2021, $40.6 million
of these letters of credit are secured by restricted cash. 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 March 31, 2021 for
the consolidated Centers over the periods in which they are expected to be paid
(in thousands):
                                                                              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)          $ 6,908,899          $ 1,938,408    (4)   $ 1,569,251          $ 1,376,447          $ 2,024,793
Lease liabilities(2)                        183,346               22,048               27,065               17,315              116,918
Purchase obligations(3)                       3,318                3,318                    -                    -                    -
Other long-term liabilities                 197,818              125,826               28,199               13,744               30,049
                                        $ 7,293,381          $ 2,089,600          $ 1,624,515          $ 1,407,506          $ 2,171,760

__________________________________________________________


(1)Interest payments on floating rate debt were based on rates in effect at
March 31, 2021.
(2)See Note 8-Leases in the Company's Notes to the Consolidated Financial
Statements.
(3)See Note 16-Commitments and Contingencies in the Company's Notes to the
Consolidated Financial Statements.
(4)On April 14, 2021, in connection with entering into the new credit agreement,
the Company repaid the entire $1.48 billion outstanding under its revolving line
of credit facility and borrowed $495 million on its new credit facility.



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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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