Docoh
Loading...

MAC Macerich

Filed: 25 Feb 20, 1:13pm

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2019
OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ________ TO ________
Commission File No. 1-12504
THE MACERICH COMPANY
(Exact name of registrant as specified in its charter)
Maryland95-4448705
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer Identification Number)
401 Wilshire Boulevard,Suite 700,Santa Monica,California90401
(Address of principal executive office, including zip code)(Zip Code) 
(310) 394-6000
 (Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Securities Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, $0.01 Par ValueMACNew York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act Yes     No 
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act Yes     No 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes     No 
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes     No 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act:
Large accelerated filerAccelerated FilerNon-Accelerated FilerSmaller Reporting Company
Emerging Growth Company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes     No 
The aggregate market value of voting and non-voting common equity held by non-affiliates of the registrant was approximately $4.7 billion as of the last business day of the registrant's most recently completed second fiscal quarter based upon the price at which the common stock was last sold on that day.
Number of shares outstanding of the registrant's common stock, as of February 21, 2020: 141,296,774 shares
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the proxy statement for the annual stockholders meeting to be held in 2020 are incorporated by reference into Part III of this Form 10-K.




THE MACERICH COMPANY
ANNUAL REPORT ON FORM 10-K
FOR THE YEAR ENDED DECEMBER 31, 2019
INDEX


2


PART I
IMPORTANT FACTORS RELATED TO FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K of The Macerich Company (the "Company") contains 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-K 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 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 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 risks and other factors that may affect our business and operating results, including those made in "Item 1A. Risk Factors" of this Annual Report on Form 10-K, as well as our other reports filed with the Securities and Exchange Commission ("SEC"). 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.
ITEM 1.    BUSINESS
General
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., a Delaware limited partnership (the "Operating Partnership"). As of December 31, 2019, the Operating Partnership owned or had an ownership interest in 47 regional shopping centers and five community/power shopping centers. These 52 regional and community/power shopping centers (which include any related office space) consist of approximately 51 million square feet of gross leasable area (“GLA”) 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”), as set forth in “Item 2. Properties,” unless the context otherwise requires.

3


The Company is a self-administered and self-managed real estate investment trust ("REIT") and conducts all of its operations through the Operating Partnership and the Company's management companies, Macerich Property Management Company, LLC, a single member Delaware limited liability company, Macerich Management Company, a California corporation, Macerich Arizona Partners LLC, a single member Arizona limited liability company, Macerich Arizona Management LLC, a single member Delaware limited liability company, Macerich Partners of Colorado LLC, a single member Colorado limited liability company, MACW Mall Management, Inc., a New York corporation, and MACW Property Management, LLC, a single member New York limited liability company. All seven of the management companies are owned by the Company and are collectively referred to herein as the "Management Companies."
The Company was organized as a Maryland corporation in September 1993. All references to the Company in this Annual Report on Form 10-K include the Company, those entities owned or controlled by the Company and predecessors of the Company, unless the context indicates otherwise.
Financial information regarding the Company for each of the last three fiscal years is contained in the Company's Consolidated Financial Statements included in "Item 15. Exhibits and Financial Statement Schedule."
Recent Developments
Financing Activity:
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.
4


Redevelopment and Development Activity:
On September 19, 2019, the Company's joint venture with Pennsylvania REIT opened the first phase of the redevelopment of Fashion District Philadelphia, an 899,000 square foot regional shopping center in Philadelphia, Pennsylvania. The project will have additional tenant openings throughout 2020 and early 2021. The total cost of the project is estimated to be between $400.0 million and $420.0 million, with $200.0 million to $210.0 million estimated to be the Company's pro rata share. The Company has funded $190.9 million of the total $381.8 million incurred by the joint venture as of December 31, 2019.
The Company's joint venture in Scottsdale Fashion Square completed the redevelopment of a former Barney's store and an 80,000 square foot exterior expansion in the fourth quarter of 2019. The Company has funded $40.0 million of the total $80.0 million incurred by the joint venture as of December 31, 2019.
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 $50.4 million of the total $201.5 million incurred by the joint venture as of December 31, 2019. 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 $35.9 million of the total $71.7 million incurred by the joint venture as of December 31, 2019.
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 $22.4 million at its pro rata share as of December 31, 2019.
Other Transactions and Events:
On January 1, 2019, the Company adopted Accounting Standards Codification ("ASC") 842, "Leases", under the modified retrospective method. The new standard amended the principles for the recognition, measurement, presentation and disclosure of leases for both parties to a contract (i.e. lessees and lessors). In connection with the adoption of the new lease standard, the Company elected to use the transition packages of practical expedients for implementation provided by the Financial Accounting Standards Board ("FASB"), which included (i) relief from re-assessing whether an expired or existing contract meets the definition of a lease, (ii) relief from re-assessing the classification of expired or existing leases at the adoption date, (iii) allowing previously capitalized initial direct leasing costs to continue to be amortized, and (iv) application of the standard as of the adoption date rather than to all periods presented.
Upon adoption of the new standard, the Company has presented all revenues associated with leases as leasing revenue on its consolidated statements of operations. The new standard requires the Company to reduce leasing revenue for credit losses associated with lease receivables. In addition, straight-line rent receivables are written off when the Company believes there is reasonable uncertainty regarding a tenant's ability to complete the term of the lease. The new standard also requires that lessors expense, on an as-incurred basis, certain initial direct costs that are not incremental in negotiating a lease. Initial direct costs include the salaries and related costs for employees directly working on leasing activities. Prior to January 1, 2019, these costs were capitalizable and therefore the new lease standard resulted in certain of these costs being expensed as incurred.
The Shopping Center Industry
General:
There are several types of retail shopping centers, which are differentiated primarily based on size and marketing strategy. Regional shopping centers generally contain in excess of 400,000 square feet of GLA and are typically anchored by two or more department or large retail stores ("Anchors") and are referred to as "Regional Shopping Centers" or "Malls." Regional Shopping Centers also typically contain numerous diversified retail stores ("Mall Stores"), most of which are national or regional retailers typically located along corridors connecting the Anchors. "Strip centers", "urban villages" or "specialty centers" ("Community/Power Shopping Centers") are retail shopping centers that are designed to attract local or neighborhood customers and are typically anchored by one or more supermarkets, discount department stores and/or drug stores. Community/Power Shopping Centers typically contain 100,000 to 400,000 square feet of GLA. Outlet Centers generally contain a wide variety of designer and manufacturer stores, often located in an open-air center, and typically range in size from 200,000 to 850,000 square feet of GLA ("Outlet Centers"). In addition, freestanding retail stores are located along the perimeter of the
5


shopping centers ("Freestanding Stores"). Mall Stores and Freestanding Stores over 10,000 square feet of GLA are also referred to as "Big Box." Anchors, Mall Stores, Freestanding Stores and other tenants typically contribute funds for the maintenance of the common areas, property taxes, insurance, advertising and other expenditures related to the operation of the shopping center.
Regional Shopping Centers:
A Regional Shopping Center draws from its trade area by offering a variety of fashion merchandise, hard goods and services and entertainment, often in an enclosed, climate controlled environment with convenient parking. Regional Shopping Centers provide an array of retail shops and entertainment facilities and often serve as the town center and a gathering place for community, charity and promotional events.
Regional Shopping Centers have generally provided owners with relatively stable income despite the cyclical nature of the retail business. This stability is due both to the diversity of tenants and to the typical dominance of Regional Shopping Centers in their trade areas.
Regional Shopping Centers have different strategies with regard to price, merchandise offered and tenant mix, and are generally tailored to meet the needs of their trade areas. Anchors are located along common areas in a configuration designed to maximize consumer traffic for the benefit of the Mall Stores. Mall GLA, which generally refers to GLA contiguous to the Anchors for tenants other than Anchors, is leased to a wide variety of smaller retailers. Mall Stores typically account for the majority of the revenues of a Regional Shopping Center.
Business of the Company
Strategy:
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.
Acquisitions.    The Company principally focuses on well-located, quality Regional Shopping Centers that can be dominant in their trade area and have strong revenue enhancement potential. In addition, the Company pursues other opportunistic acquisitions of property that include retail and will complement the Company's portfolio such as Outlet Centers. The Company subsequently seeks to improve operating performance and returns from these properties through leasing, management and redevelopment. Since its initial public offering, the Company has acquired interests in shopping centers nationwide. The Company believes that it is geographically well positioned to cultivate and maintain ongoing relationships with potential sellers and financial institutions and to act quickly when acquisition opportunities arise.
Leasing and Management.    The Company believes that the shopping center business requires specialized skills across a broad array of disciplines for effective and profitable operations. For this reason, the Company has developed a fully integrated real estate organization with in-house acquisition, accounting, development, finance, information technology, leasing, legal, marketing, property management and redevelopment expertise. In addition, the Company emphasizes a philosophy of decentralized property management, leasing and marketing performed by on-site professionals. The Company believes that this strategy results in the optimal operation, tenant mix and drawing power of each Center, as well as the ability to quickly respond to changing competitive conditions of the Center's trade area.
The Company believes that on-site property managers can most effectively operate the Centers. Each Center's property manager is responsible for overseeing the operations, marketing, maintenance and security functions at the Center. Property managers focus special attention on controlling operating costs, a key element in the profitability of the Centers, and seek to develop strong relationships with, and be responsive to, the needs of retailers.
The Company generally utilizes regionally located leasing managers to better understand the market and the community in which a Center is located. The Company continually assesses and fine tunes each Center's tenant mix, identifies and replaces underperforming tenants and seeks to optimize existing tenant sizes and configurations.
On a selective basis, the Company provides property management and leasing services for third parties. The Company currently manages one regional shopping center and two community centers for third party owners on a fee basis.

6


Redevelopment.    One of the major components of the Company's growth strategy is its ability to redevelop acquired properties. On a selective basis, the Company's business strategy may include mixed-use densification to maximize space at the Company’s Regional Shopping Centers, including by developing available land at the Regional Shopping Centers or by demolishing underperforming department store boxes and redeveloping the land. For this reason, the Company has built a staff of redevelopment professionals who have primary responsibility for identifying redevelopment opportunities that they believe will result in enhanced long-term financial returns and market position for the Centers. The redevelopment professionals oversee the design and construction of the projects in addition to obtaining required governmental approvals (See "Redevelopment and Development Activity" in Recent Developments).
Development.    The Company pursues ground-up development projects on a selective basis. The Company has supplemented its strong acquisition, operations and redevelopment skills with its ground-up development expertise to further increase growth opportunities (See "Redevelopment and Development Activity" in Recent Developments).
The Centers:
As of December 31, 2019, the Centers primarily included 47 Regional Shopping Centers and five Community/Power Shopping Centers totaling approximately 51 million square feet of GLA. These 52 Centers average approximately 920,000 square feet of GLA and range in size from 3.5 million square feet of GLA at Tysons Corner Center to 184,000 square feet of GLA at Boulevard Shops. As of December 31, 2019, the Centers primarily included 176 Anchors totaling approximately 23.7 million square feet of GLA and approximately 5,000 Mall Stores and Freestanding Stores totaling approximately 24.5 million square feet of GLA.
Competition:
Numerous owners, developers and managers of malls, shopping centers and other retail-oriented real estate compete with the Company for the acquisition of properties and in attracting tenants or Anchors to occupy space. There are a number of other publicly traded mall companies and several large private mall companies in the United States, any of which under certain circumstances could compete against the Company for an Anchor or a tenant. In addition, these companies, as well as other REITs, private real estate companies or investors compete with the Company in terms of property acquisitions. This results in competition both for the acquisition of properties or centers and for tenants or Anchors to occupy space. Competition for property acquisitions may result in increased purchase prices and may adversely affect the Company's ability to make suitable property acquisitions on favorable terms. The existence of competing shopping centers could have a material adverse impact on the Company's ability to lease space and on the level of rents that can be achieved. There is also increasing competition from other retail formats and technologies, such as lifestyle centers, power centers, outlet centers, Internet shopping, home shopping networks, catalogs, telemarketing and discount shopping clubs that could adversely affect the Company's revenues.
In making leasing decisions, the Company believes that retailers consider the following material factors relating to a center: quality, design and location, including consumer demographics; rental rates; type and quality of Anchors and retailers at the center; and management and operational experience and strategy of the center. The Company believes it is able to compete effectively for retail tenants in its local markets based on these criteria in light of the overall size, quality and diversity of its Centers.

7


Major Tenants:
For the year ended December 31, 2019, the Centers derived approximately 73% of their total rents from Mall Stores and Freestanding Stores under 10,000 square feet and 27% of their total rents from Big Box and Anchor tenants. Total rents as set forth in "Item 1. Business" include minimum rents and percentage rents.
The following retailers (including their subsidiaries) represent the 10 largest tenants in the Centers based upon total rents in place as of December 31, 2019:
TenantPrimary DBAsNumber of
Locations
in the
Portfolio
% of Total
Rents
L Brands, Inc.Victoria's Secret, Bath and Body Works, PINK91  2.9 %
H & M Hennes & Mauritz ABH & M31  2.3 %
Foot Locker, Inc.Champs Sports, Foot Locker, Kids Foot Locker, Lady Foot Locker, Foot Action, House of Hoops, and others87  2.2 %
Gap, Inc., TheAthleta, Banana Republic, Gap, Gap Kids, Old Navy and others53  1.9 %
Dick's Sporting Goods, Inc.Dick's Sporting Goods15  1.6 %
Signet JewelersJared Jewelry, Kay Jewelers, Piercing Pagoda, Zales94  1.6 %
Forever 21, Inc.(1)Forever 21, XXI Forever26  1.4 %
American Eagle Outfitters, Inc.American Eagle Outfitters, aerie37  1.2 %
Abercrombie & FitchAbercrombie & Fitch, Hollister52  1.2 %
ExpressExpress, Express Men28  1.1 %
_____________________

(1)Forever 21, Inc. filed for Chapter 11 bankruptcy protection in September 2019. The total rents used to compute the percentage of rent paid by Forever 21, Inc. in the table above are the anticipated rents to be paid to the Company in 2020 based on a negotiated settlement currently in process through the bankruptcy court.

Mall Stores and Freestanding Stores:
Mall Store and Freestanding Store leases generally provide for tenants to pay rent comprised of a base (or "minimum") rent and a percentage rent based on sales. In some cases, tenants pay only minimum rent, and in other cases, tenants pay only percentage rent. The Company generally enters into leases for Mall Stores and Freestanding Stores that also require tenants to pay a stated amount for operating expenses, generally excluding property taxes, regardless of the expenses the Company actually incurs at any Center. However, certain leases for Mall Stores and Freestanding Stores contain provisions that only require tenants to pay their pro rata share of maintenance of the common areas, property taxes, insurance, advertising and other expenditures related to the operations of the Center.
Tenant space of 10,000 square feet and under in the Company's portfolio at December 31, 2019 comprises approximately 65% of all Mall Store and Freestanding Store space. The Company uses tenant spaces of 10,000 square feet and under for comparing rental rate activity because this space is more consistent in terms of shape and configuration and, as such, the Company is able to provide a meaningful comparison of rental rate activity for this space. Mall Store and Freestanding Store space greater than 10,000 square feet is inconsistent in size and configuration throughout the Company's portfolio and as a result does not lend itself to a meaningful comparison of rental rate activity with the Company's other space. Much of the non-Anchor space over 10,000 square feet is not physically connected to the mall, does not share the same common area amenities and does not benefit from the foot traffic in the mall. As a result, space greater than 10,000 square feet has a unique rent structure that is inconsistent with mall space under 10,000 square feet.
8


The following tables set forth the average base rent per square foot for the Centers, as of December 31 for each of the past five years:
Mall Stores and Freestanding Stores under 10,000 square feet:
For the Years Ended December 31,Avg. Base
Rent Per
Sq. Ft.(1)(2)
Avg. Base Rent
Per Sq. Ft. on
Leases Executed
During the Year(2)(3)
Avg. Base Rent
Per Sq. Ft.
on Leases Expiring
During the Year(2)(4)
Consolidated Centers (at the Company's pro rata share):   
2019$58.76  $53.29  $53.20  
2018$56.82  $54.00  $49.07  
2017$55.08  $57.36  $49.61  
2016$53.51  $53.48  $44.77  
2015$52.64  $53.99  $49.02  
Unconsolidated Joint Venture Centers (at the Company's pro rata share):         
2019$65.67  $73.05  $65.22  
2018$63.84  $66.95  $59.49  
2017$60.99  $63.50  $55.50  
2016$57.90  $64.78  $57.29  
2015$60.74  $80.18  $60.85  

Big Box and Anchors:
For the Years Ended December 31,Avg. Base
Rent Per
Sq. Ft.(1)(2)
Avg. Base Rent
Per Sq. Ft. on
Leases Executed
During the Year(2)(3)
Number of
Leases
Executed
During
the Year
Avg. Base Rent
Per Sq. Ft.
on Leases Expiring
During the Year(2)(4)
Number of
Leases
Expiring
During
the Year
Consolidated Centers (at the Company's pro rata share):     
2019$16.51  $15.47  24  $10.37  11  
2018$15.29  $14.03  23  $16.83  13  
2017$14.13  $18.19  24  $14.85  21  
2016$13.34  $22.23  20  $19.12   
2015$12.72  $19.87  19  $8.96  14  
Unconsolidated Joint Venture Centers (at the Company's pro rata share):     
2019$17.20  $25.62  13  $19.28   
2018$17.40  $38.98  11  $38.20   
2017$16.87  $26.33  15  $33.25   
2016$15.76  $29.41  13  $28.00   
2015$14.48  $33.00  14  $9.30   
_____________________

(1)Average base rent per square foot is based on spaces occupied as of December 31 for each of the Centers and gives effect to the terms of each lease in effect, as of such date, including any concessions, abatements and other adjustments or allowances that have been granted to the tenants.
(2)Centers under development and redevelopment are excluded from average base rents. As a result, the leases for Fashion District Philadelphia, Paradise Valley Mall and One Westside are excluded for the years ended December 31, 2019, 2018, 2017, 2016 and 2015. The leases for Broadway Plaza are excluded for the years ended December 31, 2016 and 2015. The leases for Fashion Outlets of Niagara Falls USA and SouthPark Mall are excluded for the year ended December 31, 2015.
9


The leases for Cascade Mall and Northgate Mall, which were sold on January 18, 2017, are excluded for the year ended December 31, 2016. Flagstaff Mall was conveyed to the mortgage lender by a deed-in-lieu of foreclosure on July 15, 2016 and is excluded for the year ended December 31, 2015.
(3)The average base rent per square foot on leases executed during the year represents the actual rent paid on a per square foot basis during the first twelve months of the lease.
(4)The average base rent per square foot on leases expiring during the year represents the actual rent to be paid on a per square foot basis during the final twelve months of the lease.
Cost of Occupancy:
A major factor contributing to tenant profitability is cost of occupancy, which consists of tenant occupancy costs charged by the Company. Tenant expenses included in this calculation are minimum rents, percentage rents and recoverable expenditures, which consist primarily of property operating expenses, real estate taxes and repair and maintenance expenditures. These tenant charges are collectively referred to as tenant occupancy costs. These tenant occupancy costs are compared to tenant sales. A low cost of occupancy percentage shows more potential capacity for the Company to increase rents at the time of lease renewal than a high cost of occupancy percentage. The following table summarizes occupancy costs for Mall Store and Freestanding Store tenants in the Centers as a percentage of total Mall Store sales for the last five years:
 For the Years Ended December 31,
 2019201820172016(1)2015(2)
Consolidated Centers:     
Minimum rents9.1 %9.3 %9.5 %9.4 %9.0 %
Percentage rents0.4 %0.3 %0.3 %0.4 %0.4 %
Expense recoveries(3)3.6 %3.9 %4.2 %4.3 %4.5 %
13.1 %13.5 %14.0 %14.1 %13.9 %
Unconsolidated Joint Venture Centers:     
Minimum rents7.3 %7.8 %8.6 %8.6 %8.1 %
Percentage rents0.3 %0.3 %0.3 %0.3 %0.4 %
Expense recoveries(3)3.2 %3.4 %3.8 %3.9 %4.0 %
10.8 %11.5 %12.7 %12.8 %12.5 %
_____________________________

(1)Cascade Mall and Northgate Mall were sold on January 18, 2017 and are excluded for the year ended December 31, 2016.
(2)Flagstaff Mall was conveyed to the mortgage lender by a deed-in-lieu of foreclosure on July 15, 2016 and is excluded for the year ended December 31, 2015.
(3)Represents real estate tax and common area maintenance charges.

10


Lease Expirations:
The following tables show scheduled lease expirations for Centers owned as of December 31, 2019 for the next ten years, assuming that none of the tenants exercise renewal options:
Mall Stores and Freestanding Stores under 10,000 square feet:
Year Ending December 31,Number of
Leases
Expiring
Approximate
GLA of Leases
Expiring(1)
% of Total Leased
GLA Represented
by Expiring
Leases(1)
Ending Base Rent
per Square Foot of
Expiring Leases(1)
% of Base Rent
Represented
by Expiring
Leases(1)
Consolidated Centers (at the Company's pro rata share):     
2020324  669,961  15.30 %$55.73  12.91 %
2021320  606,388  13.84 %$60.36  12.66 %
2022285  470,126  10.73 %$65.95  10.72 %
2023226  456,925  10.43 %$61.34  9.69 %
2024244  578,073  13.20 %$67.94  13.58 %
2025169  402,136  9.18 %$73.18  10.18 %
2026145  415,401  9.48 %$72.95  10.48 %
202793  224,400  5.12 %$81.62  6.33 %
202881  212,304  4.85 %$67.84  4.98 %
202982  227,595  5.20 %$80.47  6.33 %
Unconsolidated Joint Venture Centers (at the Company's pro rata share):     
2020217  261,174  11.48 %$55.18  8.70 %
2021268  322,600  14.18 %$64.79  12.61 %
2022190  230,695  10.14 %$68.51  9.54 %
2023164  240,096  10.56 %$65.83  9.54 %
2024172  232,829  10.24 %$71.21  10.01 %
2025135  213,831  9.40 %$71.86  9.27 %
2026161  226,891  9.98 %$88.69  12.15 %
2027116  163,281  7.18 %$90.36  8.91 %
2028104  176,492  7.76 %$86.97  9.26 %
202985  110,480  4.86 %$79.71  5.32 %

11


Big Boxes and Anchors:
Year Ending December 31,Number of
Leases
Expiring
Approximate
GLA of Leases
Expiring(1)
% of Total Leased
GLA Represented
by Expiring
Leases(1)
Ending Base Rent
per Square Foot of
Expiring Leases(1)
% of Base Rent
Represented
by Expiring
Leases(1)
Consolidated Centers (at the Company's pro rata share):     
202010  470,910  5.34 %$11.03  3.29 %
202120  715,068  8.12 %$10.47  4.75 %
202227  941,805  10.69 %$22.62  13.49 %
202329  884,615  10.04 %$12.63  7.08 %
202427  772,756  8.77 %$22.24  10.89 %
202525  825,362  9.37 %$19.85  10.38 %
202617  833,376  9.46 %$13.18  6.96 %
202719  564,153  6.40 %$30.08  10.75 %
202819  884,785  10.04 %$17.23  9.66 %
2029 238,522  2.71 %$9.34  1.41 %
Unconsolidated Joint Venture Centers (at the Company's pro rata share):     
202015  201,601  4.17 %$27.31  6.29 %
202119  288,748  5.97 %$24.72  8.16 %
202218  497,807  10.29 %$12.48  7.10 %
202321  291,620  6.03 %$24.12  8.04 %
202420  310,779  6.43 %$36.13  12.83 %
202521  748,340  15.48 %$10.54  9.02 %
202621  407,761  8.43 %$25.78  12.02 %
202713  292,686  6.05 %$18.84  6.30 %
202811  380,712  7.87 %$17.76  7.73 %
202911  288,865  5.97 %$12.94  4.27 %
_______________________________________________________________________________

(1)The ending base rent per square foot on leases expiring during the period represents the final year minimum rent, on a cash basis, for tenant leases expiring during the year. Currently, 30% of leases have provisions for future consumer price index increases that are not reflected in ending base rent. The leases for Centers currently under development and redevelopment are excluded from this table.
Anchors:
Anchors have traditionally been a major factor in the public's identification with Regional Shopping Centers. Anchors are generally department stores whose merchandise appeals to a broad range of shoppers. Although the Centers receive a smaller percentage of their operating income from Anchors than from Mall Stores and Freestanding Stores, strong Anchors play an important part in maintaining customer traffic and making the Centers desirable locations for Mall Store and Freestanding Store tenants.
Anchors either own their stores, the land under them and in some cases adjacent parking areas, or enter into long-term leases with an owner at rates that are lower than the rents charged to tenants of Mall Stores and Freestanding Stores. Each Anchor that owns its own store and certain Anchors that lease their stores enter into reciprocal easement agreements with the owner of the Center covering, among other things, operational matters, initial construction and future expansion.
Anchors accounted for approximately 7.3% of the Company's total rents for the year ended December 31, 2019.


12


The following table identifies each Anchor, each parent company that owns multiple Anchors and the number of square feet owned or leased by each such Anchor or parent company in the Company's portfolio at December 31, 2019.
NameNumber of
Anchor
Stores
GLA Owned
by Anchor
GLA Leased
by Anchor
Total GLA
Occupied by
Anchor
Macy's Inc.            
Macy's36  4,698,000  1,931,000  6,629,000  
Bloomingdale's —  355,000  355,000  
38  4,698,000  2,286,000  6,984,000  
JCPenney(1)27  1,641,000  2,299,000  3,940,000  
Sears(2) —  584,000  584,000  
Dillard's13  2,107,000  257,000  2,364,000  
Nordstrom(3)12  739,000  1,339,000  2,078,000  
Dick's Sporting Goods15  —  952,000  952,000  
Forever 21(4) —  629,000  629,000  
Target 304,000  273,000  577,000  
Hudson Bay Company
Lord & Taylor(5) 121,000  199,000  320,000  
Saks Fifth Avenue —  92,000  92,000  
 121,000  291,000  412,000  
Home Depot —  395,000  395,000  
Burlington 187,000  182,000  369,000  
Costco —  321,000  321,000  
Primark(6) —  251,000  251,000  
Kohl's —  84,000  84,000  
Neiman Marcus —  188,000  188,000  
Von Maur 187,000  —  187,000  
Walmart —  173,000  173,000  
Century 21 —  171,000  171,000  
La Curacao —  165,000  165,000  
Boscov's —  161,000  161,000  
Belk —  139,000  139,000  
BJ's Wholesale Club —  123,000  123,000  
Lowe's —  114,000  114,000  
Mercado de los Cielos —  78,000  78,000  
L.L. Bean —  75,000  75,000  
Best Buy 66,000  —  66,000  
Des Moines Area Community College 64,000  —  64,000  
Bealls —  40,000  40,000  
Vacant Anchors(7)16  —  1,849,000  1,849,000  
173  10,114,000  13,419,000  23,533,000  
Anchors at Centers not owned by the Company(8):
Kohl's —  83,000  83,000  
Vacant Anchors(7) —  120,000  120,000  
Total176  10,114,000  13,622,000  23,736,000  
_______________________________

(1)JCPenney announced plans to close their store at Green Acres Mall in 2020. The Company is actively releasing this site.
(2)Three of these five Sears stores are closing in early 2020. The Company continues to collect rent under the terms of the related leases. The Company is actively seeking replacement tenants for these Company-owned sites.
(3)Nordstrom has announced plans to open a 116,000 square foot store at Country Club Plaza in 2021.
(4)Forever 21 has announced plans to close two of these stores in early 2020 at Arrowhead Towne Center and Danbury Fair Mall. The Company is actively seeking replacement tenants for these Company-owned sites.
13


(5)The Lord & Taylor store closed at Tysons Corner Center in January 2020. The joint venture is actively evaluating redevelopment opportunities.
(6)Primark has announced plans to open a 47,000 square foot store at Fashion District Philadelphia in Spring 2021.
(7)The Company is actively seeking replacement tenants or has entered into replacement leases for many of these vacant sites and/or is currently executing on or considering redevelopment opportunities for these locations. The Company continues to collect rent under the terms of an agreement regarding one of these vacant Anchors.
(8)The Company owns an office building and six stores located at shopping centers not owned by the Company. Of these six stores, one has been leased to Kohl's, two are vacant and three have been leased for non-Anchor usage.
Environmental Matters
Each of the Centers has been subjected to an Environmental Site Assessment—Phase I (which involves review of publicly available information and general property inspections, but does not involve soil sampling or ground water analysis) completed by an environmental consultant.
Based on these assessments, and on other information, the Company is aware of the following environmental issues, which may result in potential environmental liability and cause the Company to incur costs in responding to these liabilities or in other costs associated with future investigation or remediation:
Asbestos.  The Company has conducted asbestos-containing materials ("ACM") surveys at various locations within the Centers. The surveys indicate that ACMs are present or suspected in certain areas, primarily vinyl floor tiles, mastics, roofing materials, drywall tape and joint compounds. The identified ACMs are generally non-friable, in good condition, and possess low probabilities for disturbance. At certain Centers where ACMs are present or suspected, however, some ACMs have been or may be classified as "friable," and ultimately may require removal under certain conditions. The Company has developed and implemented an operations and maintenance ("O&M") plan to manage ACMs in place.
Underground Storage Tanks.  Underground storage tanks ("USTs") are or were present at certain Centers, often in connection with tenant operations at gasoline stations or automotive tire, battery and accessory service centers located at such Centers. USTs also may be or have been present at properties neighboring certain Centers. Some of these tanks have either leaked or are suspected to have leaked. Where leakage has occurred, investigation, remediation, and monitoring costs may be incurred by the Company if responsible current or former tenants, or other responsible parties, are unavailable to pay such costs.
Chlorinated Hydrocarbons.  The presence of chlorinated hydrocarbons such as perchloroethylene ("PCE") and its degradation byproducts have been detected at certain Centers, often in connection with tenant dry cleaning operations. Where PCE has been detected, the Company may incur investigation, remediation and monitoring costs if responsible current or former tenants, or other responsible parties, are unavailable to pay such costs.
See "Item 1A. Risk Factors—Possible environmental liabilities could adversely affect us."
Insurance
Each of the Centers has comprehensive liability, fire, extended coverage and rental loss insurance with insured limits customarily carried for similar properties. The Company does not insure certain types of losses (such as losses from wars), because they are either uninsurable or not economically insurable. In addition, while the Company or the relevant joint venture, as applicable, carry specific earthquake insurance on the Centers located in California, the policies are subject to a deductible equal to 5% of the total insured value of each Center, a $100,000 per occurrence minimum and a combined annual aggregate loss limit of $100 million on these Centers. The Company or the relevant joint venture, as applicable, carry specific earthquake insurance on the Centers located in the Pacific Northwest and in the New Madrid Seismic Zone. However, the policies are subject to a deductible equal to 2% of the total insured value of each Center, a $50,000 per occurrence minimum and a combined annual aggregate loss limit of $100 million on these Centers. While the Company or the relevant joint venture also carries standalone terrorism insurance on the Centers, the policies are subject to a $25,000 deductible and a combined annual aggregate loss limit of $1.0 billion. Each Center has environmental insurance covering eligible third-party losses, remediation and non-owned disposal sites, subject to a $100,000 retention and a $50 million three-year aggregate loss limit, with the exception of one Center, which has a $5 million ten-year aggregate loss limit and another Center, which has a $20 million ten-year aggregate loss limit. Some environmental losses are not covered by this insurance because they are uninsurable or not economically insurable. Furthermore, the Company carries title insurance on substantially all of the Centers for generally less than their full value.
14


Qualification as a Real Estate Investment Trust
The Company elected to be taxed as a REIT under the Internal Revenue Code of 1986, as amended (the "Code"), commencing with its first taxable year ended December 31, 1994, and intends to conduct its operations so as to continue to qualify as a REIT under the Code. As a REIT, the Company generally will not be subject to federal and state income taxes on its net taxable income that it currently distributes to stockholders. Qualification and taxation as a REIT depends on the Company's ability to meet certain dividend distribution tests, share ownership requirements and various qualification tests prescribed in the Code.
Supplemental Material United States Federal Income Tax Considerations
The following discussion updates the disclosures under “Material United States Federal Income Tax Considerations” in the prospectus dated August 10, 2017 contained in the Company's Registration Statement on Form S-3 filed with the SEC on August 10, 2017, as previously updated by the disclosures under “Supplemental Material Federal Income Tax Considerations” in its Annual Report on Form 10-K for the year ended December 31, 2017 filed with the SEC on February 23, 2018 and its Annual Report on Form 10-K for the year ended December 31, 2018 filed with the SEC on February 25, 2019 (collectively, the “Base Disclosure”).
The Tax Cuts and Jobs Act (the "TCJA") repealed the rule, referenced under the heading “Taxable REIT Subsidiaries,” that limits a taxable REIT subsidiary’s ability to deduct interest payments made to the Company. The TCJA introduced a rule which may limit the deductibility of interest payments by the Company and its subsidiaries, including its Taxable REIT subsidiaries. However, certain tax elections may be available to a "real property trade or business" to have this rule not apply.
Recently promulgated proposed regulations make certain changes to the discussion of “qualified foreign pension funds” appearing under the heading “Taxation of Non-U.S. Stockholders–Dispositions of Stock”. Under the proposed regulations, entities that are wholly owned, directly or indirectly, by one or more qualified foreign pension funds are exempt from FIRPTA in the same manner as described in the Base Disclosure for qualified foreign pension funds. The proposed regulations also do not require an entity to provide annual information reporting about its beneficiaries to relevant local tax authorities in order to qualify as a qualified foreign pension fund as long as such information is either available to the taxing authorities or is provided to another government agency. These proposed regulations have not been finalized, may never be finalized, and may be rescinded at any time, but taxpayers may rely on them while they are proposed, provided they apply them consistently and accurately.
The TCJA introduced a rule which expanded the scope of the $1 million limitation on corporate tax deductions and repealed the exclusion for performance-based compensation (the "section 162(m) limitation"). Proposed regulations were issued in late 2019 which may cause the Company to be subject to the section 162(m) limitation.
Employees
As of December 31, 2019, the Company had approximately 737 employees, of which approximately 723 were full-time. The Company believes that relations with its employees are good.
Seasonality
The shopping center industry is seasonal in nature, particularly in the fourth quarter during the holiday season when retailer occupancy and retail sales are typically at their highest levels. In addition, shopping malls achieve a substantial portion of their specialty (temporary retailer) rents during the holiday season and the majority of percentage rent is recognized in the fourth quarter. As a result of the above, earnings are generally higher in the fourth quarter.
Sustainability
A recognized leader in sustainability, the Company has achieved the #1 Global Real Estate Sustainability Benchmark (GRESB) ranking in the North American Retail Sector for five straight years 2015 – 2019. Additional information about the Company’s Environmental, Social and Governance programs can be obtained from the Company's website at www.macerich.com.

15


Available Information; Website Disclosure; Corporate Governance Documents
The Company's corporate website address is www.macerich.com. The Company makes available free-of-charge through this website its reports on Forms 10-K, 10-Q and 8-K and all amendments thereto, as soon as reasonably practicable after the reports have been filed with, or furnished to, the SEC. These reports are available under the heading "Investors—Financial Information—SEC Filings", through a free hyperlink to a third-party service. Information provided on our website is not incorporated by reference into this Form 10-K. The following documents relating to Corporate Governance are available on the Company's website at www.macerich.com under "Investors—Corporate Governance":
Guidelines on Corporate Governance
Code of Business Conduct and Ethics
Code of Ethics for CEO and Senior Financial Officers
Audit Committee Charter
Compensation Committee Charter
Executive Committee Charter
Nominating and Corporate Governance Committee Charter
You may also request copies of any of these documents by writing to:
Attention: Corporate Secretary
The Macerich Company
401 Wilshire Blvd., Suite 700
Santa Monica, CA 90401

 ITEM 1A.    RISK FACTORS
The following factors could cause our actual results to differ materially from those contained in forward-looking statements made in this Annual Report on Form 10-K and presented elsewhere by our management from time to time. This list should not be considered to be a complete statement of all potential risks or uncertainties as it does not describe additional risks of which we are not presently aware or that we do not currently consider material. We may update our risk factors from time to time in our future periodic reports. Any of these factors may have a material adverse effect on our business, financial condition, operating results and cash flows. For purposes of this “Risk Factor” section, Centers wholly owned by us are referred to as “Wholly Owned Centers” and Centers that are partly but not wholly owned by us are referred to as “Joint Venture Centers.”
RISKS RELATED TO OUR BUSINESS AND PROPERTIES
We invest primarily in shopping centers, which are subject to a number of significant risks that are beyond our control.
Real property investments are subject to varying degrees of risk that may affect the ability of our Centers to generate sufficient revenues to meet operating and other expenses, including debt service, lease payments, capital expenditures and tenant improvements, and to make distributions to us and our stockholders. A number of factors may decrease the income generated by the Centers, including:
the national economic climate;
the regional and local economy (which may be negatively impacted by rising unemployment, declining real estate values, increased foreclosures, higher taxes, plant closings, industry slowdowns, union activity, adverse weather conditions, natural disasters and other factors);
local real estate conditions (such as an oversupply of, or a reduction in demand for, retail space or retail goods, decreases in rental rates, declining real estate values and the availability and creditworthiness of current and prospective tenants);
decreased levels of consumer spending, consumer confidence, and seasonal spending (especially during the holiday season when many retailers generate a disproportionate amount of their annual sales);
increasing use by customers of e-commerce and online store sites and the impact of internet sales on the demand for retail space;
negative perceptions by retailers or shoppers of the safety, convenience and attractiveness of a Center;
acts of violence, including terrorist activities; and
16


increased costs of maintenance, insurance and operations (including real estate taxes).
Income from shopping center properties and shopping center values are also affected by applicable laws and regulations, including tax, environmental, safety and zoning laws.
A significant percentage of our Centers are geographically concentrated and, as a result, are sensitive to local economic and real estate conditions.
A significant percentage of our Centers are located in California and Arizona. Nine Centers in the aggregate are located in New York, New Jersey and Connecticut. To the extent that weak economic or real estate conditions or other factors affect California, Arizona, New York, New Jersey or Connecticut (or their respective regions) more severely than other areas of the country, our financial performance could be negatively impacted.
We are in a competitive business.
Numerous owners, developers and managers of malls, shopping centers and other retail-oriented real estate compete with us for the acquisition of properties and in attracting tenants or Anchors to occupy space. There are a number of other publicly traded mall companies and several large private mall companies in the United States, any of which under certain circumstances could compete against us for an Anchor or a tenant. In addition, these companies, as well as other REITs, private real estate companies or investors compete with us in terms of property acquisitions. This results in competition both for the acquisition of properties or centers and for tenants or Anchors to occupy space. Competition for property acquisitions may result in increased purchase prices and may adversely affect our ability to make suitable property acquisitions on favorable terms or at all. The existence of competing shopping centers could have a material adverse impact on our ability to lease space and on the rental rates that can be achieved. There is also increasing competition for tenants and shoppers from other retail formats and technologies, such as lifestyle centers, power centers, outlet centers, e-commerce, home shopping networks, catalogs, telemarketing and discount shopping clubs that could adversely affect our revenues.
We may be unable to renew leases, lease vacant space or re-let space as leases expire on favorable terms or at all, which could adversely affect our financial condition and results of operations.
There are no assurances that our leases will be renewed or that vacant space in our Centers will be re-let at net effective rental rates equal to or above the current average net effective rental rates or that substantial rent abatements, tenant improvements, early termination rights or below-market renewal options will not be offered to attract new tenants or retain existing tenants. If the rental rates at our Centers decrease, if our existing tenants do not renew their leases or if we do not re-let a significant portion of our available space and space for which leases will expire, our financial condition and results of operations could be adversely affected.
If Anchors or other significant tenants experience a downturn in their business, close or sell stores or declare bankruptcy, our financial condition and results of operations could be adversely affected.
Our financial condition and results of operations could be adversely affected if a downturn in the business of, or the bankruptcy or insolvency of, an Anchor or other significant tenant leads them to close retail stores or terminate their leases after seeking protection under the bankruptcy laws from their creditors, including us as lessor. In recent years, a number of companies in the retail industry, including some of our tenants, have declared bankruptcy, have gone out of business, have significantly reduced their brick-and-mortar presence or failed to comply with their contractual obligations to us and others. If one of our tenants files for bankruptcy, we may not be able to collect amounts owed by that party prior to filing for bankruptcy. We may make lease modifications either pre- or post-bankruptcy for certain tenants undergoing significant financial distress in order for them to continue as a going concern. In addition, after filing for bankruptcy, a tenant may terminate any or all of its leases with us, in which event we would have a general unsecured claim against such tenant that would likely be worth less than the full amount owed to us for the remainder of the lease term. Furthermore, we may be required to incur significant expense in re-letting the space vacated by a bankrupt tenant and may not be able to release the space on similar terms or at all. The bankruptcy of a tenant, particularly an Anchor, may require a substantial redevelopment of their space, the success of which cannot be assured, and may make the re-letting of their space difficult and costly, and it may also be difficult to lease the remainder of the space at the affected property.
On October 15, 2018, Sears filed for bankruptcy and announced additional store closings. At the time of the bankruptcy filing, we had 21 Sears stores in our portfolio totaling approximately 3.1 million square feet and accounting for less than 1% of the Company’s total leasing revenue. As of December 31, 2019, we recaptured ten Sears locations, including seven through our joint venture with Seritage Growth Properties ("Seritage"), through formal lease rejections and lease terminations. We anticipate aggregate redevelopment investments at several of these locations of $130.0 million to $160.0 million (at our pro rata share) over the next several years. New tenants are expected to open at several projects in 2020. In early 2020, Sears will be closing five additional locations, including three stores in which we have an ownership interest and two that are owned by
17


Seritage and not by us. Sears will continue to pay rent on these locations in which we have an ownership interest. We are actively seeking replacement tenants for these Company-owned sites. Although, in the short-term, the bankruptcy of an Anchor such as Sears may lead to lost base rent and the triggering of co-tenancy clauses, there is also the potential to create additional future value through the recapturing of space and releasing that space to new tenants at higher rents per square foot, which we have demonstrated through our joint venture with Seritage and the completed redevelopment of a former Sears store at Kings Plaza Shopping Center in July 2018.
On September 29, 2019, Forever 21, Inc. filed for Chapter 11 bankruptcy. At the time of the bankruptcy filing, we had 29 Forever 21 stores in our portfolio totaling approximately 1.2 million square feet. As of December 31, 2019, Forever 21 stores represented 1.4% of our total minimum and percentage rental revenues. We are in ongoing discussions with Forever 21 regarding the status of these stores. Based on a court filing dated October 28, 2019, we expect that four of the Forever 21 stores will close, three of which are owned by us, and one of which is not owned by us. We anticipate that we may provide certain rent concessions in connection with a number of the remaining stores. We are actively seeking replacement tenants for these Company-owned sites.
Furthermore, certain department stores and other national retailers have experienced, and may continue to experience, decreases in customer traffic in their retail stores, increased competition from alternative retail options such as e-commerce and other forms of pressure on their business models. If the store sales of retailers operating at our Centers decline significantly due to adverse economic conditions or for any other reason, tenants might be unable to pay their minimum rents or expense recovery charges. In the event of a default by a lessee, the affected Center may experience delays and costs in enforcing its rights as lessor.
Anchors and/or tenants at one or more Centers might also terminate their leases as a result of mergers, acquisitions, consolidations or dispositions in the retail industry. The sale of an Anchor or store to a less desirable retailer may reduce occupancy levels, customer traffic and rental income. Depending on economic conditions, there is also a risk that Anchors or other significant tenants may sell stores operating in our Centers or consolidate duplicate or geographically overlapping store locations. Store closures by an Anchor and/or a significant number of tenants may allow other Anchors and/or certain other tenants to terminate their leases, receive reduced rent and/or cease operating their stores at the Center or otherwise adversely affect occupancy at the Center.
Our real estate acquisition, development and redevelopment strategies may not be successful.
Our historical growth in revenues, net income and funds from operations has been in part tied to the acquisition, development and redevelopment of shopping centers. Many factors, including the availability and cost of capital, our total amount of debt outstanding, our ability to obtain financing on attractive terms, if at all, interest rates and the availability of attractive acquisition targets, among others, will affect our ability to acquire, develop and redevelop additional properties in the future. We may not be successful in pursuing acquisition opportunities, and newly acquired properties may not perform as well as expected. Expenses arising from our efforts to complete acquisitions, develop and redevelop properties or increase our market penetration may have a material adverse effect on our business, financial condition and results of operations. We face competition for acquisitions primarily from other REITs, as well as from private real estate companies or investors. Some of our competitors have greater financial and other resources. Increased competition for shopping center acquisitions may result in increased purchase prices and may impact adversely our ability to acquire additional properties on favorable terms. We cannot guarantee that we will be able to implement our growth strategy successfully or manage our expanded operations effectively and profitably.
We may not be able to achieve the anticipated financial and operating results from newly acquired assets. Some of the factors that could affect anticipated results are:
our ability to integrate and manage new properties, including increasing occupancy rates and rents at such properties;
the disposal of non-core assets within an expected time frame; and
our ability to raise long-term financing to implement a capital structure at a cost of capital consistent with our business strategy.
Our business strategy also includes the selective development and construction of retail properties. On a selective basis, our business strategy may include mixed-use densification to maximize space at our Regional Shopping Centers, including by developing available land at our Regional Shopping Centers or by demolishing underperforming department store boxes and redeveloping the land. Any development, redevelopment and construction activities that we may undertake will be subject to the risks of real estate development, including lack of financing, construction delays, environmental requirements, budget overruns, sunk costs and lease-up. Furthermore, occupancy rates and rents at a newly completed property may not be
18


sufficient to make the property profitable. Real estate development activities are also subject to risks relating to the inability to obtain, or delays in obtaining, all necessary zoning, land-use, building, and occupancy and other required governmental permits and authorizations. Additionally, if we elect to pursue a "mixed-use" redevelopment, we expose ourselves to risks associated with each non-retail use (e.g., office, residential, hotel and entertainment). If any of the above events occur, our ability to pay dividends to our stockholders and service our indebtedness could be adversely affected.
Excess space at our properties could materially and adversely affect us.
Certain of our properties have had excess space available for prospective tenants, and those properties may continue to experience, and other properties may commence experiencing, such oversupply in the future. Among other causes, (1) there has been an increased number of bankruptcies of Anchors and other national retailers, as well as store closures, and (2) there has been lower demand from retail tenants for space, due to certain retailers increasing their use of e-commerce websites to distribute their merchandise. As a result of the increased bargaining power of creditworthy retail tenants, there is a downward pressure on our rental rates and occupancy levels, and this increased bargaining power may also result in us having to increase our spend on tenant improvements and potentially make other lease modifications, any of which, in the aggregate, could materially and adversely affect us.
Real estate investments are relatively illiquid and we may be unable to sell properties at the time we desire and on favorable terms.
Investments in real estate are relatively illiquid, which limits our ability to adjust our portfolio in response to changes in economic, market or other conditions. Moreover, there are some limitations under federal income tax laws applicable to REITs that limit our ability to sell assets. In addition, because our properties are generally mortgaged to secure our debts, we may not be able to obtain a release of a lien on a mortgaged property without the payment of the associated debt and/or a substantial prepayment penalty, which restricts our ability to dispose of a property, even though the sale might otherwise be desirable. Furthermore, the number of prospective buyers interested in purchasing shopping centers is limited. Therefore, if we want to sell one or more of our Centers, we may not be able to dispose of it in the desired time period and may receive less consideration than we originally invested in the Center.
Our real estate assets may be subject to impairment charges.
We periodically assess whether there are any indicators, including property operating performance, changes in anticipated holding period and general market conditions, that the value of our real estate assets and other investments may be impaired. A property’s value is considered to be impaired only if the estimated aggregate future undiscounted and unleveraged property cash flows, taking into account the anticipated probability weighted average holding period, are less than the carrying value of the property. In our estimate of cash flows, we consider trends and prospects for a property and the effects of demand and competition on expected future operating income. If we are evaluating the potential sale of an asset or redevelopment alternatives, the undiscounted future cash flows consider the most likely course of action as of the balance sheet date based on current plans, intended holding periods and available market information. We are required to make subjective assessments as to whether there are impairments in the value of our real estate assets and other investments. Impairment charges have an immediate direct impact on our earnings. There can be no assurance that we will not take additional charges in the future related to the impairment of our assets. Any future impairment could have a material adverse effect on our operating results in the period in which the charge is recognized.
Our success depends, in part, on our ability to attract and retain talented employees, and the loss of any one of our key personnel could adversely impact our business.
The success of our business depends, in part, on the leadership and performance of our executive management team and key employees, and our ability to attract, retain and motivate talented employees could significantly impact our future performance. Competition for these individuals is intense, and we cannot assure you that we will retain our executive management team and key employees or that we will be able to attract and retain other highly qualified individuals for these positions in the future. Losing any one or more of these persons could have a material adverse effect on our results of operations, financial condition and cash flows.
Possible environmental liabilities could adversely affect us.
Under various federal, state and local environmental laws, ordinances and regulations, a current or previous owner or operator of real property may be liable for the costs of removal or remediation of hazardous or toxic substances on, under or in that real property. These laws often impose liability whether or not the owner or operator knew of, or was responsible for, the presence of hazardous or toxic substances. The costs of investigation, removal or remediation of hazardous or toxic substances may be substantial. In addition, the presence of hazardous or toxic substances, or the failure to remedy environmental hazards
19


properly, may adversely affect the owner's or operator's ability to sell or rent affected real property or to borrow money using affected real property as collateral.
Persons or entities that arrange for the disposal or treatment of hazardous or toxic substances may also be liable for the costs of removal or remediation of hazardous or toxic substances at the disposal or treatment facility, whether or not that facility is owned or operated by the person or entity arranging for the disposal or treatment of hazardous or toxic substances. Laws exist that impose liability for release of asbestos containing materials (“ACMs”) into the air, and third parties may seek recovery from owners or operators of real property for personal injury associated with exposure to ACMs. In connection with our ownership, operation, management, development and redevelopment of the Centers, or any other centers or properties we acquire in the future, we may be potentially liable under these laws and may incur costs in responding to these liabilities.
Some of our properties are subject to potential natural or other disasters.
Some of our Centers are located in areas that are subject to natural disasters, including our Centers in California or in other areas with higher risk of earthquakes, our Centers in flood plains or in areas that may be adversely affected by tornadoes, as well as our Centers in coastal regions that may be adversely affected by increases in sea levels or in the frequency or severity of hurricanes, tropical storms or other severe weather conditions. The occurrence of natural disasters can delay redevelopment or development projects, increase investment costs to repair or replace damaged properties, increase future property insurance costs and negatively impact the tenant demand for lease space. If insurance is unavailable to us or is unavailable on acceptable terms, or our insurance is not adequate to cover losses from these events, our financial condition and results of operations could be adversely affected.
Uninsured losses could adversely affect our financial condition.
Each of our Centers has comprehensive liability, fire, extended coverage and rental loss insurance with insured limits customarily carried for similar properties. We do not insure certain types of losses (such as losses from wars), because they are either uninsurable or not economically insurable. In addition, while we or the relevant joint venture, as applicable, carry specific earthquake insurance on the Centers located in California, the policies are subject to a deductible equal to 5% of the total insured value of each Center, a $100,000 per occurrence minimum and a combined annual aggregate loss limit of $100 million on these Centers. We or the relevant joint venture, as applicable, carry specific earthquake insurance on the Centers located in the Pacific Northwest and in the New Madrid Seismic Zone. However, the policies are subject to a deductible equal to 2% of the total insured value of each Center, a $50,000 per occurrence minimum and a combined annual aggregate loss limit of $100 million on these Centers. While we or the relevant joint venture also carries standalone terrorism insurance on the Centers, the policies are subject to a $25,000 deductible and a combined annual aggregate loss limit of $1.0 billion. Each Center has environmental insurance covering eligible third-party losses, remediation and non-owned disposal sites, subject to a $100,000 retention and a $50 million three-year aggregate loss limit, with the exception of one Center, which has a $5 million ten-year aggregate loss limit and another Center has a $20 million ten-year aggregate loss limit. Some environmental losses are not covered by this insurance because they are uninsurable or not economically insurable. Furthermore, we carry title insurance on substantially all of the Centers for generally less than their full value.
If an uninsured loss or a loss in excess of insured limits occurs, we could lose all or a portion of the capital we have invested in a property, as well as the anticipated future revenue from the property, but may remain obligated for any mortgage debt or other financial obligations related to the property.
We face risks associated with and have been the target of security breaches through cyber attacks, cyber intrusions or otherwise, as well as other significant disruptions of our information technology (IT) networks and related systems.
We face risks associated with and have been the target of security breaches, whether through cyber attacks or cyber intrusions over the Internet, malware, computer viruses, attachments to e-mails, persons inside our organization or persons with access to systems inside our organization, and other significant disruptions of our IT networks and related systems. The risk of a security breach or disruption, particularly through cyber attack or cyber intrusion, including by computer hackers, foreign governments and cyber terrorists, has generally increased as the number, intensity and sophistication of attempted attacks and intrusions from around the world have increased. Our IT networks and related systems are essential to the operation of our business and our ability to perform day-to-day operations and, in some cases, may be critical to the operations of certain of our tenants. Although we make efforts to maintain the security and integrity of these types of IT networks and related systems, and we have implemented various measures to manage the risk of a security breach or disruption, there can be no assurance that our security efforts and measures will be effective or that attempted security breaches or disruptions would not be successful or damaging. A security breach or other significant disruption involving our IT networks and related systems could disrupt the proper functioning of our networks and systems; result in misstated financial reports, violations of loan covenants and/or missed reporting deadlines; result in our inability to properly monitor our compliance with the rules and regulations regarding our qualification as a REIT; result in the unauthorized access to, and destruction, loss, theft, misappropriation or release of
20


proprietary, confidential, sensitive or otherwise valuable information of ours or others, which others could use to compete against us or for disruptive, destructive or otherwise harmful purposes and outcomes; require significant management attention and resources to remedy any damages that result; subject us to claims for breach of contract, damages, credits, penalties or termination of leases or other agreements; or damage our reputation among our tenants and investors generally. Moreover, cyber attacks perpetrated against our Anchors and tenants, including unauthorized access to customers’ credit card data and other confidential information, could diminish consumer confidence and consumer spending and negatively impact our business.
Compliance with the Americans with Disabilities Act and fire, safety and other regulations may require us to make expenditures that adversely affect our cash flows.
All of the properties in our portfolio are required to comply with the Americans with Disabilities Act (“ADA”). The ADA has separate compliance requirements for “public accommodations” and “commercial facilities,” but generally requires that buildings be made accessible to people with disabilities. Compliance with the ADA requirements could require removal of access barriers, and non-compliance could result in the imposition of fines by the United States government or an award of damages to private litigants, or both. While the tenants to whom our portfolio is leased are obligated to comply with ADA provisions, within their leased premises, if required changes within their leased premises involve greater expenditures than anticipated, or if the changes must be made on a more accelerated basis than anticipated, the ability of tenants to cover costs could be adversely affected. Furthermore, we are required to comply with ADA requirements within the common areas of the properties in our portfolio and we may not be able to pass on to our tenants any costs necessary to remediate any common area ADA issues. As a result, we could be required to expend funds to comply with the provisions of the ADA, which could adversely affect our financial condition and operating results. In addition, we are required to operate the properties in compliance with fire and safety regulations, building codes and other land use regulations, as they may be adopted by governmental agencies and bodies and become applicable to our portfolio. We may be required to make substantial capital expenditures to comply with, and we may be restricted in our ability to renovate or redevelop the properties subject to, those requirements. The resulting expenditures and restrictions could have a material adverse effect on our ability to meet our financial obligations.
Possible terrorist activity or other acts or threats of violence and threats to public safety could adversely affect our financial condition and results of operations.
Terrorist attacks and threats of terrorist attacks in the United States or other acts or threats of violence may result in declining economic activity, which could harm the demand for goods and services offered by our tenants and the value of our properties and might adversely affect the value of an investment in our securities. Such a resulting decrease in retail demand could make it difficult for us to renew or re-lease our properties.
Terrorist activities or violence also could directly affect the value of our properties through damage, destruction or loss, and the availability of insurance for such acts, or of insurance generally, might be reduced or cost more, which could increase our operating expenses and adversely affect our financial condition and results of operations. To the extent that our tenants are affected by such attacks and threats of attacks, their businesses similarly could be adversely affected, including their ability to continue to meet obligations under their existing leases. These acts and threats might erode business and consumer confidence and spending and might result in increased volatility in national and international financial markets and economies. Any one of these events might decrease demand for real estate, decrease or delay the occupancy of our new or redeveloped properties, and limit our access to capital or increase our cost of raising capital.
Inflation may adversely affect our financial condition and results of operations.
If inflation increases in the future, we may experience any or all of the following:
Difficulty in replacing or renewing expiring leases with new leases at higher rents;
Decreasing tenant sales as a result of decreased consumer spending which could adversely affect the ability of our tenants to meet their rent obligations and/or result in lower percentage rents; and
An inability to receive reimbursement from our tenants for their share of certain operating expenses, including common area maintenance, real estate taxes and insurance.
Inflation also poses a risk to us due to the possibility of future increases in interest rates. Such increases would adversely impact us due to our outstanding floating-rate debt as well as result in higher interest rates on new fixed-rate debt. In certain cases, we may limit our exposure to interest rate fluctuations related to a portion of our floating-rate debt by the use of interest rate cap and swap agreements. Such agreements, subject to current market conditions, allow us to replace floating-rate debt with fixed-rate debt in order to achieve our desired ratio of floating-rate to fixed-rate debt. However, in an increasing
21


interest rate environment the fixed rates we can obtain with such replacement fixed-rate cap and swap agreements or the fixed-rate on new debt will also continue to increase.
We have substantial debt that could affect our future operations.
Our total outstanding loan indebtedness at December 31, 2019 was $8.1 billion (consisting of $5.2 billion of consolidated debt, less $359.1 million attributable to noncontrolling interests, plus $3.2 billion of our pro rata share of mortgages and other notes payable on unconsolidated joint ventures). As a result of this substantial indebtedness, we are required to use a material portion of our cash flow to service principal and interest on our debt, which limits the amount of cash available for other business opportunities. We are also subject to the risks normally associated with debt financing, including the risk that our cash flow from operations will be insufficient to meet required debt service and that rising interest rates could adversely affect our debt service costs. In addition, our use of interest rate hedging arrangements may expose us to additional risks, including that the counterparty to the arrangement may fail to honor its obligations and that termination of these arrangements typically involves costs such as transaction fees or breakage costs. There can be no assurance that our hedging activities will have the desired impact on our results of operations, liquidity or financial condition. Furthermore, most of our Centers are mortgaged to secure payment of indebtedness, and if income from the Center is insufficient to pay that indebtedness, the Center could be foreclosed upon by the mortgagee resulting in a loss of income and a decline in our total asset value. Certain Centers also have debt that could become recourse debt to us if the Center is unable to discharge such debt obligation and, in certain circumstances, we may incur liability with respect to such debt greater than our legal ownership.
We are obligated to comply with financial and other covenants that could affect our operating activities.
Our unsecured credit facilities contain financial covenants, including interest coverage requirements, as well as limitations on our ability to incur debt, make dividend payments and make certain acquisitions. These covenants may restrict our ability to pursue certain business initiatives or certain transactions that might otherwise be advantageous. In addition, failure to meet certain of these financial covenants could cause an event of default, which, if not cured or waived, could accelerate some or all of such indebtedness which could have a material adverse effect on us.
We depend on external financings for our growth and ongoing debt service requirements.
We depend primarily on external financings, principally debt financings and, in more limited circumstances, equity financings, to fund the growth of our business and to ensure that we can meet ongoing maturities of our outstanding debt. Our access to financing depends on the willingness of banks, lenders and other institutions to lend to us based on their underwriting criteria which can fluctuate with market conditions and on conditions in the capital markets in general. In addition, levels of market disruption and volatility could materially adversely impact our ability to access the capital markets for equity financings.
There are no assurances that we will continue to be able to obtain the financing we need for future growth or to meet our debt service as obligations mature, or that the financing will be available to us on acceptable terms, or at all. Any debt refinancing could also impose more restrictive terms.
We may be adversely affected by the potential discontinuation of LIBOR.
In July 2017, the Financial Conduct Authority (the “FCA”) announced it intends to stop compelling banks to submit rates for the calculation of LIBOR after 2021. As a result, the Federal Reserve Board and the Federal Reserve Bank of New York organized the Alternative Reference Rates Committee which identified the Secured Overnight Financing Rate (“SOFR”) as its preferred alternative to USD-LIBOR. We are not able to predict when LIBOR will cease to be published or precisely how SOFR will be calculated and published. Any changes adopted by the FCA or other governing bodies in the method used for determining LIBOR may result in a sudden or prolonged increase or decrease in reported LIBOR. If that were to occur, our interest payments could change. In addition, uncertainty about the extent and manner of future changes may result in interest rates and/or payments that are higher or lower than if LIBOR were to remain available in its current form.
We have contracts that are indexed to LIBOR and are monitoring and evaluating the related risks, which include interest amounts on our variable rate debt, the variable rate debt of our joint ventures and the swap rate for our interest rate swaps. In the event that LIBOR is discontinued, the interest rates will be based on an alternative variable rate specified in the applicable documentation governing such debt or swaps or as otherwise agreed upon. Such an event would not affect our ability to borrow or maintain already outstanding borrowings or swaps, but the alternative variable rate could be higher and more volatile than LIBOR prior to its discontinuance.
Certain risks arise in connection with transitioning contracts to an alternative variable rate, including any resulting value transfer that may occur. The value of loans, securities, or derivative instruments tied to LIBOR could also be impacted if LIBOR is limited or discontinued. For some instruments, the method of transitioning to an alternative rate may be challenging, as they may require substantial negotiation with each respective counterparty.
22


If a contract is not transitioned to an alternative variable rate and LIBOR is discontinued, the impact is likely to vary by contract. If LIBOR is discontinued or if the method of calculating LIBOR changes from its current form, interest rates on our current or future indebtedness may be adversely affected.
While we expect LIBOR to be available in substantially its current form until the end of 2021, it is possible that LIBOR will become unavailable prior to that point. This could result, for example, if sufficient banks decline to make submissions to the LIBOR administrator. In that case, the risks associated with the transition to an alternative variable rate will be accelerated and magnified.
RISKS RELATED TO OUR ORGANIZATIONAL STRUCTURE

Certain individuals have substantial influence over the management of both us and the Operating Partnership, which may create conflicts of interest.
Under the limited partnership agreement of the Operating Partnership, we, as the sole general partner, are responsible for the management of the Operating Partnership's business and affairs. Conflicts of interest may exist or could arise in the future as a result of the relationships between us and our affiliates, on the one hand, and our Operating Partnership or any of its partners, on the other. Our directors and officers have duties to our Company under Maryland law in connection with their management of our Company. At the same time, we have duties and obligations to our Operating Partnership and its limited partners under Delaware law as modified by the partnership agreement of our Operating Partnership in connection with the management of our Operating Partnership as the sole general partner. Our duties and obligations as the general partner of our Operating Partnership may come into conflict with the duties of our directors and officers to our Company and our stockholders.
Outside partners in Joint Venture Centers result in additional risks to our stockholders.
We own partial interests in property partnerships that own 23 Joint Venture Centers as well as several development sites. We may acquire partial interests in additional properties through joint venture arrangements. Investments in Joint Venture Centers involve risks different from those of investments in Wholly Owned Centers.
We have fiduciary responsibilities to our joint venture partners that could affect decisions concerning the Joint Venture Centers. Our partners in certain Joint Venture Centers (notwithstanding our majority legal ownership) share control of major decisions relating to the Joint Venture Centers, including decisions with respect to sales, refinancings and the timing and amount of additional capital contributions, as well as decisions that could have an adverse impact on us.
In addition, we may lose our management and other rights relating to the Joint Venture Centers if:
we fail to contribute our share of additional capital needed by the property partnerships; or
we default under a partnership agreement for a property partnership or other agreements relating to the property partnerships or the Joint Venture Centers. 
Furthermore, the bankruptcy of one of the other investors in our Joint Venture Centers could materially and adversely affect the respective property or properties. Pursuant to the bankruptcy code, we could be precluded from taking some actions affecting the estate of the other investor without prior court approval which would, in most cases, entail prior notice to other parties and a hearing. At a minimum, the requirement to obtain court approval may delay the actions we would or might want to take. If the relevant joint venture through which we have invested in a Joint Venture Center has incurred recourse obligations, the discharge in bankruptcy of one of the other investors might result in our ultimate liability for a greater portion of those obligations than would otherwise be required.
Our legal ownership interest in a joint venture vehicle may, at times, not equal our economic interest in the entity because of various provisions in certain joint venture agreements regarding distributions of cash flow based on capital account balances, allocations of profits and losses and payments of preferred returns. As a result, our actual economic interest (as distinct from our legal ownership interest) in certain of the Joint Venture Centers could fluctuate from time to time and may not wholly align with our legal ownership interests. Substantially all of our joint venture agreements contain rights of first refusal, buy-sell provisions, exit rights, default dilution remedies and/or other break up provisions or remedies which are customary in real estate joint venture agreements and which may, positively or negatively, affect the ultimate realization of cash flow and/or capital or liquidation proceeds.
23


Our holding company structure makes us dependent on distributions from the Operating Partnership.
Because we conduct our operations through the Operating Partnership, our ability to service our debt obligations and pay dividends to our stockholders is strictly dependent upon the earnings and cash flows of the Operating Partnership and the ability of the Operating Partnership to make distributions to us. Under the Delaware Revised Uniform Limited Partnership Act, the Operating Partnership is prohibited from making any distribution to us to the extent that at the time of the distribution, after giving effect to the distribution, all liabilities of the Operating Partnership (other than some non-recourse liabilities and some liabilities to the partners) exceed the fair value of the assets of the Operating Partnership. An inability to make cash distributions from the Operating Partnership could jeopardize our ability to maintain qualification as a REIT.
An ownership limit and certain of our Charter and bylaw provisions could inhibit a change of control or reduce the value of our common stock.
The Ownership Limit. In order for us to maintain our qualification as a REIT, not more than 50% in value of our outstanding stock (after taking into account certain options to acquire stock) may be owned, directly or indirectly or through the application of certain attribution rules, by five or fewer individuals (as defined in the Internal Revenue Code of 1986, as amended, (the "Code") to include some entities that would not ordinarily be considered “individuals”) at any time during the last half of a taxable year. To assist us in maintaining our qualification as a REIT, among other purposes, our Charter restricts ownership of more than 5% (the “Ownership Limit”) of the lesser of the number or value of our outstanding shares of stock by any single stockholder or a group of stockholders (with limited exceptions). In addition to enhancing preservation of our status as a REIT, the Ownership Limit may:
have the effect of delaying, deferring or preventing a change in control of us or other transaction without the approval of our board of directors, even if the change in control or other transaction is in the best interests of our stockholders; and
limit the opportunity for our stockholders to receive a premium for their common stock or preferred stock that they might otherwise receive if an investor were attempting to acquire a block of stock in excess of the Ownership Limit or otherwise effect a change in control of us.
Our board of directors, in its sole discretion, may waive or modify (subject to limitations and upon any conditions as it may direct) the Ownership Limit with respect to one or more of our stockholders, if it is satisfied that ownership in excess of this limit will not jeopardize our status as a REIT.
Selected Provisions of our Charter and bylaws. Some of the provisions of our Charter and bylaws may have the effect of delaying, deferring or preventing a third party from making an acquisition proposal for us and may inhibit a change in control that holders of some, or a majority, of our shares might believe to be in their best interests or that could give our stockholders the opportunity to realize a premium over the then-prevailing market prices for our shares. These provisions include the following:
advance notice requirements for stockholder nominations of directors and stockholder proposals to be considered at stockholder meetings;
the obligation of our directors to consider a variety of factors with respect to a proposed business combination or other change of control transaction;
the authority of our directors to classify or reclassify unissued shares and cause the Company to issue shares of one or more classes or series of common stock or preferred stock;
the authority of our directors to create and cause the Company to issue rights entitling the holders thereof to purchase shares of stock or other securities from us; and
limitations on the amendment of our Charter, the change in control of us, and the liability of our directors and officers.
Certain provisions of Maryland law could inhibit a change in control or reduce the value of our common stock.
Certain provisions of the Maryland General Corporation Law (the “MGCL”) may have the effect of delaying, deferring or preventing a third party from making an acquisition proposal for us and may inhibit a change in control that holders of some, or a majority, of our shares might believe to be in their best interests or that could give our stockholders the opportunity to realize a premium over the then-prevailing market prices for our shares, including:
24


“Business Combination” provisions that, subject to limitations, prohibit certain business combinations between us and an “interested stockholder” (defined generally as any person who beneficially owns 10% or more of the voting power of our outstanding voting stock or an affiliate or associate of ours who, at any time within the two-year period immediately prior to the date in question, was the beneficial owner of 10% or more of our then outstanding stock) or an affiliate of an interested stockholder for five years after the most recent date on which the stockholder becomes an interested stockholder, and thereafter may impose special appraisal rights and special stockholder voting requirements on these combinations; and
“Control Share” provisions that provide that holders of “control shares” of our Company (defined as shares which, when aggregated with other shares controlled by the stockholder, entitle the stockholder to exercise one of three increasing ranges of voting power in electing directors) acquired in a “control share acquisition” (defined as the direct or indirect acquisition of ownership or control of “control shares”) have no voting rights except to the extent approved by our stockholders by the affirmative vote of at least two-thirds of all the votes entitled to be cast on the matter, excluding all interested shares.
As permitted by the MGCL, our Charter exempts from the “business combination” provisions any business combination between us and the principals and their respective affiliates and related persons. The MGCL also allows the board of directors to exempt particular business combinations before the interested stockholder becomes an interested stockholder. Furthermore, a person is not an interested stockholder if the transaction by which he or she would otherwise have become an interested stockholder is approved in advance by the board of directors.
Additionally, pursuant to a provision in our bylaws, we have opted out of the “control share” acquisition provisions of the MGCL. However, in the future, we may, without the approval of our stockholders, by amendment to our bylaws, opt in to the control share provisions of the MGCL. The MGCL and our Charter also contain supermajority voting requirements with respect to our ability to amend certain provisions of our Charter, merge, or sell all or substantially all of our assets.
Furthermore, our board of directors has adopted a resolution prohibiting us from electing to be subject to the provisions of Title 3, Subtitle 8 of the MGCL that would, among other things, permit our board of directors to classify the board without stockholder approval. Such provisions of Title 3, Subtitle 8 of the MGCL could have an anti-takeover effect. We may only elect to be subject to the classified board provisions of Title 3, Subtitle 8 after first obtaining the approval of our stockholders.
FEDERAL INCOME TAX RISKS
The tax consequences of the sale of some of the Centers and certain holdings of the principals may create conflicts of interest.
The principals will experience negative tax consequences if some of the Centers are sold. As a result, the principals may not favor a sale of these Centers even though such a sale may benefit our other stockholders. In addition, the principals may have different interests than our stockholders because they are significant holders of limited partnership units in the Operating Partnership.
If we were to fail to qualify as a REIT, we would have reduced funds available for distributions to our stockholders.
We believe that we currently qualify as a REIT. No assurance can be given that we will remain qualified as a REIT. Qualification as a REIT involves the application of highly technical and complex Code provisions for which there are only limited judicial or administrative interpretations. The complexity of these provisions and of the applicable income tax regulations is greater in the case of a REIT structure like ours that holds assets through the Operating Partnership and joint ventures. The determination of various factual matters and circumstances not entirely within our control, including determinations by our partners in the Joint Venture Centers, may affect our continued qualification as a REIT. In addition, legislation, new regulations, administrative interpretations or court decisions could significantly change the tax laws with respect to our qualification as a REIT or the U.S. federal income tax consequences of that qualification.
In addition, we currently hold certain of our properties through subsidiaries that have elected to be taxed as REITs and we may in the future determine that it is in our best interests to hold one or more of our other properties through one or more subsidiaries that elect to be taxed as REITs. If any of these subsidiaries fails to qualify as a REIT for U.S. federal income tax purposes, then we may also fail to qualify as a REIT for U.S. federal income tax purposes.
If in any taxable year we were to fail to qualify as a REIT, we will suffer the following negative results:
we will not be allowed a deduction for distributions to stockholders in computing our taxable income; and
we will be subject to U.S. federal and state income tax on our taxable income at regular corporate rates.
25


In addition, if we were to lose our REIT status, we would be prohibited from qualifying as a REIT for the four taxable years following the year during which the qualification was lost, absent relief under statutory provisions. As a result, net income and the funds available for distributions to our stockholders would be reduced for at least five years and the fair market value of our shares could be materially adversely affected. Furthermore, the Internal Revenue Service could challenge our REIT status for past periods. Such a challenge, if successful, could result in us owing a material amount of tax, interest and penalties for prior periods. It is possible that future economic, market, legal, tax or other considerations might cause our board of directors to revoke our REIT election.
Even if we remain qualified as a REIT, we might face other tax liabilities that reduce our cash flow. Further, we might be subject to federal, state and local taxes on our income and property. Any of these taxes would decrease cash available for distributions to stockholders.
Complying with REIT requirements might cause us to forego otherwise attractive opportunities.
In order to qualify as a REIT for U.S. federal income tax purposes, we must satisfy tests concerning, among other things, our sources of income, the nature of our assets, the amounts we distribute to our stockholders and the ownership of our stock. We may also be required to make distributions to our stockholders at disadvantageous times or when we do not have funds readily available for distribution. Thus, compliance with REIT requirements may cause us to forego opportunities we would otherwise pursue.
In addition, the REIT provisions of the Code impose a 100% tax on income from “prohibited transactions.” Prohibited transactions generally include sales of assets that do not qualify for a statutory safe harbor if such assets constitute inventory or other property held for sale in the ordinary course of business, other than foreclosure property. This 100% tax could impact our desire to sell assets and other investments at otherwise opportune times if we believe such sales could be considered prohibited transactions.
Complying with REIT requirements may force us to borrow or take other measures to make distributions to our stockholders.
As a REIT, we generally must distribute 90% of our annual taxable income (subject to certain adjustments) to our stockholders. From time to time, we might generate taxable income greater than our net income for financial reporting purposes, or our taxable income might be greater than our cash flow available for distributions to our stockholders. If we do not have other funds available in these situations, we might be unable to distribute 90% of our taxable income as required by the REIT rules. In that case, we would need to borrow funds, liquidate or sell a portion of our properties or investments (potentially at disadvantageous or unfavorable prices), in certain limited cases distribute a combination of cash and stock (at our stockholders' election but subject to an aggregate cash limit established by the Company) or find another alternative source of funds. These alternatives could increase our costs or reduce our equity. In addition, to the extent we borrow funds to pay distributions, the amount of cash available to us in future periods will be decreased by the amount of cash flow we will need to service principal and interest on the amounts we borrow, which will limit cash flow available to us for other investments or business opportunities.
We may face risks in connection with Section 1031 Exchanges.
If a transaction intended to qualify as a Section 1031 Exchange is later determined to be taxable, we may face adverse consequences, and if the laws applicable to such transactions are amended or repealed, we may not be able to dispose of properties on a tax deferred basis. Section 1031 Exchanges now only apply to real property and do not apply to any related personal property transferred with the real property. As a result, any appreciated personal property that is transferred in connection with a Section 1031 Exchange of real property will cause gain to be recognized, and such gain is generally treated as non-qualifying income for the 95% and 75% gross income tests. Any such non-qualifying income could have an adverse effect on our REIT status.
If our Operating Partnership fails to maintain its status as a partnership for tax purposes, we would face adverse tax consequences.
We intend to maintain the status of the Operating Partnership as a partnership for federal income tax purposes. However, if the Internal Revenue Service were to successfully challenge the status of the Operating Partnership as an entity taxable as a partnership, the Operating Partnership would be taxable as a corporation. This would reduce the amount of distributions that the Operating Partnership could make to us. This could also result in our losing REIT status, with the consequences described above. This would substantially reduce the cash available to us to make distributions and the return on your investment. In addition, if any of the partnerships or limited liability companies through which the Operating Partnership owns its property, in whole or in part, loses its characterization as a partnership or disregarded entity for federal income tax
26


purposes, it would be subject to taxation as a corporation, thereby reducing distributions to the Operating Partnership. Such a recharacterization of an underlying entity could also threaten our ability to maintain REIT status.
The TCJA substantially modified the taxation of REITs and their shareholders, and the effects of such legislation and related regulatory action are uncertain.
The TCJA makes major changes to the Code, including a number of provisions of the Code that affect the taxation of REITs and their stockholders. Among the changes made by the TCJA are permanently reducing the generally applicable corporate tax rate, generally reducing the tax rate applicable to individuals and other non-corporate taxpayers for tax years beginning after December 31, 2017 and before January 1, 2026, eliminating or modifying certain previously allowed deductions (including substantially limiting interest deductibility and, for individuals, the deduction for non-business state and local taxes), and, for taxable years beginning after December 31, 2017 and before January 1, 2026, providing for preferential rates of taxation through a deduction of up to 20% (subject to certain limitations) on most ordinary REIT dividends and certain trade or business income of non-corporate taxpayers. The TCJA also imposes new limitations on the deduction of net operating losses and requires us to recognize income for tax purposes no later than when we take it into account on our financial statements, which may result in us having to make additional taxable distributions to our stockholders in order to comply with REIT distribution requirements or avoid taxes on retained income and gains. The effect of the significant changes made by the TCJA is highly uncertain, and administrative guidance will be required in order to fully evaluate the effect of many provisions. The effect of any technical corrections with respect to the TCJA could have an adverse effect on us or our stockholders. Investors should consult their tax advisors regarding the implications of the TCJA on their investment in our capital stock.
In recent years, numerous legislative, judicial and administrative changes have been made to the U.S. federal income tax laws applicable to investments similar to an investment in our stock. Additional changes to tax laws are likely to continue in the future, and we cannot assure you that any such changes will not adversely affect the taxation of us or our stockholders. Any such changes could have an adverse effect on an investment in our stock or on the market value or the resale potential of our properties.
ITEM 1B.    UNRESOLVED STAFF COMMENTS
None.

27


ITEM 2.    PROPERTIES
The following table sets forth certain information regarding the Centers and other locations that are wholly owned or partly owned by the Company as of December 31, 2019.
CountCompany's
Ownership(1)
Name of
Center/Location(2)
Year of
Original
Construction/
Acquisition
Year of Most
Recent
Expansion/
Renovation
Total
GLA(3)
Mall and
Freestanding
GLA
Percentage
of Mall and
Freestanding
GLA Leased
Non-Owned Anchors (3)Company-Owned Anchors (3)
CONSOLIDATED CENTERS:    
 50.1%  Chandler Fashion Center(4)2001/2002-1,318,000  633,000  95.8 %Dillard's, Macy's, Nordstrom—  
Chandler, Arizona
 100%  Danbury Fair Mall1986/200520161,271,000  527,000  93.2 %JCPenney, Macy'sDick's Sporting Goods, Forever 21(5), Lord & Taylor, Primark, Sears(6)
Danbury, Connecticut
 100%  Desert Sky Mall(7)1981/20022007746,000  280,000  98.9 %Burlington, Dillard'sLa Curacao, Mercado de los Cielos
Phoenix, Arizona
 100%  Eastland Mall(4)(8)1978/199819961,034,000  500,000  92.5 %Dillard's, Macy's  JCPenney  
Evansville, Indiana
 100%  Fashion Outlets of Chicago2013/—-537,000  537,000  97.5 %—  —  
Rosemont, Illinois
 100%  Fashion Outlets of Niagara Falls USA1982/20112014689,000  689,000  92.0 %—  —  
Niagara Falls, New York
 50.1%  Freehold Raceway Mall1990/200520071,673,000  775,000  97.5 %JCPenney, Lord & Taylor, Macy's, NordstromDick's Sporting Goods, Primark, Sears(6) 
Freehold, New Jersey
 100%  Fresno Fashion Fair1970/19962006995,000  434,000  90.4 %Macy'sForever 21, JCPenney, Macy's
Fresno, California
 100%  Green Acres Mall(4)(8)1956/201320162,063,000  875,000  96.4 %—  BJ's Wholesale Club, Dick's Sporting Goods, Century 21, JCPenney(9), Macy's (two), Sears, Walmart
Valley Stream, New York
10  100%  Inland Center(7)1966/20042016605,000  208,000  93.8 %Macy'sForever 21, JCPenney
San Bernardino, California
11  100%  Kings Plaza Shopping Center(8)1971/201220181,137,000  445,000  99.4 %Macy'sBurlington, JCPenney, Lowe's, Primark
Brooklyn, New York
12  100%  La Cumbre Plaza(4)(8)1967/20041989492,000  175,000  86.8 %Macy's—  
Santa Barbara, California
13  100%  NorthPark Mall(4)(7)1973/19982001934,000  399,000  84.2 %Dillard's, JCPenney, Von Maur—  
Davenport, Iowa
14  100%  Oaks, The1978/200220091,209,000  607,000  92.7 %JCPenney, Macy's (two)Dick's Sporting Goods, Nordstrom
Thousand Oaks, California
15  100%  Pacific View(7)1965/19962001900,000  416,000  85.2 %JCPenney, TargetMacy's
Ventura, California
16  100%  Queens Center(8)1973/19952004965,000  408,000  98.9 %JCPenney, Macy's—  
Queens, New York
17  100%  Santa Monica Place1980/19992015526,000  303,000  94.7 %—  Bloomingdale's, Nordstrom
Santa Monica, California
18  84.9%  SanTan Village Regional Center2007/—20181,124,000  716,000  96.3 %Dillard's, Macy'sDick's Sporting Goods  
Gilbert, Arizona
19  100%  SouthPark Mall(4)1974/19982015863,000  348,000  86.0 %Dillard's, Von MaurDick's Sporting Goods, JCPenney
Moline, Illinois
28


CountCompany's
Ownership(1)
Name of
Center/Location(2)
Year of
Original
Construction/
Acquisition
Year of Most
Recent
Expansion/
Renovation
Total
GLA(3)
Mall and
Freestanding
GLA
Percentage
of Mall and
Freestanding
GLA Leased
Non-Owned Anchors (3)Company-Owned Anchors (3)
20  100%  Stonewood Center(8)1953/19971991935,000  361,000  94.0 %—  JCPenney, Kohl's, Macy's, Sears
Downey, California
21  100%  Superstition Springs Center(4)(7)1990/20022002922,000  390,000  93.9 %Dillard's, JCPenney, Macy's—  
Mesa, Arizona
22  100%  Towne Mall(4)1985/20051989350,000  179,000  77.8 %—  Belk, JCPenney
Elizabethtown, Kentucky
23  100%  Tucson La Encantada2002/20022005246,000  246,000  98.0 %—  —  
Tucson, Arizona
24  100%  Valley Mall1978/19981992505,000  190,000  92.0 %TargetBelk, Dick's Sporting Goods, JCPenney
Harrisonburg, Virginia
25  100%  Valley River Center1969/20062007871,000  408,000  93.4 %Macy'sJCPenney
Eugene, Oregon
26  100%  Victor Valley, Mall of1986/20042012577,000  254,000  97.0 %Macy'sDick's Sporting Goods, JCPenney, Sears(6)
Victorville, California
27  100%  Vintage Faire Mall(4)1977/19962008984,000  405,000  98.0 %Macy'sDick's Sporting Goods, JCPenney, Macy's
Modesto, California
28  100%  Wilton Mall(4)1990/20051998709,000  506,000  90.3 %JCPenneyDick's Sporting Goods
Saratoga Springs, New York
Total Consolidated Centers25,180,000  12,214,000  93.7 %
UNCONSOLIDATED JOINT VENTURE CENTERS:  
29  60%  Arrowhead Towne Center(4)1993/200220151,197,000  390,000  97.1 %Dillard's, JCPenney, Macy'sDick's Sporting Goods, Forever 21(5)
Glendale, Arizona
30  50%  Biltmore Fashion Park1963/20032006597,000  292,000  93.1 %—  Macy's, Saks Fifth Avenue
Phoenix, Arizona
31  50%  Broadway Plaza1951/19852016927,000  382,000  95.9 %Macy'sNeiman Marcus, Nordstrom
Walnut Creek, California
32  50.1%  Corte Madera, The Village at1985/19982005501,000  265,000  94.9 %Macy's, Nordstrom—  
Corte Madera, California
33  50%  Country Club Plaza(10)1922/20162015947,000  947,000  n/a  —  —  
Kansas City, Missouri
34  51%  Deptford Mall(4)1975/200619901,040,000  372,000  96.0 %JCPenney, Macy'sBoscov's
Deptford, New Jersey
35  51%  FlatIron Crossing2000/200220091,428,000  729,000  95.9 %Dillard's, Macy's, NordstromDick's Sporting Goods, Forever 21
Broomfield, Colorado
36  50%  Kierland Commons1999/20052003437,000  437,000  96.5 %—  —  
Scottsdale, Arizona
37  60%  Lakewood Center1953/197520082,069,000  1,004,000  97.2 %—  Costco, Forever 21, Home Depot, JCPenney, Macy's, Target
Lakewood, California
38  60%  Los Cerritos Center(11)1971/199920161,023,000  541,000  98.8 %Macy's, NordstromDick's Sporting Goods, Forever 21
Cerritos, California
39  50%  North Bridge, The Shops at(8)1998/2008-670,000  410,000  86.3 %—  Nordstrom
Chicago, Illinois
40  50%  Scottsdale Fashion Square1961/2002Ongoing1,835,000  875,000  93.2 %Dillard'sDick's Sporting Goods, Macy's, Neiman Marcus, Nordstrom
Scottsdale, Arizona
41  60%  South Plains Mall(4)1972/199820171,136,000  477,000  88.0 %—  Bealls, Dillard's (two), JCPenney
Lubbock, Texas
42  51%  Twenty Ninth Street(8)1963/19792007845,000  553,000  96.8 %Macy'sHome Depot
Boulder, Colorado
29


CountCompany's
Ownership(1)
Name of
Center/Location(2)
Year of
Original
Construction/
Acquisition
Year of Most
Recent
Expansion/
Renovation
Total
GLA(3)
Mall and
Freestanding
GLA
Percentage
of Mall and
Freestanding
GLA Leased
Non-Owned Anchors (3)Company-Owned Anchors (3)
43  50%  Tysons Corner Center1968/200520141,971,000  1,087,000  93.1 %—  Bloomingdale's, L.L. Bean, Lord & Taylor(12), Macy's, Nordstrom
Tysons Corner, Virginia
44  60%  Washington Square(11)1974/199920051,296,000  573,000  95.1 %Macy'sDick's Sporting Goods, JCPenney, Nordstrom
Portland, Oregon
45  19%  West Acres1972/19862001691,000  426,000  98.1 %Macy'sJCPenney
Fargo, North Dakota
Total Unconsolidated Joint Ventures18,610,000  9,760,000  94.4 %
REGIONAL SHOPPING CENTERS UNDER REDEVELOPMENT  
46  50%  Fashion District Philadelphia(8)(13)1977/20142019899,000  626,000  (14)—  Burlington, Century 21, Primark(15)
Philadelphia, Pennsylvania
47  100%  Paradise Valley Mall(4)(16)1979/200220091,202,000  421,000  (14)Dillard's, JCPenney, Macy'sCostco
Phoenix, Arizona
47  Total Regional Shopping Centers45,891,000  23,021,000  94.0 %
COMMUNITY/POWER SHOPPING CENTERS
 50%  Atlas Park, The Shops at(13)2006/20112013369,000  369,000  89.9 %—  —  
Queens, New York
 50%  Boulevard Shops(13)2001/20022004184,000  184,000  95.7 %—  —  
Chandler, Arizona
 100%  Southridge Center(4)(16)1975/19982013848,000  459,000  77.4 %Des Moines Area Community CollegeTarget
Des Moines, Iowa
 100%  Superstition Springs Power Center(16)1990/2002-206,000  53,000  50.9 %Best Buy, Burlington—  
Mesa, Arizona
 100%  The Marketplace at Flagstaff(8)(16)2007/—-268,000  147,000  100.0 %—  Home Depot
Flagstaff, Arizona
 Total Community/Power Shopping Centers1,875,000  1,212,000  
52  Total before Other Assets47,766,000  24,233,000  
OTHER ASSETS:
100%  Various(16)(17)--427,000  224,000  —  Kohl's
83.2%  Estrella Falls(16)2016201679,000  79,000  —  —  —  
Goodyear, Arizona
50%  Scottsdale Fashion Square-Office(13)1984/20022016124,000  —  —  —  —  
Scottsdale, Arizona
50%  Tysons Corner Center-Office(13)1999/20052012174,000  —  —  —  —  
Tysons Corner, Virginia
50%  Hyatt Regency Tysons Corner Center(13)20152015290,000  —  —  —  —  
Tysons Corner, Virginia
50%  VITA Tysons Corner Center(13)20152015510,000  —  —  —  —  
Tysons Corner, Virginia
50%  Tysons Tower(13)20142014529,000  —  —  —  —  
Tysons Corner, Virginia
OTHER ASSETS UNDER DEVELOPMENT:
25%  One Westside(13)(18)1985/1998Ongoing680,000  —  —  —  —  
Los Angeles, California
Total Other Assets2,813,000  303,000  
Grand Total50,579,000  24,536,000  
30


________________________
(1)The Company's ownership interest in this table reflects its direct or indirect legal ownership interest. Legal ownership may, at times, not equal the Company's economic interest in the listed properties because of various provisions in certain joint venture agreements regarding distributions of cash flow based on capital account balances, allocations of profits and losses and payments of preferred returns. As a result, the Company's actual economic interest (as distinct from its legal ownership interest) in certain of the properties could fluctuate from time to time and may not wholly align with its legal ownership interests. Substantially all of the Company's joint venture agreements contain rights of first refusal, buy-sell provisions, exit rights, default dilution remedies and/or other break up provisions or remedies which are customary in real estate joint venture agreements and which may, positively or negatively, affect the ultimate realization of cash flow and/or capital or liquidation proceeds. See “Item 1A.—Risks Related to Our Organizational Structure—Outside partners in Joint Venture Centers result in additional risks to our stockholders.”
(2)With respect to 42 Centers, the underlying land controlled by the Company is owned in fee entirely by the Company or, in the case of Joint Venture Centers, by the joint venture property partnership or limited liability company. With respect to the remaining ten Centers, portions of the underlying land controlled by the Company are owned by third parties and leased to the Company, or the joint venture property partnership or limited liability company, pursuant to long-term ground leases. Under the terms of a typical ground lease, the Company, or the joint venture property partnership or limited liability company, has an option or right of first refusal to purchase the land. The termination dates of the ground leases range from 2028 to 2098.
(3)Total GLA includes GLA attributable to Anchors (whether owned or non-owned) and Mall and Freestanding Stores as of December 31, 2019. “Non-owned Anchors” is space not owned by the Company (or, in the case of Joint Venture Centers, by the joint venture property partnership or limited liability company) which is occupied by Anchor tenants. “Company-owned Anchors” is space owned (or leased) by the Company (or, in the case of Joint Venture Centers, by the joint venture property partnership or limited liability company) and leased (or subleased) to Anchor.
(4)These Centers have vacant Anchor locations. The Company is actively seeking replacement tenants or has entered into replacement leases for many of these vacant sites and/or is currently executing or considering redevelopment opportunities for these locations. The Company continues to collect rent under the terms of an agreement regarding one of these vacant Anchors.
(5)Forever 21 has announced plans to close two of their stores in early 2020 at Arrowhead Towne Center and Danbury Fair Mall. The Company is actively seeking replacement tenants for these Company-owned sites.
(6)These three Sears stores are closing in early 2020. The Company continues to collect rent under the terms of the related leases. The Company is actively seeking replacement tenants for these Company-owned sites.
(7)This Center had a Sears store, not owned by the Company, that closed.
(8)Portions of the land on which the Center is situated are subject to one or more long-term ground leases.
(9)JCPenney announced plans to close their Green Acres Mall store in 2020. The Company is actively releasing this store.
(10)Nordstrom has announced plans to open a 116,000 square foot store at Country Club Plaza in 2021.
(11)The Center has a vacant former Sears to be demolished for redevelopment.
(12)The Lord & Taylor store closed in January 2020. The joint venture is actively evaluating redevelopment opportunities.
(13)Included in Unconsolidated Joint Venture Centers.
(14)Tenant spaces have been intentionally held off the market and remain vacant because of redevelopment plans. As a result, the Company believes the percentage of mall and freestanding GLA leased at this redevelopment property is not meaningful data.
(15)Primark has announced plans to open a 47,000 square foot store at Fashion District Philadelphia in Spring 2021.
(16)Included in Consolidated Centers.
(17)The Company owns an office building and six stores located at shopping centers not owned by the Company. Of the six stores, one has been leased to Kohl's, two are vacant and three have been leased for non-Anchor uses. With respect to the office building and three of the six stores, the underlying land is owned in fee entirely by the Company. With respect to the remaining three stores, the underlying land is owned by third parties and leased to the Company pursuant to long-term building or ground leases. Under the terms of a typical building or ground lease, the Company pays rent for the use of the building or land and is generally responsible for all costs and expenses associated with the building and improvements. In some cases, the Company has an option or right of first refusal to purchase the land. The termination dates of the ground leases range from 2023 to 2027.
(18)One Westside, formerly known as Westside Pavilion, was a regional shopping center that closed in January 2019. This property is under redevelopment into 584,000 square feet of creative office leased entirely to Google, along with 96,000 square feet of existing dining and entertainment space.
31


Mortgage Debt
The following table sets forth certain information regarding the mortgages encumbering the Centers, including those Centers in which the Company has less than a 100% interest. The information set forth below is as of December 31, 2019 (dollars in thousands):
Property Pledged as CollateralFixed or
Floating
Carrying
Amount(1)
Effective Interest
Rate(2)
Annual
Debt
Service(3)
Maturity
Date(4)
Balance
Due on
Maturity
Earliest Date
Notes Can Be
Defeased or
Be Prepaid
Consolidated Centers:       
Chandler Fashion Center(5)(6)Fixed$255,174  4.18 %$10,496  7/5/24$256,000  7/15/2020
Danbury Fair MallFixed194,718  5.53 %18,456  10/1/20188,854  Any Time
Fashion Outlets of Chicago(7)Fixed299,112  4.61 %13,740  2/1/31300,000  Any Time
Fashion Outlets of Niagara Falls USAFixed106,398  4.89 %8,724  10/6/20103,810  Any Time
Freehold Raceway Mall(5)Fixed398,379  3.94 %15,600  11/1/29386,013  11/1/22
Fresno Fashion FairFixed323,659  3.67 %11,652  11/1/26325,000  Any Time
Green Acres Commons(8)Floating128,926  4.40 %4,993  3/29/21130,000  Any Time
Green Acres MallFixed277,747  3.61 %17,364  2/3/21269,922  Any Time
Kings Plaza Shopping Center(9)Fixed535,097  3.71 %19,548  1/1/30540,000  2/1/2023
Oaks, TheFixed187,142  4.14 %12,768  6/5/22174,433  Any Time
Pacific ViewFixed118,202  4.08 %8,016  4/1/22110,597  Any Time
Queens CenterFixed600,000  3.49 %20,928  1/1/25600,000  Any Time
Santa Monica Place(10)Floating297,817  3.34 %9,270  12/9/22300,000  Any Time
SanTan Village Regional Center(11)Fixed219,140  4.34 %9,460  7/1/29220,000  7/1/2023
Towne MallFixed20,284  4.48 %1,404  11/1/2218,886  Any Time
Tucson La EncantadaFixed63,682  4.23 %4,416  3/1/2259,788  Any Time
Victor Valley, Mall ofFixed114,733  4.00 %4,560  9/1/24115,000  Any Time
Vintage Faire MallFixed252,389  3.55 %15,072  3/6/26210,825  Any Time
 $4,392,599       

32


Property Pledged as CollateralFixed or
Floating
Carrying
Amount(1)
Effective Interest
Rate(2)
Annual
Debt
Service(3)
Maturity
Date(4)
Balance
Due on
Maturity
Earliest Date
Notes Can Be
Defeased or
Be Prepaid
Unconsolidated Joint Venture Centers (at Company's Pro Rata Share):       
Arrowhead Towne Center(60%)Fixed$240,000  4.05 %$9,720  2/1/28$212,719  2/1/22
Atlas Park, The Shops at(50%)(12)Floating35,742  4.65 %1,336  10/28/2136,183  Any Time
Boulevard Shops(50%)(13)Floating9,253  3.91 %337  12/5/239,400  Any Time
Broadway Plaza(50%)Fixed224,462  4.19 %9,405  4/1/30189,724  4/1/22
Corte Madera, The Village at(50.1%)Fixed112,415  3.53 %3,945  9/1/2898,753  Any Time
Country Club Plaza(50%)Fixed157,788  3.88 %9,001  4/1/26137,525  4/1/21
Deptford Mall(51%)Fixed90,517  3.55 %5,795  4/3/2381,750  Any Time
FlatIron Crossing(51%)Fixed115,976  2.81 %8,525  1/5/21110,538  Any Time
Kierland Commons(50%)Fixed106,836  3.98 %6,406  4/1/2788,724  Any Time
Lakewood Center(60%)Fixed214,660  4.15 %13,144  6/1/26185,306  Any Time
Los Cerritos Center(60%)Fixed315,000  4.00 %12,600  11/1/27278,711  11/1/21
North Bridge, The Shops at(50%)Fixed187,045  3.71 %6,900  6/1/28160,523  Any Time
One Westside(25%)(14)Floating10  3.71 %—  12/18/2410  Any Time
Scottsdale Fashion Square(50%)Fixed223,190  3.02 %13,281  4/3/23201,331  Any Time
South Plains Mall(60%)Fixed120,000  4.22 %5,065  11/6/25120,000  Any Time
Twenty Ninth Street(51%)Fixed76,500  4.10 %3,137  2/6/2676,500  Any Time
Tysons Corner Center(50%)Fixed373,024  4.13 %24,643  1/1/24333,233  Any Time
Tysons Tower(50%)(15)Fixed94,380  3.38 %3,164  11/11/2995,000  12/18/2021
Washington Square(60%)Fixed329,494  3.65 %12,045  11/1/22311,863  Any Time
West Acres - Development(19%)(16)Fixed170  3.72 % 10/10/29170  Any Time
West Acres(19%)Fixed14,250  4.61 %1,025  3/1/328,256  Any Time
 $3,040,712       
_______________________________________________________________________________

(1)The mortgage notes payable balances include the unamortized debt premiums (discounts). Debt premiums (discounts) represent the excess (deficiency) of the fair value of debt over (under) the principal value of debt assumed in various acquisitions. The debt premiums (discounts) are being amortized into interest expense over the term of the related debt in a manner which approximates the effective interest method.
The debt premiums (discounts) as of December 31, 2019 consisted of the following:
Property Pledged as Collateral
Consolidated Centers: 
Fashion Outlets of Niagara Falls USA$773  
Unconsolidated Joint Venture Centers (at Company's Pro Rata Share):
Deptford Mall$507  
FlatIron Crossing1,260  
Lakewood Center(9,083) 
$(7,316) 
The mortgage notes payable balances also include unamortized deferred finance costs that are amortized into interest expense over the remaining term of the related debt in a manner that approximates the effective interest method. Unamortized deferred finance costs at December 31, 2019 were $16.0 million for Consolidated Centers and $5.3 million for Unconsolidated Joint Venture Centers (at Company's pro rata share).
(2)The interest rate disclosed represents the effective interest rate, including the debt premiums (discounts) and deferred finance costs.
(3)The annual debt service represents the annual payment of principal and interest.
(4)The maturity date assumes that all extension options are fully exercised and that the Company does not opt to refinance the debt prior to these dates. These extension options are at the Company's discretion, subject to certain conditions, which the Company believes will be met.
(5)A 49.9% interest in the loan has been assumed by a third party in connection with a financing arrangement.
(6)On June 27, 2019, the Company replaced the existing loan on the property with a new $256.0 million loan that bears interest at an effective rate of 4.18% and matures on July 5, 2024.
33


(7)On January 10, 2019, the Company replaced the existing loan on the property with a new $300.0 million loan that bears interest at an effective rate of 4.61% and matures on February 1, 2031.
(8)The loan bears interest at LIBOR plus 2.15%.
(9)On December 3, 2019, the Company replaced the existing loan on the property with a new $540.0 million loan that bears interest at an effective rate of 3.71% and matures on January 1, 2030.
(10)The loan bears interest at LIBOR plus 1.35%. The loan is covered by an interest rate cap agreement that effectively prevents LIBOR from exceeding 4.0% during the period ending December 9, 2020.
(11)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.
(12)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 loan bears interest at LIBOR plus 2.00%.
(13)The loan bears interest at LIBOR plus 1.85%, matures on December 5, 2023 and can be expanded, depending on certain conditions, up to $23.0 million.
(14)On December 18, 2019, the Company’s joint venture in One Westside placed a construction loan on the property that allows for borrowing of up to $414.6 million, 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.
(15)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.
(16)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.
ITEM 3.    LEGAL PROCEEDINGS
None of the Company, the Operating Partnership, the Management Companies or their respective affiliates is currently involved in any material legal proceedings.
ITEM 4.    MINE SAFETY DISCLOSURES
Not applicable.
34


PART II
ITEM 5.    MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
The common stock of the Company is listed and traded on the New York Stock Exchange under the symbol "MAC". The common stock began trading on March 10, 1994 at a price of $19 per share. As of February 20, 2020, there were approximately 575 stockholders of record.
To maintain its qualification as a REIT, the Company is required each year to distribute to stockholders at least 90% of its net taxable income after certain adjustments. The Company paid all of its 2019 and 2018 quarterly dividends in cash. The timing, amount and composition of future dividends will be determined in the sole discretion of the Company's board of directors and will depend on actual and projected cash flow, financial condition, funds from operations, earnings, capital requirements, annual REIT distribution requirements, contractual prohibitions or other restrictions, applicable law and such other factors as the board of directors deems relevant. For example, under the Company's existing financing arrangements, the Company may pay cash dividends and make other distributions based on a formula derived from funds from operations (See "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations—Funds From Operations ("FFO")") and only if no default under the financing agreements has occurred, unless, under certain circumstances, payment of the distribution is necessary to enable the Company to continue to qualify as a REIT under the Code.
Stock Performance Graph
The following graph provides a comparison, from December 31, 2014 through December 31, 2019, of the yearly percentage change in the cumulative total stockholder return (assuming reinvestment of dividends) of the Company, the Standard & Poor's ("S&P") 500 Index, the S&P Midcap 400 Index, and the FTSE Nareit Equity Retail Index. The FTSE Nareit Equity Retail Index is an industry index of publicly-traded REITs that include the Company.
The graph assumes that the value of the investment in each of the Company's common stock and the indices was $100 at the close of the market on December 31, 2014.
Upon written request directed to the Secretary of the Company, the Company will provide any stockholder with a list of the REITs included in the FTSE Nareit Equity Retail Index. The historical information set forth below is not necessarily indicative of future performance.
35


Data for the S&P 500 Index, the S&P Midcap 400 Index and the FTSE Nareit Equity Retail Index were provided by Research Data Group.
mac-20191231_g1.jpg
Copyright© 2020 S&P, a division of The McGraw-Hill Companies Inc. All rights reserved.
12/31/1412/31/1512/31/1612/31/1712/31/1812/31/19
The Macerich Company$100.00  $105.01  $95.59  $92.86  $64.48  $43.74  
S&P 500 Index100.00  101.38  113.51  138.29  132.23  173.86  
S&P Midcap 400 Index100.00  97.82  118.11  137.30  122.08  154.07  
FTSE Nareit Equity Retail Index100.00  104.56  105.55  100.51  95.53  105.70  

Recent Sales of Unregistered Securities
None

36


Issuer Purchases of Equity Securities
PeriodTotal Number of Shares PurchasedAverage Price Paid per ShareTotal Number of Shares Purchased as Part of Publicly Announced Plans or ProgramsApproximate Dollar Value of Shares That May Yet Be Purchased Under the Plans or Programs (1)
October 1, 2019 to October 31, 2019—  $—  —  $278,707,048  
November 1, 2019 to November 30, 2019—  —  —  $278,707,048  
December 1, 2019 to December 31, 2019—  —  —  $278,707,048  
—  $—  —  

(1)On February 12, 2017, the Company's Board of Directors authorized the repurchase of up to $500.0 million of the Company's outstanding common shares from time to time as market conditions warrant.

37


ITEM 6.    SELECTED FINANCIAL DATA
The following sets forth selected financial data for the Company on a historical basis. The following data should be read in conjunction with the consolidated financial statements (and the notes thereto) of the Company and "Management's Discussion and Analysis of Financial Condition and Results of Operations," each included elsewhere in this Form 10-K. All dollars and share amounts are in thousands, except per share data.
 Years Ended December 31,
 20192018201720162015
OPERATING DATA:     
Revenues:     
Leasing revenue (1)$858,874  $883,996  $922,152  $970,119  $1,231,367  
Other27,879  32,875  28,116  31,688  30,528  
Management Companies40,709  43,480  43,394  39,464  26,254  
Total revenues927,462  960,351  993,662  1,041,271  1,288,149  
Expenses:
Shopping center and operating expenses271,547  277,470  295,190  307,623  379,815  
Leasing expense (1)29,611  11,624  12,420  11,127  8,267  
Management Companies' operating expenses66,795  91,910  87,701  87,196  84,073  
REIT general and administrative expenses22,634  24,160  28,240  28,217  29,870  
Costs related to shareholder activism (2)—  19,369  —  —  —  
Costs related to unsolicited takeover offer (3)—  —  —  —  25,204  
Depreciation and amortization330,726  327,436  335,431  348,488  464,472  
Interest expense138,254  182,962  171,776  163,675  211,943  
Loss (gain) on extinguishment of debt, net351  —  —  (1,709) (1,487) 
Total expenses859,918  934,931  930,758  944,617  1,202,157  
Equity in income of unconsolidated joint ventures48,508  71,773  85,546  56,941  45,164  
Co-venture expense (4)—  —  (13,629) (13,382) (11,804) 
Income tax (expense) benefit(1,589) 3,604  (15,594) (722) 3,223  
(Loss) gain on sale or write down of assets, net(11,909) (31,825) 42,446  415,348  400,337  
Net income102,554  68,972  161,673  554,839  522,912  
Less net income attributable to noncontrolling interests5,734  8,952  15,543  37,844  35,350  
Net income attributable to the Company$96,820  $60,020  $146,130  $516,995  $487,562  
Earnings per common share ("EPS") attributable to the Company:     
Basic$0.68  $0.42  $1.02  $3.52  $3.08  
Diluted (5)(6)$0.68  $0.42  $1.02  $3.52  $3.08  


38


 As of December 31,
 20192018201720162015
BALANCE SHEET DATA:     
Investment in real estate (before accumulated depreciation)$8,993,049  $8,878,820  $9,127,533  $9,209,211  $10,689,656  
Total assets$8,853,571  $9,026,808  $9,605,862  $9,958,148  $11,235,584  
Total mortgage and notes payable$5,209,976  $4,982,460  $5,170,264  $4,965,900  $5,260,750  
Equity (7)$2,830,970  $3,188,432  $3,967,999  $4,427,168  $5,071,239  
OTHER DATA:     
Funds from operations ("FFO") attributable to common stockholders and unit holders, excluding financing expense in connection with Chandler Freehold—diluted (8)$536,961  $564,436  $582,878  $642,304  $642,268  
Cash flows provided by (used in):     
Operating activities$355,157  $344,311  $386,389  $429,534  $554,956  
Investing activities$(112,026) $176,323  $178,988  $454,066  $(70,136) 
Financing activities$(278,216) $(514,438) $(566,269) $(867,502) $(452,329) 
Number of Centers at year end52  52  55  57  58  
Regional Shopping Centers portfolio occupancy94.0 %95.4 %95.0 %95.4 %96.1 %
Regional Shopping Centers portfolio sales per square foot$801  $726  $660  $630  $635  
Weighted average number of shares outstanding—EPS basic141,340  141,142  141,877  146,599  157,916  
Weighted average number of shares outstanding—EPS diluted (6)141,340  141,144  141,913  146,711  158,060  
Distributions declared per common share (9)$3.00  $2.97  $2.87  $2.75  $6.63  
_______________________________________________________________________________

(1)On January 1, 2019, the Company adopted Accounting Standards Codification ("ASC") 842, "Leases", under the modified retrospective method. The new standard amended the principles for the recognition, measurement, presentation and disclosure of leases for both parties to a contract (i.e. lessees and lessors).
Upon adoption of the new standard, the Company has presented all revenues associated with leases as leasing revenue on its consolidated statements of operations. For comparison purposes, the Company has reclassified minimum rents, percentage rents, tenant recoveries and other leasing income to leasing revenue for the years ended December 31, 2018, 2017, 2016 and 2015 to conform to the presentation for the the year ended December 31, 2019. The new standard requires the Company to reduce leasing revenue for credit losses associated with lease receivables. The standard also requires that the provision for bad debts relating to leases be presented as a reduction of leasing revenue. For the years ended December 31, 2018, 2017, 2016 and 2015, the provision for bad debts is included in shopping center and operating expenses.
The new standard requires that lessors expense, on an as-incurred basis, certain initial direct costs that are not incremental in negotiating a lease. Initial direct costs include the salaries and related costs for employees directly working on leasing activities. Prior to January 1, 2019, these costs were capitalizable and therefore the new lease standard resulted in certain of these costs being expensed as incurred. For comparison purposes, the Company has reclassified leasing costs that were included in management companies' operating expenses to leasing expenses for the years ended December 31, 2018, 2017, 2016 and 2015 to conform to the presentation for the the year ended December 31, 2019.
See "Item 7. Management's Discussion and Analysis of Financial Condition and Management's Overview and Summary—Other Transactions and Events".
(2)During the year ended December 31, 2018, the Company incurred $19.4 million in costs associated with activities related to shareholder activism. These costs were primarily for legal and advisory services.
(3)During the year ended December 31, 2015, the Company incurred $25.2 million in legal and advisory costs in response to an unsolicited, conditional proposal from Simon Property Group, Inc.
(4)On January 1, 2018, upon adoption of ASU 2014-09, "Revenue From Contracts With Customers (ASC 606)", the Company changed its accounting for Chandler Freehold from a co-venture arrangement to a financing arrangement. As a result, the Company no longer records co-venture expense for its partner's share of the income of Chandler Freehold. Under the financing arrangement, the Company recognizes interest 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.
(5)Assumes the conversion of Operating Partnership units to the extent they are dilutive to the EPS computation. It also assumes the conversion of MACWH, LP common and preferred units to the extent that they are dilutive to the EPS computation.
(6)Includes the dilutive effect, if any, of share and unit-based compensation plans calculated using the treasury stock method and the dilutive effect, if any, of all other dilutive securities calculated using the "if converted" method.
39


(7)Equity includes the noncontrolling interests in the Operating Partnership, nonredeemable noncontrolling interests in consolidated joint ventures and common and non-participating convertible preferred units of MACWH, LP.
(8)See "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations—Funds From Operations ("FFO")".
(9)On October 30, 2015, the Company declared two special dividends/distributions ("Special Dividend"), each of $2.00 per share of common stock and per OP Unit to stockholders and OP Unit holders of record on November 12, 2015. The first Special Dividend was paid on December 8, 2015 and the second Special Dividend was paid on January 6, 2016. The Special Dividends were funded from proceeds in connection with the financing and sale of ownership interests in the Lakewood Center, Los Cerritos Center, South Plains Mall and Washington Square (collectively referred to as the "PPR Portfolio") and Arrowhead Towne Center.

ITEM 7.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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 Operating Partnership. As of December 31, 2019, the Operating Partnership owned or had an ownership interest in 47 regional shopping centers and five community/power shopping centers. These 52 regional and community/power shopping centers (which include any related office space) consist of approximately 51 million square feet of gross leasable area (“GLA”) 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”) as set forth in “Item 2. Properties,” unless the context otherwise requires. The Company is a self-administered and self-managed REIT and conducts all of its operations through the Operating Partnership and the Management Companies.
The following discussion is based primarily on the consolidated financial statements of the Company for the years ended December 31, 2019, 2018 and 2017. It compares the results of operations and cash flows for the year ended December 31, 2019 to the results of operations and cash flows for the year ended December 31, 2018. Also included is a comparison of the results of operations and cash flows for the year ended December 31, 2018 to the results of operations and cash flows for the year ended December 31, 2017. This information should be read in conjunction with the accompanying consolidated financial statements and notes thereto.
Acquisitions and Dispositions:
The financial statements reflect the following acquisitions, dispositions and changes in ownership subsequent to the occurrence of each transaction.
On January 18, 2017, the Company sold Cascade Mall, a 589,000 square foot regional shopping center in Burlington, Washington; and Northgate Mall, a 750,000 square foot regional shopping center in San Rafael, California, in a combined transaction for $170.0 million, resulting in a gain on the sale of assets of $59.6 million. The proceeds were used to pay off the mortgage note payable on Northgate Mall and to repurchase shares of the Company's common stock under the 2017 Stock Buyback Program (See "Other Transactions and Events").
On March 17, 2017, the Company's joint venture in Country Club Plaza sold an ownership interest in an office building for $78.0 million, resulting in a gain on sale of assets of $4.6 million. The Company's pro rata share of the gain on sale of assets of $2.3 million was included in equity in income of unconsolidated joint ventures. The Company used its share of the proceeds to fund repurchases under the 2017 Stock Buyback Program (See "Other Transactions and Events").
On September 18, 2017, the Company's joint venture in Fashion District Philadelphia sold an ownership interest in an office building for $61.5 million, resulting in a gain on sale of assets of $13.1 million. The Company's pro rata share of the gain on sale of assets of $6.5 million was included in equity in income of unconsolidated joint ventures. The Company used its share of the proceeds to fund repurchases under the 2017 Stock Buyback Program (See "Other Transactions and Events").
On November 16, 2017, the Company sold 500 North Michigan Avenue, a 326,000 square foot office building in Chicago, Illinois for $86.4 million, resulting in a gain on sale of assets of $14.6 million. The Company used the proceeds from the sale to pay down its line of credit and for other general corporate purposes.
On December 14, 2017, the Company’s joint venture in Westcor/Queen Creek LLC sold land for $30.5 million, resulting in a gain on sale of assets of $14.9 million. The Company’s share of the gain on sale was $5.4 million, which was included in equity in income of unconsolidated joint ventures. The Company used its portion of the proceeds to pay down its line of credit and for general corporate purposes.
40


On February 16, 2018, the Company's joint venture in Fashion District Philadelphia sold its ownership share of an office building for $41.8 million, resulting in a gain on sale of assets of $5.5 million. The Company's pro rata share of the gain on the sale of assets of $2.8 million was included in equity in income from unconsolidated joint ventures. The Company used its portion of the proceeds to pay down its line of credit and for general corporate purposes.
On March 1, 2018, the Company formed a 25/75 joint venture with Hudson Pacific Properties, whereby the Company agreed to contribute Westside Pavilion (referred to hereafter as One Westside), a 680,000 square foot regional shopping center in Los Angeles, California in exchange for $142.5 million. The Company completed the sale of the 75% ownership interest in the property to Hudson Pacific Properties on August 31, 2018, resulting in a gain on sale of assets of $46.2 million. The sales price was funded by a cash payment of $36.9 million and the assumption of a pro rata share of the mortgage note payable on the property of $105.6 million. The Company used the proceeds to fund its share of the cost to defease the mortgage note payable on the property (See "Financing Activity"). From March 1, 2018 to the completion of the sale, the Company accounted for its interest in the property as a collaborative arrangement (See Note 15—Collaborative Arrangement of the Company's consolidated financial statements). Upon completion of the sale, the Company has accounted for its ownership interest in the property under the equity method of accounting.
On May 17, 2018, the Company sold Promenade at Casa Grande, a 761,000 square foot community center in Casa Grande, Arizona for $26.0 million, resulting in a loss on sale of assets of $0.3 million. The Company used the proceeds from the sale to pay down its line of credit and for other general corporate purposes.
On July 6, 2018, the Company’s joint venture in The Market at Estrella Falls, a 298,000 square foot community center in Goodyear, Arizona, sold the property for $49.1 million, resulting in a gain on sale of assets of $12.6 million. The Company's share of the gain of $3.0 million was included in equity in income from unconsolidated joint ventures. The proceeds were used to pay off the $24.1 million mortgage loan payable on the property, settle development obligations and for distributions to the partners. The Company used its share of the net proceeds for general corporate purposes.
Financing Activity:
On February 1, 2017, the Company's joint venture in West Acres replaced the existing loan on the property with a new $80.0 million loan that bears interest at an effective rate of 4.61% and matures on March 1, 2032. The Company used its share of the excess proceeds to pay down its line of credit and for general corporate purposes.
On March 16, 2017, the Company's joint venture in Kierland Commons replaced the existing loan on the property with a new $225.0 million loan that bears interest at an effective rate of 3.98% and matures on April 1, 2027. The Company used its share of the excess proceeds to pay down its line of credit and for general corporate purposes.
On September 29, 2017, the Company placed a new $110.0 million loan on Green Acres Commons that bears interest at LIBOR plus 2.15% and matures on March 29, 2021, including extension options. The Company expanded the loan and borrowed the additional $20.0 million available on the loan on March 1, 2018. The Company used the proceeds to pay down its line of credit and for general corporate purposes.
On October 19, 2017, the Company's joint venture in Chandler Fashion Center and Freehold Raceway Mall replaced the existing loan on Freehold Raceway Mall with a new $400.0 million loan that bears interest at an effective rate of 3.94% and matures on November 1, 2029. The Company used its share of the net proceeds to pay down its line of credit and for general corporate purposes.
On November 1, 2017, the Company paid off in full the $95.0 million mortgage loan payable on Stonewood Center. The Company funded the repayment of the mortgage loan payable from borrowings under its line of credit.
On December 4, 2017, the Company replaced the existing loan on Santa Monica Place with a new $300.0 million loan that bears interest at LIBOR plus 1.35% and matures on December 9, 2022, including three one-year extension options. The loan is covered by an interest rate cap agreement that effectively prevents LIBOR from exceeding 4.00% through December 9, 2021. The Company used the net proceeds to pay down its line of credit and for general corporate purposes.
On January 22, 2018, the Company's joint venture in Fashion District Philadelphia obtained a $250.0 million term loan that bears interest at LIBOR plus 2.0% and matures on January 22, 2023. Concurrent with the loan closing, the joint venture borrowed $150.0 million on the term loan and borrowed the remaining $100.0 million on March 26, 2018. The Company used its share of the proceeds to pay down its line of credit and for general corporate purposes.
On March 29, 2018, the Company's joint venture in Broadway Plaza placed a $450.0 million loan on the property that bears interest at an effective rate of 4.19% and matures on April 1, 2030. The Company used its share of the proceeds to pay down its line of credit and for general corporate purposes.
41


On August 31, 2018, concurrent with the sale of the ownership interest in One Westside (See "Acquisitions and Dispositions"), the Company's joint venture defeased the $140.8 million mortgage note payable on the property by providing a $149.2 million portfolio of marketable securities as replacement collateral in lieu of the property. The Company funded its $37.3 million share of the purchase price of the marketable securities portfolio with the proceeds from the sale of the ownership interest in the property.
On September 14, 2018, the Company entered into four interest rate swap agreements that effectively convert a total of $400.0 million of the outstanding balance of the Company’s line of credit from floating rate debt of LIBOR plus 1.45% to fixed rate debt of 4.30% until September 30, 2021.
On November 7, 2018, the Company's joint venture in Boulevard Shops replaced the existing loan on the property with a new $18.8 million loan that bears interest at LIBOR plus 1.85% and matures on December 5, 2023. The loan can be expanded, depending on certain conditions, up to $23.0 million. The Company used its share of the proceeds to pay down its line of credit and for general corporate purposes.
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.

42


Redevelopment and Development Activity:
On September 19, 2019, the Company's joint venture with Pennsylvania REIT opened the first phase of the redevelopment of Fashion District Philadelphia, an 899,000 square foot regional shopping center in Philadelphia, Pennsylvania. The project will have additional tenant openings throughout 2020 and early 2021. The total cost of the project is estimated to be between $400.0 million and $420.0 million, with $200.0 million to $210.0 million estimated to be the Company's pro rata share. The Company has funded $190.9 million of the total $381.8 million incurred by the joint venture as of December 31, 2019.
The Company's joint venture in Scottsdale Fashion Square completed the redevelopment of a former Barney's store and an 80,000 square foot exterior expansion in the fourth quarter of 2019. The Company has funded $40.0 million of the total $80.0 million incurred by the joint venture as of December 31, 2019.
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 $50.4 million of the total $201.5 million incurred by the joint venture as of December 31, 2019. 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 $35.9 million of the total $71.7 million incurred by the joint venture as of December 31, 2019.
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 $22.4 million at its pro rata share as of December 31, 2019.
Other Transactions and Events:
On February 12, 2017, the Company's Board of Directors authorized the repurchase of up to $500.0 million of its outstanding common shares as market conditions and the Company’s liquidity warrant (the "2017 Stock Buyback Program"). Repurchases may be made through open market purchases, privately negotiated transactions, structured or derivative transactions, including ASR transactions, or other methods of acquiring shares, from time to time as permitted by securities laws and other legal requirements. During the period from February 12, 2017 to December 31, 2017, the Company repurchased a total of 3,627,390 of its common shares for $221.4 million, representing an average price of $61.01 per share. The Company funded the repurchases from the net proceeds of the sale of Cascade Mall and Northgate Mall (See "Acquisitions and Dispositions"), its share of the proceeds from the sale of ownership interests in office buildings at Fashion District Philadelphia and Country Club Plaza (See "Acquisitions and Dispositions") and from borrowings under its line of credit. There were no repurchases during the years ended December 31, 2019 and 2018.
On January 1, 2018, upon adoption of ASU 2014-09, "Revenue From Contracts With Customers (ASC 606)", the Company changed its accounting for Chandler Freehold from a co-venture arrangement to a financing arrangement ("Financing Arrangement"). As a result, the Company no longer records co-venture expense for its partner's share of the income of Chandler Freehold. Under the Financing Arrangement, the Company recognizes interest 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.
On February 1 and 2, 2018, the Company reduced its workforce by approximately 10 percent. The Company incurred a one-time charge of $12.7 million in connection with the workforce reduction during the year ended December 31, 2018.  As a result of the workforce reduction, the Company, exclusive of the one-time charge, reduced expenses by approximately $10.0 million during the year ending December 31, 2018.
During the year ended December 31, 2018, the Company incurred $19.4 million in costs associated with activities related to shareholder activism. These costs were primarily for legal and advisory services.

43


On January 1, 2019, the Company adopted Accounting Standards Codification ("ASC") 842, "Leases", under the modified retrospective method. The new standard amended the principles for the recognition, measurement, presentation and disclosure of leases for both parties to a contract (i.e. lessees and lessors). In connection with the adoption of the new lease standard, the Company elected to use the transition packages of practical expedients for implementation provided by the Financial Accounting Standards Board ("FASB"), which included (i) relief from re-assessing whether an expired or existing contract meets the definition of a lease, (ii) relief from re-assessing the classification of expired or existing leases at the adoption date, (iii) allowing previously capitalized initial direct leasing costs to continue to be amortized, and (iv) application of the standard as of the adoption date rather than to all periods presented.
Upon adoption of the new standard, the Company has presented all revenues associated with leases as leasing revenue on its consolidated statements of operations. For comparison purposes, the Company has reclassified minimum rents, percentage rents, tenant recoveries and other leasing income to leasing revenue for the years ended December 31, 2018 and 2017 to conform to the presentation for the year ended December 31, 2019. The new standard requires the Company to reduce leasing revenue for credit losses associated with lease receivables. For the years ended December 31, 2018 and 2017, the provision for bad debts is included in shopping center and operating expenses. In addition, straight-line rent receivables are written off when the Company believes there is reasonable uncertainty regarding a tenant's ability to complete the term of the lease. As a result, the Company recognized a cumulative effect adjustment of $2.2 million upon adoption for the write off of straight-line rent receivables of tenants that were in litigation or bankruptcy.
The new standard requires that lessors expense, on an as-incurred basis, certain initial direct costs that are not incremental in negotiating a lease. Initial direct costs include the salaries and related costs for employees directly working on leasing activities. Prior to January 1, 2019, these costs were capitalizable and therefore the new lease standard resulted in certain of these costs being expensed as incurred. For comparison purposes, the Company has reclassified leasing costs that were included in management companies' operating expenses to leasing expenses for the years ended December 31, 2018 and 2017 to conform to the presentation for the year ended December 31, 2019.
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 ("CPI"). 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
44


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 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.
Remeasurement gains are recognized when the Company obtains control of an existing equity method investment to the extent that the fair value of the existing equity investment exceeds the carrying value of the investment.
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.

45


The Company calculates the fair value of financial instruments and includes this additional information in the notes to consolidated financial statements when the fair value is different than the carrying value of those financial instruments. When the fair value reasonably approximates the carrying value, no additional disclosure is made.
The Company records its Financing Arrangement 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.
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 above, including those related to the Redevelopment Properties, the JV Transition Centers and the Disposition Properties (each 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 consolidated assets ("JV Transition Centers") 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, the JV Transition Center and the Disposition Properties for the periods of comparison.
For the comparison of the year ended December 31, 2019 to the year ended December 31, 2018 and the comparison of the year ended December 31, 2018 to the year ended December 31, 2017, the Redevelopment Properties are Paradise Valley Mall and certain ground up developments.
For the comparison of the year ended December 31, 2019 to the year ended December 31, 2018 and the comparison of the year ended December 31, 2018 to the year ended December 31, 2017, the JV Transition Center is One Westside. The change in revenues and expenses at the JV Transition Center is primarily due to the conversion of One Westside from a Consolidated Center to an Unconsolidated Joint Venture Center.
For comparison of the year ended December 31, 2019 to the year ended December 31, 2018, the Disposition Property is Promenade at Casa Grande. For the comparison of the year ended December 31, 2018 to the year ended December 31, 2017, the Disposition Properties are Promenade at Casa Grande, 500 North Michigan Avenue, Cascade Mall and Northgate 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 per square foot (for tenants in place for a minimum of 12 months or longer and 10,000 square feet and under) for regional shopping centers, occupancy rates (excluding large retail stores or "Anchors") for the Centers 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 year 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 increased from $726 for the twelve months ended December 31, 2018 to $801 for the twelve months ended December 31, 2019. Occupancy rate decreased from 95.4% at December 31, 2018 to 94.0% at December 31, 2019. Releasing spreads remained positive as the Company was able to lease available space at average higher rents than the expiring rental rates, resulting in a releasing spread of $2.65 per square foot ($59.15 on new and renewal leases executed compared to $56.50 on leases expiring), representing a 4.7% increase for the trailing twelve months ended December 31, 2019. The Company expects that releasing spreads will continue to be positive for 2020 as it renews or relets leases that are scheduled to expire. These leases that are scheduled to expire represent approximately 930,000 square feet of the Centers, accounting for 14.0% of the GLA of mall stores and freestanding stores, for spaces 10,000 square feet and under, as of December 31, 2019. These calculations exclude Centers under development or redevelopment and property dispositions (See "Acquisitions and Dispositions" and "Redevelopment and Development Activities" in Management's Overview and Summary).

46


During the trailing twelve months ended December 31, 2019, the Company signed 359 new leases and 579 renewal leases comprising approximately 3.5 million square feet of GLA, of which 2.3 million square feet related to the consolidated Centers. The average tenant allowance was $29.25 per square foot.
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 reasonably strong, the Company expects that its results for 2020 will be negatively impacted by Anchor closures and tenant bankruptcies, among other factors.
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. However, in an increasing interest rate environment the fixed rates the Company can obtain with such replacement fixed-rate cap and swap agreements or the fixed-rate on new debt will also continue to increase.
In recent years, a number of companies in the retail industry, including some of the Company’s Anchors, have declared bankruptcy, gone out of business or significantly reduced the number of their retail stores. Store closures by an Anchor may impact the Company’s Centers more holistically by causing other tenants, including Anchors, to terminate their leases, receive reduced rent or cease operating their stores at the Center.
On October 15, 2018, Sears filed for bankruptcy and announced additional store closings. At the time of the bankruptcy filing, the Company had 21 Sears stores in its portfolio totaling approximately 3.1 million square feet and accounting for less than 1% of the Company’s total leasing revenue. The twenty-one stores included seven owned by the Company, nine owned by the Company’s joint venture with Seritage Growth Properties (“Seritage”), one store that was owned by Sears and four stores that were owned by Seritage. Although, in the short-term, the bankruptcy of an Anchor such as Sears may lead to lost base rent and the triggering of co-tenancy clauses, there is also the potential to create additional future value through the recapturing of space and releasing that space to new tenants at higher rent per square foot, which the Company has demonstrated through its joint venture with Seritage and the completed redevelopment of a former Sears store at Kings Plaza Shopping Center in July 2018.
As of December 31, 2019, the Company recaptured ten Sears locations, including seven through its joint venture with Seritage, through formal lease rejections and lease terminations. The Company currently anticipates aggregate redevelopment investments at several of these locations of $130.0 million to $160.0 million (at the Company's pro rata share) over the next several years. New tenants are expected to open at several projects in 2020. In early 2020, Sears will be closing five additional locations, including three stores in which the Company has an ownership interest and two that are owned by Seritage and not by the Company. Sears will continue to pay rent on these locations in which the Company has an ownership interest. The Company is actively seeking replacement tenants for these Company-owned sites.
On September 29, 2019, Forever 21, Inc. filed for Chapter 11 bankruptcy. At the time of the bankruptcy filing, the Company had 29 Forever 21 stores in its portfolio totaling approximately 1.2 million square feet. As of December 31, 2019, Forever 21 stores represented 1.4% of total minimum and percentage rental revenues of the Company. The Company is in ongoing discussions with Forever 21 regarding the status of those stores. Based on a court filing dated October 28, 2019, the Company expects that four of the Forever 21 stores will close, three of which are owned by the Company (Danbury Fair Mall, Arrowhead Towne Center and Pacific View), and one of which is not owned by the Company (Vintage Faire Mall). The Company anticipates that it may provide certain rent concessions in connection with a number of the remaining stores.The Company is actively seeking replacement tenants for these Company-owned sites.
Comparison of Years Ended December 31, 2019 and 2018
Revenues:
Leasing revenue decreased by $25.1 million, or 2.8%, from 2018 to 2019. The decrease in rental revenue is attributed to a decrease of $18.5 million from the Same Centers, $3.0 million from the JV Transition Center, $2.3 million from the Disposition Property and $1.3 million from the Redevelopment Properties.
Leasing revenue includes the amortization of above and below-market leases, the amortization of straight-line rents and lease termination income. The amortization of above and below-market leases increased from $1.9 million in 2018 to $5.2 million in 2019. The amortization of straight-line rents decreased from $11.8 million in 2018 to $10.5 million in 2019. Lease
47


termination income decreased from $9.9 million in 2018 to $4.6 million in 2019. Leasing revenue also includes a provision for bad debts of $7.7 million in 2019 (See "Other Transactions and Events" in Management's Overview and Summary). The decrease in leasing revenue at the Same Centers is primarily due to the inclusion of the provision for bad debts in 2019 and a decrease in lease termination income.
Management Companies' revenue decreased from $43.5 million in 2018 to $40.7 million in 2019.
Shopping Center and Operating Expenses:
Shopping center and operating expenses decreased $5.9 million, or 2.1%, from 2018 to 2019. The decrease in shopping center and operating expenses is attributed to a decrease of $2.0 million from the Same Centers, $1.9 million from the JV Transition Center, $1.2 million from the Disposition Property and $0.8 million from the Redevelopment Properties. The decrease in shopping center and operating expenses at the the Same Centers is primarily due to the exclusion of bad debt expense in 2019 (See "Other Transactions and Events" in Management's Overview and Summary) offset in part by an increase in property tax expense.
Leasing Expenses:
Leasing expenses increased from $11.6 million in 2018 to $29.6 million in 2019. The increase in leasing expenses is due to the Company's adoption of ASC 842 in 2019 (See "Other Transactions and Events" in Management's Overview and Summary).
Management Companies' Operating Expenses:
Management Companies' operating expenses decreased $25.1 million from 2018 to 2019. The decrease is attributed to a one-time charge of $12.7 million in connection with the Company's reduction in work force in 2018 (See "Other Transactions and Events" in Management's Overview and Summary) and the subsequent reduction in payroll and share and unit-based compensation costs.
REIT General and Administrative Expenses:
REIT general and administrative expenses decreased $1.5 million from 2018 to 2019 due to a reduction in compensation costs.
Costs Related to Shareholder Activism:
The Company incurred $19.4 million in costs related to shareholder activism in 2018 (See "Other Transactions and Events" in Management's Overview and Summary) and none in 2019.
Depreciation and Amortization:
Depreciation and amortization increased $3.3 million from 2018 to 2019. The increase in depreciation and amortization is primarily attributed to an increase of $5.3 million from the Same Centers offset in part by decreases of $1.3 million from the JV Transition Center and $0.7 million from the Disposition Property.
Interest Expense:
Interest expense decreased $44.7 million from 2018 to 2019. The decrease in interest expense is primarily attributed to decreases of $62.7 million from the Financing Arrangement (See "Other Transactions and Events" in Management's Overview and Summary) and $1.1 million from the JV Transition Center offset in part by increases of $12.9 million from the Same Centers, $4.4 million from borrowings under the line of credit and $1.8 million from the Redevelopment Properties.
The decrease 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. The increase in interest expense at the Same Centers is primarily due to the new loans on Fashion Outlets of Chicago, Chandler Fashion Center, SanTan Village Regional Center and Kings Plaza Shopping Center (See "Financing Activities" in Management's Overview and Summary).
The above interest expense items are net of capitalized interest, which decreased from $15.4 million in 2018 to $9.6 million in 2019.
Equity in Income of Unconsolidated Joint Ventures:
Equity in income of unconsolidated joint ventures decreased $23.3 million from 2018 to 2019. The decrease in equity in income of unconsolidated joint ventures is primarily due to the write-down of intangible assets as a result of lease terminations at the Company's joint venture with Seritage in 2019, the gain on the sale of The Market at Estrella Falls in 2018 (See
48


"Acquisitions and Dispositions" in Management's Overview and Summary), the gain on the sale of an ownership interest in an office building at Fashion District Philadelphia in 2018 (See "Acquisitions and Dispositions" in Management's Overview and Summary) and interest expense from the loan placed on Broadway Plaza in 2018 (See "Financing Activities" 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 $19.9 million from $31.8 million in 2018 to $11.9 million in 2019. The decrease in loss on sale or write down of assets, net is primarily due to the $54.5 million in impairment losses in 2018 and a $12.0 million decrease in the write down of development costs in 2019 offset in part by the $46.2 million gain on the sale of a 75% ownership interest in One Westside in 2018 (See "Acquisitions and Dispositions" in Management's Overview and Summary) and a $0.6 million decrease in gain on land sales in 2019. The impairment losses were due to the reduction in the estimated holding periods of SouthPark Mall, Promenade at Casa Grande, Southridge Center and two freestanding stores.
Net Income:
Net income increased $33.6 million from 2018 to 2019. The increase in net income is primarily attributed to the decreases of $44.7 million in interest expense and $19.4 million in costs related to shareholder activism offset in part by the decrease of$19.9 million in loss on sale or write down of assets, net, as described above.
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 4.9% from $564.4 million in 2018 to $537.0 million in 2019. 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.
Operating Activities:
Cash provided by operating activities increased $10.8 million from 2018 to 2019. The increase is primarily due to the $19.4 million in costs related to shareholder activism in 2018 (See "Other Transactions and Events" in Management's Overview and Summary) and changes in assets and liabilities and the results as discussed above.
Investing Activities:
Cash used in investing activities increased by $288.3 million from 2018 to 2019. The increase in cash used in investing activities is primarily attributed to a decrease in distributions from unconsolidated joint ventures of $270.3 million, a decrease in proceeds from the sale of assets of $80.4 million and an increase in contributions to unconsolidated joint ventures of $71.7 million offset in part by an increase in proceeds from notes receivable of $67.8 million and decreases in development, redevelopment, expansion and renovations of properties of $14.3 million and property improvements of $35.0 million.
The decrease in distributions from unconsolidated joint ventures is primarily due to the distribution of the Company's share of proceeds from the loans placed on Broadway Plaza and Fashion District Philadelphia (See "Financing Activities" in Management's Overview and Summary) in 2018 and the sale of an ownership interest in an office building at Fashion District Philadelphia (See "Acquisitions and Dispositions" in Management's Overview and Summary) in 2018, offset in part by the Company's share of loan proceeds from the new loan on Tysons Tower (See "Financing Activities" in Management's Overview and Summary) in 2019. The increase in proceeds from notes receivable is due to the repayment of the note receivable from the Lennar Corporation in 2019 (See Note 18—Related Party Transactions in the Company's Notes to the Consolidated Financial Statements).
Financing Activities:
Cash used in financing activities decreased $236.2 million from 2018 to 2019. The decrease in cash used in financing activities is primarily due to an increase in proceeds from mortgages, bank and other notes payable of $1.4 billion, offset in part by an increase in payments on mortgages, bank and other notes payable of $1.1 billion, the payment on the Financing Arrangement of $27.9 million in 2019 and an increase in dividends and distributions of $20.9 million.



49


Comparison of Years Ended December 31, 2018 and 2017
Revenues:
Leasing revenue decreased by $38.2 million, or 4.1%, from 2017 to 2018. The decrease in rental revenue is attributed to a decrease of $13.5 million from the JV Transition Center, $12.7 million from the Same Centers, $11.9 million from the Disposition Properties and $0.1 million from the Redevelopment Properties.
The amortization of above and below-market leases increased from $1.0 million in 2017 to $1.9 million in 2018 primarily due to the JV Transition Centers. The amortization of straight-line rents increased from $8.6 million in 2017 to $11.8 million in 2018. Lease termination income decreased from $18.1 million in 2017 to $9.9 million in 2018.
Management Companies' revenue increased from $43.4 million in 2017 to $43.5 million in 2018.
Shopping Center and Operating Expenses:
Shopping center and operating expenses decreased $17.7 million, or 6.0%, from 2017 to 2018. The decrease in shopping center and operating expenses is attributed to decreases of $9.8 million from the Same Centers, $5.5 million from Disposition Properties and $5.0 million from JV Transition Center offset in part by an increase of $2.6 million from Redevelopment Properties. The decrease in shopping center and operating expenses at the the Same Centers is primarily due to a reduction in property tax expense.
Leasing Expenses:
Leasing expenses decreased from $12.4 million in 2017 to $11.6 million in 2018.
Management Companies' Operating Expenses:
Management Companies' operating expenses increased $4.2 million from 2017 to 2018. The increase is attributed to a one-time charge of $12.7 million in 2018 in connection with the Company's reduction in work force (See "Other Transactions and Events" in Management's Overview and Summary) offset in part by the subsequent reduction in payroll and share and unit-based compensation costs.
REIT General and Administrative Expenses:
REIT general and administrative expenses decreased $4.1 million from 2017 to 2018 due to a reduction in compensation costs.
Costs Related to Shareholder Activism:
The Company incurred $19.4 million in costs related to shareholder activism in 2018 (See "Other Transactions and Events" in Management's Overview and Summary).
Depreciation and Amortization:
Depreciation and amortization decreased $8.0 million from 2017 to 2018. The decrease in depreciation and amortization is primarily attributed to decreases of $4.9 million from the JV Transition Center, $4.3 million from the Disposition Properties and $0.3 million from the Redevelopment Properties offset in part by an increase of $1.5 million from the Same Centers.
Interest Expense:
Interest expense increased $11.2 million from 2017 to 2018. The increase in interest expense is primarily attributed to an increase of $10.6 million from the Same Centers, $4.0 million from borrowings under the line of credit, $0.8 million from the Redevelopment Properties, $0.3 million from the Disposition Properties and $0.2 million from the Financing Arrangement (See "Other Transactions and Events" in Management's Overview and Summary) offset in part by a decrease of $4.7 million from the JV Transition Center. The increase in interest expense at the Same Centers is primarily due to the new loans on Green Acres Commons and Freehold Raceway Mall (See "Financing Activities" in Management's Overview and Summary).
The above interest expense items are net of capitalized interest, which increased from $13.2 million in 2017 to $15.4 million in 2018.
Equity in Income of Unconsolidated Joint Ventures:
Equity in income of unconsolidated joint ventures decreased $13.8 million from 2017 to 2018. The decrease in equity in income from joint ventures is primarily due to the gain on the sale of an ownership interest in office buildings at Fashion District Philadelphia in 2017 (See "Acquisitions and Dispositions" in Management's Overview and Summary) and interest
50


expense on the mortgage loan on Broadway Plaza in 2018 (See "Financing Activities" in Management's Overview and Summary).
(Loss) Gain on Sale or Write Down of Assets, net:
The change in (loss) gain on sale or write down of assets, net was $74.3 million, resulting from a gain of $42.4 million in 2017 and a loss of $31.8 million in 2018. The change in (loss) gain on sale or write down of assets, net is primarily due to the gain of $59.6 million on the sale of Cascade Mall and Northgate Mall in 2017 (See "Acquisitions and Dispositions" in Management's Overview and Summary) and impairment losses of $54.5 million on SouthPark Mall, La Cumbre Plaza, Southridge Center and Promenade at Casa Grande in 2018 offset in part by the gain of $46.2 million on the sale of a 75% ownership interest in One Westside in 2018 (See "Acquisitions and Dispositions" in Management's Overview and Summary) and impairment losses of $22.1 million on Southridge Center and Promenade at Casa Grande in 2017. The impairment losses were due to the reduction in the estimated holding periods of the properties.
Net Income:
Net income decreased $92.7 million from 2017 to 2018. The decrease in net income is primarily attributed to the change in (loss) gain on sale or write down of assets, net of $74.3 million, as discussed above.
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 3.2% from $582.9 million in 2017 to $564.4 million 2018. 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 and 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 $42.1 million from 2017 to 2018. The decrease is primarily due to the $19.4 million in costs related to shareholder activism in 2018 (See "Other Transactions and Events" in Management's Overview and Summary), changes in assets and liabilities and the results as discussed above.
Investing Activities:
Cash provided by investing activities decreased $2.7 million from 2017 to 2018. The decrease in cash provided by investing activities is primarily attributed to a decrease in cash proceeds from the sale of assets of $169.4 million, an increase in contributions to unconsolidated joint ventures of $63.7 million, an increase in development, redevelopment, expansion and renovation of properties costs of $20.7 million and an increase in property improvements of $14.3 million offset in part by an increase in distributions from unconsolidated joint ventures of $268.7 million.
The decrease in cash proceeds from the sale of assets is attributed to the sales of Cascade Mall and Northgate Mall in 2017 offset in part by the proceeds from the sale of Promenade at Casa Grande and an ownership interest in Westside Pavilion in 2018 (See "Acquisitions and Dispositions" in Management's Overview and Summary). The increase in distributions from unconsolidated joint ventures is primarily due to the distribution of the Company's share of proceeds from the loans placed on Broadway Plaza and Fashion District Philadelphia (See "Financing Activities" in Management's Overview and Summary) and the sale of The Market at Estrella Falls and the sale of an ownership interest in an office building at Fashion District Philadelphia (See "Acquisitions and Dispositions" in Management's Overview and Summary) in 2018.
Financing Activities:
Cash used in financing activities decreased $51.8 million from 2017 to 2018. The decrease in cash used in financing activities is primarily due to a decrease in payments on mortgages, bank and other notes payable of $749.9 million, the repurchases of the Company's common stock of $221.4 million in 2017 (See "Other Transactions and Events" in Management's Overview and Summary) and a decrease in distributions to co-venture partner of $103.8 million (See "Other Transactions and Events" in Management's Overview and Summary) offset in part by a decrease in proceeds from mortgages, bank and other notes payable of $1.0 billion.

51


Liquidity and Capital Resources
The Company anticipates meeting its liquidity needs for its operating expenses and debt service and dividend requirements for the next twelve months through cash generated from operations, working capital reserves and/or borrowings under its unsecured line of credit.
The following tables summarize capital expenditures and lease acquisition costs incurred at the Centers (at the Company's pro rata share) for the years ended December 31:
(Dollars in thousands)201920182017
Consolidated Centers:   
Acquisitions of property, building improvement and equipment$34,763  $53,350  $38,153  
Development, redevelopment, expansion and renovation of Centers112,263  173,329  152,095  
Tenant allowances18,860  12,636  11,484  
Deferred leasing charges3,203  17,353  26,526  
$169,089  $256,668  $228,258  
Joint Venture Centers (at Company's pro rata share):   
Acquisitions of property, building improvement and equipment$12,321  $15,697  $16,069  
Development, redevelopment, expansion and renovation of Centers210,574  145,905  121,787  
Tenant allowances9,339  8,736  6,779  
Deferred leasing charges3,386  10,880  6,154  
$235,620  $181,218  $150,789  
The Company expects amounts to be incurred during the next twelve months for tenant allowances and deferred leasing charges to be comparable to 2019 and that capital for those expenditures will be available from working capital, cash flow from operations, borrowings on property specific debt or unsecured corporate borrowings. Although the amounts to be incurred for deferred leasing charges during the next twelve months are expected to be comparable to 2019, the Company began expensing a significant portion of its leasing costs in 2019 in accordance with its adoption of ASC 842 (See "Other Transactions and Events" in Management's Overview and Summary). The Company expects to incur between $250 million and $300 million during the next twelve months for development, redevelopment, expansion and renovations. Capital for these major expenditures, developments and/or redevelopments has been, and is expected to continue to be, obtained from a combination of debt or equity financings, which are expected to include borrowings under the Company's line of credit and construction loans.
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. For example, the Company has generated liquidity through the sales of ownership interests in One Westside and an office building at Fashion District Philadelphia (See "Acquisitions and Dispositions" in Management's Overview and Summary), the sales of The Market at Estrella Falls and Promenade at Casa Grande, and the financing of Fashion Outlets of Chicago, Fashion District Philadelphia, Broadway Plaza, SanTan Village Regional Center, Chandler Fashion Center and Tysons Tower (See "Financing Activities" in Management's Overview and Summary). The Company used the proceeds from these transactions to pay down its line of credit and for general corporate purposes. 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 expects any additional repurchases of the Company's common stock under the 2017 Stock Buyback Program to be funded by future sales of non-core assets, borrowings under its line of credit and/or refinancing transactions.
The capital and credit markets can fluctuate and, at times, limit access to debt and equity financing for companies. As demonstrated by the Company's recent activity as discussed below, 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. 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. In the event that the Company has significant tenant defaults as a result of the overall economy and general market conditions, the Company could have a decrease in cash flow from operations, which could result in increased borrowings under its line of credit. These events could result in an increase in the Company's proportion of floating rate debt, which would cause it to be subject to interest rate fluctuations in the future.

52


The Company's total outstanding loan indebtedness, which includes mortgages and other notes payable, at December 31, 2019 was $8.1 billion (consisting of $5.2 billion of consolidated debt, less $359.1 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 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.
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 matures on July 6, 2020 with a one-year extension option. 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 December 31, 2019, the borrowing rate on the facility was LIBOR plus 1.55%. 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 1.55% to fixed rate debt of 4.30% until September 30, 2021. At December 31, 2019, total borrowings under the line of credit were $820.0 million less unamortized deferred finance costs of $2.6 million with a total interest rate of 3.92%. The Company's availability under the line of credit was $679.7 million at December 31, 2019.
Cash dividends and distributions for the twelve months ended December 31, 2019 were $474.5 million. A total of $355.2 million was funded by operations. The remaining $119.4 million was funded from distributions from unconsolidated joint ventures, which were included in the cash flows from investing activities section of the Company's Consolidated Statement of Cash Flows.
At December 31, 2019, the Company was in compliance with all applicable loan covenants under its agreements.
At December 31, 2019, the Company had cash and cash equivalents of $100.0 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 December 31, 2019, one of the Company's joint ventures has $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.
Additionally, as of December 31, 2019, the Company was contingently liable for $40.8 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.
53


Contractual Obligations:
The following is a schedule of contractual obligations as of December 31, 2019 for the consolidated Centers over the periods in which they are expected to be paid (in thousands):
 Payment Due by Period
Contractual ObligationsTotalLess than
1 year
1 - 3 years3 - 5 yearsMore than
five years
Long-term debt obligations (includes expected interest payments)(1)$6,266,635  $494,795  $2,218,344  $609,305  $2,944,191  
Lease obligations(2)217,455  19,255  46,730  20,123  131,347  
Purchase obligations(3)4,194  4,194  —  —  —  
Other liabilities223,410  159,917  17,199  13,744  32,550  
$6,711,694  $678,161  $2,282,273  $643,172  $3,108,088  
_______________________________________________________________________________
(1)Interest payments on floating rate debt were based on rates in effect at December 31, 2019.
(2)See Note 8—Leases in the Company's Notes to the Consolidated Financial Statements.
(3)See Note 17—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.
Beginning during the first quarter of 2018, the Company revised its definition of FFO so that FFO excluded the impact of the financing expense in connection with Chandler Freehold. Beginning in 2019, the Company now presents a separate non-GAAP measure - FFO excluding financing expense in connection with Chandler Freehold. The Company has revised the FFO presentation for the years ended December 31, 2018, 2017, 2016 and 2015 to conform to the current presentation.
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. Only 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 are excluded from the measure - FFO excluding financing expense in connection with Chandler Freehold.
The Company also presents FFO excluding financing expense in connection with Chandler Freehold, gain or loss on extinguishment of debt, net and costs related to shareholder activism and unsolicited takeover offer.
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, non-routine costs associated with extinguishment of debt and costs related to shareholder activism 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.
54


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 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 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 income attributable to the Company to FFO and FFO-basic and diluted, excluding financing expense in connection with Chandler Freehold, loss (gain) on extinguishment of debt, net and costs related to shareholder activism and unsolicited takeover offer for the years ended December 31, 2019, 2018, 2017, 2016 and 2015 (dollars and shares in thousands):
20192018201720162015
Net income attributable to the Company$96,820  $60,020  $146,130  $516,995  $487,562  
Adjustments to reconcile net income attributable to the Company to FFO attributable to common stockholders and unit holders—basic and diluted:     
Noncontrolling interests in the Operating Partnership7,131  4,407  10,729  37,780  32,615  
Loss (gain) on sale or write down of consolidated assets, net11,909  31,825  (42,446) (415,348) (400,337) 
Add: gain on undepreciated assets—consolidated assets3,829  4,884  1,564  3,717  1,326  
Less: loss on write-down of non-real estate assets—consolidated assets—  —  (10,138) —  —  
Add: noncontrolling interests share of (loss) gain on sale or write-down of assets—consolidated assets(2,822) 580  1,209  (1,662) 481  
Loss (gain) on sale or write down of assets—unconsolidated joint ventures(1)462  (2,993) (14,783) 189  (4,392) 
Add: gain (loss) on sale of undepreciated assets—unconsolidated joint ventures(1)—  666  6,644  (2) 4,395  
Depreciation and amortization on consolidated assets330,726  327,436  335,431  348,488  464,472  
Less: noncontrolling interests in depreciation and amortization—consolidated assets(15,124) (14,793) (15,126) (15,023) (14,962) 
Depreciation and amortization—unconsolidated joint ventures(1)189,728  174,952  177,274  179,600  84,160  
Less: depreciation on personal property(15,997) (13,699) (13,610) (12,430) (13,052) 
FFO attributable to common stockholders and unit holders—basic and diluted606,662  573,285  582,878  642,304  642,268  
Financing expense in connection with Chandler Freehold(69,701) (8,849) —  —  —  
FFO attributable to common stockholders and unit holders, excluding financing expense in connection with Chandler Freehold—basic and diluted536,961  564,436  582,878  642,304  642,268  
Loss (gain) on extinguishment of debt, net—consolidated assets351  —  —  (1,709) (1,487) 
Costs related to shareholder activism—  19,369  —  —  —  
Costs related to unsolicited takeover offer—  —  —  —  25,204  
FFO attributable to common stockholders and unit holders excluding financing expense in connection with Chandler Freehold, extinguishment of debt, net and costs related to shareholder activism and unsolicited takeover offer—diluted$537,312  $583,805  $582,878  $640,595  $665,985  
Weighted average number of FFO shares outstanding for:     
FFO attributable to common stockholders and unit holders—basic(2)151,755  151,502  152,293  157,320  168,478  
Adjustments for the impact of dilutive securities in computing FFO—diluted:     
   Share and unit-based compensation plans—   36  112  144  
FFO attributable to common stockholders and unit holders—diluted(3)151,755  151,504  152,329  157,432  168,622  
_______________________________________________________________________________
55


(1)Unconsolidated assets are presented at the Company's pro rata share.
(2)Calculated based upon basic net income as adjusted to reach basic FFO. During the years ended December 31, 2019, 2018, 2017, 2016 and 2015, there were 10.4 million, 10.4 million, 10.4 million, 10.7 million and 10.6 million OP Units outstanding, respectively.
(3)The computation of FFO—diluted shares outstanding includes the effect of share and unit-based compensation plans and the convertible senior notes using the treasury stock method. It also assumes the conversion of MACWH, LP common and preferred units to the extent that they are dilutive to the FFO-diluted computation.

ITEM 7A.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company's primary market risk exposure is interest rate risk. The Company has managed and will continue to manage interest rate risk by (1) maintaining a ratio of fixed rate, long-term debt to total debt such that floating rate exposure is kept at an acceptable level, (2) reducing interest rate exposure on certain long-term floating rate debt through the use of interest rate caps and/or swaps with matching maturities where appropriate, (3) using treasury rate locks where appropriate to fix rates on anticipated debt transactions, and (4) taking advantage of favorable market conditions for long-term debt and/or equity.
The following table sets forth information as of December 31, 2019 concerning the Company's long term debt obligations, including principal cash flows by scheduled maturity, weighted average interest rates and estimated fair value (dollars in thousands):
Expected Maturity Date
 For the years ending December 31,   
 20202021202220232024ThereafterTotalFair Value
CONSOLIDATED CENTERS:        
Long term debt:        
Fixed rate(1)$325,133  $688,239  $374,340  $6,895  $378,120  $2,605,141  $4,377,868  $4,406,734  
Average interest rate5.50 %3.95 %4.10 %3.50 %4.05 %3.79 %3.99 % 
Floating rate—  550,000  300,000  —  —  —  850,000  847,336  
Average interest rate— %3.51 %3.09 %— %— %— %3.36 % 
Total debt—Consolidated Centers$325,133  $1,238,239  $674,340  $6,895  $378,120  $2,605,141  $5,227,868  $5,254,070  
UNCONSOLIDATED JOINT VENTURE CENTERS:        
Long term debt (at Company's pro rata share):        
Fixed rate$39,837  $150,599  $365,530  $360,617  $366,738  $1,756,583  $3,039,904  $3,062,251  
Average interest rate3.69 %3.81 %3.67 %3.40 %4.08 %3.88 %3.81 % 
Floating rate—  36,183  —  159,900  —  —  196,083  196,257  
Average interest rate— %3.69 %— %3.68 %— %— %3.69 % 
Total debt—Unconsolidated Joint Venture Centers$39,837  $186,782  $365,530  $520,517  $366,738  $1,756,583  $3,235,987  $3,258,508  
_______________________________________________________________________________
(1)Fixed rate debt includes $400 million of floating rate bank and other notes payable. The Company has four interest rate swap agreements that effectively convert a total of $400 million of the outstanding balance from floating rate debt of LIBOR plus 1.55% to fixed rate debt of 4.30% until September 30, 2021 (See Note 5—Derivative Instruments and Hedging Activities in the Company's Notes to the Consolidated Financial Statements ).
The Consolidated Centers' total fixed rate debt at December 31, 2019 and 2018 was $4.4 billion and $3.9 billion, respectively. The average interest rate on such fixed rate debt at December 31, 2019 and 2018 was 3.99% and 3.87%, respectively. The Consolidated Centers' total floating rate debt at December 31, 2019 and 2018 was $0.9 billion and $1.1 billion. The average interest rate on such floating rate debt at December 31, 2019 and 2018 was 3.36% and 3.94%, respectively.
The Company's pro rata share of the Unconsolidated Joint Venture Centers' fixed rate debt at December 31, 2019 and 2018 was $3.0 billion. The average interest rate on such fixed rate debt at December 31, 2019 and 2018 was 3.81% and 3.83%, respectively. The Company's pro rata share of the Unconsolidated Joint Venture Centers' floating rate debt at December 31, 2019 and 2018 was $196.1 million and $221.4 million, respectively. The average interest rate on such floating rate debt at December 31, 2019 and 2018 was 3.69% and 4.13%, respectively.
56


The Company uses derivative financial instruments in the normal course of business to manage or hedge interest rate risk and records all derivatives on the balance sheet at fair value. Interest rate cap agreements offer protection against floating rates on the notional amount from exceeding the rates noted in the above schedule, and interest rate swap agreements effectively replace a floating rate on the notional amount with a fixed rate as noted above. As of December 31, 2019, the Company has one interest rate cap agreement and four interest rate swap agreements in place (See Note 5—Derivative Instruments and Hedging Activities in the Company's Notes to the Consolidated Financial Statements).
In addition, the Company has assessed the market risk for its floating rate debt and believes that a 1% increase in interest rates would decrease future earnings and cash flows by approximately $10.5 million per year based on $1.0 billion of floating rate debt outstanding at December 31, 2019.
The fair value of the Company's long-term debt is estimated based on a present value model utilizing interest rates that reflect the risks associated with long-term debt of similar risk and duration. In addition, the method of computing fair value for mortgage notes payable included a credit value adjustment based on the estimated value of the property that serves as collateral for the underlying debt (See Note 10—Mortgage Notes Payable and Note 11—Bank and Other Notes Payable in the Company's Notes to the Consolidated Financial Statements).
In the event that LIBOR is discontinued, the interest rate for the variable rate debt of the Company and its joint ventures and the swap rate for the Company’s interest rate swaps following such event will be based on an alternative variable rate as specified in the applicable documentation governing such debt or swaps or as otherwise agreed upon. Such an event would not affect the Company’s ability to borrow or maintain already outstanding borrowings or swaps, but the alternative variable rate could be higher and more volatile than LIBOR prior to its discontinuance. The Company understands that LIBOR is expected to remain available through the end of 2021, but may be discontinued or otherwise become unavailable thereafter.
ITEM 8.    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Refer to the Financial Statements and Financial Statement Schedules for the required information appearing in Item 15.
ITEM 9.    CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
ITEM 9A.    CONTROLS AND PROCEDURES
Conclusion Regarding Effectiveness of Disclosure Controls and Procedures
As required by Rule 13a-15(b) under the Securities and Exchange Act of 1934, as amended (the "Exchange Act"), management carried out an evaluation, under the supervision and with the participation of the Company's Chief Executive Officer and Chief Financial Officer, of the effectiveness of the Company's disclosure controls and procedures as of the end of the period covered by this Annual Report on Form 10-K. Based on their evaluation as of December 31, 2019, the Company's Chief Executive Officer and Chief Financial Officer have concluded that the Company's disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Exchange Act) were effective to ensure that the information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is (a) recorded, processed, summarized, and reported within the time periods specified in the SEC's rules and forms and (b) accumulated and communicated to the Company's management, including its Chief Executive Officer and Chief Financial Officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
Management's Report on Internal Control Over Financial Reporting
The Company's management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act). The Company's management assessed the effectiveness of the Company's internal control over financial reporting as of December 31, 2019. In making this assessment, the Company's management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control—Integrated Framework (2013). The Company's management concluded that, as of December 31, 2019, its internal control over financial reporting was effective based on this assessment.
KPMG LLP, the independent registered public accounting firm that audited the Company's 2019 consolidated financial statements included in this Annual Report on Form 10-K, has issued a report on the Company's internal control over financial reporting which follows below.


57


Changes in Internal Control over Financial Reporting
There were no changes in the Company's internal control over financial reporting during the quarter ended December 31, 2019 that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.
58


Report of Independent Registered Public Accounting Firm

To the Stockholders and Board of Directors of
The Macerich Company:

Opinion on Internal Control over Financial Reporting
We have audited The Macerich Company’s and subsidiaries’ (the Company) internal control over financial reporting as of December 31, 2019, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2019, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2019 and 2018, the related consolidated statements of operations, comprehensive income, equity, and cash flows for each of the years in the three-year period ended December 31, 2019, and the related notes and financial statement Schedule III – Real Estate and Accumulated Depreciation (collectively, the consolidated financial statements), and our report dated February 25, 2020 expressed an unqualified opinion on those consolidated financial statements.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ KPMG LLP

Los Angeles, California
February 25, 2020
59


ITEM 9B.    OTHER INFORMATION
None
PART III
ITEM 10.    DIRECTORS AND EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
There is hereby incorporated by reference the information which appears under the captions "Information Regarding our Director Nominees," "Executive Officers," "Delinquent Section 16(a) Reports" and "Audit Committee Matters" in the Company's definitive proxy statement for its 2020 Annual Meeting of Stockholders that is responsive to the information required by this Item.
The Company has adopted a Code of Business Conduct and Ethics that provides principles of conduct and ethics for its directors, officers and employees. This Code complies with the requirements of the Sarbanes-Oxley Act of 2002 and applicable rules of the Securities and Exchange Commission and the New York Stock Exchange. In addition, the Company has adopted a Code of Ethics for CEO and Senior Financial Officers which supplements the Code of Business Conduct and Ethics applicable to all employees and complies with the additional requirements of the Sarbanes-Oxley Act of 2002 and applicable rules of the Securities and Exchange Commission for those officers. To the extent required by applicable rules of the Securities and Exchange Commission and the New York Stock Exchange, the Company intends to promptly disclose future amendments to certain provisions of these Codes or waivers of such provisions granted to directors and executive officers, including the Company’s principal executive officer, principal financial officer, principal accounting officer or persons performing similar functions, on the Company’s website at www.macerich.com under "Investors—Corporate Governance—Code of Ethics." Each of these Codes of Conduct is available on the Company’s website at www.macerich.com under "Investors—Corporate Governance."
During 2019, there were no material changes to the procedures described in the Company's proxy statement relating to the 2019 Annual Meeting of Stockholders by which stockholders may recommend director nominees to the Company.
ITEM 11.    EXECUTIVE COMPENSATION
There is hereby incorporated by reference the information which appears under the captions "Compensation of Non-Employee Directors," "Compensation Committee Report," "Compensation Discussion and Analysis," "Executive Compensation" and "Compensation Committee Interlocks and Insider Participation" in the Company's definitive proxy statement for its 2020 Annual Meeting of Stockholders that is responsive to the information required by this Item.
ITEM 12.    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
There is hereby incorporated by reference the information which appears under the captions "Principal Stockholders," "Information Regarding Our Director Nominees," "Executive Officers" and "Equity Compensation Plan Information" in the Company's definitive proxy statement for its 2020 Annual Meeting of Stockholders that is responsive to the information required by this Item.
ITEM 13.    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
There is hereby incorporated by reference the information which appears under the captions "Certain Transactions" and "The Board of Directors and its Committees" in the Company's definitive proxy statement for its 2020 Annual Meeting of Stockholders that is responsive to the information required by this Item.
ITEM 14.    PRINCIPAL ACCOUNTANT FEES AND SERVICES
There is hereby incorporated by reference the information which appears under the captions "Principal Accountant Fees and Services" and "Audit Committee Pre-Approval Policy" in the Company's definitive proxy statement for its 2020 Annual Meeting of Stockholders that is responsive to the information required by this Item.
60


PART IV
ITEM 15.    EXHIBITS AND FINANCIAL STATEMENT SCHEDULE

ITEM 16.    FORM 10-K SUMMARY
Not applicable.

61


Report of Independent Registered Public Accounting Firm
To the Stockholders and Board of Directors of
The Macerich Company:

Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheets of The Macerich Company and subsidiaries (the Company) as of December 31, 2019 and 2018, the related consolidated statements of operations, comprehensive income, equity, and cash flows for each of the years in the three-year period ended December 31, 2019, and the related notes and financial statement Schedule III – Real Estate and Accumulated Depreciation (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2019 and 2018, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2019, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2019, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated February 25, 2020 expressed an unqualified opinion on the effectiveness of the Company's internal controls over financial reporting.
Change in Accounting Principle
As discussed in Note 2 to the consolidated financial statements, the Company has changed its method of accounting as of January 1, 2019 due to the adoption of FASB Accounting Standards Codification Topic 842 (ASC 842), Leases.
As discussed in Note 2 to the consolidated financial statements, the Company has changed its method of accounting for certain historical property sales as of January 1, 2018 due to the adoption of FASB Accounting Standards Update 2014-09, Revenue from Contracts With Customers (ASC 606).
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
Evaluation of incremental borrowing rates used to measure operating lease liabilities
As discussed in Notes 2 and 8 to the consolidated financial statements, the Company’s operating lease liabilities, upon adoption of ASC 842 on January 1, 2019, were $109 million. To measure the operating lease liability, the Company determines an incremental borrowing rate (IBR) for each operating lease and uses that IBR to discount the future cash flows for the lease to determine the amount of the operating lease liability.
62


We identified the evaluation of the IBRs used to measure operating lease liabilities, for the Company’s 14 ground leases, as a critical audit matter. The matter required subjective auditor judgment and specialized skills and knowledge to evaluate the appropriateness of the IBR for each ground lease. The rates were internally developed by the Company using observable market rates, which were adjusted for Company specific factors and the measurement of the liability was sensitive to changes in these rates.
The primary procedures we performed to address this critical audit matter included the following. We tested certain internal controls over the Company’s process to measure the operating lease liability, including controls over the development of the IBR for each ground lease. We involved valuation professionals with specialized skills and knowledge who assisted in the evaluation of the Company’s IBR for each ground lease by:
developing independent estimates of IBR by obtaining market rates of the Company’s long-term borrowings and rates of similar companies and making adjustments for differences between the terms of the leases, the maturities, and level of collateral for the observable long-term borrowings, and
comparing the Company’s IBR for each ground lease used in the calculation of the Company’s operating lease liability to the rates we independently developed.
Evaluation of the fair value of the Chandler Freehold financing arrangement obligation
As discussed in Notes 2 and 12 to the consolidated financial statements, the Company reports the Chandler Freehold consolidated joint venture as a financing arrangement with the related deferred gain recorded as a liability at fair value. The fair value of the financing arrangement obligation is determined primarily on the fair value of the underlying shopping centers, Chandler Fashion Center and Freehold Raceway Mall, owned by the Chandler Freehold consolidated joint venture. The fair value of the shopping centers is estimated using a discounted cash flow model. Subsequent changes in fair value of the financing arrangement obligation are recorded through earnings as interest expense. The financing arrangement obligation as of December 31, 2019 was $274 million, or 5% of total liabilities. The adjustment to fair value of the financing arrangement obligation was $77 million, or 79% of net income.
We identified the evaluation of the fair value of the Chandler Freehold financing arrangement obligation as a critical audit matter. A high degree of subjectivity was required in evaluating the discounted cash flow model used to fair value the shopping centers. Specifically, the model is sensitive to reasonably possible changes to key assumptions, which have a significant effect on the determination of fair value of the financing arrangement obligation. The key assumptions include market rental rates, discount rates, and terminal capitalization rates.
The primary procedures we performed to address this critical audit matter included the following. We tested certain internal controls over the Company’s fair value determination process for the financing arrangement obligation and specifically the development of the key assumptions. We performed sensitivity analyses on the key assumptions, considering data obtained from industry publications, to assess the impact on the Company’s determination of the fair value of the financing arrangement obligation. We involved a valuation professional with specialized skills and knowledge who assisted in evaluating the Company’s key assumptions used in the discounted cash flow model. The valuation professionals independently developed a range of the market rental rates, discount rates, and terminal capitalization rates using publicly available market data for comparable properties and geographic regions in which Chandler Fashion Center and Freehold Raceway Mall are located and compared the rates to those used by the Company.
Evaluation of property impairment indicators
As discussed in Notes 2 and 6 to the consolidated financial statements, the Company assesses whether an indicator of impairment in the carrying value of its properties exists by considering property operating performance, holding periods, capitalization rates, and other market factors. Property, net as of December 31, 2019 was $6,644 million, or 75% of total assets.
We identified the evaluation of property impairment indicators for properties as a critical audit matter. Evaluating the Company’s judgments of changes in market conditions that could have an adverse impact on property operating performance, holding periods, and capitalization rates involved a high degree of subjective auditor judgment due to the limited amount of observable market data available for the Company’s properties.

63


The primary procedures we performed to address this critical audit matter included the following. We tested certain internal controls over the Company’s property impairment process, including controls over the potential impairment indicators. We evaluated key performance metrics for properties, specifically to identify any negative trends in the performance metrics that could indicate potential impairment indicators, including decreases in net operating income compared to historical results, shortened holding periods and properties with current encumbrances that are set to mature within one year. We evaluated the Company’s potential impairment indicators by reading minutes of the meetings of the Company’s Board of Directors and inquiring of the Company. We performed a sensitivity analysis over the capitalization rates and holding periods used in the Company’s impairment indicator identification analysis.

/s/ KPMG LLP
We have served as the Company’s auditor since 2010.
Los Angeles, California
February 25, 2020
64


THE MACERICH COMPANY
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except par value)

 December 31,
 20192018
ASSETS:  
Property, net$6,643,513  $6,785,776  
Cash and cash equivalents100,005  102,711  
Restricted cash14,211  46,590  
Tenant and other receivables, net144,035  123,492  
Right-of-use assets, net148,087  —  
Deferred charges and other assets, net277,866  390,403  
Due from affiliates6,157  85,181  
Investments in unconsolidated joint ventures1,519,697  1,492,655  
Total assets$8,853,571  $9,026,808  
LIABILITIES AND EQUITY:  
Mortgage notes payable$4,392,599  $4,073,916  
Bank and other notes payable817,377  908,544  
Accounts payable and accrued expenses51,027  59,392  
Lease liabilities114,201  —  
Other accrued liabilities265,595  303,051  
Distributions in excess of investments in unconsolidated joint ventures107,902  114,988  
Financing arrangement obligation273,900  378,485  
Total liabilities6,022,601  5,838,376  
Commitments and contingencies
Equity:  
Stockholders' equity:  
Common stock, $0.01 par value, 250,000,000 shares authorized, 141,407,650
 and 141,221,712 shares issued and outstanding at December 31, 2019
 and 2018, respectively
1,414  1,412  
Additional paid-in capital4,583,911  4,567,643  
Accumulated deficit(1,944,012) (1,614,357) 
Accumulated other comprehensive loss(9,051) (4,466) 
Total stockholders' equity2,632,262  2,950,232  
Noncontrolling interests198,708  238,200  
Total equity2,830,970  3,188,432  
Total liabilities and equity$8,853,571  $9,026,808  
   
The accompanying notes are an integral part of these consolidated financial statements.
65


THE MACERICH COMPANY
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share amounts)

 For The Years Ended December 31,
 201920182017
Revenues:   
Leasing revenue$858,874  $883,996  $922,152  
Other27,879  32,875  28,116  
Management Companies40,709  43,480  43,394  
Total revenues927,462  960,351  993,662  
Expenses:   
Shopping center and operating expenses271,547  277,470  295,190  
Leasing expense29,611  11,624  12,420  
Management Companies' operating expenses66,795  91,910  87,701  
REIT general and administrative expenses22,634  24,160  28,240  
Costs related to shareholder activism—  19,369  —  
Depreciation and amortization330,726  327,436  335,431  
721,313  751,969  758,982  
Interest (income) expense:   
Related parties(62,517) 6,883  8,731  
Other200,771  176,079  163,045  
138,254  182,962  171,776  
Loss on extinguishment of debt351  —  —  
Total expenses859,918  934,931  930,758  
Equity in income of unconsolidated joint ventures48,508  71,773  85,546  
Co-venture expense—  —  (13,629) 
Income tax (expense) benefit(1,589) 3,604  (15,594) 
(Loss) gain on sale or write down of assets, net(11,909) (31,825) 42,446  
Net income102,554  68,972  161,673  
Less net income attributable to noncontrolling interests5,734  8,952  15,543  
Net income attributable to the Company$96,820  $60,020  $146,130  
Earnings per common share attributable to common stockholders:   
Basic$0.68  $0.42  $1.02  
Diluted$0.68  $0.42  $1.02  
Weighted average number of common shares outstanding:   
Basic141,340,000  141,142,000  141,877,000  
Diluted141,340,000  141,144,000  141,913,000  
   The accompanying notes are an integral part of these consolidated financial statements.
66


THE MACERICH COMPANY
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Dollars in thousands)

 For The Years Ended December 31,
 201920182017
Net income$102,554  $68,972  $161,673  
Other comprehensive loss:   
Interest rate cap/swap agreements(4,585) (4,424) (42) 
Comprehensive income97,969  64,548  161,631  
Less net income attributable to noncontrolling interests5,734  8,952  15,543  
Comprehensive income attributable to the Company$92,235  $55,596  $146,088  
   The accompanying notes are an integral part of these consolidated financial statements.
67


THE MACERICH COMPANY
CONSOLIDATED STATEMENTS OF EQUITY
(Dollars in thousands, except per share data)
 Stockholders' Equity  
 Common StockAdditional Paid-in CapitalAccumulated
Deficit
Accumulated Other Comprehensive LossTotal Stockholders'
Equity
  
 SharesPar
Value
Noncontrolling
Interests
Total
Equity
Balance at January 1, 2017143,985,036  $1,440  $4,593,229  $(488,782) $—  $4,105,887  $321,281  $4,427,168  
Net income—  —  —  146,130  —  146,130  15,543  161,673  
Cumulative effect of adoption of ASU 2016-09—  —  —  6,484  —  6,484  —  6,484  
Interest rate cap—  —  —  —  (42) (42) —  (42) 
Amortization of share and unit-based plans97,694   37,004  —  —  37,005  —  37,005  
Employee stock purchases38,832  —  1,868  —  —  1,868  —  1,868  
Stock repurchase(3,627,390) (36) (135,176) (86,216) —  (221,428) —  (221,428) 
Distributions declared ($2.87) per share—  —  —  (407,895) —  (407,895) —  (407,895) 
Distributions to noncontrolling interests—  —  —  —  —  —  (35,944) (35,944) 
Contributions from noncontrolling interests—  —  —  —  —  —  30  30  
Conversion of noncontrolling interests to common shares499,813   16,792  —  —  16,797  (16,797) —  
Redemption of noncontrolling interests—  —  (615) —  —  (615) (305) (920) 
Adjustment of noncontrolling interests in Operating Partnership—  —  (2,613) —  —  (2,613) 2,613  —  
Balance at December 31, 2017140,993,985  $1,410  $4,510,489  $(830,279) $(42) $3,681,578  $286,421  $3,967,999  
   
The accompanying notes are an integral part of these consolidated financial statements.

68


THE MACERICH COMPANY
CONSOLIDATED STATEMENTS OF EQUITY (Continued)
(Dollars in thousands, except per share data)
 Stockholders' Equity  
Common StockAdditional Paid-in CapitalAccumulated
Deficit
Accumulated
Other
Comprehensive
Loss
Total Stockholders'
Equity
 SharesPar
Value
Noncontrolling
Interests
Total
Equity
Balance at December 31, 2017140,993,985  $1,410  $4,510,489  $(830,279) $(42) $3,681,578  $286,421  $3,967,999  
Net income—  —  —  60,020  —  60,020  8,952  68,972  
Cumulative effect of adoption of ASU 2014-09—  —  —  (424,859) —  (424,859) —  (424,859) 
Interest rate cap/swap agreements—  —  —  —  (4,424) (4,424) —  (4,424) 
Amortization of share and unit-based plans125,723   33,550  —  —  33,551  —  33,551  
Employee stock purchases35,293  —  1,570  —  —  1,570  —  1,570  
Distributions declared ($2.97) per share—  —  —  (419,239) —  (419,239) —  (419,239) 
Distributions to noncontrolling interests—  —  —  —  —  —  (34,395) (34,395) 
Contributions from noncontrolling interests—  —  —  —  —  —  16  16  
Conversion of noncontrolling interests to common shares66,711   74  —  —  75  (75) —  
Redemption of noncontrolling interests—  —  (511) —  —  (511) (248) (759) 
Adjustment of noncontrolling interests in Operating Partnership—  —  22,471  —  —  22,471  (22,471) —  
Balance at December 31, 2018141,221,712  $1,412  $4,567,643  $(1,614,357) $(4,466) $2,950,232  $238,200  $3,188,432  
   
The accompanying notes are an integral part of these consolidated financial statements.

69


THE MACERICH COMPANY
CONSOLIDATED STATEMENTS OF EQUITY (Continued)
(Dollars in thousands, except per share data)
 Stockholders' Equity  
 Common StockAdditional Paid-in CapitalAccumulated DeficitAccumulated Other Comprehensive LossTotal Stockholders' Equity  
 SharesPar
Value
Noncontrolling
Interests
Total
Equity
Balance at December 31, 2018141,221,712  $1,412  $4,567,643  $(1,614,357) $(4,466) $2,950,232  $238,200  $3,188,432  
Net income—  —  —  96,820  —  96,820  5,734  102,554  
Cumulative effect of adoption of ASC 842—  —  —  (2,203) —  (2,203) —  (2,203) 
Interest rate cap/swap agreements—  —  —  —  (4,585) (4,585) —  (4,585) 
Amortization of share and unit-based plans106,747   16,722  —  —  16,723  —  16,723  
Employee stock purchases58,191   1,518  —  —  1,519  —  1,519  
Distributions declared ($3.00) per share—  —  —  (424,272) —  (424,272) —  (424,272) 
Distributions to noncontrolling interests—  —  —  —  —  —  (50,262) (50,262) 
Contributions from noncontrolling interests—  —  —  —  —  —  3,131  3,131  
Conversion of noncontrolling interests to common shares21,000  —  1,005  —  —  1,005  (1,005) —  
Redemption of noncontrolling interests—  —  (31) —  —  (31) (36) (67) 
Adjustment of noncontrolling interests in Operating Partnership—  —  (2,946) —  —  (2,946) 2,946  —  
Balance at December 31, 2019141,407,650  $1,414  $4,583,911  $(1,944,012) $(9,051) $2,632,262  $198,708  $2,830,970  
   
The accompanying notes are an integral part of these consolidated financial statements.
70


THE MACERICH COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
 For the Years Ended December 31,
 201920182017
Cash flows from operating activities:   
Net income$102,554  $68,972  $161,673  
Adjustments to reconcile net income to net cash provided by operating activities:   
Loss on extinguishment of debt351  —  —  
Loss (gain) on sale or write down of assets, net11,909  31,825  (42,446) 
Depreciation and amortization337,667  334,682  341,275  
Amortization of net premium on mortgage notes payable(929) (929) (3,277) 
Amortization of share and unit-based plans12,032  27,367  30,799  
Straight-line rent and amortization of above and below market leases(14,009) (13,701) (9,561) 
Provision for doubtful accounts7,682  4,663  4,314  
Income tax expense (benefit)1,589  (3,604) 15,594  
Equity in income of unconsolidated joint ventures(48,508) (71,773) (85,546) 
Change in fair value of financing arrangement obligation(76,640) (15,225) —  
Co-venture expense—  —  13,629  
Distributions of income from unconsolidated joint ventures934  1,959  463  
Changes in assets and liabilities, net of acquisitions and dispositions:   
Tenant and other receivables(9,929) (13,912) (6,508) 
Other assets(9,553) 8,439  (4,414) 
Due from affiliates13,894  (3,019) (13,982) 
Accounts payable and accrued expenses(237) (2,159) (5,822) 
Other accrued liabilities26,350  (9,274) (9,802) 
Net cash provided by operating activities355,157  344,311  386,389  
Cash flows from investing activities:   
Development, redevelopment, expansion and renovation of properties(166,791) (181,089) (160,343) 
Property improvements(21,114) (56,142) (41,807) 
Proceeds from collection of notes receivable68,819  1,043  7,073  
Deferred leasing costs(11,906) (28,769) (31,655) 
Distributions from unconsolidated joint ventures266,349  536,643  267,964  
Contributions to unconsolidated joint ventures(252,903) (181,239) (117,538) 
Proceeds from sale of assets5,520  85,876  255,294  
Net cash (used in) provided by investing activities(112,026) 176,323  178,988  

The accompanying notes are an integral part of these consolidated financial statements.
71


THE MACERICH COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(Dollars in thousands)
 For the Years Ended December 31,
 201920182017
Cash flows from financing activities:   
Proceeds from mortgages, bank and other notes payable1,796,000  415,000  1,430,000  
Payments on mortgages, bank and other notes payable(1,567,089) (469,814) (1,219,728) 
Deferred financing costs(7,759) (275) (8,500) 
Payment of finance deposits, net of refunds received—  (6,542) —  
Payment on finance arrangement obligation(27,945) —  —  
Payments on finance leases(1,472) —  —  
Proceeds from share and unit-based plans1,519  1,570  1,868  
Stock repurchases—  —  (221,428) 
Redemption of noncontrolling interests(67) (759) (920) 
Contributions from noncontrolling interests3,131  16  30  
Dividends and distributions(474,534) (453,634) (443,839) 
Distributions to co-venture partner—  —  (103,752) 
Net cash used in financing activities(278,216) (514,438) (566,269) 
Net (decrease) increase in cash, cash equivalents and restricted cash(35,085) 6,196  (892) 
Cash, cash equivalents and restricted cash at beginning of year149,301  143,105  143,997  
Cash, cash equivalents, and restricted cash at end of year$114,216  $149,301  $143,105  
Supplemental cash flow information:   
Cash payments for interest, net of amounts capitalized$210,026  $192,254  $168,493  
Non-cash investing and financing activities:   
Accrued development costs included in accounts payable and accrued expenses and other accrued liabilities$32,452  $50,006  $43,726  
Conversion of Operating Partnership Units to common stock$1,005  $75  $16,797  
Lease liabilities recorded in connection with right-of-use assets$109,299  $—  $—  
Mortgage notes payable assumed by buyer in exchange for investment in unconsolidated joint venture$—  $139,249  $—  
Disposition of property in exchange for investments in unconsolidated joint ventures$—  $25,177  $—  
  
 The accompanying notes are an integral part of these consolidated financial statements.

72

THE MACERICH COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share amounts)
1. Organization:
The Macerich Company (the "Company") is involved in the acquisition, ownership, development, redevelopment, management and leasing of regional and community/power shopping centers (the "Centers") located throughout the United States.
The Company commenced operations effective with the completion of its initial public offering on March 16, 1994. As of December 31, 2019, the Company was the sole general partner of and held a 93% ownership interest in The Macerich Partnership, L.P. (the "Operating Partnership"). The Company was organized to qualify as a real estate investment trust ("REIT") under the Internal Revenue Code of 1986, as amended (the "Code").
The property management, leasing and redevelopment of the Company's portfolio is provided by the Company's management companies, Macerich Property Management Company, LLC, a single member Delaware limited liability company, Macerich Management Company, a California corporation, Macerich Arizona Partners LLC, a single member Arizona limited liability company, Macerich Arizona Management LLC, a single member Delaware limited liability company, Macerich Partners of Colorado LLC, a single member Colorado limited liability company, MACW Mall Management, Inc., a New York corporation, and MACW Property Management, LLC, a single member New York limited liability company. All 7 of the management companies are owned by the Company and are collectively referred to herein as the "Management Companies."
2. Summary of Significant Accounting Policies:
Basis of Presentation:
These consolidated financial statements have been prepared in accordance with generally accepted accounting principles ("GAAP") in the United States of America.
The accompanying consolidated financial statements include the accounts of the Company. Investments in entities in which the Company has a controlling financial interest or entities that meet the definition of a variable interest entity ("VIE") in which the Company has, as a result of ownership, contractual or other financial interests, both the power to direct activities that most significantly impact the economic performance of the VIE and the obligation to absorb losses or the right to receive benefits that could potentially be significant to the VIE are consolidated; otherwise they are accounted for under the equity method of accounting and are reflected as investments in unconsolidated joint ventures.
The Company's sole significant asset is its investment in the Operating Partnership and as a result, substantially all of the Company's assets and liabilities represent the assets and liabilities of the Operating Partnership. In addition, the Operating Partnership has investments in a number of VIEs.
The Operating Partnership's VIEs included the following assets and liabilities:
December 31,
20192018
Assets:  
Property, net$254,071  $263,511  
Other assets30,049  23,001  
Total assets$284,120  $286,512  
Liabilities:  
Mortgage notes payable$219,140  $125,273  
Other liabilities32,101  32,503  
Total liabilities$251,241  $157,776  
All intercompany accounts and transactions have been eliminated in the consolidated financial statements.
73

THE MACERICH COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share amounts)
2. Summary of Significant Accounting Policies: (Continued)
Basis of Presentation: (Continued)
The following table presents a reconciliation of the beginning of period and end of period cash, cash equivalents and restricted cash reported on the Company's consolidated balance sheets to the totals shown on its consolidated statements of cash flows:
201920182017
Beginning of period
Cash and cash equivalents$102,711  $91,038  $94,046  
Restricted cash46,590  52,067  49,951  
Cash, cash equivalents and restricted cash$149,301  $143,105  $143,997  
End of period
Cash and cash equivalents$100,005  $102,711  $91,038  
Restricted cash14,211  46,590  52,067  
Cash, cash equivalents and restricted cash$114,216  $149,301  $143,105  

Cash and Cash Equivalents and Restricted Cash:
The Company considers all highly liquid investments with an original maturity of three months or less when purchased to be cash equivalents, for which cost approximates fair value. Restricted cash includes impounds of property taxes and other capital reserves required under loan and other agreements.
Revenues:
Leasing revenue includes minimum rents, percentage rents, tenant recoveries and other leasing income. Minimum rental revenues are recognized on a straight-line basis over the terms of the related leases. The difference between the amount of rent due in a year and the amount recorded as rental income is referred to as the "straight-line rent adjustment." Minimum rents were increased by $10,533, $11,755 and $8,597 due to the straight-line rent adjustment during the years ended December 31, 2019, 2018 and 2017, respectively. Percentage rents are recognized and accrued when tenants' specified sales targets have been met. Estimated recoveries from certain tenants for their pro rata share of real estate taxes, insurance and other shopping center operating expenses are recognized as revenues in the period the applicable expenses are incurred. Other tenants pay a fixed rate and these tenant recoveries are recognized as revenues on a straight-line basis over the term of the related leases.
The Management Companies provide property management, leasing, corporate, development, redevelopment and acquisition services to affiliated and non-affiliated shopping centers. In consideration for these services, the Management Companies receive monthly management fees generally ranging from 1.5% to 4% of the gross monthly rental revenue of the properties managed.
Property:
Maintenance and repair expenses are charged to operations as incurred. Costs for major replacements and betterments, which includes HVAC equipment, roofs, parking lots, etc., are capitalized and depreciated over their estimated useful lives. Gains and losses are recognized upon disposal or retirement of the related assets and are reflected in earnings.
Property is recorded at cost and is depreciated using a straight-line method over the estimated useful lives of the assets as follows:
Buildings and improvements5 - 40 years
Tenant improvements5 - 7 years
Equipment and furnishings5 - 7 years
74

THE MACERICH COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share amounts)
2. Summary of Significant Accounting Policies: (Continued)
Capitalization of Costs:
The Company capitalizes costs incurred in redevelopment, development, renovation and improvement of properties. The capitalized costs include pre-construction costs essential to the development of the property, development costs, construction costs, interest costs, real estate taxes, salaries and related costs and other costs incurred during the period of development. These capitalized costs include direct and certain indirect costs clearly associated with the project. Indirect costs include real estate taxes, insurance and certain shared administrative costs. In assessing the amounts of direct and indirect costs to be capitalized, allocations are made to projects based on estimates of the actual amount of time spent on each activity. Indirect costs not clearly associated with specific projects are expensed as period costs. Capitalized indirect costs are allocated to development and redevelopment activities based on the square footage of the portion of the building not held available for immediate occupancy. If costs and activities incurred to ready the vacant space cease, then cost capitalization is also discontinued until such activities are resumed. Once work has been completed on a vacant space, project costs are no longer capitalized. For projects with extended lease-up periods, the Company ends the capitalization when significant activities have ceased, which does not exceed the shorter of a one-year period after the completion of the building shell or when the construction is substantially complete.
Investment in Unconsolidated Joint Ventures:
The Company accounts for its investments in joint ventures using the equity method of accounting unless the Company has a controlling financial interest in the joint venture or the joint venture meets the definition of a variable interest entity in which the Company is the primary beneficiary through both its power to direct activities that most significantly impact the economic performance of the variable interest entity and the obligation to absorb losses or the right to receive benefits that could potentially be significant to the variable interest entity. Although the Company has a greater than 50% interest in Corte Madera Village, LLC, Macerich HHF Centers LLC, New River Associates LLC and Pacific Premier Retail LLC, the Company does not have controlling financial interests in these joint ventures due to the substantive participation rights of the outside partners in these joint ventures and, therefore, accounts for its investments in these joint ventures using the equity method of accounting.
Equity method investments are initially recorded on the balance sheet at cost and are subsequently adjusted to reflect the Company’s proportionate share of net earnings and losses, distributions received, additional contributions and certain other adjustments, as appropriate. The Company separately reports investments in joint ventures when accumulated distributions have exceeded the Company’s investment, as distributions in excess of investments in unconsolidated joint ventures. The net investment of certain joint ventures is less than zero because of financing or operating distributions that are usually greater than net income, as net income includes charges for depreciation and amortization.
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 3 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 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
75

THE MACERICH COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share amounts)
2. Summary of Significant Accounting Policies: (Continued)
Acquisitions: (Continued)
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.
Remeasurement gains are recognized when the Company obtains control of an existing equity method investment to the extent that the fair value of the existing equity investment exceeds the carrying value of the investment.
Deferred Charges:
Costs relating to obtaining tenant leases are deferred and amortized over the initial term of the lease agreement using the straight-line method. As these deferred leasing costs represent productive assets incurred in connection with the Company's leasing arrangements at the Centers, the related cash flows are classified as investing activities within the accompanying Consolidated Statements of Cash Flows. Costs relating to financing of shopping center properties are deferred and amortized over the life of the related loan using the straight-line method, which approximates the effective interest method.
The range of the terms of the agreements is as follows:
Deferred leasing costs1 - 15 years
Deferred financing costs1 - 15 years
Accounting for 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, 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.
Share and Unit-based Compensation Plans:
The cost of share and unit-based compensation awards is measured at the grant date based on the calculated fair value of the awards and is recognized on a straight-line basis over the requisite service period, which is generally the vesting period of the awards.

76

THE MACERICH COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share amounts)
2. Summary of Significant Accounting Policies: (Continued)
Derivative Instruments and Hedging Activities:
The Company recognizes all derivatives in the consolidated financial statements and measures the derivatives at fair value. The Company uses interest rate swap and cap agreements (collectively, "interest rate agreements") in the normal course of business to manage or reduce its exposure to adverse fluctuations in interest rates. The Company designs its hedges to be effective in reducing the risk exposure that they are designated to hedge. Any instrument that meets the cash flow hedging criteria is formally designated as a cash flow hedge at the inception of the derivative contract. On an ongoing quarterly basis, the Company adjusts its balance sheet to reflect the current fair value of its derivatives. To the extent they are effective, changes in fair value are recorded in comprehensive income.
Amounts paid (received) as a result of interest rate agreements are recorded as an addition (reduction) to (of) interest expense.
If any derivative instrument used for risk management does not meet the hedging criteria, it is marked-to-market each period with the change in value included in the consolidated statements of operations.
Income Taxes:
The Company elected to be taxed as a REIT under the Code commencing with its taxable year ended December 31, 1994. To qualify as a REIT, the Company must meet a number of organizational and operational requirements, including a requirement that it distribute at least 90% of its taxable income to its stockholders. It is management's current intention to adhere to these requirements and maintain the Company's REIT status. As a REIT, the Company generally will not be subject to corporate level federal income tax on taxable income it distributes currently to its stockholders. If the Company fails to qualify as a REIT in any taxable year, then it will be subject to federal income taxes at regular corporate rates and may not be able to qualify as a REIT for four subsequent taxable years. Even if the Company qualifies for taxation as a REIT, the Company may be subject to certain state and local taxes on its income and property and to federal income and excise taxes on its undistributed taxable income, if any.
Each partner is taxed individually on its share of partnership income or loss, and accordingly, no provision for federal and state income tax is provided for the Operating Partnership in the consolidated financial statements. The Company's taxable REIT subsidiaries ("TRSs") are subject to corporate level income taxes, which are provided for in the Company's consolidated financial statements.
Deferred tax assets and liabilities are recognized for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred tax assets and liabilities are determined based on the differences between the financial reporting and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. The deferred tax assets and liabilities of the TRSs relate primarily to differences in the book and tax bases of property and to operating loss carryforwards for federal and state income tax purposes. A valuation allowance for deferred tax assets is provided if the Company believes it is more likely than not that all or some portion of the deferred tax assets will not be realized. Realization of deferred tax assets is dependent on the Company generating sufficient taxable income in future periods.
Segment Information:
The Company currently operates in 1 business segment, the acquisition, ownership, development, redevelopment, management and leasing of regional and community shopping centers. Additionally, the Company operates in 1 geographic area, the United States.

77

THE MACERICH COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share amounts)
2. Summary of Significant Accounting Policies: (Continued)
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 are 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 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 fair values of interest rate agreements are determined using the market standard methodology of discounting the future expected cash receipts that would occur if variable interest rates fell below or rose above the strike rate of the interest rate agreements. The variable interest rates used in the calculation of projected receipts on the interest rate agreements are based on an expectation of future interest rates derived from observable market interest rate curves and volatilities. The Company incorporates credit valuation adjustments to appropriately reflect both its own nonperformance risk and the respective counterparty's nonperformance risk in the fair value measurements. In adjusting the fair value of its derivative contracts for the effect of nonperformance risk, the Company has considered the impact of netting and any applicable credit enhancements, such as collateral postings, thresholds, mutual puts and guarantees.
The Company records its financing arrangement 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 the 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.
Concentration of Risk:
The Company maintains its cash accounts in a number of commercial banks. Accounts at these banks are guaranteed by the Federal Deposit Insurance Corporation ("FDIC") up to $250. At various times during the year, the Company had deposits in excess of the FDIC insurance limit.
No Center or tenant generated more than 10% of total revenues during the years ended December 31, 2019, 2018 or 2017.
Management Estimates:
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Shareholder Activism Costs:
During the year ended December 31, 2018, the Company incurred $19,369 in costs associated with activities related to shareholder activism. These costs were primarily for legal and advisory services.

78

THE MACERICH COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share amounts)
2. Summary of Significant Accounting Policies: (Continued)
Recent Accounting Pronouncements:
In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update ("ASU") 2014-09, “Revenue From Contracts With Customers (ASC 606)," which outlines a comprehensive model for entities to use in accounting for revenue arising from contracts with customers. The standard states that “an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.” While the standard specifically references contracts with customers, it may apply to certain other transactions such as the sale of real estate or equipment. The standard applies to the Company's recognition of management companies and other revenues. The Company's adoption of the standard on January 1, 2018 did not have an impact on the pattern of revenue recognition for management companies and other revenues.
Additionally, under ASC 606, the Company changed its accounting for its joint venture in Chandler Freehold from a co-venture arrangement to a financing arrangement (See Note 12—Financing Arrangement). Upon adoption of the standard on January 1, 2018, the Company replaced its $31,150 distributions in excess of co-venture obligation with a financing arrangement obligation of $393,709 on its consolidated balance sheets. This resulted in the recognition of a $424,859 increase in the Company’s accumulated deficit as a cumulative effect adjustment under the modified retrospective method of adoption.
On January 1, 2019, the Company adopted Accounting Standards Codification ("ASC") 842 "Leases", under the modified retrospective method. The new standard amended the principles for the recognition, measurement, presentation and disclosure of leases for both parties to a contract (i.e. lessees and lessors). In connection with the adoption of the new lease standard, the Company elected to use the transition packages of practical expedients for implementation provided by the FASB, which included (i) relief from re-assessing whether an expired or existing contract meets the definition of a lease, (ii) relief from re-assessing the classification of expired or existing leases at the adoption date, (iii) allowing previously capitalized initial direct leasing costs to continue to be amortized, and (iv) application of the standard as of the adoption date rather than to all periods presented.
The new standard requires the Company to reduce leasing revenue for credit losses associated with lease receivables. In addition, straight-line rent receivables are written off when the Company believes there is uncertainty regarding a tenant's ability to complete the term of the lease. As a result, the Company recognized a cumulative effect adjustment of $2,203 upon adoption for the write off of straight-line rent receivables of tenants that were in litigation or bankruptcy. The standard also requires that the provision for bad debts relating to leases be presented as a reduction of leasing revenue. For the years ended December 31, 2018 and 2017, the provision for bad debts is included in shopping center and operating expenses.
The standard requires that lessors expense, on an as-incurred basis, certain initial direct costs that are not incremental in negotiating a lease. Initial direct costs include the salaries and related costs for employees directly working on leasing activities. Prior to January 1, 2019, these costs were capitalizable and therefore the new lease standard resulted in certain of these costs being expensed as incurred. For comparison purposes, the Company has reclassified leasing expenses that were included in management companies' operating expenses to leasing expenses for the years ended December 31, 2018 and 2017, to conform to the presentation for the year ended December 31, 2019. Upon the adoption of the new standard, the Company elected the practical expedient to not separate non-lease components, most significantly certain common area maintenance recoveries, from the associated lease components, resulting in the Company presenting all revenues associated with leases as leasing revenue on its consolidated statements of operations. For comparison purposes, the Company has reclassified minimum rents, percentage rents, tenant recoveries and other leasing income to leasing revenue for the years ended December 31, 2018 and 2017, to conform to the presentation for the year ended December 31, 2019.
The standard requires lessees to classify its leases as either finance or operating leases. The lessee records a right-of-use ("ROU") asset and a lease liability for all leases with a term of greater than twelve months, regardless of their lease classification. Upon adoption, the Company recognized initial ROU assets and corresponding lease liabilities of $109,299, representing the discounted value of future lease payments required for leases classified as operating leases. In addition, the Company reclassified $59,736 from deferred charges and other assets, net, $5,978 from accounts payable and accrued expenses and $4,342 from other accrued liabilities, relating to existing intangible assets and straight-line rent liabilities. The Company's lease liabilities were increased at adoption by $15,268 for lease liabilities associated with finance leases that were previously included in other accrued liabilities. See Note 8—Leases, for further disclosure on the Company's adoption of the new standard.
79

THE MACERICH COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share amounts)
2. Summary of Significant Accounting Policies: (Continued)
Recent Accounting Pronouncements: (Continued)
In August 2017, the FASB issued ASU 2017-12, “Targeted Improvements to Accounting for Hedging Activities,” which aims to (i) improve the transparency and understandability of information conveyed to financial statement users about an entity’s risk management activities by better aligning the entity’s financial reporting for hedging relationships with those risk management activities and (ii) reduce the complexity of and simplify the application of hedge accounting by preparers. The standard is effective for the Company beginning January 1, 2019. The Company's adoption of this standard did not have a significant impact on its consolidated financial statements.
3. Earnings Per Share ("EPS"):
The following table reconciles the numerator and denominator used in the computation of earnings per share for the years ended December 31 (shares in thousands):
201920182017
Numerator   
Net income$102,554  $68,972  $161,673  
Net income attributable to noncontrolling interests(5,734) (8,952) (15,543) 
Net income attributable to the Company96,820  60,020  146,130  
Allocation of earnings to participating securities(1,190) (1,106) (757) 
Numerator for basic and diluted EPS—net income attributable to common stockholders$95,630  $58,914  $145,373  
Denominator   
Denominator for basic EPS—weighted average number of common shares outstanding141,340  141,142  141,877  
Effect of dilutive securities (1)
   Share and unit based compensation—   36  
Denominator for diluted EPS—weighted average number of common shares outstanding141,340  141,144  141,913  
EPS—net income attributable to common stockholders:   
Basic$0.68  $0.42  $1.02  
Diluted$0.68  $0.42  $1.02  

____________________________________
(1)Diluted EPS excludes 90,619 convertible preferred units for the years ended December 31, 2019, 2018 and 2017, as their impact was antidilutive.
Diluted EPS excludes 10,415,291, 10,360,390 and 10,416,321 Operating Partnership units ("OP Units") for the years ended December 31, 2019, 2018 and 2017, respectively, as their effect was antidilutive.
80

THE MACERICH COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share amounts)
4. Investments in Unconsolidated Joint Ventures:
The following are the Company's direct or indirect investments in various unconsolidated joint ventures with third parties. The Company's direct or indirect ownership interest in each joint venture as of December 31, 2019 was as follows:
Joint VentureOwnership %(1)
443 Wabash MAB LLC50.0 %
AM Tysons LLC50.0 %
Biltmore Shopping Center Partners LLC50.0 %
CAM-CARSON LLC—Los Angeles Premium Outlets50.0 %
Coolidge Holding LLC37.5 %
Corte Madera Village, LLC50.1 %
Country Club Plaza KC Partners LLC50.0 %
Fashion District Philadelphia—Various Entities50.0 %
Goodyear Peripheral LLC41.7 %
HPP-MAC WSP, LLC—One Westside25.0 %
Jaren Associates #412.5 %
Kierland Commons Investment LLC50.0 %
Macerich HHF Broadway Plaza LLC—Broadway Plaza50.0 %
Macerich HHF Centers LLC—Various Properties51.0 %
MS Portfolio LLC50.0 %
New River Associates LLC—Arrowhead Towne Center60.0 %
North Bridge Chicago LLC50.0 %
One Scottsdale Investors LLC50.0 %
Pacific Premier Retail LLC—Various Properties60.0 %
Propcor II Associates, LLC—Boulevard Shops50.0 %
Scottsdale Fashion Square Partnership50.0 %
TM TRS Holding Company LLC50.0 %
Tysons Corner LLC50.0 %
Tysons Corner Hotel I LLC50.0 %
Tysons Corner Property Holdings II LLC50.0 %
Tysons Corner Property LLC50.0 %
West Acres Development, LLP19.0 %
Westcor/Surprise Auto Park LLC33.3 %
WMAP, L.L.C.—Atlas Park, The Shops at50.0 %
_______________________________________________________________________________
(1)The Company's ownership interest in this table reflects its direct or indirect legal ownership interest. Legal ownership may, at times, not equal the Company’s economic interest in the listed entities because of various provisions in certain joint venture agreements regarding distributions of cash flow based on capital account balances, allocations of profits and losses and payments of preferred returns. As a result, the Company’s actual economic interest (as distinct from its legal ownership interest) in certain of the properties could fluctuate from time to time and may not wholly align with its legal ownership interests. Substantially all of the Company’s joint venture agreements contain rights of first refusal, buy-sell provisions, exit rights, default dilution remedies and/or other break up provisions or remedies which are customary in real estate joint venture agreements and which may, positively or negatively, affect the ultimate realization of cash flow and/or capital or liquidation proceeds.

81

THE MACERICH COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share amounts)
4. Investments in Unconsolidated Joint Ventures: (Continued)
The Company has made the following investments, dispositions and financings in unconsolidated joint ventures during the years ended December 31, 2019, 2018 and 2017:
On March 17, 2017, the Company's joint venture in Country Club Plaza sold an ownership interest in an office building for $78,000, resulting in a gain on sale of assets of $4,580. The Company's pro rata share of the gain on sale of assets of $2,290 was included in equity in income of unconsolidated joint ventures. The Company used its share of the proceeds to fund repurchases under the 2017 Stock Buyback Program (See Note 14—Stockholders' Equity).
On September 18, 2017, the Company's joint venture in Fashion District Philadelphia sold an ownership interest in an office building for $61,500, resulting in a gain on sale of assets of $13,078. The Company's pro rata share of the gain on sale of assets of $6,539 was included in equity in income of unconsolidated joint ventures. The Company used its share of the proceeds to fund repurchases under the 2017 Stock Buyback Program (See Note 14—Stockholders' Equity).
On December 14, 2017, the Company’s joint venture in Westcor/Queen Creek LLC sold land for $30,491, resulting in a gain on sale of assets of $14,853. The Company’s share of the gain on sale was $5,436, which was included in equity in income of unconsolidated joint ventures. The Company used its portion of the proceeds to pay down its line of credit and for general corporate purposes.
On February 16, 2018, the Company's joint venture in Fashion District Philadelphia sold its ownership interest in an office building for $41,800, resulting in a gain on sale of assets of $5,545. The Company's pro rata share of the gain on the sale of assets of $2,773 was included in equity in income from unconsolidated joint ventures. The Company used its share of the proceeds to pay down its line of credit and for general corporate purposes.
On March 1, 2018, the Company formed a 25/75 joint venture with Hudson Pacific Properties, whereby the Company agreed to contribute Westside Pavilion, a 680,000 square foot regional shopping center in Los Angeles, California in exchange for $142,500. From March 1, 2018 to August 31, 2018, the Company accounted for its interest in the property as a collaborative arrangement (See Note 15—Collaborative Arrangement). On August 31, 2018, the Company completed the sale of the 75% ownership interest in the property to Hudson Pacific Properties, resulting in a gain on sale of assets of $46,242. The sales price was funded by a cash payment of $36,903 and the assumption of a pro rata share of the mortgage note payable on the property of $105,597. Concurrent with the sale of the ownership interest, the joint venture defeased the loan on the property by providing $149,175 portfolio of marketable securities as replacement collateral in lieu of the property. The Company funded its $37,294 share of the purchase price of the marketable securities portfolio with the proceeds from the sale of the ownership interest in the property. Upon completion of the sale of the ownership interest in the property, the Company has accounted for its remaining ownership interest in the property, also referred to as One Westside, under the equity method of accounting.
On July 6, 2018, the Company’s joint venture in The Market at Estrella Falls, a 298,000 square foot community center in Goodyear, Arizona, sold the property for $49,100, resulting in a gain on sale of assets of $12,598. The Company's share of the gain of $2,996 was included in equity in income from unconsolidated joint ventures. The proceeds were used to pay off the $24,118 mortgage loan payable on the property, settle development obligations and for distributions to the partners. The Company used its share of the net proceeds for general corporate purposes.
On September 6, 2018, the Company formed 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 stage.
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 $100,000 at LIBOR plus 2%. Concurrent with the amendment, the joint venture borrowed an additional $26,000. On August 16, 2019, the joint venture borrowed an additional $25,000. 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 $190,000 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.

82

THE MACERICH COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share amounts)
4. Investments in Unconsolidated Joint Ventures: (Continued)
On December 18, 2019, the Company’s joint venture in One Westside placed a $414,600 construction loan on the redevelopment project.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. This loan is expected to fund the joint venture's remaining cost to complete the project.
Combined and condensed balance sheets and statements of operations are presented below for all unconsolidated joint ventures.
Combined and Condensed Balance Sheets of Unconsolidated Joint Ventures as of December 31:
20192018
Assets(1):  
Property, net$9,424,591  $9,241,003  
Other assets772,116  703,861  
Total assets$10,196,707  $9,944,864  
Liabilities and partners' capital(1):  
Mortgage and other notes payable$6,144,685  $6,050,930  
Other liabilities565,412  388,509  
Company's capital1,904,145  1,913,475  
Outside partners' capital1,582,465  1,591,950  
Total liabilities and partners' capital$10,196,707  $9,944,864  
Investment in unconsolidated joint ventures:  
Company's capital$1,904,145  $1,913,475  
Basis adjustment(2)(492,350) (535,808) 
$1,411,795  $1,377,667  
Assets—Investments in unconsolidated joint ventures1,519,697  $1,492,655  
Liabilities—Distributions in excess of investments in unconsolidated joint ventures(107,902) (114,988) 
$1,411,795  $1,377,667  
_______________________________________________________________________________

(1)These amounts include the assets of $2,932,401 and $3,047,851 of Pacific Premier Retail LLC (the "PPR Portfolio") as of December 31, 2019 and 2018, respectively, and liabilities of $1,732,976 and $1,859,637 of the PPR Portfolio as of December 31, 2019 and 2018, respectively.

(2)The Company amortizes the difference between the cost of its investments in unconsolidated joint ventures and the book value of the underlying equity into income on a straight-line basis consistent with the lives of the underlying assets. The amortization of this difference was $18,834, $12,793 and $16,562 for the years ended December 31, 2019, 2018 and 2017, respectively.
83

THE MACERICH COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share amounts)
4. Investments in Unconsolidated Joint Ventures: (Continued)
Combined and Condensed Statements of Operations of Unconsolidated Joint Ventures:
PPR PortfolioOther
Joint
Ventures
Total
Year Ended December 31, 2019   
Revenues:   
Leasing revenue$187,789  $712,860  $900,649  
Other1,598  49,184  50,782  
Total revenues189,387  762,044  951,431  
Expenses:   
Shopping center and operating expenses37,528  250,598  288,126  
Leasing expenses1,598  6,695  8,293  
Interest expense67,354  150,111  217,465  
Depreciation and amortization100,490  273,565  374,055  
Total operating expenses206,970  680,969  887,939  
Loss on sale of assets(452) (380) (832) 
Net (loss) income$(18,035) $80,695  $62,660  
Company's equity in net (loss) income$(590) $49,098  $48,508  
Year Ended December 31, 2018   
Revenues:   
Leasing revenue186,924  727,328  914,252  
Other905  41,420  42,325  
Total revenues187,829  768,748  956,577  
Expenses:   
Shopping center and operating expenses39,283  246,652  285,935  
Interest expense(1)67,117  145,915  213,032  
Depreciation and amortization97,885  248,778  346,663  
Total operating expenses204,285  641,345  845,630  
(Loss) gain on sale of assets(140) 14,471  14,331  
Net (loss) income$(16,596) $141,874  $125,278  
Company's equity in net (loss) income$(16) $71,789  $71,773  

84

THE MACERICH COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share amounts)
4. Investments in Unconsolidated Joint Ventures: (Continued)
PPR Portfolio  Other
Joint
Ventures 
 Total  
Year Ended December 31, 2017   
Revenues:   
Leasing revenue$190,186  $719,406  $909,592  
Other1,848  37,018  38,866  
Total revenues192,034  756,424  948,458  
Expenses:
Shopping center and operating expenses41,340  243,271  284,611  
Interest expense(1)67,053  131,714  198,767