Item 2. Properties, Continued
Item 2. Properties, Continued - ------------------------------ (1) The land underlying twenty of the Centers is owned entirely by the Company or, in the case of jointly-owned Centers, the property partnership in fee. All or part of the land underlying the remaining Centers is owned by third parties and leased to the Company or property partnership pursuant to long-term ground leases. Under the terms of a typical ground lease, the Company or property partnership pays rent for the use of the land and is generally responsible for all costs and expenses associated with the building and improvements. In some cases, the Company or property partnership has an option or right of first refusal to purchase the land. The termination dates of the ground leases range from 2013 to 2060.
All centers are wholly owned by the Company or its subsidiaries, except for Broadway Plaza (50%), North Valley Plaza (50%), Panorama Mall (50%), and West Acres (19%).
(2) Includes GLA attributable to Anchors (whether owned or leased) and Mall and Freestanding Stores as of December 31, 1996.
(3) J.C. Penney vacated its facility at County East Mall in 1997.
(4) The Company negotiated an early termination of the Fashion Bar lease. Fashion Bar closed on January 15, 1997. The Company is currently negotiating with a replacement tenant.
(5) Federated closed the Weinstock's store at Parklane Mall and the Company acquired Federated's leasehold interest. The Company is planning to demolish the Weinstocks building and redevelop this area as a location based entertainment complex.
(6) J.C. Penney vacated its facility at North Valley Plaza in 1993. The Company has relocated the existing 60,000 square foot Mervyn's at the Center into the larger J.C. Penney building. The Company is in negotiations for a replacement tenant for the Mervyn's building.
(7) Federated Department Stores, Inc. merged with Broadway Stores, Inc. in November, 1995. Federated owns the Broadway Store at Panorama. This Broadway Store ceased operations in January 1996. Federated is currently negotiating to sell this building to Wal-Mart.
(8) Sales are based on reports by retailers leasing Mall and Freestanding Stores for the year ending December 31, 1996 for tenants which have occupied such stores for a minimum of twelve months. Consistent with industry practices, sales per square foot are based on gross leased and occupied area, excluding theaters, and are not based on GLA.
(9) Portions of the land on which the Center is situated are subject to one or more ground leases.
(10) Edwards Cinema signed a lease in January 1997 to occupy the former Broadway location. Edwards is expected to open a 21 screen theater complex on that site in May 1998.
(11) Certain spaces have been intentionally held off the market and remain vacant due to major redevelopment strategy. As a result, the Company believes the percentage of mall and free-standing GLA leased at these major redevelopments is not meaningful data.
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. All mortgage debt is nonrecourse to the Company. The information set forth below is as of December 31, 1996.
	Notes:
(1) The annual debt service payment represents the payment of principal and interest. In addition, contingent interest, as defined in the loan agreement, may be due to the extent that 35% of the gross receipts (as defined in the loan agreement) exceeds a base amount specified therein. Contingent interest recognized was $75,910 for the period from July 21, 1994 (the date of acquisition of Chesterfield) to December 31, 1994, $184,321 for the year ended December 31, 1995 and $398,619 for the year ended December 31, 1996.
(2) No prepayment except under certain circumstances in the event of the sale of the Center.
(3) This debt was issued at a discount. The unamortized discount at December 31, 1996 was $463,000. The above balance is net of the discount.
(4) The interest rate is LIBOR plus .45%. LIBOR was 5.55% at December 31, 1996. There is an interest rate cap on $10 million of this debt at a LIBOR strike rate of 5.88% through maturity. The remaining principal has an interest rate cap with a LIBOR strike rate of 7.07% from December 31, 1996 to December 30, 1997, and 7.7% thereafter.
(5) The Valley View loan bears interest at LIBOR plus 1.50%. The Company can elect to convert the loan to a fixed rate, ten year loan at any time up to October 21, 1997.
(6) Reflects the Company's pro rata share of debt.
Mortgage Debt, Continued ------------------------ 	The Company has also obtained a $50 million unsecured working capital line of credit with a financial institution which bears interest at approximately LIBOR plus 1.625% or the institution's prime rate. There was $12 million outstanding on this line as of December 31, 1996. In addition, the Company has a $57 million unsecured bank loan bearing interest at LIBOR plus 1.625% due December 31, 1997. This debt was incurred in connection with the Fresno Fashion Fair, Huntington Center and Buenaventura Mall acquisitions.
Item 3.
Item 3. Legal Proceedings. - --------------------------
	The Company, the Operating Partnership, the Management Companies and the affiliated partnerships are not currently involved in any material litigation nor, to the Company's knowledge, is any material litigation currently threatened against such entities or the Centers, other than routine litigation arising in the ordinary course of business, most of which is expected to be covered by liability insurance. For information about certain environmental matters, see "Business of the Company - Environmental Matters."
Item 4.
Item 4. Submission of Matter to a Vote of Security Holders. - ------------------------------------------------------------ 	None.
Part II
Item 5.
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters. - ------------------------------------------------------------------------- 	The common stock of the Company is listed and traded on the New York Stock Exchange ("NYSE") under the symbol "MAC". The common stock began trading on March 10, 1994 at a price of $19 per share. In 1996 the Company's shares traded at a high of $26.125 and a low of $19.
	As of February 20, 1997 there were approximately 218 shareholders of record. The following table shows high and low closing prices per share of common stock for each quarter in 1995 and 1996 and dividends/distributions per share of common stock declared and paid by quarter.
Item 6.
Item 6. Selected Financial Data.
	The following sets forth selected financial data for the Company on a historical and pro forma consolidated basis, and for the Centers and the Management Companies (collectively, the "Predecessor"), on an historical combined basis. The following data should be read in conjunction with the financial statements (and the notes thereto) of the Company and the Predecessor and "Management's Discussion And Analysis of Financial Condition and Results of Operations" each included elsewhere in this Form 10-K.
	The pro forma data for the Company for the year ended December 31, 1994 has been prepared as if the IPO and the transactions related to the reorganization of the Operating Partnership and formation of the Company (the "Formation") and the application of the net proceeds of the IPO had occurred as of January 1, 1994. The pro forma information is not necessarily indicative of what the Company's financial position or results of operations would have been assuming the completion of the Formation and IPO at the beginning of the period indicated, nor does it purport to project the Company's financial position or what results of operations would have been assuming the completion of the Formation and the IPO at the beginning of the period indicated, nor does it purport to project the Company's financial position or results of operations at any future date or for any future period.
	The Selected Financial Data is presented on a combined basis. The limited partnership interests in the Operating Partnership (not owned by the REIT) are reflected in the pro forma data as minority interest. Centers in which the Company does not have a greater than 50% ownership interest (Panorama Mall, North Valley Plaza, Broadway Plaza and West Acres Shopping Center) are referred to as the "Joint Venture Centers", and along with the Management Companies, are reflected in the selected financial data under the equity method of accounting. Accordingly, the net income from the Joint Venture Centers and the Management Companies that is allocable to the Company and the Predecessor is included on the statement of operations as Income of uncombined joint ventures and management companies.
Item 6. Selected Financial Data, Continued - -------------------------------------------
(1) "Minority Interest" reflects the ownership interest in the Operating Partnership not owned by the REIT. (2) Unconsolidated joint ventures include all Centers that the Company does not wholly own and the Management Companies. The Management Companies on a pro forma basis and after March 15, 1994 have been reflected on the equity method. (3) Net income per share assumes full redemption of OP Units . (4) Funds from operations ("FFO") represents net income (loss) (computed in accordance with generally accepted accounting principles ("GAAP")), excluding gains (or losses) from debt restructuring and sales of property, plus depreciation and amortization (excluding depreciation on personal property and amortization of loan and financial instrument costs), and after adjustments for unconsolidated entities. Adjustments for unconsolidated entities are calculated on the same basis. Funds from operations does not represent cash flow from operations as defined by GAAP and is not necessarily indicative of cash available to fund all cash flow needs. (5) The Company's share of FFO represents the Company's weighted average ownership of the Operating Partnership multiplied by total FFO. (6) EBITDA represents earnings before interest, income taxes, depreciation, amortization, minority interest, income in unconsolidated entities and extraordinary items. This data is relevant to an understanding of the economics of the shopping center business as it indicates cash flow available from operations to service debt and satisfy certain fixed obligations. EBITDA should not be construed by the reader as an alternative to operating income as an indicator of the Company's operating performance, or to cash flows from operating activities (as determined in accordance with GAAP) or as a measure of liquidity. (7) Assumes that all OP units are converted to common stock.
Item 7.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations - --------------------------------------------------------------------------
	The following discussion should be read in conjunction with the "Selected Financial Data" and the Company's Consolidated and Predecessor Combined Financial Statements and Notes thereto appearing elsewhere in this 10-K.
General Background and Performance Measurement - ----------------------------------------------- 	The Company receives income primarily from two sources:
(1) Through its ownership of wholly-owned Centers. (2) Through its ownership interests in Joint Venture Centers which include Panorama Mall (50%), Broadway Plaza (50%), North Valley Plaza (50%), and West Acres Shopping Center (19%).
General Background and Performance Measurement, Continued - --------------------------------------------------------- 	The Company believes that the most significant measures of its operating performance are Funds from Operations and EBITDA. Funds from Operations is defined as net income (loss) (computed in accordance with GAAP), excluding gains (or losses) from debt restructuring and sales of property, plus depreciation and amortization (excluding depreciation on personal property and amortization of loan and financial instrument costs), and after adjustments for unconsolidated entities. Adjustments for unconsolidated entities are calculated on the same basis. Funds from Operations does not represent cash flow from operations as defined by GAAP and is not necessarily indicative of cash available to fund all cash flow needs.
EBITDA represents earnings before interest, income taxes, depreciation, amortization, minority interest, income in unconsolidated entities and extraordinary items. This data is relevant to an understanding of the economics of the shopping center business as it indicates cash flow available from operations to service debt and satisfy certain fixed obligations. EBITDA should not be construed as an alternative to operating income as an indicator of the Company's operating performance, or to cash flows from operating activities (as determined in accordance with GAAP) or as a measure of liquidity. While the performance of individual Centers and the Management Companies determines EBITDA, the Company's capital structure also influences Funds from Operations. The most important component in determining EBITDA and Funds from Operations is Center revenues. Center revenues consist primarily of minimum rents, percentage rents and tenant expense recoveries. Minimum rents will increase to the extent that new leases are signed at market rents that are higher than prior rents. Minimum rent will also fluctuate up or down with changes in the occupancy level. Additionally, to the extent that new leases are signed with more favorable expense recovery terms, expense recoveries will increase.
	Percentage rents generally increase or decrease with changes in tenant sales. As leases roll over, however, a significant portion of historical percentage rent is often converted to minimum rent. It is therefore common for percentage rents to decrease as minimum rents increase. Accordingly, in discussing financial performance, the Company combines minimum and percentage rents in order to better measure revenue growth.
	The following discussion is based primarily on the consolidated financial statements of the Company for the years ended December 31, 1996 and 1995, and for the period from March 16, 1994 (commencement of operations) through December 31, 1994, and the combined financial statements of Macerich Predecessor Affiliates ("Predecessor") for the period from January 1, 1994 through March 15, 1994. The combined financial statements of the Predecessor combine the balance sheet data and results of operations of the partnerships that previously owned 14 of the properties and of the management and leasing operations of the Predecessor which were contributed to the Company. The Predecessor is considered the predecessor entity to the Company and the combined financial statements are presented for comparative purposes. The following discussion compares the activity for the year ended December 31, 1996 to results of operations for 1995. Also included is a comparison of the activities for the year ended December 31, 1995 to the results for the year ended December 31, 1994, which includes a summation of the Company's and the Predecessor's results of operations for 1994.
	This information should be read in conjunction with the accompanying consolidated and combined financial statements and notes thereto.
	On March 16, 1994 the Company acquired Crossroads Mall ("Crossroads-OK") located in Oklahoma City, Oklahoma and on July 21, 1994 the Company acquired Chesterfield Towne Center ("Chesterfield") in Richmond, Virginia. Crossroads- OK and Chesterfield are collectively referred to herein as the "1994 Acquisition Centers". In August, 1995, the Company acquired The Centre at Salisbury ("Salisbury") in Salisbury, Maryland, and in December, 1995 the Company acquired two malls, Capitola Mall ("Capitola"), in Capitola, California, and Queens Center ("Queens"), in Queens, New York. These properties are known as the "1995 Acquisition Centers." In January 1996, the Company acquired Villa Marina Marketplace ("Villa Marina"), Valley View Mall ("Valley View") in Dallas, Texas was acquired in October 1996 and Rimrock Mall ("Rimrock") in Billings, Montana and Vintage Faire Mall ("Vintage Faire") in Modesto, California were acquired in November 1996. In December 1996 the Company acquired Huntington Center ("Huntington") in Huntington Beach, California, Buenaventura Mall ("Buenaventura") in Ventura, California, and Fresno Fashion Fair ("Fresno") in Fresno, California. These properties are known as the "1996 Acquisition Centers." The financial statements include the results of the acquired properties from their acquisition dates. As a result, many of the variations in the results of operations, discussed below, occurred due to the addition of these properties to the Company's portfolio during 1996, 1995 and 1994. Many factors, such as availability and cost of capital, overall debt to market capitalization level, interest rates and availability of potential acquisition targets that meet the Company's criteria, impact the Company's ability to acquire additional properties. Accordingly, management is uncertain as to whether during 1997 and future years there will be similar acquisitions and corresponding increases in revenues, net income and Funds from Operations that occurred as a result of the 1996, 1995 and 1994 acquisitions.
General Background and Performance Measurement, Continued - --------------------------------------------------------- The bankruptcy and/or closure of retail stores, particularly Anchors, may reduce customer traffic and cash flow generated by a Center. During 1995, Federated Department Stores, Inc. announced the closure of the Broadway Stores at Panorama and Huntington Center and Weinstock's at Parklane. The Company acquired Weinstock's leasehold interest in 1996 and is negotiating with a replacement. Federated is currently negotiating with another retailer to sell the former Panorama Broadway building. The Huntington Center Broadway store is being demolished and replaced with a 21 screen theater complex. All three stores remained closed through December 31, 1996. The long-term closure of these or other stores could adversely affect the Company's performance.
	In addition, the Company's success in the highly competitive real estate shopping center business depends upon many other factors, including general economic conditions, the ability of tenants to make rent payments, increases or decreases in operating expenses and interest rates, occupancy levels, changes in demographics, competition from other centers and forms of retailing and the ability to renew leases or relet space upon the expiration or termination of leases.
Assets and Liabilities - ---------------------- 	Total assets increased to $1,187,753,000 at December 31, 1996 compared to $763,398,000 at December 31, 1995 and $485,903,000 at December 31, 1994. During that same period, total liabilities increased from $326,588,000 in 1994 to $509,313,000 in 1995 to $767,266,000 in 1996. These changes were primarily as a result of the 1996 and 1995 common stock offerings, the purchase of the 1996 Acquisition Centers and 1995 Acquisition Centers and various refinancing and debt reduction transactions described below.
A. Equity Offering ------------------- 	The Company had an equity offering in November, 1996 in which 5,750,000 shares were sold, raising $122.2 million of net equity, after costs of the offering. The use of those proceeds and timing are summarized below:
	Included in minimum rents were rents attributable to the accounting practice of "straight lining of rents." The amount of straight lining of rents that impacted minimum rents was $1,832 for 1996, $944 for 1995 and $1,306 for 1994 (pro forma).
Inflation - ---------
In the last three years, inflation has not had a significant impact on the Company or the Predecessor because of a relatively low inflation rate. Substantially all the leases at the Centers have rent adjustments periodically through the lease term. These rent increases are either in fixed increments or based on increases in the Consumer Price Index. In addition, many of the leases are for terms of less than ten years, which enables the Company to replace existing leases with new leases at higher base rents if the rents of the existing leases are below the then existing market rate. Additionally, most of the leases require the tenants to pay their pro rata share of operating expenses. This reduces the Company's exposure to increases in costs and operating expenses resulting from inflation.
New Pronouncements Issued: - ------------------------- 	None.
Item 8.
Item 8. Financial Statements and Supplementary Data - ---------------------------------------------------- 	Refer to the Index to Financial Statements and Financial Statement Schedules for the required information.
Item 9.
Item 9. Changes in and Disagreements with Accountants or Accounting and Financial Disclosure. - -------------------------------------------------------------------------- 	None.
Part III
Item 10.
Item 10. Directors and Executive Officers of the Company. - ---------------------------------------------------------- 	There is hereby incorporated by reference the information which appears under the captions "Election of Director," "Executive Officers" and "Section 16 Reporting" in the Company's definitive proxy statement for its 1996 Annual Meeting of Stockholders.
Item 11.
Item 11. Executive Compensation. - --------------------------------- 	There is hereby incorporated by reference the information which appears under the caption "Executive Compensation" in the Company's definitive proxy statement for its 1996 Annual Meeting of Stockholders; provided, however, that neither the Report of the Compensation Committee on executive compensation nor the Stock Performance Graph set forth therein shall be incorporated by reference herein, in any of the Company's prior or future filings under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, except to the extent the Company specifically incorporates such report or stock performance graph by reference therein and shall not be otherwise deemed filed under either of such Acts.
Item 12.
Item 12. Security Ownership of Certain Beneficial Owners and Management - ------------------------------------------------------------------------ 	There is hereby incorporated by reference the information which appears under the captions "Principal Stockholders," "Information Regarding Nominees and Directors" and "Executive Officers" in the Company's definitive proxy statement for its 1996 Annual Meeting of Stockholders.
Item 13.
Item 13. Certain Relationships and Related Transactions - -------------------------------------------------------- 	There is hereby incorporated by reference the information which appears under the captions "Certain Transactions" in the Company's definitive proxy statement for its 1996 Annual Meeting of Stockholders.
PART IV
Item 14.
Item 14. Exhibits, Financial Statement Schedule and Reports on Form 8-K - -------------------------------------------------------------------------
			 Page 			 (a)	1.	Financial Statements	 			 		Report of Independent Accountants	 30 			 		Consolidated balance sheets of the Company as of December 31, 1996 and 1995 31 			 		Consolidated statements of operations of the Company for the years ended December 31, 1996 and 1995 and for the period from March 16, 1994 through December 31, 1994 and combined statement of operations of the Predecessor for the period from January 1, 1994 through March 15, 1994 32 			 Consolidated statements of stockholders' equity of the Company for the years ended December 31, 1996 and 1995 and for the period from March 16, 1994 to December 31, 1994 and combined statement of partners' deficit for the Predecessor for the period from January 1 through March 15, 1994. 33 			 Consolidated statements of cash flows of the Company for the years ended December 31, 1996 and 1995 and for the period from March 16, 1994 through December 31, 1994 and combined statement of cash flows of the Predecessor for the period from January 1, 1994 through March 15, 1994.	 34 			 		Notes to consolidated and combined financial statements. 35 			 	2.	Financial Statement Schedules	 			 		Schedule III - Real estate and accumulated depreciation 51 			 (b) 1.	Reports on Form 8-K filed during the last quarter of 1996 are incorporated by reference to this item.	 			 A. Form 8-K dated October 30, 1996 for the acquisition of Valley View Mall, including the financial statements of the business to be acquired and pro forma financial information. B. Form 8-K dated December 11, 1996 for the acquisition of Vintage Faire Mall and Rimrock Mall.	 			 (c)	1.	Exhibits	 			 		 The Exhibit Index attached hereto is incorporated by reference to this item.	
REPORT OF INDEPENDENT ACCOUNTANTS ----------------------------------
To the Board of Directors and Stockholders of The Macerich Company
We have audited the consolidated and combined financial statements and financial statement schedule of The Macerich Company and Macerich Predecessor Affiliates as listed in Item 14(a) of this Form 10-K. These financial statements and financial statement schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these statements and financial statement schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of The Macerich Company as of December 31, 1996 and 1995, and the consolidated and combined results of the Macerich Company's and Macerich Predecessor Affiliates' operations and their cash flows for the years ended December 31, 1996 and 1995 and for the period March 16, 1994 through December 31, 1994 and the period January 1, 1994 through March 15, 1994, respectively, in conformity with generally accepted accounting principles. In addition, in our opinion, the financial statement schedule referred to above, when considered in relation to the basic financial statements taken as a whole, presents fairly, in all material respects, the information required to be included therein.
COOPERS & LYBRAND L.L.P.
Los Angeles, California March 14, 1997
The accompanying notes are an integral part of these financial statements.
THE MACERICH COMPANY (THE "COMPANY") and MACERICH PREDECESSOR AFFILIATES ("PREDECESSOR")
CONSOLIDATED STATEMENTS OF OPERATIONS OF THE COMPANY AND COMBINED STATEMENT OF OPERATIONS OF THE PREDECESSOR (Dollars in thousands, except per share amounts)
The accompanying notes are an integral part of these financial statements.
The accompanying notes are an integral part of these financial statements.
The accompanying notes are an integral part of these financial statements.
THE MACERICH COMPANY (THE "COMPANY") and MACERICH PREDECESSOR AFFILIATES (PREDECESSOR)
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Dollars in thousands, except per share amounts)
1.	Organization And Basis Of Presentation: - -------------------------------------------- Macerich Predecessor Affiliates ("Predecessor"), represent entities owned by or affiliated with Macerich principals and their affiliates ("The Macerich Group") that were reorganized to combine The Macerich Group's interests in certain retail investment properties and property management, leasing and redevelopment businesses. The reorganization entailed a public offering of common stock in a newly formed Maryland corporation, The Macerich Company ("Company"), the proceeds of which were invested in the Macerich Partnership L.P. ("The Operating Partnership"). The Company commenced operations effective with the completion of the initial public offering (the "IPO") on March 16, 1994. The Operating Partnership holds ownership interests in the entities reflected herein as Predecessor for periods prior to March 16, 1994. These interests in the Predecessor were obtained in exchange for cash, an ownership interest in The Operating Partnership ("OP Units") and common stock of the Company. OP Units not held by the Company can be exchanged, subject to certain restrictions, on a one-for-one basis, into the Company's common stock.
The Company, which was organized to qualify as a real estate investment trust ("REIT") under the Internal Revenue Service Code of 1986, as amended, as of December 31, 1996, owns approximately 68% of The Operating Partnership and is the sole general partner. The 32% limited partnership interest of the Operating Partnership, not owned by the Company, is reflected in these financial statements as minority interest. The average total number of OP Units outstanding in The Operating Partnership (including the units owned by the Company) was 32,934,000 for the year ended December 31, 1996, 26,930,000 for the year ended December 31, 1995, and 25,645,000 for the period from March 16, 1994 to December 31, 1994.
The property management, leasing and redevelopment of the Company's portfolio is provided by the Macerich Management Company and Macerich Property Management Company, California corporations (together referred to hereafter as "the Management Companies"). The non-voting preferred stock of the Management Companies is owned by The Operating Partnership, which provides The Operating Partnership the right to receive 95% of the distributable cash flow from the Management Companies.
Basis Of Presentation: - ---------------------- The consolidated financial statements of the Company include the accounts of the Company and the Operating Partnership. The accompanying Predecessor financial statements are presented on a combined basis as the entities are predecessor businesses to the Company. The properties which The Operating Partnership does not own a greater than 50% interest in, and the Management Companies, have been accounted for under the equity method of accounting. These entities are reflected on the Company's consolidated financial statements as investment in joint ventures and the Management Companies. The Management Companies are combined with the financial statements of the Predecessor in the combined financial statements of the Predecessor.
The formation of the Company has been reflected as a reorganization of the predecessor business with the assets and liabilities reflected at the historical cost basis of the Predecessor, except for those properties for which monetary consideration was given to acquire interests previously held by outside joint venture partners, in which case the portion of the property so acquired has been adjusted to reflect the value of the consideration given.
All significant intercompany accounts and transactions have been eliminated in the consolidated and combined financial statements.
THE MACERICH COMPANY (THE "COMPANY") and MACERICH PREDECESSOR AFFILIATES (PREDECESSOR)
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Dollars in thousands, except per share amounts)
2.	Summary of Significant Accounting Policies: - ------------------------------------------------- Cash And Cash Equivalents: - ------------------------- The Company considers all highly liquid investments with an original maturity of 90 days or less when purchased to be cash equivalents, for which cost approximates market. Included in cash is restricted cash of $3,775 at December 31, 1996 and $750 at December 31, 1995 which reflects cash restricted under terms of a loan agreement to be used for certain capital expenditures.
Revenues: - -------- Minimum rental revenues are recognized on a straight-line basis over the terms of the related lease. The difference between the amount of rent due in a year and the amount recorded as rental income is referred to as the "straight lining of rent adjustment." Rental income was increased by $1,832 in 1996, $944 in 1995, $1,212 for the period from March 16, 1994 to December 31, 1994, and $94 for the period from January 1, 1994 to March 15, 1994 due to the straight lining of rent adjustment. Percentage rents are recognized on an accrual basis. Recoveries from tenants for real estate taxes, insurance and other shopping center operating expenses are recognized as revenues in the period the applicable costs are incurred. 	 	The Management Companies provide property management, leasing, corporate, development and acquisitions 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 5% of the gross monthly rental revenue of the properties managed.
Management fees are recognized as revenue as they are earned in the combined financial statements of the Predecessor.
Property: - -------- Costs related to the acquisition, development, construction and improvement of properties are capitalized. Interest costs are capitalized until construction is substantially complete.
Expenditures for maintenance and repairs are charged to operations as incurred. Realized 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:
		Tenant improvements initial term of related lease 		Buildings and improvements 5-40 years 		Equipment and furnishings 5- 7 years
Deferred Charges: 	 ---------------- 	Costs relating to financing of shopping center properties and obtaining tenant leases are deferred and amortized over the initial term of the agreement. The straight-line method is used to amortize all costs except financing, for which the effective interest method is used. The range of the terms of the agreements are as follows:
		Deferred lease costs 2 - 15 years 		Deferred financing costs 1 - 15 years
THE MACERICH COMPANY (THE "COMPANY") and MACERICH PREDECESSOR AFFILIATES (PREDECESSOR)
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Dollars in thousands, except per share amounts)
2.	Summary of Significant Accounting Policies, Continued: - -----------------------------------------------------
Deferred Acquisition Liability: - ------------------------------ 	As part of the Company's total consideration to the seller of Capitola Mall, the Company will issue $5,000 of OP Units five years after the acquisition date. The number of OP Units will be determined based on the Company's common stock price at that time.
Income Taxes: - ------------ 	The Company has elected to be taxed as a REIT under the Internal Revenue Code of 1986, as amended. A REIT is generally not subject to income taxation on that portion of its income that qualifies as REIT taxable income as long as it distributes at least 95 percent of its taxable income to its stockholders and complies with other requirements. Accordingly, no provision has been made for income taxes in the consolidated financial statements.
	On a tax basis, the distributions of $1.70 paid during 1996 represented $1.14 of ordinary income and $0.56 of return of capital and the distributions of $1.66 per share during 1995 represented $1.00 of ordinary income and $0.66 return of capital. During 1994 the distributions were $0.87 per share of which $0.70 was ordinary income and $0.17 was return of capital.
	Each partner is taxed individually on their share of partnership income or loss, and accordingly, no provision for federal and state income tax is provided for the Operating Partnership or Predecessor in the combined financial statements.
Reclassifications: - ----------------- 	Certain reclassifications have been made to the 1994 and 1995 financial statements to conform to the 1996 financial statement presentation.
Accounting Pronouncements: - ------------------------- 	During 1995 the Financial Accounting Standard Board ("FAS") issued Statement of Accounting Standards No. 121 "Accounting for the Impairment of Long-Lived Assets" and FAS No. 123 "Accounting for Stock-Based Compensation." The Company adopted these pronouncement in 1996 but the requirements of these statements did not have a significant impact on the Company's consolidated financial statements. The effect of FAS 123 is discussed in Footnote 12 and the effect of FAS 121 is discussed below.
Impairment of Long-Lived Assets: - ------------------------------- 	In March 1995, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." SFAS No 121 requires that long-lived assets and certain identifiable intangibles to be held and used by an entity be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Certain long-lived assets and certain identifiable intangibles to be disposed must be reported at the lower of carrying amount or fair value less cost to sell. The Company adopted SFAS No.121 beginning in the first quarter of 1996 with no material impact to the Company's financial condition or results of operations.
THE MACERICH COMPANY (THE "COMPANY") and MACERICH PREDECESSOR AFFILIATES (PREDECESSOR)
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Dollars in thousands, except per share amounts)
2.	Summary of Significant Accounting Policies, Continued: - ------------------------------------------------------ Fair Value of Financial Instruments: - ----------------------------------- 	To meet the reporting requirement of FAS No. 107 "Disclosures about Fair Value of Financial Instruments", the Company calculates the fair value of financial instruments and includes this additional information in the notes to financial statements when the fair value is different than the carrying value of those financial instruments. When the fair value reasonably approximates the carrying value, no additional disclosure is made. The estimated fair value amounts have been determined by the Company using available market information and appropriate valuation methodologies. However, considerable judgment is necessarily required in interpreting market data to develop the estimates of fair value. Accordingly, the estimates presented herein are not necessarily indicative of the amounts that the Company could realize in a current market exchange. The use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair value amounts.
	Interest rate cap agreements are purchased by the Company from third parties to hedge the risk of interest rate increases on some of the Company's variable rate debt. The cost of these cap agreements is amortized over the life of the cap agreement on a straight line basis. Payments received as a result of the cap agreements are recorded as a reduction of interest expense. The unamortized costs of the cap agreements are included in deferred charges. The fair market value of these caps will vary with fluctuations in interest rates. The Company is exposed to credit loss in the event of nonperformance by these counter parties to the financial instruments, however, management does not anticipate nonperformance by the counter party.
Earnings Per Share: - ------------------ 	The computation of primary earnings per share is based on net income and the weighted average number of common shares outstanding for the years ended December 31, 1996 and 1995. The outstanding common stock options have less than a 3% dilutive effect on earnings per share and thus have not been included in the computation. The effect of the Company stock option plan was calculated using the Treasury stock method. The computation of fully diluted earnings per share is less than 3% dilutive and has not been presented.
Concentration of Risk: - ---------------------- 	Lakewood Mall generated 16.0% of total shopping center revenues in 1996, 22.0% in 1995 and 25.6% in 1994. Shopping center revenues at Crossroads Mall-Colorado accounted for 10.6% of total shopping center revenues in 1995 and 12.16% in 1994. During 1995 Chesterfield accounted for 12.6% of total Shopping Center revenues. Queens Center accounted for 13.8% of 1996 shopping center revenue. No other Center generated more than 10% of shopping center revenues during 1996, 1995 or 1994.
	The Centers derived approximately 88.8% of their total rents for the year ended December 31, 1996 from Mall and Freestanding Stores. No single retailer accounted for more than 6.5% of annual base rents of the Company as of December 31, 1996. The Limited represented 6.3% of total minimum rents in place as of December 31, 1996 and Woolworth represented 4.8% as of that date. No other retailer represented more than 2.5% of total minimum rents as of December 31, 1996.
Management Estimates: - --------------------- 	The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of 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.
THE MACERICH COMPANY (THE "COMPANY") and MACERICH PREDECESSOR AFFILIATES (PREDECESSOR)
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Dollars in thousands, except per share amounts)
3.	Investments In Joint Ventures and the Management Companies: - ----------------------------------------------------------- 	The following are the Company's investments in various real estate joint ventures which own regional retail shopping centers. The Operating Partnership is a general partner in these joint ventures. The Operating Partnership's interest in each joint venture as of December 31, 1996 is as follows:
			 The Operating 			 Partnership's Joint Venture	Ownership % 	 ----------------------- ------------- 	Macerich Northwestern Associates	 50% 	North Valley Plaza Associates 	 50% Panorama City Associates 	50% West Acres Development 	19%
	The Operating Partnership also owns the non-voting preferred stock of the Management Companies and is entitled to receive 95% of the distributable cash flow.
	Combined and condensed balance sheets and statement of operations are presented below for all unconsolidated joint ventures and the Management Companies, followed by information regarding The Operating Partnership's/ Predecessor's beneficial interest in operations. Beneficial interest is calculated based on the terms of the joint venture agreements and reflects 95% of the Management Companies.
	Significant accounting policies used by the unconsolidated joint ventures and the Management Companies are similar to those used by the Company.
	The Management Companies are reflected above for the years ended December 31, 1996 and 1995 and for the period from March 16, 1994 to December 31, 1994. Prior to March 16, 1994 (the date of the IPO) the Management Companies were combined and included in the results of the Predecessor.
	Included in mortgage notes payable are amounts due to related parties of $43,500 for the years ended December 31, 1996, 1995 and 1994. Interest expense incurred on these borrowings amounted to $2,976 for the years ended December 31, 1996 and 1995, $1,631 for the period from January 1 to March 15, 1994 and $2,081 for the period March 16 through December 31, 1994.
THE MACERICH COMPANY (THE "COMPANY") and MACERICH PREDECESSOR AFFILIATES (PREDECESSOR)
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Dollars in thousands, except per share amounts)
3.	Investments In Joint Ventures and the Management Companies: - -----------------------------------------------------------
	The following table sets forth the Operating Partnership's and the Predecessor's beneficial interest in the joint ventures and the Management Companies:
4. 	Property:
		Property, at December 31, is summarized as follows:
	
THE MACERICH COMPANY (THE "COMPANY") and MACERICH PREDECESSOR AFFILIATES (PREDECESSOR)
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Dollars in thousands, except per share amounts)
5. Deferred Charges And Other Assets: - ------------------------------------- 		Deferred charges and other assets are summarized as follows:
	
THE MACERICH COMPANY (THE "COMPANY") and MACERICH PREDECESSOR AFFILIATES (PREDECESSOR)
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Dollars in thousands, except per share amounts)
6. Mortgage Notes Payable:
Mortgage notes payable at December 31, 1996 and December 31, 1995 consists of the following:
THE MACERICH COMPANY (THE "COMPANY") and MACERICH PREDECESSOR AFFILIATES (PREDECESSOR)
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Dollars in thousands, except per share amounts)
6. Mortgage Notes Payable, Continued: - ------------------------------------- (a)		On August 15, 1995 the Company issued $127,000 of collateralized floating rate notes (the "Notes"). The Notes bear interest at an average fixed rate of 7.20% and mature in July 2005.
The Note requires the Company to deposit all cash flow from the property operations with a trustee to meet its obligations under the Notes. Cash in excess of the required amount, as defined, is released. Included in cash and cash equivalents is $750 of restricted cash deposited with the trustee at December 31, 1995 and $750 at December 31, 1996.
(b)		This loan was refinanced on December 21, 1995. The loan amount remained the same. The interest rate was reduced to 7.08%.
(c)		This note was issued at a discount. The discount is being amortized over the life of the loan using the effective interest method. At December 31, 1996 and 1995 the unamortized discount was $463 and $496, respectively.
(d) 		This loan bears interest at LIBOR plus 0.45%. There is an interest rate protection agreement in place on the first $10.2 million of this debt with a LIBOR ceiling of 5.88% through maturity with the remaining principal having an interest rate cap with a LIBOR ceiling at 7.07% through 1997 and 7.7% thereafter.
(e) The $55,800 loan bears interest at LIBOR plus .90%. This loan was paid off on September 30, 1996.
The $10,200 loan bears interest at LIBOR plus 2.22%. This loan was paid off on September 30, 1996.
(f)		This represents the monthly payment of principal and interest.
(g)	 This loan is cross collateralized by Green Tree Mall and Crossroads Mall Oklahoma and as of April 14, 1996 also included Salisbury.
(h)	 Represents the unamortized cost of interest rate arrangements at County East Mall and Crossroads Mall. The estimated market value of these arrangements is $886 at December 31, 1995 and $0 at December 31, 1996.
(i)	 This amount represents the monthly payment of principal and interest. In addition, contingent interest, as defined in the loan agreement, may be due to the extent that 35% of the amount by which the property's gross receipts (as defined in the loan agreement) exceeds a base amount specified therein. Contingent interest expense recognized by the Company was $76 for the period from July 21, 1994 (the date of acquisition of Chesterfield Towne Center) to December 31, 1994, $184 for the year ended December 31, 1995 and $399 for 1996. As of January 1, 1997 all these loans were consolidated into a new loan of $66.2 million at an interest rate of 9.1%.
This amount bears interest at LIBOR plus 1.50% and matures on October 21, 1997, however, at any time prior to maturity, the Company can convert this into a fixed rate loan maturing in October 2006.
(j)	 Interest only is payable through March 1996. Thereafter monthly payments total $187 until maturity, at which time the balance is due in full.
(k) This loan was combined with the Greentree/Crossroads-OK loan on April 14, 1996.
(l) This loan bears interest at LIBOR plus 1.50% (7.00% at December 31, 1996). At any time prior to October 21, 1997 this loan can be converted to a fixed rate loan at a rate of 1.25% over the rate on a Treasury Note of a duration equal to the maturity of the loan.
THE MACERICH COMPANY (THE "COMPANY") and MACERICH PREDECESSOR AFFILIATES (PREDECESSOR)
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Dollars in thousands, except per share amounts)
6. 	Mortgage Notes Payable, Continued: - ---------------------------------------- 	Certain mortgage loan agreements contain a prepayment penalty provision for the early extinguishment of the debt. 	 	Total interest expense capitalized during 1996 was $461 and during 1995 was $546 and during 1994 was $116 .
	The above debt matures as follows:
	The market value of notes payable at December 31, 1996 and 1995 is estimated to be approximately $733,000 and $466,000, respectively, based on current interest rates for comparable loans.
7.	Notes Payable: - -------------------- 	The Company has a $50,000 unsecured line of credit with a bank. The line of credit bears interest at LIBOR plus 1.625% and matures in June 1997. There was a $12,000 balance outstanding on the line of credit at December 31, 1996 and $0 at December 31, 1995. Also, at December 31, 1996 there is a $57,000 unsecured note bearing interest at LIBOR plus 1.625% which matures December 31, 1997.
8.	Related-Party Transactions: - --------------------------------- 	The Predecessor and the Company engaged the Management Companies to manage the operations of certain uncombined joint ventures and other uncombined affiliated shopping centers. Management fees earned from uncombined joint ventures and affiliates were $401 for the period from January 1, 1994 to March 15, 1994. Subsequent to March 15, 1994, the Management Companies are reflected under the equity method of accounting for investments. During the period from March 16, 1994 to December 31, 1994 management fees of $1,180 were paid by the Company to the Management Companies. During 1995 and 1996, management fees of $1,456 and $1,788 were paid to the Management Companies by the Company.
	Certain mortgage notes are held by outside partners of the individual Macerich Group partnerships. Interest expense, in connection with these notes was $10,168, $8,226 and $8,652 for the years ended December 31, 1996, 1995 and 1994, respectively. Included in accounts payables and accrued expense is interest payable to these partners of $516, $537 and $398 at December 31, 1996, 1995, and 1994 respectively.
	Certain Company officers and affiliates have guaranteed mortgages of $21,750 at one of the Company's joint venture properties and $2,000 at Greeley Mall.
THE MACERICH COMPANY (THE "COMPANY") and MACERICH PREDECESSOR AFFILIATES (PREDECESSOR)
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Dollars in thousands, except per share amounts)
9.	Future Rental Revenues: - ---------------------------- 	Under existing noncancellable operating lease agreements, tenants are committed to pay the following minimum rentals to the Company:
10. Commitments and Contingencies: - ----------------------------------
	The Company has certain properties subject to noncancellable operating ground leases. The leases expire at various times through 2060, subject in some cases to options to extend the terms of the lease. Certain leases provide for contingent rent payments based on a percent of base rent income, as defined. Ground rent expenses were $704, (including contingent rent of $0) in 1996, $1,944 (including contingent rents of $1,168) in 1995 and $2,267 (including contingent rents of $733) in 1994.
	Certain leases also require the lessee to pay real estate taxes, insurance and certain other operating costs applicable to the leased property.
	Minimum future rental payments required under the leases are as follows:
Perchloroethylene (PCE) has been detected in soil and groundwater in the vicinity of a dry cleaning establishment at North Valley Plaza. The California Department of Toxic Substance Control (DTSC) has advised the Company that very low levels of Dichlorethylene (1,2,DCE) a degradation byproduct of PCE, have been detected in a water well located 1/4 mile west from the dry cleaners, and that the dry cleaning facility may have contributed to the introduction of 1,2 DCE into the water well. According to DTSC, the maximum contaminant level (MCL) for 1,2DCE which is permitted in drinking water is 6 parts per billion (ppb); and the 1,2DCE was detected in the water well at 1.2 ppb, which is below the MCL. The Company has retained an environmental consultant and has initiated extensive testing of the site, although the extent of the impacted soil and groundwater has not been fully defined. Remediation is scheduled to begin in the first half of 1997. The joint venture that owns that property had a $685 reserve at December 31, 1996. In addition, $155 has already been incurred, to cover professional fees and testing costs. The Company intends to look to the responsible parties and insurers for cost recovery.
THE MACERICH COMPANY (THE "COMPANY") and MACERICH PREDECESSOR AFFILIATES (PREDECESSOR)
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Dollars in thousands, except per share amounts)
10.	Commitments and Contingencies, Continued: ----------------------------------------- Toluene, a petroleum constituent, was detected in a groundwater dewatering system at the Queens Center. The source of the toluene is currently unknown, but it is possible that an adjacent Sunoco service station has caused or contributed to the problem. It is also possible that the toluene remains from previous service station operations which occurred on site prior to the development of the site into its current use in the early 1970s. Toluene was detected at levels of 410 and 160 parts per billion (ppb) in samples taken from the tank in October, 1995 and February, 1996, respectively. Additional samples were taken in May and December of 1996, with results of .63 ppb and "non-detect" for the May sampling event and 16.2 ppb and 25.2 ppb for the December sampling event. The maximum containment level (MCL) for toluene in drinking water is 150 ppb. Although the Company believes that no remediation will be required, it has set up a $150 reserve to cover professional fees and testing costs. The Company intends to look to the responsible parties and insurers if remediation is required.
Dry cleaning chemicals, including PCE were detected in soil and groundwater in the vicinity of a dry cleaning establishment at Villa Marina Marketplace. The previous owner of the property has reported the release to the local government authorities and has agreed to fully assess and remediate the site to the extent required by those authorities. Although the Company believes that it will not be required to participate in assessment or remediation activities, it has set up a $150 reserve ($20 of which has already been incurred) to cover professional and legal fees.
Dry cleaning chemicals including PCE were detected in soil and groundwater in the vicinity of a former dry cleaning establishment at Huntington Center. The release has been reported to the local government authorities. The Company estimates, based on the data currently available, that costs for assessment, remediation and legal services will not exceed $500. Consequently, a $500 reserve was established at the time of the acquisition to cover professional and legal fees. The Company intends to look to responsible parties and insurers for cost recovery.
	The Company acquired Fresno Fashion Fair in December, 1996. Asbestos has been detected in structural fireproofing throughout much of the Mall. Recent testing data conducted by a professional environmental consulting firms indicates that the fireproofing is largely inaccessible to building occupants and is well adhered to the structural members. Additionally, airborne concentrations of asbestos are well within OSHA's permissible exposure limit (PEL) of .1 fcc. The Company intends to abate asbestos fireproofing as tenant spaces become vacant. The accounting for this acquisition includes a reserve of $3.3 million to cover future removal of this asbestos, as necessary.
11.	Profit Sharing Plan: ------------------- 	The Management Companies and the Company have a retirement profit sharing plan that was established in 1984 covering substantially all of their eligible employees. The plan is qualified in accordance with section 401(a) of the Internal Revenue Code. Effective January 1, 1995 this plan was modified to include a 401(k) plan whereby employees can elect to defer compensation subject to Internal Revenue Service withholding rules. Contributions by the Management Companies are made at the discretion of the Board of Directors and are based upon a specified percentage of employee compensation. The Management Companies and the Company contributed $350, $348 and $325 to the plan in 1996, 1995 and 1994, respectively.
12.	Stock Option Plan: ------------------ 	The Company has established stock option plans for the purpose of attracting and retaining executive officers, directors and key employees. The Company has issued options to employees to purchase 1,512,334 shares of the Company under the stock incentive plan. The term of these options is ten years from the grant date. These options generally vest 33 1/3% per year over three years and were issued and are exercisable at the market value of the common stock at the grant date.
THE MACERICH COMPANY (THE "COMPANY") and MACERICH PREDECESSOR AFFILIATES (PREDECESSOR)
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Dollars in thousands, except per share amounts)
12.	Stock Option Plan, Continued
	In addition, the Company has established a plan for non employee directors. A total of 27,500 options were outstanding at December 31, 1996, 22,500 were exercisable. The non employee directors options have a term of ten years from the grant date and vest six months after grant.
	Also, under the employees stock incentive plan 41,238 shares of restricted stock have been issued to executives. These awards are granted based on certain performance criteria for the Company. The restricted stock vests over 5 years and the compensation expense related to these grants is reflected over the vesting period on a straight line basis. As of December 31, 1996 none of the restricted stock grants had vested. A total of 41,238 shares were issued during 1996 at a weighted average price of $20.70 per share and 0 shares were issued during 1995.
	An additional 412,762 shares have been reserved for issuance under the stock incentive plan. The plan allow for granting options or restricted stock at market value.
	The weighted average exercise price for options granted in 1994 is $19.02, for 1995 is $20.25 and for 1996 is $21.65.
	The weighted average remaining contractual life for options outstanding at December 31, 1996 is 7.9 years and the weighed average remaining contractual life for options exercisable at December 31, 1996 is 7.6 years.
	The Company records options granted using Accounting Principles Board (APB) opinion Number 25, Accounting for Stock Issued to Employees and Related Interpretations. Accordingly, no compensation expense is recognized on the date the options are granted. If the Company had recorded compensation expense using the methodology prescribed in Financial Accounting Standards Number 123, the Company's net income would have been reduced by approximately $56 or $0.00 per share for the year ended December 31, 1996 and $160 or $0.01 per share for the year ended December 31, 1995.
THE MACERICH COMPANY (THE "COMPANY") and MACERICH PREDECESSOR AFFILIATES (PREDECESSOR)
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Dollars in thousands, except per share amounts)
13.	Deferred Compensation Plans: --------------------------- 	The Company has established deferred compensation plans under which key executives of the Company may elect to defer receiving a portion of their cash compensation otherwise payable in one calendar year until a later year. The Company may, as determined by the Board of Directors in its sole discretion, credit a participant's account with an amount equal to a percentage of the participant's deferral. The Company contributed $125 during 1996 and $104 during 1995 to two of these plans.
In addition, certain executives have split dollar life insurance agreements with the Company whereby the Company generally pays annual premiums on a life insurance policy in an amount equal to the executives deferral under one of the Company's deferred compensation plans.
14.	Acquisitions: ------------- 	On March 16, 1994, concurrent with the IPO, the Company acquired Crossroads Mall-Oklahoma ("Crossroads-OK"). Crossroads-OK is a 1.1 million square foot super regional mall in Oklahoma City, Oklahoma. The purchase price was $51,500 and was paid in cash.
	On July 21, 1994, the Company acquired Chesterfield Towne Center ("Chesterfield") in Richmond, Virginia. Chesterfield is a 608,500 square foot regional mall. The purchase price of $84,500 was paid with approximately $13,100 in cash, $3,900 in OP Units of the Operating Partnership and assumption of the existing mortgage of approximate $67,500.
On August 15, 1995 the Company acquired The Centre at Salisbury ("Salisbury"), an 884,000 square foot super regional mall. The total purchase price was $78 million, and was comprised of $55.6 million of cash, $21 million of debt and approximately $1.4 million in OP Units.
Capitola Mall ("Capitola") was acquired on December 21, 1995. Capitola is a 577,000 square foot regional mall. The purchase price was $57.5 million and was comprised of the issuance of OP Units valued at $12.1 million, the assumption of $38.3 million of mortgage indebtedness, and cash of $2.1 million. The remaining $5 million of consideration will be paid in OP Units in five years.
Queens Center ("Queens") was acquired on December 28, 1995. The total purchase price was $108 million which consisted of assumption of debt of $66 million and $42 million of cash.
Villa Marina was acquired on January 25, 1996. Villa Marina is a 447,684 square foot community center/entertainment complex located in Marina del Rey, California. The purchase price was $80 million, consisting of $57.6 million of cash and $22.4 million of assumption of mortgage indebtedness.
Valley View Mall is a super regional mall in Dallas, Texas which the Company acquired on October 21, 1996. Valley View Mall contains 1,523,000 square feet and the purchase price was $87.5 million.
Rimrock Mall, located in Billings, Montana, and Vintage Faire Mall, located in Modesto, California were purchased simultaneous on November 27, 1996. The combined purchase price was $118.2 million. Vintage Faire Mall is a super regional mall with 1,051,458 square feet and Rimrock Mall is a regional mall consisting of 581,912 square feet.
Buenaventura Mall, Fresno Fashion Fair and Huntington Center were purchased on December 18, 1996 for a combined price of $128.9 million. Buenaventura Mall, located in Ventura, California, is an 801,152 square foot regional mall, Fresno Fashion Fair, located in Fresno, California, is a super regional mall containing 881,334 square feet and Huntington Center, located in Huntington Beach, California, consists of 832,578 square feet.
THE MACERICH COMPANY (THE "COMPANY") and MACERICH PREDECESSOR AFFILIATES (PREDECESSOR)
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (Dollars in thousands, except per share amounts)
15.	Unaudited Pro Forma Financial Information: ----------------------------------------- The following unaudited pro forma financial information combines the consolidated results of operations of the Company for 1996 and 1995 as if the 1996 Acquisitions had occurred on January 1, 1995, after giving effect to certain adjustments, including depreciation, interest expense relating to debt incurred to finance the acquisitions and general and administrative expense to manage the properties. The pro forma information is based on assumptions management believes to be appropriate. The pro forma information is not necessarily indicative of what the actual results would have been had the initial public offering and acquisitions occurred at the beginning of the period indicated, nor does it purport to project the Company's financial position or results of operations at any future date or for any future period.
16. Quarterly Financial Data (Unaudited): ------------------------------------ The following is a summary of periodic results of operations for 1996 and 1995:
17.	Subsequent Events
On February 7, 1997 a $0.44 per share dividend was declared, payable to stockholders of record as of February 20, 1997 and paid on March 6, 1997.
							 												
SIGNATURES
	Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
									THE MACERICH COMPANY
									By /s/ Arthur M. Coppola ---------------------- 									 Arthur M. Coppola 									 President and Chief Executive Officer
	Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
	EXHIBIT INDEX
Exhibit Number	 Description	 Sequentially Numbered Page 3.1*	Articles of Amendment and Restatement of the Company	 3.2**	Articles Supplementary of the Company	 3.3*	Bylaws of the Company	 4.1**	Form of Common Stock Certificate	 10.1***	Amended and Restated Limited Partnership Agreement for the Operating Partnership, dated as of March 16, 1994	 10.2*** 	Employment Agreement between the Company and Mace Siegel, dated as of March 16, 1994	 10.2.1***	List of omitted Employment Agreements	 10.3****	The Macerich Company 1994 Stock Incentive Plan	 10.4****	The Macerich Company 1994 Eligible Directors' Stock Option Plan	 10.5****	The Macerich Company Deferred Compensation Plan	 10.6****	The Macerich Company Annual Incentive Compensation Plan	 10.7****	The Macerich Company Deferred Compensation Plan for Mall Executives	 10.8***	The Macerich Company Eligible Directors' Deferred Compensation Plan/Phantom Stock Plan	 10.9***	The Macerich Company Executive Officer Salary Deferral Plan	 10.10*	NML Master Agreement, dated as of October 22, 1993, among the Operating Partnership, The Northwestern Mutual Life Insurance Company (as general partner), The Northwestern Mutual Life Insurance Company (as lender), each of the property partnerships and each of the Macerich Partnerships	 10.11*	Partnership Interest Agreement of Purchase and Sale, dated as of October 18, 1993, between Hexalon Real Estate, Inc. and the Operating Partnership	 10.12*	Third Amendment to Partnership Interest Agreement of Purchase and Sale, dated as of February 9, 1994, between Hexalon Real Estate, Inc. and the Operating Partnership	 10.13*	Purchase and Sale Agreement, dated as of June 30, 1993, between the Operating Partnership and Provident Life and Accident Insurance Company	 10.14*	Indenture of Lease, dated as of January 26, 1983, between PCA Crossroads, Ltd., as landlord, and Crossroads Shopping Center Company and Macerich Crossroads Associates, collectively, as tenant, as amended	
10.15***	Macerich Master Agreement, dated as of March 16, 1994, regarding the transfer of property partnership interests of The Macerich Group to the Operating Partnership	 10.16***	Registration Rights Agreement, dated as of March 16, 1994, between the Company and The Northwestern Mutual Life Insurance Company	 10.17***	Registration Rights Agreement, dated as of March 16, 1994, among the Company and Mace Siegel, Dana K. Anderson, Arthur M. Coppola and Edward C. Coppola	 10.18***	Registration Rights Agreement, dated as of March 16, 1994, among the Company, Richard M. Cohen and MRII Associates	 10.19***	Incidental Registration Rights Agreement, dated as of March 16, 10.20***	Indemnification Agreement, dated as of March 16, 1994, between the Company and Mace Siegel	 10.20.1***	List of omitted Indemnification Agreements	 10.21***	Property Management Agreement, dated as of March 16, 1994, with respect to Macerich Bristol Associates	 10.21.1***	List of omitted Property Management Agreements	 10.22*	Management and Operating Agreement, dated July 1, 1991, between Macerich Management Company and North Valley Plaza Associates	 10.23*	Management and Operating Agreement, dated January 17, 1985, between Macerich Management Company and Macerich Northwestern Associates, as amended	 10.24*	Management Agreement, dated September 1, 1985, between Macerich Management Company and Panorama City Associates	 10.25***	Amended and Restated Partnership Agreement for Macerich Bristol Associates	 10.25.1***	List of omitted Amended and Restated Partnership Agreements for certain Property Partnerships	 10.26*	Partnership Agreement for Macerich Northwestern Associates, dated as of January 17, 1985, between Macerich Walnut Creek Associates and The Northwestern Mutual Life Insurance Company	 10.27***	First Amendment to Macerich Northwestern Associates Partnership Agreement between Operating Partnership and The Northwestern Mutual Life Insurance Company	 10.28*	North Valley Plaza Associates Joint Venture Agreement, dated as of April 14, 1988, between Chico Associates and The Northwestern Mutual Life Insurance Company	 10.29***	First Amendment to North Valley Plaza Associates Joint Venture Agreement between Operating Partnership and The Northwestern Mutual Life Insurance Company	
10.30*	Panorama City Associates Partnership Agreement, dated as of February 2, 1979, between Macerich Panorama Associates and Connecticut General Mortgage and Realty Investments, as amended	 10.31***	Second Amendment to Panorama City Associates Partnership Agreement between Operating Partnership and 745 Property Investments (formerly Connecticut General Mortgage and Realty Investments)	 10.32*	Amended and Restated Partnership Agreement, dated as of February 28, 1986, among William A. Schlossman, Donald L. Johnson, Charles R. Nolan, John L. McCormick, M.O. Foss, Jr., Mark B. Foss, and Macerich Fargo Associates	 10.33*	Parcel #1 Ground Lease (Bristol), dated as of November 1, 1971, between First Western Bank and Trust Company, as landlord, and Rinker Development Corp., as tenant	 10.33.1***	List of omitted Ground Leases	 10.34*	Amendment to Lease Parcel #2 Ground Lease (Bristol), dated November 1, 1973, between First Western Bank and Trust Company, as landlord, and Century Properties Equity Partnership 72, as tenant	 10.35*	Amendment No. 1 to Ground Leases (Bristol), dated as of June 6, 1973, between First Western Bank and Trust Company, as landlord, and Montgomery Ross Fisher and Joanne M. Fisher, collectively, as lessee	 10.36*	Ground Lease (Broadway), dated June 30, 1993, between City of Walnut Creek, as lessor, and Macerich Northwestern Associates, as lessee	 10.37*	Agreement of Lease (Crossroads-Boulder), dated December 31, 1960, between H.R. Hindry, as lessor, and Gerri Von Frellick, as lessee, with amendments and supplements thereto	 10.38*	Lease (Menke #1) (Parklane), dated December 22, 1959, between Bessie L. Menke, as lessor, and A.J. Flagg, as lessee, as supplemented	 10.39*	Agreement Supplementing Lease (Menke #1), dated November 1, 1960, between Bessie L. Menke, as lessor, and A.J. Flagg, as lessee	 10.40*	Second Agreement Supplementing Lease (Menke #1), dated September 1, 1964, between Mark W. Menke, as executor of the estate of Bessie L. Menke, and Edith Menke Gamos and Mark W. Menke, individually (collectively as lessor), and Parklane Mall, as lessee	 10.41*	Lease (Menke #2), dated July 30, 1960, between Edith Menke Gamos and Mark W. Menke, collectively, as lessor, and Flaghill, Inc., as lessee	 10.42*	Amendment to Ground Lease (Menke #2), dated May 1, 1979, between Parklane Shopping Center Company, as ground lessee, and Mark W. Menke, Diana J. Jones, Edith Menke Gamos and Gary Gamos, collectively, as ground lessor	 10.43*	Lease (Menke #3), dated October 5, 1960, between Bessie L. Menke, as lessor, and Flaghill, Inc., as lessee	 10.44*	First Agreement Supplementing Lease (Menke #3), dated September 1, 1964, between Mark W. Menke, executor of the estate of Bessie L. Menke, deceased, Edith Menke Gamos and Mark W. Menke, as lessor, and Parklane Mall, as lessee	 10.45*	Lease (Menke #4), dated October 5, 1960, between Bessie L. Menke, as lessor, and Flaghill, Inc., as lessee, as supplemented	 10.46*	Amendment of Leases (Menke #1 through Menke #4) dated June 9, 1981, among Diana J. Jones, Curtis D. Jones, Gary Gamos, Steward R. Wilson (as Trustee for Menke Trust), Edith Gamos and Mark W. S. Menke, collectively, as lessor, and Parklane Shopping Center Company, as lessee	 10.47*	Agreement (amending Menke #1 through Menke #4), dated May 31, 1967, among Parklane Mall (as ground lessee), Mark W. Menke, Edith Menke Gamos and Mark W. Menke (as the Administrator of the Estate of Bessie L. Menke, deceased) (collectively, the ground lessors) and The Equitable Life Assurance Society of the United States	 10.48*	Agreement (amending Menke #1 through Menke #4), dated May 1, 1979, among Parklane Mall (as ground lessee), Mark W. Menke, Edith Menke Gamos and Gary Gamos, Diana J. Jones, Stewart R. Wilson, and Diana J. Jones as trustee under a Trust Agreement dated September 3, 1971 (collectively, the ground lessors), and The Equitable Life Assurance Society of the United States	 10.49***	Amended and Restated Partnership Agreement of Macerich Fargo Associates, dated as of March 16, 1994	 10.50*	Purchase and Sale Agreement, dated as of January 24, 1994, by and between Crossroads Associates Limited Partnership, as seller, and the Operating Partnership, as purchaser	 10.51*****	Contribution Agreement, dated May 13, 1994, between Chesterfield Mall Associates, a Virginia general partnership, and the Operating Partnership, as amended and supplemented	 10.52******	Contribution Agreement, dated May 13, 1995, between Salisbury- Springhill Limited Partnership, a Maryland limited partnership, and the Operating Partnership	 10.53*******	Contribution Agreement, dated as of July 28, 1995, between Capitola Mall Associates, a California limited partnership, and the Operating Partnership, as amended	 10.54********	Purchase and Sale Agreement, dated as of November 28, 1995, between Queens Center Associates, L.P., a Delaware limited partnership, and Macerich Queens Limited Partnership, a California limited partnership, as amended	 10.55*********	Purchase and Sale Agreement, dated as of November 11, 1995, between Copley Investors Limited Partnership, a Delaware limited partnership, and Macerich Marina Limited Partnership, a California limited partnership	
10.56#	Purchase and Sale Agreement, dated as of September 26, 1996, between LaSalle Street Fund Incorporated of Delaware, a Delaware corporation, and Macerich Valley View Limited Partnership, a California limited partnership	 10.57##	Purchase and Sale Agreement, dated as of September 30, 1996, between Vintage Faire Associates, a California general partnership, and Macerich Vintage Faire Limited Partnership, a California limited partnership.	 10.58###	Purchase and Sale Agreement, dated as of September 30, 1996, between Billings Associates, a Montana limited partnership, and Macerich Rimrock Mall Limited Partnership, a California limited partnership.	 10.59####	Purchase and Sale Agreement, dated as of November 22, 1996, between MCA Buenaventura Associates, L.P., a Delaware limited partnership, and MR Buenaventura Limited Partnership, a California limited partnership	 10.60#####	Purchase and Sale Agreement, dated as of November 22, 1996, between MCA Fresno Associates, L.P., a Delaware limited partnership, and MR Fresno Limited Partnership, a California limited partnership	 10.61######	Purchase and Sale Agreement, dated as of November 22, 1996, between MCA Huntington Associates, L.P., a Delaware limited partnership, and MR Huntington Limited Partnership, a California limited partnership	 11.1	Computation of per Share Earnings	 21.1	List of Subsidiaries	 23.1	Consent of Independent Accountants (Coopers & Lybrand L.L.P.)	
*		Previously filed as an exhibit to the Company's Registration Statement on Form S-11, as amended (No. 33-68964), and incorporated herein by reference. **		Previously filed as an exhibit to the Company's Current Report on Form 8-K, event date May 30, 1995, and incorporated herein by reference. ***		Previously filed as an exhibit to the Company's Annual Report on Form 10-K for the year ended December 31, 1996, and incorporated herein by reference. ****		Previously filed as an exhibit to the Company's Quarterly Statement on Form 10-Q for the quarter ended June 30, 1994, and incorporated herein by reference. *****		Previously filed as an exhibit to the Company's Current Report on Form 8-K, event date July 21, 1994, and incorporated herein by reference. ******		Previously filed as an exhibit to the Company's Current Report on Form 8-K, event date May 13, 1995, and incorporated herein by reference. *******		Previously filed as an exhibit to the Company's Current Report on Form 8-K, event date July 28, 1995, and incorporated herein by reference. ********	Previously filed as an exhibit to the Company's Current Report on Form 8-K, event date December 28, 1995, and incorporated herein by reference. *********	Previously filed as an exhibit to the Company's Current Report on Form 8-K, event date January 29, 1996, and incorporated herein by reference. #		Previously filed as an exhibit to the Company's Current Report on Form 8-K, event date October 21, 1996, and incorporated herein by reference. ##		Previously filed as an exhibit to the Company's Current Report on Form 8-K, event date February 3, 1997, and incorporated herein by reference. ###		Previously filed as an exhibit to the Company's Current Report on Form 8-K, event date February 3, 1997, and incorporated herein by reference. ####		Previously filed as an exhibit to the Company's Current Report on Form 8-K, event date February 27, 1997, and incorporated herein by reference. #####		Previously filed as an exhibit to the Company's Current Report on Form 8-K, event date February 27, 1997, and incorporated herein by reference. ######		Previously filed as an exhibit to the Company's Current Report on Form 8-K, event date February 27, 1997, and incorporated herein by reference.