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PART IV

Table of Contents

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, 2011

Commission File No. 1-12504

THE MACERICH COMPANY
(Exact name of registrant as specified in its charter)

MARYLAND
(State or other jurisdiction of
incorporation or organization)
  95-4448705
(I.R.S. Employer
Identification Number)

401 Wilshire Boulevard, Suite 700, Santa Monica, California 90401
(Address of principal executive office, including zip code)

Registrant's telephone number, including area code (310) 394-6000

Securities registered pursuant to Section 12(b) of the Act

Title of each class   Name of each exchange on which registered
Common Stock, $0.01 Par Value   New York Stock Exchange

        Indicate by check mark if the registrant is well-known seasoned issuer, as defined in Rule 405 of the Securities Act YES ý    NO o

        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 o    NO ý

        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 report) and (2) has been subject to such filing requirements for the past 90 days. YES ý    NO o

        Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files). YES ý    NO o

        Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment on to this Form 10-K. o

        Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of "large accelerated filer," "accelerated filer," and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer ý   Accelerated filer o   Non-accelerated filer o
(Do not check if a
smaller reporting company)
  Smaller reporting company o

        Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES o    NO ý

        The aggregate market value of voting and non-voting common equity held by non-affiliates of the registrant was approximately $7.0 billion as of the last business day of the registrant's most recent completed second fiscal quarter based upon the price at which the common shares were last sold on that day.

        Number of shares outstanding of the registrant's common stock, as of February 16, 2012: 131,992,974 shares

DOCUMENTS INCORPORATED BY REFERENCE

        Portions of the proxy statement for the annual stockholders meeting to be held in 2012 are incorporated by reference into Part III of this Form 10-K

   


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THE MACERICH COMPANY
ANNUAL REPORT ON FORM 10-K
FOR THE YEAR ENDED DECEMBER 31, 2011
INDEX

 
   
  Page  

Part I

           

Item 1.

 

Business

    1  

Item 1A.

 

Risk Factors

    17  

Item 1B.

 

Unresolved Staff Comments

    26  

Item 2.

 

Properties

    27  

Item 3.

 

Legal Proceedings

    35  

Item 4.

 

Mine Safety Disclosures

    35  

Part II

           

Item 5.

 

Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

    36  

Item 6.

 

Selected Financial Data

    38  

Item 7.

 

Management's Discussion and Analysis of Financial Condition and Results of Operations

    44  

Item 7A.

 

Quantitative and Qualitative Disclosures About Market Risk

    61  

Item 8.

 

Financial Statements and Supplementary Data

    62  

Item 9.

 

Changes in and Disagreements With Accountants on Accounting and Financial Disclosure

    62  

Item 9A.

 

Controls and Procedures

    62  

Item 9B.

 

Other Information

    65  

Part III

           

Item 10.

 

Directors and Executive Officers and Corporate Governance

    65  

Item 11.

 

Executive Compensation

    65  

Item 12.

 

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

    65  

Item 13.

 

Certain Relationships and Related Transactions, and Director Independence

    65  

Item 14.

 

Principal Accountant Fees and Services

    65  

Part IV

           

Item 15.

 

Exhibits and Financial Statement Schedules

    66  

Signatures

    139  

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PART I

IMPORTANT FACTORS RELATED TO FORWARD-LOOKING STATEMENTS

        This Annual Report on Form 10-K of The Macerich Company (the "Company") contains or incorporates by reference 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:

        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. 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 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, 2011, the Operating Partnership owned or had an ownership interest in 65 regional shopping centers and 14 community shopping centers totaling approximately 66 million square feet of gross leasable area ("GLA"). These 79 regional and community shopping centers are referred to herein as the "Centers," and consist of consolidated Centers ("Consolidated Centers") and unconsolidated

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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 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 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 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 Schedules."

Recent Developments

        On February 24, 2011, the Company increased its ownership interest in Kierland Commons, a 434,642 square foot community center in Scottsdale, Arizona, from 24.5% to 50%. The Company's share of the purchase price for this transaction was $34.2 million in cash and the assumption of $18.6 million of existing debt.

        On February 28, 2011, the Company, in a 50/50 joint venture, acquired The Shops at Atlas Park, a 377,924 square foot community center in Queens, New York, for a total purchase price of $53.8 million. The Company's share of the purchase price was $26.9 million and was funded from the Company's cash on hand.

        On February 28, 2011, the Company acquired the additional 50% ownership interest in Desert Sky Mall, an 893,863 square foot regional shopping center in Phoenix, Arizona, that it did not own. The total purchase price was $27.6 million, which included the assumption of the third party's pro rata share of the mortgage note payable on the property of $25.7 million. Concurrent with the purchase of the partnership interest, the Company paid off the $51.5 million loan on the property.

        On April 29, 2011, the Company purchased a fee interest in a freestanding Kohl's store at Capitola Mall in Capitola, California for $28.5 million. The purchase price was paid from cash on hand.

        On June 3, 2011, the Company acquired an additional 33.3% ownership interest in Arrowhead Towne Center, a 1,197,006 square foot regional shopping center in Glendale, Arizona, an additional 33.3% ownership interest in Superstition Springs Center, a 1,204,540 square foot regional shopping center in Mesa, Arizona, and an additional 50% ownership interest in the land under Superstition Springs Center in exchange for the Company's ownership interest in six anchor stores, including five former Mervyn's stores and a cash payment of $75.0 million. The cash purchase price was funded from borrowings under the Company's line of credit. This transaction is referred herein as the "GGP Exchange".

        On July 22, 2011, the Company acquired the Fashion Outlets of Niagara, a 529,059 square foot outlet center in Niagara Falls, New York. The initial purchase price of $200.0 million was funded by a cash payment of $78.6 million and the assumption of the mortgage note payable of $121.4 million. The

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cash purchase price was funded from borrowings under the Company's line of credit. The purchase and sale agreement includes contingent consideration based on the performance of the Fashion Outlets of Niagara from the acquisition date through July 21, 2014 that could increase the purchase price from the initial $200.0 million up to a maximum of $218.7 million. The Company estimated the fair value of the contingent consideration as of December 31, 2011 to be $14.8 million, which has been included in other accrued liabilities.

        On December 31, 2011, the Company and its joint venture partner reached agreement for the distribution and conveyance of interests in SDG Macerich Properties, L.P., a Delaware limited partnership ("SDG Macerich") that owned 11 regional malls in a 50/50 partnership. Six of the eleven assets were distributed to the Company on December 31, 2011. The Company received 100% ownership of Eastland Mall in Evansville, Indiana, Lake Square Mall in Leesburg, Florida, SouthPark Mall in Moline, Illinois, Southridge Mall in Des Moines, Iowa, NorthPark Mall in Davenport, Iowa and Valley Mall in Harrisonburg, Virginia (collectively referred to herein as the "SDG Acquisition Properties"). These wholly-owned assets were recorded at fair value at the date of transfer, which resulted in a gain of $188.3 million. The gain reflected the fair value of the net assets received in excess of the book value of the Company's interest in SDG Macerich. This transaction is referred to herein as the "SDG Transaction."

        On January 18, 2011, the Company replaced the existing loan on Twenty Ninth Street with a new $107.0 million loan that bears interest at LIBOR plus 2.63% and matures on January 18, 2016.

        On February 1, 2011, the Company paid off the $50.3 million mortgage on Chesterfield Towne Center. The loan bore interest at an effective rate of 9.07% with a maturity in January 2024.

        On February 23, 2011 and November 28, 2011, the Company exercised options under the loan agreement on Danbury Fair Mall to borrow an additional $20.0 million and $10.0 million, respectively. The entire loan bears interest at an effective rate of 5.53%.

        On February 28, 2011, in connection with the acquisition of an additional 50% interest in Desert Sky Mall (See "Acquisitions" in Recent Developments), the Company paid off the existing $51.5 million loan on the property that bore interest at 1.36%.

        On March 10, 2011, the Company's joint venture in Inland Center replaced the existing loan on the property with a new $50.0 million loan that bears interest at LIBOR plus 3.0% and matures on April 1, 2016.

        On March 15, 2011, the Company paid off the $33.1 million loan on Capitola Mall that bore interest at an effective rate of 7.13%.

        On April 26, 2011, the Company's joint venture in Chandler Village Center replaced the existing loan on the property with a new $17.5 million loan that bears interest at LIBOR plus 2.25% and matures on March 1, 2014 with two one-year extension options.

        On May 2, 2011, the Company replaced the $1.5 billion line of credit that had matured on April 25, 2011 with a new $1.5 billion revolving line of credit that bears interest at LIBOR plus a spread of 1.75% to 3.0% depending on the Company's overall leverage and matures on May 2, 2015 with a one-year extension option. Based on the Company's current leverage levels, the borrowing rate on the new facility is LIBOR plus 2.0%. The new line of credit can be expanded, depending on certain conditions, up to a total facility of $2.0 billion less the outstanding balance of the $125.0 million unsecured term loan, as discussed below.

        On June 1, 2011, the Company paid off the $83.4 million loan on Pacific View that bore interest at an effective rate of 7.23%.

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        On July 1, 2011, the Company paid off the $40.2 million loan on Rimrock Mall that bore interest at an effective rate of 7.57%.

        On July 1, 2011, the Company's joint venture in the Los Cerritos Center replaced the existing loan on the property with a new $200.0 million loan that bears interest at 4.50% and matures on July 1, 2018.

        On September 29, 2011, the Company's joint venture in Arrowhead Towne Center replaced the existing loan on the property with a new $230.0 million loan that bears interest at 4.30% and matures on October 5, 2018.

        On September 30, 2011, the Company paid off the $8.6 million loan on Hilton Village that bore interest at an effective rate of 5.27%.

        On October 28, 2011, the Company's joint venture in Superstition Springs Center replaced the existing loan on the property with a new $67.5 million loan that bears interest at LIBOR plus 2.30% and matures on October 28, 2016.

        In October 2011, the Company repurchased and retired $180.3 million of the 3.25% convertible senior notes due 2012 (the "Senior Notes") for $180.8 million.

        On December 8, 2011, the Company obtained a $125 million unsecured term loan under the Company's line of credit that bears interest at LIBOR plus 2.20% and matures on December 8, 2018.

        On December 9, 2011, the Company paid off the $19.0 million loan on La Cumbre Plaza that bore interest at an effective rate of 2.41%.

        On December 30, 2011, the Company conveyed Shoppingtown Mall to the lender by a deed-in-lieu of foreclosure. As a result, the Company has been discharged from the loan on the property (See "Other Transactions and Events" in Recent Developments).

        On February 1, 2012, the Company replaced the existing loan on Tucson La Encantada with a new $75.1 million loan that bears interest at 4.22% and matures on February 1, 2022.

        The Company has arranged a $140 million, 10-year fixed rate loan on Pacific View. The loan is expected to close in March 2012 with an interest rate of 4.00%. The property is currently unencumbered by debt.

        The Company expects to obtain in the near future a construction loan for the Fashion Outlets of Chicago that will allow for borrowings of up to $130 million and will bear interest at LIBOR plus 2.50% and mature in February 2015 with two one-year extension options. The loan will allow for an additional $10 million of borrowings, depending upon certain conditions.

        In February 2012, the Company entered into an arrangement for a $220.0 million, 10-year fixed rate loan to replace the existing loan on The Oaks. The new loan is expected to close in April 2012 with an interest rate of approximately 4.10%.

        In August 2011, the Company entered into a joint venture agreement with a subsidiary of AWE/Talisman for the development of the Fashion Outlets of Chicago in the Village of Rosemont, Illinois. The Company will own 60% of the joint venture and AWE/Talisman will own 40%. The Center will be a fully enclosed two level, 528,000 square foot outlet center. The site is located within a mile of O'Hare International Airport. The project broke ground in November 2011 and is expected to be completed in Summer 2013. The total estimated project cost is approximately $200.0 million.

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Other Transactions and Events:

        On July 15, 2010, a court appointed receiver assumed operational control of Valley View Center and responsibility for managing all aspects of the property. The Company anticipates the disposition of the asset, which is under the control of the receiver, will be executed through foreclosure, deed-in-lieu of foreclosure, or by some other means, and will be completed in the near future. Although the Company is no longer funding any cash shortfall, it continues to record the operations of Valley View Center until the title for the Center is transferred and its obligation for the loan is discharged. Once title to the Center is transferred, the Company will remove the net assets and liabilities from the Company's consolidated balance sheets. The mortgage note payable on Valley View Center is non-recourse to the Company.

        On April 1, 2011, the Company's joint venture in SDG Macerich conveyed Granite Run Mall to the mortgage note lender by a deed-in-lieu of foreclosure. The mortgage note was non-recourse. The Company's pro rata share of gain on early extinguishment of debt was $7.8 million.

        On May 11, 2011, the non-recourse mortgage note payable on Shoppingtown Mall went into maturity default. As a result of the maturity default and the corresponding reduction of the expected holding period, the Company recognized an impairment charge of $35.7 million to write-down the carrying value of the long-lived assets to its estimated fair value. On September 14, 2011, the Company exercised its right and redeemed the outside ownership interests in Shoppingtown Mall for a cash payment of $11.4 million. On December 30, 2011, the Company conveyed Shoppingtown Mall to the mortgage note lender by a deed-in-lieu of foreclosure. As a result of the conveyance, the Company recognized a $3.9 million additional loss on the disposal of the property.

        As of December 1, 2011, the Prescott Gateway non-recourse loan was in maturity default. The Company is negotiating with the lender and the outcome is uncertain at this time.

The Shopping Center Industry

        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 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 Shopping Centers typically contain 100,000 square feet to 400,000 square feet of GLA. Outlet Centers generally contain a wide variety of designer and manufacturer stores located in an open-air center and typically range in size from 200,000 to 850,000 square feet of GLA. In addition, freestanding retail stores are located along the perimeter of the shopping centers ("Freestanding Stores"). Mall Stores and Freestanding Stores over 10,000 square feet are also referred to as "Big Box." Anchors, Mall Stores and 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.

        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.

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        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

        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. (See "Recent Developments—Acquisitions").

        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.

        Similarly, the Company generally utilizes on-site and 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 four regional shopping centers and three community centers for third party owners on a fee basis.

        Redevelopment.    One of the major components of the Company's growth strategy is its ability to redevelop acquired properties. For this reason, the Company has built a staff of redevelopment

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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 "Recent Developments—Redevelopment and Development Activity").

        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 "Recent Developments—Redevelopment and Development Activity").

        As of December 31, 2011, the Centers consist of 65 Regional Shopping Centers and 14 Community Shopping Centers totaling approximately 66 million square feet of GLA. The 65 Regional Shopping Centers in the Company's portfolio average approximately 923,000 square feet of GLA and range in size from 2.1 million square feet of GLA at Tysons Corner Center to 314,000 square feet of GLA at Panorama Mall. The Company's 14 Community Shopping Centers have an average of approximately 298,000 square feet of GLA. As of December 31, 2011, the Centers included 256 Anchors totaling approximately 34.5 million square feet of GLA and approximately 8,100 Mall Stores and Freestanding Stores totaling approximately 31.8 million square feet of GLA.

        There are numerous owners and developers of real estate that compete with the Company in its trade areas. There are eight other publicly traded mall companies in the United States and several large private mall companies, any of which under certain circumstances could compete against the Company for an acquisition of an Anchor or a tenant. In addition, other REITs, private real estate companies, and financial buyers compete with the Company in terms of acquisitions. This results in competition for both 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, Internet shopping, home shopping networks, outlet centers, discount shopping clubs and mail-order services 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.

        The Centers derived approximately 79% of their total rents for the year ended December 31, 2011 from Mall Stores and Freestanding Stores under 10,000 square feet. Big Box and Anchor tenants accounted for 21% of total rents for the year ended December 31, 2011.

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        The following retailers (including their subsidiaries) represent the 10 largest rent payers in the Centers (excluding Valley View Center, which is under the control of a court appointed receiver) based upon total rents in place as of December 31, 2011:

Tenant
  Primary DBAs   Number of
Locations
in the
Portfolio
  % of Total
Rents(1)
 

Limited Brands, Inc. 

  Victoria's Secret, Bath and Body Works, Victoria's Secret Beauty, PINK     118     2.4 %

Gap Inc. 

  The Gap, Old Navy, Banana Republic, Gap Kids, Gap Body, Baby Gap, The Gap Outlet, Athleta     80     2.3 %

Forever 21, Inc. 

  Forever 21, XXI Forever     40     1.9 %

Golden Gate Capital

  Express, Eddie Bauer, J. Jill, California Pizza Kitchen     78     1.9 %

Foot Locker, Inc. 

  Champs Sports, Foot Locker, Foot Action USA, CCS, Lady Foot Locker, Kids Foot Locker     115     1.7 %

Abercrombie & Fitch Co. 

  Abercrombie & Fitch, Hollister, abercrombie     64     1.4 %

Luxottica Group S.P.A. 

  Sunglass Hut, LensCrafters, Oakley, Optical Shop of Aspen, Pearle Vision Center, Ilori, Sunglass Hut / Watch Station     133     1.3 %

American Eagle Outfitters, Inc. 

  American Eagle, Aerie, 77Kids     53     1.2 %

Nordstrom, Inc. 

  Nordstrom, Last Chance, Nordstrom Rack, Nordstrom Spa     21     1.1 %

AT&T Mobility LLC(2)

  AT&T, Cingular Wireless, AT&T Experience Store     30     1.1 %

(1)
Total rents include minimum rents and percentage rents.

(2)
Includes AT&T Mobility office headquarters located at Redmond Town Center.

        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 has generally entered into leases for Mall Stores and Freestanding Stores that 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. Additionally, certain leases for Mall Stores and Freestanding Stores contain provisions that 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, 2011 comprises 66.9% 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. Most 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.

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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.

        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:

                   

2011(5)(6)

  $ 38.80   $ 38.35   $ 35.84  

2010(5)

  $ 37.93   $ 34.99   $ 37.02  

2009

  $ 37.77   $ 38.15   $ 34.10  

2008

  $ 41.39   $ 42.70   $ 35.14  

2007

  $ 38.49   $ 43.23   $ 34.21  

Unconsolidated Joint Venture Centers (at the Company's pro rata share):

                   

2011

  $ 53.72   $ 50.00   $ 38.98  

2010

  $ 46.16   $ 48.90   $ 38.39  

2009

  $ 45.56   $ 43.52   $ 37.56  

2008

  $ 42.14   $ 49.74   $ 37.61  

2007

  $ 38.72   $ 47.12   $ 34.87  

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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:

                               

2011(5)(6)

  $ 8.42   $ 10.87     21   $ 6.71     14  

2010(5)

  $ 8.64   $ 13.79     31   $ 10.64     10  

2009

  $ 9.66   $ 10.13     19   $ 20.84     5  

2008

  $ 9.53   $ 11.44     26   $ 9.21     18  

2007

  $ 9.08   $ 18.51     17   $ 20.13     3  

Unconsolidated Joint Venture Centers (at the Company's pro rata share):

                               

2011

  $ 12.50   $ 21.43     15   $ 14.19     7  

2010

  $ 11.90   $ 24.94     20   $ 15.63     26  

2009

  $ 11.60   $ 31.73     16   $ 19.98     16  

2008

  $ 11.16   $ 14.38     14   $ 10.59     5  

2007

  $ 10.89   $ 18.21     13   $ 11.03     5  

(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)
The leases for Promenade at Casa Grande, SanTan Village Power Center and SanTan Village Regional Center were excluded for the years ended December 31, 2007 and 2008 because they were under development. The leases for The Market at Estrella Falls were excluded for the years ended December 31, 2009 and 2008 because it was under development. The leases for Santa Monica Place were excluded for the years ended December 31, 2010, 2009 and 2008 because it was under redevelopment.

(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.

(5)
The leases for Valley View Center were excluded because the Center is under the control of a court appointed receiver.

(6)
The leases for the SDG Acquisition Properties were included as Consolidated Centers for the year ended December 31, 2011. These Centers were included with Unconsolidated Joint Venture Centers for the years ended December 31, 2010, 2009, 2008 and 2007.

        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 capacity for the Company to increase rents at

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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 Years ended December 31,  
 
  2011(1)(2)   2010(1)(2)   2009(1)   2008(1)   2007(1)  

Consolidated Centers:

                               

Minimum rents

    8.2 %   8.6 %   9.1 %   8.9 %   8.0 %

Percentage rents

    0.5 %   0.4 %   0.4 %   0.4 %   0.4 %

Expense recoveries(3)

    4.1 %   4.4 %   4.7 %   4.4 %   3.8 %
                       

    12.8 %   13.4 %   14.2 %   13.7 %   12.2 %
                       

Unconsolidated Joint Venture Centers:

                               

Minimum rents

    9.1 %   9.1 %   9.4 %   8.2 %   7.3 %

Percentage rents

    0.4 %   0.4 %   0.4 %   0.4 %   0.5 %

Expense recoveries(3)

    3.9 %   4.0 %   4.3 %   3.9 %   3.2 %
                       

    13.4 %   13.5 %   14.1 %   12.5 %   11.0 %
                       

(1)
The SDG Acquisition Properties were included in the Consolidated Centers for the year ended December 31, 2011 and were included in the Unconsolidated Joint Venture Centers for the years ended December 31, 2010, 2009, 2008 and 2007.

(2)
The cost of occupancy excludes Valley View Center for the years ended December 31, 2011 and 2010 because the Center is under the control of a court appointed receiver.

(3)
Represents real estate tax and common area maintenance charges.

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        The following tables show scheduled lease expirations for Centers owned as of December 31, 2011, excluding Valley View Center because the Center is under the control of a court appointed receiver, 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:

                               

2012

    472     992,496     14.19 % $ 37.69     12.96 %

2013

    389     747,012     10.68 % $ 41.25     10.68 %

2014

    343     736,723     10.53 % $ 38.20     9.75 %

2015

    312     712,830     10.19 % $ 38.17     9.43 %

2016

    330     801,817     11.46 % $ 39.42     10.96 %

2017

    302     765,037     10.94 % $ 42.76     11.34 %

2018

    258     650,012     9.29 % $ 43.24     9.74 %

2019

    215     551,606     7.89 % $ 44.74     8.55 %

2020

    171     396,273     5.67 % $ 52.21     7.17 %

2021

    178     470,084     6.72 % $ 42.97     7.00 %

Unconsolidated Joint Venture Centers (at the Company's pro rata share):

                               

2012

    330     334,533     11.75 % $ 48.00     9.79 %

2013

    276     300,917     10.57 % $ 56.22     10.32 %

2014

    257     304,982     10.71 % $ 60.45     11.24 %

2015

    285     378,318     13.29 % $ 58.37     13.46 %

2016

    270     331,546     11.64 % $ 58.58     11.84 %

2017

    200     299,798     10.53 % $ 52.78     9.65 %

2018

    172     225,115     7.91 % $ 58.67     8.05 %

2019

    143     163,575     5.74 % $ 68.41     6.82 %

2020

    152     193,213     6.79 % $ 66.16     7.79 %

2021

    163     218,037     7.66 % $ 57.98     7.71 %

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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:

                               

2012

    22     927,046     7.43 % $ 8.80     7.51 %

2013

    22     849,514     6.81 % $ 6.06     4.74 %

2014

    28     1,480,080     11.86 % $ 6.86     9.36 %

2015

    21     1,040,554     8.34 % $ 5.80     5.56 %

2016

    24     1,375,312     11.02 % $ 5.78     7.32 %

2017

    29     1,280,621     10.26 % $ 7.77     9.16 %

2018

    17     282,922     2.27 % $ 16.11     4.20 %

2019

    15     236,747     1.90 % $ 20.85     4.55 %

2020

    27     792,185     6.35 % $ 8.75     6.38 %

2021

    25     937,074     7.51 % $ 14.36     12.40 %

Unconsolidated Joint Venture Centers (at the Company's pro rata share):

                               

2012

    11     201,175     4.21 % $ 9.34     2.94 %

2013

    22     326,992     6.84 % $ 15.00     7.67 %

2014

    22     381,504     7.97 % $ 16.10     9.61 %

2015

    35     912,606     19.08 % $ 8.86     12.65 %

2016

    30     500,111     10.45 % $ 13.94     10.90 %

2017

    12     148,209     3.10 % $ 26.08     6.04 %

2018

    10     316,693     6.62 % $ 5.45     2.70 %

2019

    12     215,198     4.50 % $ 19.14     6.44 %

2020

    19     637,413     13.32 % $ 13.24     13.20 %

2021

    11     220,629     4.61 % $ 11.56     3.99 %

(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, 62% of leases have provisions for future consumer price index increases that are not reflected in ending base rent. Leases for the SDG Acquisition Properties are included in the Consolidated Centers. The leases for The Shops at Atlas Park and South Ridge Mall were excluded as these properties are under redevelopment.

        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, 2011.

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        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, 2011. Anchors at Valley View Center are excluded from the table below because the Center is under the control of a court appointed receiver.

Name
  Number of
Anchor
Stores
  GLA Owned
by Anchor
  GLA Leased
by Anchor
  Total GLA
Occupied by
Anchor
 

Macy's Inc.

                         

Macy's(1)

    51     5,419,918     2,959,858     8,379,776  

Bloomingdale's

    2         357,644     357,644  
                   

Total

    53     5,419,918     3,317,502     8,737,420  

Sears Holdings Corporation

                         

Sears

    39     3,588,537     1,589,613     5,178,150  

Great Indoors, The

    1         131,051     131,051  

K-Mart

    1         86,479     86,479  
                   

Total

    41     3,588,537     1,807,143     5,395,680  

jcpenney

    37     2,162,764     2,844,218     5,006,982  

Dillard's

    23     3,343,556     557,112     3,900,668  

Nordstrom

    14     720,349     1,676,891     2,397,240  

Target(2)

    10     870,830     452,533     1,323,363  

Forever 21(1)

    10     154,518     791,461     945,979  

The Bon-Ton Stores, Inc.

                         

Younkers

    3         317,241     317,241  

Bon-Ton, The

    1         71,222     71,222  

Herberger's

    2     188,000     53,317     241,317  
                   

Total

    6     188,000     441,780     629,780  

Neiman Marcus(3)

    4     120,000     409,058     529,058  

Kohl's

    5     164,902     240,041     404,943  

Home Depot

    3         394,932     394,932  

Wal-Mart

    2     371,527         371,527  

Costco

    2         321,419     321,419  

Lord & Taylor

    3     120,635     199,372     320,007  

Boscov's

    2         301,350     301,350  

Burlington Coat Factory

    3     174,449     86,706     261,155  

Dick's Sporting Goods

    3         257,241     257,241  

Belk

    3         200,925     200,925  

Von Maur

    2     186,686         186,686  

La Curacao

    1         164,656     164,656  

Barneys New York

    2         141,398     141,398  

Lowe's

    1     135,197         135,197  

Garden Ridge

    1         109,933     109,933  

Saks Fifth Avenue

    1         92,000     92,000  

Mercado de los Cielos

    1         77,500     77,500  

L.L. Bean

    1         75,778     75,778  

Best Buy

    1     65,841         65,841  

Sports Authority

    1         52,250     52,250  

Bealls

    1         40,000     40,000  

Vacant Anchors(4)

    6         688,359     688,359  
                   

Total

    243     17,787,709     15,741,558     33,529,267  

Anchors at Centers not owned by the Company(5):

                         

Forever 21

    5         397,726     397,726  

Burlington Coat Factory

    1         85,000     85,000  

Kohl's

    1         82,600     82,600  

Cabela's

    1         75,330     75,330  

Vacant Anchors(5)

    5         377,823     377,823  
                   

Total

    256     17,787,709     16,760,037     34,547,746  
                   

(1)
Macy's is scheduled to open a 103,000 square foot store at Mall of Victor Valley in 2013. The Forever 21 at Mall of Victor Valley closed in January 2012.

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(2)
Target is scheduled to open a 98,000 square foot store at Capitola Mall in Summer of 2012.

(3)
Neiman Marcus is scheduled to open an 88,000 square foot store at Broadway Plaza in March of 2012.

(4)
The Company is currently seeking various replacement tenants and/or contemplating redevelopment opportunities for these vacant sites.

(5)
The Company owns a portfolio of 15 former Mervyn's stores located at shopping centers not owned by the Company. Of these 15 stores, five have been leased to Forever 21, one has been leased to Kohl's, one has been leased to Burlington Coat Factory, one has been leased to Cabela's, two have been leased for non-Anchor usage and the remaining five former Mervyn's locations are vacant. The Company is currently seeking replacement tenants for these vacant sites.

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:

        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, further carries 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 $150 million on these Centers. The Company or the

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relevant joint venture, as applicable, carries specific earthquake insurance on the Centers located in the Pacific Northwest. 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 $800 million on these Centers. While the Company or the relevant joint venture also carries terrorism insurance on the Centers, the policies are subject to a $50,000 deductible and a combined annual aggregate loss of $800 million. Each Center has environmental insurance covering eligible third-party losses, remediation and non-owned disposal sites, subject to a $100,000 deductible and a $20 million five-year aggregate 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 less than their full value.

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.

Employees

        As of December 31, 2011, the Company had approximately 1,377 employees, of which approximately 1,094 were full-time. Unions represent five of these employees. The Company believes that relations with its employees are good.

Seasonality

        For a discussion of the extent to which the Company's business may be seasonal, see "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations—Management's Overview and Summary—Seasonality."

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 "Investing—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.

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        The following documents relating to Corporate Governance are available on the Company's website at www.macerich.com under "Investing—Corporate Governance":

        You may also request copies of any of these documents by writing to:

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.

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. 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." A number of factors may decrease the income generated by the Centers, including:

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        Income from shopping center properties and shopping center values are also affected by applicable laws and regulations, including tax, environmental, safety and zoning laws.

Continued economic weakness from the severe economic recession that began in 2007 may materially and adversely affect our results of operations and financial condition.

        The U.S. economy is still experiencing weakness from the severe recession that began in 2007 and resulted in increased unemployment, the bankruptcy or weakened financial condition of a number of large retailers, a decline in residential and commercial property values and reduced demand and rental rates for retail space. Although the U.S. economy has improved, high levels of unemployment have persisted, and rental rates and valuations for retail space have not fully recovered to pre-recession levels and may not for a number of years. We may continue to experience downward pressure on the rental rates we are able to charge as leases signed prior to the recession expire, and tenants may declare bankruptcy, announce store closings or fail to meet their lease obligations, any of which could adversely affect the value of our properties and our financial condition and results of operations.

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, and eight Centers in the aggregate are located in New York, New Jersey and Connecticut. Many of these states have been more adversely affected by weak economic and real estate conditions than have other states. To the extent that weak economic or real estate conditions, including as a result of the factors described in the preceding risk factors, or other factors continue to affect or 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.

        There are numerous owners and developers of real estate that compete with us in our trade areas. There are seven other publicly traded mall companies in the United States and several large private mall companies, any of which under certain circumstances could compete against us for an acquisition of an Anchor or a tenant. In addition, other REITs, private real estate companies, and financial buyers compete with us in terms of 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. The existence of competing shopping centers could have a material adverse impact on our 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, Internet shopping, home shopping networks, outlet centers, discount shopping clubs and mail-order services that could adversely affect our revenues.

We may be unable to renew leases, lease vacant space or re-let space as leases expire, 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

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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 or have gone out of business. We may be unable to re-let stores vacated as a result of voluntary closures or the bankruptcy of a tenant. Furthermore, 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.

        In addition, Anchors and/or tenants at one or more Centers might 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. Given current economic conditions, there is an increased risk that Anchors or other significant tenants will 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 acquisition and real estate development strategies may not be successful.

        Our historical growth in revenues, net income and funds from operations has been in part tied to the acquisition 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 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, 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 and financial buyers. 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:

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        Our business strategy also includes the selective development and construction of retail properties. 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 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. If any of the above events occur, our ability to pay dividends to our stockholders and service our indebtedness could be adversely affected.

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 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.

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 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 tornados, 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 and tropical storms.

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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, carries 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 $150 million on these Centers. We or the relevant joint venture, as applicable, carries specific earthquake insurance on the Centers located in the Pacific Northwest. 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 $800 million on these Centers. While we or the relevant joint venture also carries terrorism insurance on the Centers, the policies are subject to a $50,000 deductible and a combined annual aggregate loss of $800 million. Each Center has environmental insurance covering eligible third-party losses, remediation and non-owned disposal sites, subject to a $100,000 deductible and a $20 million five-year aggregate limit. Some environmental losses are not covered by this insurance because they are uninsurable or not economically insurable. Furthermore, we carry title insurance on 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.

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:

We have substantial debt that could affect our future operations.

        Our total outstanding loan indebtedness at December 31, 2011 was $6.2 billion (which includes $852.8 million of unsecured debt and $1.9 billion of our pro rata share of joint venture debt). Approximately $737.0 million of such indebtedness (at our pro rata share), including $437.8 million of Senior Notes, matures in 2012 (excluding Valley View Center, Prescott Gateway and refinancing transactions that have recently closed). 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. Furthermore, a majority 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.

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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 under and/or 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. The credit markets experienced a severe dislocation during 2008 and 2009, which, for certain periods of time, resulted in the near unavailability of debt financing for even the most creditworthy borrowers. Although the credit markets have recovered from this severe dislocation, there are a number of continuing effects, including a weakening of many traditional sources of debt financing and changes in underwriting standards and terms. Since the severe recession that began in 2007, the capital markets have also experienced and may continue to experience significant volatility and disruption. While the capital markets have shown signs of improvement, the sustainability of an economic recovery is uncertain and additional 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. In addition, any debt refinancing could also impose more restrictive terms.

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. Three of the principals of the Operating Partnership serve as our executive officers, and a member of our board of directors. Accordingly, these principals have substantial influence over our management and the management of the Operating Partnership. As a result, certain decisions concerning our operations or other matters affecting us may present conflicts of interest for these individuals.

Outside partners in Joint Venture Centers result in additional risks to our stockholders.

        We own partial interests in property partnerships that own 34 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 may have fiduciary responsibilities to our partners that could affect decisions concerning the Joint Venture Centers. Third parties may 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 our status. For example, we may lose our management and other rights relating to the Joint Venture Centers if:

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        In addition, some of our outside partners control the day-to-day operations of two Joint Venture Centers (NorthPark Center and West Acres Center). We, therefore, do not control cash distributions from these Centers, and the lack of cash distributions from these Centers could jeopardize our ability to maintain our qualification as a REIT. Furthermore, certain Joint Venture Centers have debt that could become recourse debt to us if the Joint Venture Center is unable to discharge such debt obligation.

        Our percentage ownership interest in the equity of a joint venture vehicle may not reflect our economic interest in the Joint Venture Center owned by the entity, since each joint venture has various agreements regarding cash flow, profits and losses, allocations, capital requirements, priority on return of capital, preferential returns to joint venture partners, incentive compensation for the joint venture manager and other matters.

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 anti-takeover defenses 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 options to acquire stock) may be owned, directly or indirectly, by five or fewer individuals (as defined in the Internal Revenue Code to include some entities that would not ordinarily be considered "individuals") during the last half of a taxable year. 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 for some holders of limited partnership interests in the Operating Partnership, and their respective families and affiliated entities, including all three principals who serve as one of our executive officers and directors). In addition to enhancing preservation of our status as a REIT, the Ownership Limit may:

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        Our board of directors, in its sole discretion, may waive or modify (subject to limitations) 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 some, or a majority, of our stockholders might believe to be in their best interest 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:

        Selected Provisions of Maryland Law.    The Maryland General Corporation Law prohibits business combinations between a Maryland corporation and an interested stockholder (which includes any person who beneficially holds 10% or more of the voting power of the corporation's outstanding voting stock or any affiliate or associate of ours who was the beneficial owner, directly or indirectly, of 10% or more of the voting power of the corporation's outstanding stock at any time within the two year period prior to the date in question) or its affiliates for five years following the most recent date on which the interested stockholder became an interested stockholder and, after the five-year period, requires the recommendation of the board of directors and two super-majority stockholder votes to approve a business combination unless the stockholders receive a minimum price determined by the statute. As permitted by Maryland law, our Charter exempts from these provisions any business combination between us and the principals and their respective affiliates and related persons. Maryland law 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.

        The Maryland General Corporation Law also provides that the acquirer of certain levels of voting power in electing directors of a Maryland corporation (one-tenth or more but less than one-third, one-third or more but less than a majority and a majority or more) is not entitled to vote the shares in excess of the applicable threshold, unless voting rights for the shares are approved by holders of two-thirds of the disinterested shares or unless the acquisition of the shares has been specifically or generally approved or exempted from the statute by a provision in our Charter or bylaws adopted before the acquisition of the shares. Our Charter exempts from these provisions voting rights of shares owned or acquired by the principals and their respective affiliates and related persons. Our bylaws also contain a provision exempting from this statute any acquisition by any person of shares of our common stock. There can be no assurance that this bylaw will not be amended or eliminated in the future. The Maryland General Corporation Law and our Charter also contain supermajority voting requirements with respect to our ability to amend our Charter, dissolve, merge, or sell all or substantially all of our assets.

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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 the Operating Partnership.

If we were to fail to qualify as a REIT, we will 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 Internal Revenue 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 in partnership form. 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:

        In addition, if we were to lose our REIT status, we will 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, which if successful could result in us owing a material amount of tax 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

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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 Internal Revenue Code impose a 100% tax on income from "prohibited transactions." Prohibited transactions generally include sales of assets that 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 a prohibited transaction.

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.

Tax legislative or regulatory action could adversely affect investors.

        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.

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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. Valley View Center is excluded from the table below because it is under the control of a court appointed receiver.

Company'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
  Anchors

CONSOLIDATED CENTERS

                     

100%

  Capitola Mall(4)
Capitola, California
    1977/1995     1988     586,077     196,360     84.6 % Kohl's, Macy's, Sears, Target(5)

50.1%

  Chandler Fashion Center
Chandler, Arizona
    2001/2002         1,324,101     638,941     97.3 % Dillard's, Macy's, Nordstrom, Sears

100%

  Chesterfield Towne Center
Richmond, Virginia
    1975/1994     2000     1,018,373     474,801     92.4 % Garden Ridge, jcpenney, Macy's, Sears

100%

  Danbury Fair Mall
Danbury, Connecticut
    1986/2005     2010     1,273,331     567,091     97.9 % Forever 21, jcpenney, Lord & Taylor, Macy's, Sears

100%

  Deptford Mall
Deptford, New Jersey
    1975/2006     1990     1,042,374     345,932     99.6 % Boscov's, jcpenney, Macy's, Sears

100%

  Desert Sky Mall
Phoenix, Arizona
    1981/2002     2007     893,863     283,368     91.5 % Burlington Coat Factory, Dillard's, La Curacao, Mercado, Sears

100%

  Eastland Mall(4)
Evansville, Indiana
    1978/1998     1996     1,040,941     551,797     96.9 % Dillard's, jcpenney, Macy's

100%

  Fashion Outlets of Niagara
Niagara Falls, New York
    1982/2011     2009     529,059     529,059     95.8 %

100%

  Fiesta Mall
Mesa, Arizona
    1979/2004     2009     932,613     414,422     85.0 % Dillard's, Macy's, Sears

100%

  Flagstaff Mall
Flagstaff, Arizona
    1979/2002     2007     347,379     143,367     93.4 % Dillard's, jcpenney, Sears

50.1%

  Freehold Raceway Mall
Freehold, New Jersey
    1990/2005     2007     1,671,413     877,881     94.8 % jcpenney, Lord & Taylor, Macy's, Nordstrom, Sears

100%

  Fresno Fashion Fair
Fresno, California
    1970/1996     2006     962,083     401,202     96.4 % Forever 21, jcpenney, Macy's (two)

100%

  Great Northern Mall(6)
Clay, New York
    1988/2005         892,196     562,208     95.8 % Macy's, Sears

100%

  Green Tree Mall
Clarksville, Indiana
    1968/1975     2005     805,227     299,642     86.0 % Burlington Coat Factory, Dillard's jcpenney, Sears

100%

  La Cumbre Plaza(4)
Santa Barbara, California
    1967/2004     1989     493,441     176,441     85.7 % Macy's, Sears

100%

  Lake Square Mall
Leesburg, Florida
    1980/1998     1995     558,802     262,765     82.2 % Belk, jcpenney, Sears, Target

100%

  Northgate Mall
San Rafael, California
    1964/1986     2010     715,847     245,516     95.9 % Kohl's, Macy's, Sears

100%

  NorthPark Mall
Davenport, Iowa
    1973/1998     2001     1,075,312     424,856     87.8 % Dillard's, jcpenney, Sears, Von Maur, Younkers

100%

  Northridge Mall
Salinas, California
    1972/2003     1994     887,323     350,343     95.0 % Forever 21, jcpenney, Macy's, Sears

100%

  Oaks, The
Thousand Oaks, California
    1978/2002     2009     1,134,640     577,147     96.1 % jcpenney, Macy's (two), Nordstrom

100%

  Pacific View
Ventura, California
    1965/1996     2001     1,017,283     368,469     95.6 % jcpenney, Macy's, Sears, Target

100%

  Panorama Mall
Panorama, California
    1955/1979     2005     314,203     149,203     94.2 % Wal-Mart

100%

  Paradise Valley Mall
Phoenix, Arizona
    1979/2002     2009     1,146,037     365,908     89.1 % Costco, Dillard's, jcpenney, Macy's, Sears

100%

  Prescott Gateway
Prescott, Arizona
    2002/2002     2004     583,959     339,771     80.4 % Dillard's, jcpenney, Sears

51.3%

  Promenade at Casa Grande
Casa Grande, Arizona
    2007/—     2009     930,309     492,876     95.1 % Dillard's, jcpenney, Kohl's, Target

100%

  Rimrock Mall
Billings, Montana
    1978/1996     1999     597,688     289,786     87.4 % Dillard's (two), Herberger's, jcpenney

100%

  Rotterdam Square
Schenectady, New York
    1980/2005     1990     585,217     275,442     87.4 % K-Mart, Macy's, Sears

100%

  Salisbury, Centre at
Salisbury, Maryland
    1990/1995     2005     861,272     363,856     95.7 % Boscov's, jcpenney, Macy's, Sears

100%

  Santa Monica Place
Santa Monica, California
    1980/1999     2010     471,623     248,202     89.3 % Bloomingdale's, Nordstrom

84.9%

  SanTan Village Regional Center
Gilbert, Arizona
    2007/—     2009     979,184     641,933     96.9 % Dillard's, Macy's

100%

  Somersville Towne Center
Antioch, California
    1966/1986     2004     349,264     176,079     84.7 % Macy's, Sears

100%

  SouthPark Mall
Moline, Illinois
    1974/1998     1990     1,017,105     439,049     85.6 % Dillard's, jcpenney, Sears, Von Maur, Younkers

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Company'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
  Anchors

100%

  South Plains Mall
Lubbock, Texas
    1972/1998     1995     1,070,421     410,634     86.9 % Bealls, Dillard's (two), jcpenney, Sears

100%

  South Towne Center
Sandy, Utah
    1987/1997     1997     1,274,936     498,424     95.8 % Dillard's, Forever 21, jcpenney, Macy's, Target

100%

  Towne Mall
Elizabethtown, Kentucky
    1985/2005     1989     340,619     169,747     82.8 % Belk, jcpenney, Sears

100%

  Twenty Ninth Street(4)
Boulder, Colorado
    1963/1979     2007     832,711     541,057     92.4 % Home Depot, Macy's

100%

  Valley Mall
Harrisonburg, Virginia
    1978/1998     1992     464,200     191,212     86.7 % Belk, jcpenney, Target

100%

  Valley River Center(6)
Eugene, Oregon
    1969/2006     2007     912,121     336,057     93.3 % jcpenney, Macy's, Sports Authority

100%

  Victor Valley, Mall of
Victorville, California
    1986/2004     2006     544,728     270,879     97.1 % Forever 21, jcpenney, Sears, Macy's(7)

100%

  Vintage Faire Mall
Modesto, California
    1977/1996     2008     1,128,825     428,476     98.0 % Forever 21, jcpenney, Macy's (two), Sears

100%

  Westside Pavilion
Los Angeles, California
    1985/1998     2007     754,228     396,100     96.1 % Macy's, Nordstrom

100%

  Wilton Mall
Saratoga Springs, New York
    1990/2005     1998     689,588     454,288     94.6 % The Bon-Ton, jcpenney, Sears
                                 

  Total/Average Consolidated Centers           35,049,916     16,170,587     92.8 %  
                                 

UNCONSOLIDATED JOINT VENTURE CENTERS (VARIOUS PARTNERS):

                     

66.7%

  Arrowhead Towne Center
Glendale, Arizona
    1993/2002     2004     1,197,006     389,229     97.7 % Dick's Sporting Goods, Dillard's, Forever 21, jcpenney, Macy's, Sears

50%

  Biltmore Fashion Park
Phoenix, Arizona
    1963/2003     2006     525,537     220,537     81.1 % Macy's, Saks Fifth Avenue

50%

  Broadway Plaza(4)
Walnut Creek, California
    1951/1985     1994     777,714     215,670     99.3 % Macy's (two), Neiman Marcus(8), Nordstrom

51%

  Cascade Mall(9)
Burlington, Washington
    1989/1999     1998     586,386     262,150     88.1 % jcpenney, Macy's (two), Sears, Target

50.1%

  Corte Madera, Village at
Corte Madera, California
    1985/1998     2005     439,167     221,167     98.4 % Macy's, Nordstrom

25%

  FlatIron Crossing
Broomfield, Colorado
    2000/2002     2009     1,482,673     838,932     86.4 % Dick's Sporting Goods, Dillard's, Macy's, Nordstrom

50%

  Inland Center(4)(6)
San Bernardino, California
    1966/2004     2004     933,031     205,160     98.0 % Forever 21, Macy's, Sears

51%

  Kitsap Mall(9)
Silverdale, Washington
    1985/1999     1997     846,231     386,248     90.4 % jcpenney, Kohl's, Macy's, Sears

51%

  Lakewood Center(9)
Lakewood, California
    1953/1975     2008     2,051,832     986,485     90.9 % Costco, Forever 21, Home Depot, jcpenney, Macy's, Target

51%

  Los Cerritos Center(6)(9)
Cerritos, California
    1971/1999     2010     1,300,162     505,568     96.0 % Forever 21, Macy's, Nordstrom, Sears

50%

  North Bridge, The Shops at(4)
Chicago, Illinois
    1998/2008         679,175     419,175     83.5 % Nordstrom

50%

  NorthPark Center(4)
Dallas, Texas
    1965/2004     2005     1,946,178     893,858     94.7 % Barneys New York, Dillard's, Macy's, Neiman Marcus, Nordstrom

51%

  Queens Center(4)
Queens, New York
    1973/1995     2004     967,527     410,803     97.3 % jcpenney, Macy's

51%

  Redmond Town Center(4)(9)
Redmond, Washington
    1997/1999     2004     692,481     582,481     82.0 % Macy's

50%

  Ridgmar
Fort Worth, Texas
    1976/2005     2000     1,273,518     399,545     85.0 % Dillard's, jcpenney, Macy's, Neiman Marcus, Sears

50%

  Scottsdale Fashion Square
Scottsdale, Arizona
    1961/2002     2009     1,802,237     831,977     95.1 % Barneys New York, Dillard's, Macy's, Neiman Marcus, Nordstrom

51%

  Stonewood Center(4)(9)
Downey, California
    1953/1997     1991     931,384     357,624     96.3 % jcpenney, Kohl's, Macy's, Sears

66.7%

  Superstition Springs Center(4)
Mesa, Arizona
    1990/2002     2002     1,204,540     441,246     91.4 % Best Buy, Burlington Coat Factory, Dillard's, jcpenney, Macy's, Sears

50%

  Tysons Corner Center(4)
McLean, Virginia
    1968/2005     2005     1,985,179     1,096,937     98.9 % Bloomingdale's, L.L. Bean, Lord & Taylor, Macy's, Nordstrom

51%

  Washington Square(9)
Portland, Oregon
    1974/1999     2005     1,453,607     518,580     89.3 % Dick's Sporting Goods, jcpenney, Macy's, Nordstrom, Sears

19%

  West Acres
Fargo, North Dakota
    1972/1986     2001     977,057     424,502     100.0 % Herberger's, jcpenney, Macy's, Sears
                                 

  Total/Average Unconsolidated Joint
    Venture Centers (Various Partners)
    24,052,622     10,607,874     92.4 %  
                                 

  Total/Average before Community Centers           59,102,538     26,778,461     92.7 %  
                                 

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Table of Contents

Company'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
  Anchors

COMMUNIUTY / SPECIALTY CENTERS:

                           

100%

  Borgata, The(10)
Scottsdale, Arizona
    1981/2002     2006     93,693     93,693     81.2 %

50%

  Boulevard Shops(11)
Chandler, Arizona
    2001/2002     2004     184,816     184,816     97.1 %

75%

  Camelback Colonnade(6)(11)
Phoenix, Arizona
    1961/2002     1994     618,804     538,804     97.0 %

100%

  Carmel Plaza(10)
Carmel, California
    1974/1998     2006     111,945     111,945     93.1 %

50%

  Chandler Festival(11)
Chandler, Arizona
    2001/2002         500,426     365,229     81.6 % Lowe's

50%

  Chandler Gateway(11)
Chandler, Arizona
    2001/2002         259,535     128,484     97.8 % The Great Indoors

50%

  Chandler Village Center(11)
Chandler, Arizona
    2004/2002     2006     273,439     130,306     94.7 % Target

39.7%

  Estrella Falls, The Market at(11)
Goodyear, Arizona
    2009/—     2009     238,083     238,083     96.1 %

100%

  Flagstaff Mall, The Marketplace at(4)(10)
Flagstaff, Arizona
    2007/—         267,551     147,021     100.0 % Home Depot

100%

  Hilton Village(4)(10)
Scottsdale, Arizona
    1982/2002         79,814     79,814     90.9 %

50%

  Kierland Commons(11)
Scottsdale, Arizona
    1999/2005     2003     434,642     434,642     87.1 %

34.9%

  SanTan Village Power Center(11)
Gilbert, Arizona
    2004/—     2007     491,037     284,510     91.8 % Wal-Mart

100%

  Tucson La Encantada(10)
Tucson, Arizona
    2002/2002     2005     242,370     242,370     91.5 %
                                 

  Total/Average Community / Specialty Centers     3,796,155     2,979,717     91.9 %  
                                 

  Total before major development and redevelopment
    properties and other assets
    62,898,693     29,758,178     92.6 %  
                                 

MAJOR DEVELOPMENT AND REDEVELOPMENT PROPERTIES:

                     

50%

  Atlas Park, The Shops at
Queens, New York
    2006/2011         377,924     377,924       (12)

100%

  SouthRidge Mall(6)
Des Moines, Iowa
    1975/1998     1998     868,532     479,780       (12) Sears, Target, Younkers
                                   

  Total Major Development and Redevelopment Properties     1,246,456     857,704          
                                   

OTHER ASSETS:

                           

100%

  Various(10)(13)                 1,159,177     140,698     100.0 % Burlington Coat Factory, Cabela's, Forever 21, Kohl's

100%

  Hilton Village-Office(4)(10)
Scottsdale, Arizona
                17,142     17,142     23.9 %

100%

  Paradise Village Ground Leases(10)
Phoenix, Arizona
                57,904     57,904     89.2 %

100%

  Paradise Village Office Park II(10)
Phoenix, Arizona
                46,040     46,040     81.9 %

51%

  Redmond Town Center-Office(9)(11)
Redmond, Washington
                582,373     582,373     100.0 %

50%

  Scottsdale Fashion Square-Office(11)
Scottsdale, Arizona
                122,897     122,897     89.8 %

50%

  Tysons Corner Center-Office(4)(11)
McLean, Virginia
                166,289     166,289     73.7 %

30%

  Wilshire Boulevard(11)
Santa Monica, California
                40,000     40,000     100.0 %
                                   

  Total Other Assets           2,191,822     1,173,343          
                                   

  Grand Total at December 31, 2011           66,336,971     31,789,225          
                                   

(1)
The Company's ownership interest in this table reflects its legal ownership interest but may not reflect its economic interest since each joint venture has various agreements regarding cash flow, profits and losses, allocations, capital requirements, priorities on liquidation or sale and other matters.

(2)
With respect to 64 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 15 Centers, the underlying land controlled by the Company is owned by third parties and leased to the Company, the property partnership or the limited liability company pursuant to long-term ground leases. Under the terms of a typical ground lease, the Company, the property partnership or the limited liability company 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, the property partnership or the limited liability company has an option or right of first refusal to purchase the land. The termination dates of the ground leases range from 2013 to 2132.

(3)
Includes GLA attributable to Anchors (whether owned or non-owned) and Mall and Freestanding Stores as of December 31, 2011.

(4)
Portions of the land on which the Center is situated are subject to one or more ground leases.

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Table of Contents

(5)
Target is scheduled to open a 98,000 square foot store at Capitola Mall in Summer 2012.

(6)
These properties have a vacant Anchor location. The Company is seeking various replacement tenants and/or contemplating redevelopment opportunities for these vacant sites.

(7)
Macy's is scheduled to open a 103,000 square foot store at Mall at Victor Valley in 2013. The Forever 21 at Mall of Victor Valley closed in January 2012.

(8)
Neiman Marcus is scheduled to open an 88,000 square foot store at Broadway Plaza in March 2012.

(9)
These properties are in an unconsolidated joint venture with Pacific Premier Retail LP.

(10)
Included in Consolidated Centers.

(11)
Included in Unconsolidated Joint Venture Centers.

(12)
Tenant spaces have been intentionally held off the market and remain vacant because of major development or redevelopment plans. As a result, the Company believes the percentage of mall and freestanding GLA leased at these major development and redevelopment properties is not meaningful data.

(13)
The Company owns a portfolio of 15 former Mervyn's stores located at shopping centers not owned by the Company. Of these 15 stores, five have been leased to Forever 21, one has been leased to Kohl's, one has been leased to Burlington Coat Factory, one has been leased to Cabela's, two have been leased for non-Anchor usage and the remaining five former Mervyn's locations are vacant. The Company is currently seeking replacement tenants for these vacant sites. With respect to ten of the 15 stores, the underlying land is owned in fee entirely by the Company. With respect to the remaining five 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 2018 to 2027.

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Table of Contents

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, 2011 (dollars in thousands):

Property Pledged as Collateral
  Fixed or
Floating
  Carrying
Amount(1)
  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)

  Fixed   $ 155,489     5.50 % $ 12,516     11/1/12   $ 152,097   Any Time

Danbury Fair Mall(6)(7)

  Fixed     244,763     5.53 %   16,212     10/1/20     188,854   Any Time

Deptford Mall

  Fixed     172,500     5.41 %   9,338     1/15/13     172,500   Any Time

Deptford Mall

  Fixed     15,030     6.46 %   1,212     6/1/16     13,877   Any Time

Eastland Mall(8)

  Fixed     168,000     5.79 %   9,732     6/1/16     168,000   Any Time

Fashion Outlets of Niagara(9)

  Fixed     129,025     4.89 %   5,908     10/6/20     103,810   Any Time

Fiesta Mall

  Fixed     84,000     4.98 %   4,176     1/1/15     84,000   Any Time

Flagstaff Mall

  Fixed     37,000     5.03 %   1,860     11/1/15     37,000   Any Time

Freehold Raceway Mall(5)

  Fixed     232,900     4.20 %   9,788     1/1/18     216,258   1/1/14

Fresno Fashion Fair(7)

  Fixed     163,467     6.76 %   13,248     8/1/15     154,596   Any Time

Great Northern Mall

  Fixed     37,256     5.19 %   2,808     12/1/13     35,566   Any Time

Northgate, The Mall at(10)

  Floating     38,115     7.00 %   2,668     1/1/15     38,115   Any Time

Oaks, The(11)

  Floating     257,264     2.26 %   5,820     7/10/13     257,264   Any Time

Paradise Valley Mall(12)

  Floating     84,000     6.30 %   5,292     8/31/14     82,000   Any Time

Prescott Gateway(13)

  Fixed     60,000     5.86 %   3,516     12/1/11     60,000   Any Time

Promenade at Casa Grande(14)

  Floating     76,598     5.21 %   3,989     12/30/13     76,598   Any Time

Salisbury, Center at

  Fixed     115,000     5.83 %   6,708     5/1/16     115,000   Any Time

SanTan Village Regional Center(15)

  Floating     138,087     2.69 %   3,720     6/13/13     138,087   Any Time

South Plains Mall

  Fixed     102,760     6.55 %   7,776     4/11/15     97,824   3/31/12

South Towne Center

  Fixed     86,525     6.39 %   6,648     11/5/15     81,162   Any Time

Towne Mall

  Fixed     12,801     4.99 %   1,206     11/1/12     12,316   Any Time

Tucson La Encantada(16)

  Fixed     75,315     5.84 %   4,398     6/1/12     74,931   Any Time

Twenty Ninth Street(17)

  Floating     107,000     3.12 %   3,338     1/18/16     102,776   1/18/12

Valley Mall(18)

  Fixed     43,543     5.85 %   2,544     6/1/16     40,169   Any Time

Valley River Center

  Fixed     120,000     5.59 %   6,708     2/1/16     120,000   Any Time

Valley View Center(19)

  Fixed     125,000     5.72 %   7,152     1/1/11     125,000   Any Time

Victor Valley, Mall of(20)

  Floating     97,000     2.13 %   2,064     5/6/13     97,000   Any Time

Vintage Faire Mall(21)

  Floating     135,000     3.56 %   4,812     4/27/15     130,252   4/27/12

Westside Pavilion(22)

  Floating     175,000     2.53 %   4,428     6/5/13     175,000   Any Time

Wilton Mall(23)

  Floating     40,000     1.28 %   516     8/1/13     40,000   Any Time
                                     

      $ 3,328,438                            
                                     

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Table of Contents

Property Pledged as Collateral
  Fixed or
Floating
  Carrying
Amount(1)
  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 (66.7%)(24)(25)

  Fixed   $ 152,910     4.30 % $ 9,052     10/5/18   $ 132,991   Any Time

Biltmore Fashion Park (50%)

  Fixed     29,510     8.25 %   2,642     10/1/14     28,758   4/1/12

Boulevard Shops (50%)(26)

  Floating     10,520     3.35 %   501     12/16/13     10,122   Any Time

Broadway Plaza (50%)(27)

  Fixed     71,766     6.12 %   5,460     8/15/15     67,443   Any Time

Camelback Colonnade (75%)

  Fixed     35,250     4.82 %   1,606     10/12/15     35,250   10/12/13

Chandler Festival (50%)

  Fixed     14,836     6.39 %   1,086     11/1/15     14,145   Any Time

Chandler Gateway (50%)

  Fixed     9,441     6.37 %   691     11/1/15     9,002   Any Time

Chandler Village Center (50%)(28)

  Floating     8,750     3.01 %   220     3/1/16     8,750   Any Time

Corte Madera, The Village at (50.1%)

  Fixed     39,231     7.27 %   3,265     11/1/16     36,696   11/1/12

FlatIron Crossing (25%)

  Fixed     43,156     5.26 %   3,306     12/1/13     41,047   Any Time

Inland Center (50%)(29)

  Floating     25,000     3.52 %   819     4/1/16     25,000   Any Time

Kierland Greenway (50%)(30)

  Fixed     28,722     6.02 %   2,336     1/1/13     27,916   Any Time

Kierland Main Street (50%)(30)

  Fixed     7,291     4.99 %   502     1/2/13     7,156   Any Time

Lakewood Center (51%)

  Fixed     127,500     5.43 %   6,899     6/1/15     127,500   Any Time

Los Cerritos Center (51%)(31)(7)

  Fixed     101,456     4.50 %   6,173     7/1/18     89,057   Any Time

Market at Estrella Falls (39.7%)(32)

  Floating     13,309     3.26 %   406     6/1/15     13,309   Any Time

North Bridge, The Shops at (50%)(27)

  Fixed     99,999     7.52 %   8,601     6/15/16     94,258   Any Time

NorthPark Center (50%)(33)

  Fixed     126,657     6.70 %   10,405     5/10/12     125,847   Any Time

NorthPark Land (50%)

  Fixed     37,831     8.33 %   3,860     5/10/12     37,593   Any Time

Pacific Premier Retail Trust (51%)(34)

  Floating     58,650     5.16 %   2,282     11/3/13     58,650   Any Time

Queens Center (51%)(7)

  Fixed     165,613     7.30 %   15,616     3/1/13     161,280   Any Time

Redmond Office (51%)(27)

  Fixed     29,673     7.52 %   3,057     5/15/14     27,561   Any Time

Ridgmar (50%)

  Fixed     28,373     7.82 %   1,723     4/11/12     28,373   Any Time

SanTan Village Power Center (34.9%)

  Fixed     15,705     5.33 %   837     6/1/12     15,705   Any Time

Scottsdale Fashion Square (50%)

  Fixed     275,000     5.66 %   15,565     7/8/13     275,000   Any Time

Stonewood Center (51%)

  Fixed     56,870     4.67 %   3,918     11/1/17     48,180   12/1/13

Superstition Springs Center (66.7%)(24)(35)

  Floating     45,000     2.88 %   1,157     10/28/16     45,000   Any Time

Tysons Corner Center (50%)

  Fixed     155,269     4.78 %   11,232     2/17/14     146,711   Any Time

Washington Square (51%)

  Fixed     122,658     6.04 %   9,173     1/1/16     114,282   Any Time

West Acres (19%)

  Fixed     11,980     6.41 %   203     10/1/16     10,315   Any Time

Wilshire Building (30%)

  Fixed     1,731     6.35 %   153     1/1/33       Any Time
                                     

      $ 1,949,657                            
                                     

(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.

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Table of Contents


The debt premiums (discounts) as of December 31, 2011 consisted of the following (dollars in thousands):


Consolidated Centers

Property Pledged as Collateral
   
 

Deptford Mall

  $ (25 )

Fashion Outlets of Niagara

    8,198  

Great Northern Mall

    (55 )

Towne Mall

    88  

Valley Mall

    (365 )
       

  $ 7,841  
       

Unconsolidated Joint Venture Centers (at Company's Pro Rata Share)

Property Pledged as Collateral
   
 

Kierland Greenway

    151  

Tysons Corner Center

    1,264  

Wilshire Building

    (110 )
       

  $ 1,305  
       
(2)
The interest rate disclosed represents the effective interest rate, including the debt premiums (discounts), deferred finance costs and notional amounts covered by interest rate swap agreements.

(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 and/or its affiliates do 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 was assumed by a third party in connection with a co-venture arrangement with that unrelated party.

(6)
On February 23, 2011 and November 28, 2011, the Company exercised options to borrow an additional $20,000 and $10,000, respectively.

(7)
Northwestern Mutual Life ("NML") is the lender for 50% of the loan. NML is considered a related party as it is a joint venture partner with the Company in Broadway Plaza.

(8)
On December 31, 2011, the Company acquired Eastland Mall as part of the SDG Transaction (See "Item 1. Business—Recent Developments—Acquisitions"). In connection with the transaction, the Company assumed the loan on the property with a fair value of $168,000 that bears interest at an effective rate of 5.79% and matures on June 1, 2016.

(9)
On July 22, 2011, the Company purchased the Fashion Outlets of Niagara (See "Item 1. Business—Recent Developments—Acquisitions"). In connection with the acquisition, the Company assumed the loan on the property with a fair value of $130,005 that bears interest at an effective rate of 4.89% and matures on October 6, 2020.

(10)
The loan bears interest at LIBOR plus 4.50% with a total interest rate floor of 6.0% and matures on January 1, 2013, with two one-year extension options. The loan also includes options for additional borrowings of up to $20,000 depending on certain conditions.

(11)
The loan bears interest at LIBOR plus 1.75% and matures on July 10, 2012 with an additional one-year extension option.

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Table of Contents

(12)
The loan bears interest at LIBOR plus 4.0% with a total interest rate floor of 5.50% and matures on August 31, 2012 with two one-year extension options.

(13)
As of December 1, 2011, the loan has been in maturity default. The Company is negotiating with the lender and the outcome is uncertain at this time. The loan is nonrecourse to the Company.

(14)
The loan bears interest at LIBOR plus 4.0% with a LIBOR rate floor of 0.50% and matures on December 30, 2013.

(15)
The loan bears interest at LIBOR plus 2.10% and matures on June 13, 2012, with a one-year extension option.

(16)
On February 1, 2012, the Company replaced the existing loan on the property with a new $75,135 loan that bears interest at 4.22% and matures on March 1, 2022. NML is the lender on the existing loan.

(17)
On January 18, 2011, the Company replaced the existing loan on the property with a new $107,000 loan that bears interest at LIBOR plus 2.63% and matures on January 18, 2016.

(18)
On December 31, 2011, the Company acquired Valley Mall as part of the SDG Transaction (See "Item 1. Business—Recent Developments—Acquisitions"). In connection with the transaction, the Company assumed the loan on the property with a fair value of $43,543 that bears interest at an effective rate of 5.85% and matures on June 1, 2016.

(19)
On July 15, 2010, a court appointed receiver assumed operational control and managerial responsibility for Valley View Center. The Company anticipates the disposition of the asset, which is under the control of the receiver, will be executed through foreclosure, deed-in-lieu of foreclosure, or by some other means, and is expected to be completed in the near future. Although the Company is no longer funding any cash shortfall, it will continue to record the operations of the property until the title for the Center is transferred and its obligation for the loan is discharged. Once title to the Center is transferred, the Company will remove the net assets and liabilities from the Company's consolidated balance sheets. The loan is non-recourse to the Company.

(20)
The loan bears interest at LIBOR plus 1.60% and matures on May 6, 2012 with a one-year extension option.

(21)
The loan bears interest at LIBOR plus 3.0% and matures on April 27, 2015.

(22)
The loan bears interest at LIBOR plus 2.00% and matures on June 5, 2012 with a one-year extension option. The loan is covered by an interest rate cap agreement that effectively prevents LIBOR from exceeding 5.50% over the loan term.

(23)
The loan bears interest at LIBOR plus 0.675% and matures on August 1, 2013. As additional collateral for the loan, the Company is required to maintain a deposit of $40,000 with the lender. The interest on the deposit is not restricted.

(24)
On June 3, 2011, the Company acquired an additional 33.3% ownership interest in the Center (See "Item 1. Business—Recent Developments—Acquisitions").

(25)
On September 29, 2011, the Company's joint venture in Arrowhead Towne Center replaced the existing loan on the property with a new $230,000 loan that bears interest at 4.30% and matures on October 5, 2018.

(26)
The loan bears interest at LIBOR plus 2.75% and matures on December 16, 2013.

(27)
NML is the lender on the loan.

(28)
On April 26, 2011, the joint venture replaced the existing loan with a new $17,500 loan that bears interest at LIBOR plus 2.25% and matures on March 1, 2014 with two one-year extension options.

(29)
On March 10, 2011, the Company's joint venture in Inland Center replaced the existing loan on the property with a new $50,000 loan that bears interest at LIBOR plus 3.0% and matures on April 1, 2016.

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(30)
On February 24, 2011, the Company's joint venture in Kierland Commons acquired the ownership interest of another partner in the joint venture, which effectively increased the Company's pro rata ownership interest in the joint venture from 24.5% to 50% (See "Item 1. Business—Recent Developments—Acquisitions").

(31)
On July 1, 2011, the Company's joint venture in Los Cerritos Center replaced the existing loan with a new $200,000 loan that bears interest at 4.50% and matures on July 1, 2018.

(32)
On May 26, 2011, the loan was modified to bear interest at LIBOR plus 2.75% and mature on June 1, 2015.

(33)
Contingent interest, as defined in the loan agreement, is due upon the occurrence of certain capital events and is equal to 15% of the proceeds less a base amount.

(34)
The credit facility bears interest at LIBOR plus 3.50%, matures on November 3, 2012, with a one-year extension option, and is cross-collateralized by Cascade Mall, Kitsap Mall and Redmond Town Center.

(35)
On October 28, 2011, the Company's joint venture in Superstition Springs Center replaced the existing loan with a new $67,500 loan that bears interest at LIBOR plus 2.30% and matures on October 28, 2016.

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.

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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. In 2011, the Company's shares traded at a high of $56.50 and a low of $38.64.

        As of February 16, 2012, there were approximately 613 stockholders of record. The following table shows high and low sales prices per share of common stock during each quarter in 2011 and 2010 and dividends/distributions per share of common stock declared and paid by quarter:

 
  Market Quotation
Per Share
   
 
 
  Dividends/
Distributions
Declared/Paid
 
Quarter Ended
  High   Low  

March 31, 2011

  $ 50.80   $ 45.69   $ 0.50  

June 30, 2011

    54.65     47.32     0.50  

September 30, 2011

    56.50     41.96     0.50  

December 31, 2011

    51.30     38.64     0.55  

March 31, 2010

   
41.34
   
29.30
   
0.60

(1)

June 30, 2010

    47.19     35.82     0.50  

September 30, 2010

    45.63     35.50     0.50  

December 31, 2010

    49.86     42.66     0.50  

(1)
The dividend was paid 10% in cash and 90% in shares of common stock in accordance with stockholder elections (subject to proration).

        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. During the first quarter of 2010, the Company paid its quarterly dividends in a combination of cash and shares of common stock, with the cash limited to 10% of the total dividend. Paying all or a portion of the dividend in a combination of cash and common stock allowed the Company to satisfy its REIT taxable income distribution requirement under applicable requirements of the Code, while enhancing the Company's financial flexibility and balance sheet strength. The decision to declare and pay dividends on common stock in the future, as well as 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 and Adjusted Funds From Operations") 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, 2001 through December 31, 2011, 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 REITs Index, an industry index of publicly-traded REITs (including the

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Company). The Company is providing the S&P Midcap 400 Index since it is a company within such index.

        The graph assumes that the value of the investment in each of the Company's common stock and the indices was $100 at the beginning of the period.

        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 REITs Index. The historical information set forth below is not necessarily indicative of future performance. Data for the FTSE NAREIT Equity REITs Index, the S&P 500 Index and the S&P Midcap 400 Index was provided to the Company by Research Data Group, Inc.

GRAPHIC

        Copyright© 2012 S&P, a division of The McGraw-Hill Companies Inc. All rights reserved.

 
  12/31/01   12/31/02   12/31/03   12/31/04   12/31/05   12/31/06   12/31/07   12/31/08   12/31/09   12/31/10   12/31/11  

The Macerich Company

    100.00     124.65     192.44     285.56     318.32     426.25     361.92     99.61     227.90     317.20     352.91  

S&P 500 Index

    100.00     77.90     100.24     111.15     116.61     135.03     142.45     89.75     113.50     130.59     133.35  

S&P Midcap 400 Index

    100.00     85.49     115.94     135.05     152.00     167.69     181.07     115.47     158.63     200.88     197.40  

FTSE NAREIT Equity REITs Index

    100.00     103.82     142.37     187.33     210.12     283.78     239.25     148.99     190.69     244.01     264.25  

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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 amounts are in thousands except per share data.

 
  Years Ended December 31,  
 
  2011   2010   2009   2008   2007  

OPERATING DATA:

                               

Revenues:

                               

Minimum rents(1)

  $ 446,308   $ 413,702   $ 466,460   $ 517,888   $ 459,947  

Percentage rents

    20,172     17,881     16,109     18,657     25,411  

Tenant recoveries

    250,226     238,415     240,134     256,244     236,859  

Management Companies

    40,404     42,895     40,757     40,716     39,752  

Other

    34,140     30,500     29,588     30,012     26,781  
                       

Total revenues

    791,250     743,393     793,048     863,517     788,750  

Shopping center and operating expenses

    255,817     237,182     248,827     271,670     245,276  

Management Companies' operating expenses

    86,587     90,414     79,305     77,072     73,761  

REIT general and administrative expenses

    21,113     20,703     25,933     16,520     16,600  

Depreciation and amortization

    265,331     240,081     255,231     256,269     205,331  

Interest expense

    195,285     210,163     264,275     292,873     258,957  

Loss (gain) on early extinguishment of debt, net(2)

    10,588     (3,661 )   (29,161 )   (84,143 )   877  
                       

Total expenses

    834,721     794,882     844,410     830,261     800,802  

Equity in income of unconsolidated joint ventures(3)

    294,677     79,529     68,160     93,831     81,458  

Co-venture expense(4)

    (5,806 )   (6,193 )   (2,262 )        

Income tax benefit (provision)(5)

    6,110     9,202     4,761     (1,126 )   470  

(Loss) gain on remeasurement, sale or write down of assets

    (42,279 )   497     161,937     (29,272 )   12,146  
                       

Income from continuing operations

    209,231     31,546     181,234     96,689     82,022  

Discontinued operations:(6)

                               

(Loss) gain on disposition of assets, net

    (37,988 )   (23 )   (40,171 )   97,986     (2,376 )

(Loss) income from discontinued operations

    (2,168 )   (3,103 )   (1,813 )   340     26,416  
                       

Total (loss) income from discontinued operations

    (40,156 )   (3,126 )   (41,984 )   98,326     24,040  
                       

Net income

    169,075     28,420     139,250     195,015     106,062  

Less net income attributable to noncontrolling interests

    12,209     3,230     18,508     28,966     29,827  
                       

Net income attributable to the Company

    156,866     25,190     120,742     166,049     76,235  

Less preferred dividends

                4,124     10,058  

Less adjustment to redemption value of redeemable noncontrolling interests

                    2,046  
                       

Net income available to common stockholders

  $ 156,866   $ 25,190   $ 120,742   $ 161,925   $ 64,131  
                       

Earnings per common share ("EPS") attributable to the Company—basic:

                               

Income from continuing operations

  $ 1.46   $ 0.21   $ 1.90   $ 1.04   $ 0.81  

Discontinued operations

    (0.28 )   (0.02 )   (0.45 )   1.13     0.07  
                       

Net income available to common stockholders

  $ 1.18   $ 0.19   $ 1.45   $ 2.17   $ 0.88  
                       

EPS attributable to the Company—diluted:(7)(8)

                               

Income from continuing operations

  $ 1.46   $ 0.21   $ 1.90   $ 1.04   $ 0.81  

Discontinued operations

    (0.28 )   (0.02 )   (0.45 )   1.13     0.07  
                       

Net income available to common stockholders

  $ 1.18   $ 0.19   $ 1.45   $ 2.17   $ 0.88  
                       

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  As of December 31,  
 
  2011   2010   2009   2008   2007  

BALANCE SHEET DATA:

                               

Investment in real estate (before accumulated depreciation)

  $ 7,489,735   $ 6,908,507   $ 6,697,259   $ 7,355,703   $ 7,078,802  

Total assets

  $ 7,938,549   $ 7,645,010   $ 7,252,471   $ 8,090,435   $ 7,937,097  

Total mortgage and notes payable

  $ 4,206,074   $ 3,892,070   $ 4,531,634   $ 5,940,418   $ 5,703,180  

Redeemable noncontrolling interests(9)

  $   $ 11,366   $ 20,591   $ 23,327   $ 322,619  

Series A preferred stock(10)

  $   $   $   $   $ 83,495  

Equity(11)

  $ 3,164,651   $ 3,187,996   $ 2,128,466   $ 1,641,884   $ 1,434,701  

OTHER DATA:

                               

Funds from operations ("FFO")—diluted(12)

  $ 399,559   $ 351,308   $ 380,043   $ 489,054   $ 396,556  

Cash flows provided by (used in):

                               

Operating activities

  $ 237,285   $ 200,435   $ 120,890   $ 251,947   $ 326,070  

Investing activities

  $ (212,086 ) $ (142,172 ) $ 302,356   $ (558,956 ) $ (865,283 )

Financing activities

  $ (403,596 ) $ 294,127   $ (396,520 ) $ 288,265   $ 355,051  

Number of Centers at year end

    79     84     86     92     94  

Regional Shopping Centers portfolio occupancy(13)

    92.7 %   93.1 %   91.3 %   92.3 %   93.1 %

Regional Shopping Centers portfolio sales per square foot(14)

  $ 489   $ 433   $ 407   $ 441   $ 467  

Weighted average number of shares outstanding—EPS basic

    131,628     120,346     81,226     74,319     71,768  

Weighted average number of shares outstanding—EPS diluted(8)(9)

    131,628     120,346     81,226     86,794     84,760  

Distributions declared per common share

  $ 2.05   $ 2.10   $ 2.60   $ 3.20   $ 2.93  

(1)
Included in minimum rents is amortization of above and below-market leases of $9.7 million, $7.3 million, $9.4 million, $22.5 million and $10.3 million for the years ended December 31, 2011, 2010, 2009, 2008 and 2007, respectively.

(2)
The Company repurchased $180.3 million, $18.5 million, $89.1 million and $222.8 million of its Senior Notes during the years ended December 31, 2011, 2010, 2009 and 2008, respectively, that resulted in (loss) gain of ($1.4) million, ($0.5) million, $29.8 million and $84.1 million on the early extinguishment of debt for the years ended December 31, 2011, 2010, 2009 and 2008, respectively. The loss on early extinguishment of debt for the year ended December 31, 2011 also includes a $9.2 million loss on the early extinguishment of a mortgage note payable. The loss on early extinguishment of debt for the year ended December 31, 2010 was offset by a gain of $4.2 million on the early extinguishment of a mortgage note payable. The gain on early extinguishment of debt for the year ended December 31, 2009 was offset in part by a loss of $0.6 million on the early extinguishment of a term loan.

(3)
On July 30, 2009, the Company sold a 49% ownership interest in Queens Center to a third party for approximately $152.7 million, resulting in a gain on sale of assets of $154.2 million. The Company used the proceeds from the sale of the ownership interest in the property to pay down the term loan and for general corporate purposes. As of the date of the sale, the Company has accounted for the operations of Queens Center under the equity method of accounting.

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On September 3, 2009, the Company formed a joint venture with a third party, whereby the Company sold a 75% interest in FlatIron Crossing and received approximately $123.8 million in cash proceeds for the overall transaction. The Company used the proceeds from the sale of the ownership interest in the property to pay down the term loan and for general corporate purposes. As part of this transaction, the Company issued three warrants for an aggregate of approximately 1.3 million shares of common stock of the Company. (See Note 15—Stockholders' Equity in the Company's Notes to the Consolidated Financial Statements). As of the date of the sale, the Company has accounted for the operations of FlatIron Crossing under the equity method of accounting.


On February 24, 2011, the Company's joint venture in Kierland Commons acquired the ownership interest of another partner in the joint venture for $105.6 million. The Company's share of the purchase price consisted of a cash payment of $34.2 million and the assumption of a pro rata share of debt of $18.6 million. As a result of the acquisition, the Company's ownership interest in Kierland Commons increased from 24.5% to 50%. The joint venture recognized a remeasurement gain of $25.0 million on the acquisition based on the difference of the fair value received and its previously held investment in Kierland Commons. The Company's pro rata share of the gain recognized was $12.5 million.


On February 28, 2011, the Company in a 50/50 joint venture, acquired The Shops at Atlas Park for a total purchase price of $53.8 million. The Company's share of the purchase price was $26.9 million.


On February 28, 2011, the Company acquired the additional 50% ownership interest in Desert Sky Mall that it did not own for $27.6 million. The purchase price was funded by a cash payment of $1.9 million and the assumption of the third party's pro rata share of the mortgage note payable on the property of $25.7 million. Prior to the acquisition, the Company had accounted for its investment in Desert Sky Mall under the equity method. As of the date of acquisition, the Company has included Desert Sky Mall in its consolidated financial statements.


On April 1, 2011, the Company's joint venture in SDG Macerich Properties, L.P. ("SDG Macerich") conveyed Granite Run Mall to the mortgage note lender by a deed-in-lieu of foreclosure. The mortgage note was non-recourse. The Company's pro rata share of gain on the early extinguishment of debt was $7.8 million.


On December 31, 2011, the Company and its joint venture partner reached agreement for the distribution and conveyance of interests in SDG Macerich that owned 11 regional malls in a 50/50 partnership. Six of the eleven assets were distributed to the Company on December 31, 2011. The Company received 100% ownership of Eastland Mall in Evansville, Indiana, Lake Square Mall in Leesburg, Florida, SouthPark Mall in Moline, Illinois, Southridge Mall in Des Moines, Iowa, NorthPark Mall in Davenport, Iowa and Valley Mall in Harrisonburg, Virginia. These wholly-owned assets were recorded at fair value at the date of transfer, which resulted in a gain of $188.3 million. The gain reflected the fair value of the net assets received in excess of the book value of the Company's interest in SDG Macerich.

(4)
On September 30, 2009, the Company formed a joint venture with a third party, whereby the third party acquired a 49.9% interest in Freehold Raceway Mall and Chandler Fashion Center. The Company received approximately $174.6 million in cash proceeds for the overall transaction. The Company used the proceeds from this transaction to pay down the Company's line of credit and for general corporate purposes. As part of this transaction, the Company issued a warrant for an aggregate of approximately 0.9 million shares of common stock of the Company. (See Note 15—Stockholders' Equity in the Notes to the Company's Consolidated Financial Statements). The transaction was accounted for as a profit-sharing arrangement, and accordingly the assets, liabilities and operations of the properties remain on the books of the Company and a co-venture obligation

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(5)
The Company's taxable REIT subsidiaries are subject to corporate level income taxes (See Note 23—Income Taxes in the Company's Notes to the Consolidated Financial Statements).

(6)
Discontinued operations include the following:


On January 1, 2008, MACWH, LP, a subsidiary of the Operating Partnership, at the election of the holders, redeemed the 3.4 million participating convertible preferred units ("PCPUs") in exchange for the 16.32% noncontrolling interest in Danbury Fair Mall, Freehold Raceway Mall, Great Northern Mall, Rotterdam Square, Shoppingtown Mall, Towne Mall, Tysons Corner Center and Wilton Mall (collectively referred to as the "Non-Rochester Properties") in exchange for the Company's ownership interest in Eastview Commons, Eastview Mall, Greece Ridge Center, Marketplace Mall and Pittsford Plaza, collectively referred to as the "Rochester Properties." This transaction is referred to herein as the Rochester Redemption. As a result of the Rochester Redemption, the Company recognized a gain of $99.1 million on the exchange.


The Company sold the fee simple and/or ground leasehold interests in three former Mervyn's stores to Pacific Premier Retail LP, one of its joint ventures, on December 19, 2008, and the results for the period of January 1, 2008 to December 19, 2008 and for the year ended December 31, 2007 have been classified as discontinued operations. The sale of these interests resulted in a gain on sale of assets of $1.5 million.


In June 2009, the Company recorded an impairment charge of $26.0 million related to the fee and/or ground leasehold interests in five former Mervyn's stores due to the anticipated loss on the sale of these properties in July 2009. The Company subsequently sold the properties in July 2009 for $52.7 million in total proceeds, resulting in an additional $0.5 million loss related to transaction costs. The Company used the proceeds from the sales to pay down the Company's term loan and for general corporate purposes.


In June 2009, the Company recorded an impairment charge of $1.0 million related to the anticipated loss on the sale of Village Center, a 170,801 square foot urban village property, in July 2009. The Company subsequently sold the property on July 14, 2009 for $11.9 million in total proceeds, resulting in a gain of $0.1 million related to a change in estimate in transaction costs. The Company used the proceeds from the sale to pay down the term loan and for general corporate purposes.


On September 29, 2009, the Company sold a leasehold interest in a former Mervyn's store for $4.5 million, resulting in a gain on sale of $4.1 million. The Company used the proceeds from the sale to pay down the Company's line of credit and for general corporate purposes.


During the fourth quarter of 2009, the Company sold five non-core community centers for $71.3 million, resulting in an aggregate loss on sales of $16.9 million. The Company used the proceeds from these sales to pay down the Company's line of credit and for general corporate purposes.


On March 4, 2011, the Company sold a former Mervyn's store in Santa Fe, New Mexico for $3.7 million, resulting in a loss of $1.9 million. The proceeds from the sale were used for general corporate purposes.


In June 2011, the Company recorded an impairment charge of $35.7 million related to Shoppingtown Mall. As a result of the maturity default on the mortgage note payable (See Note 10—Mortgage Notes Payable to the Company's Consolidated Financial Statements) and the corresponding reduction of the expected holding period, the Company wrote down the carrying value of the long-lived assets to its estimated fair value of $39.0 million. On December 30, 2011,

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On October 14, 2011, the Company sold a former Mervyn's store in Salt Lake City, Utah for $8.1 million, resulting in a gain of $3.8 million. The proceeds from the sale were used for general corporate purposes.


On November 30, 2011, the Company sold a former Mervyn's store in West Valley City, Utah for $2.3 million, resulting in a loss of $0.2 million. The proceeds from the sale were used for general corporate purposes.


The Company has classified the results of operations and gain or loss on sale for all of the above dispositions during the year ended December 31, 2011 as discontinued operations for the years ended December 31, 2011, 2010, 2009, 2008 and 2007.

(7)
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.

(8)
Includes the dilutive effect, if any, of share and unit-based compensation plans and the Senior Notes calculated using the treasury stock method and the dilutive effect, if any, of all other dilutive securities calculated using the "if converted" method.

(9)
Redeemable noncontrolling interests include the PCPUs and other redeemable equity interests not included within equity.

(10)
The holder of the Series A Preferred Stock converted approximately 0.6 million, 0.7 million, 1.3 million and 1.0 million shares to common shares on October 18, 2007, May 6, 2008, May 8, 2008 and September 17, 2008, respectively. As of December 31, 2008, there was no Series A Preferred Stock outstanding.

(11)
Equity includes the noncontrolling interests in the Operating Partnership, nonredeemable noncontrolling interests in consolidated joint ventures and common and non-participating preferred units of MACWH, L.P.

(12)
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 Generally Accepted Accounting Principles ("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 extraordinary items and sales of depreciated operating properties, plus real estate related depreciation and amortization, impairment write-downs of real estate and write-downs of investments in an affiliate where the write-downs have been driven by a decrease in the value of real estate held by the affiliate and after adjustments for unconsolidated joint ventures. Adjustments for unconsolidated joint ventures are calculated to reflect FFO on the same basis. The Company also adjusts FFO for the noncontrolling interest due to redemption value on the Rochester Properties.


Adjusted FFO ("AFFO") excludes the negative FFO impact of Shoppingtown Mall and Valley View Center for the year ended December 31, 2011. In December 2011, the Company conveyed Shoppingtown Mall to the lender by a deed-in-lieu of foreclosure and Valley View Center is in receivership.


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. In addition, consistent

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FFO and AFFO do 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 are not indicative of cash available to fund all cash flow needs. The Company also cautions that FFO and AFFO, as presented, may not be comparable to similarly titled measures reported by other real estate investment trusts.


NAREIT recently clarified that under its definition of FFO, impairment write-downs of real estate should be added back to net income. Beginning with the year ended December 31, 2011, the Company has revised its definition of FFO to add back impairment write-downs of real estate to its net income. Accordingly, the Company removed the adjustment for impairment write-downs of $35.9 million and $27.5 million, as previously reported during the years ended December 31, 2009 and 2008, respectively. There was no impairment write-downs of real estate during the years ended December 31, 2010 and 2007.


Management compensates for the limitations of FFO and AFFO by providing investors with financial statements prepared according to GAAP, along with this detailed discussion of FFO and AFFO and a reconciliation of FFO and AFFO and FFO and AFFO-diluted to net income available to common stockholders. Management believes that to further understand the Company's performance, FFO and AFFO 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. For disclosure of net income, the most directly comparable GAAP financial measure, for the periods presented and a reconciliation of FFO and AFFO and FFO and AFFO—diluted to net income, see "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations—Funds From Operations and Adjusted Funds From Operations."


The computation of FFO and AFFO—diluted includes the effect of share and unit-based compensation plans and the Senior Notes calculated using the treasury stock method. It also assumes the conversion of MACWH, LP common and preferred units and all other securities to the extent that they are dilutive to the FFO and AFFO—diluted computation. On February 25, 1998, the Company sold $100 million of its Series A Preferred Stock. The Preferred Stock was convertible on a one-for-one basis for common stock and was fully converted as of December 31, 2008.

(13)
Occupancy for the years ended December 31, 2011 and 2010 excludes Valley View Center because the Center is under the control of a court appointed receiver.

(14)
Sales are based on reports by retailers leasing Mall Stores and Freestanding Stores for the trailing 12 months for tenants which have occupied such stores for a minimum of 12 months. Sales per square foot are based on tenants 10,000 square feet and under for Regional Shopping Centers. Year ended 2007 sales per square foot were $467 after giving effect to the Rochester Redemption and including The Shops at North Bridge. Valley View Center is excluded from the years ended 2011 and 2010 sales per square foot because the Center is under the control of a court appointed receiver.

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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 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, 2011, the Operating Partnership owned or had an ownership interest in 65 regional shopping centers and 14 community shopping centers totaling approximately 66 million square feet of GLA. These 79 regional and community shopping centers are referred to hereinafter as the "Centers," 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, 2011, 2010 and 2009. It compares the results of operations and cash flows for the year ended December 31, 2011 to the results of operations and cash flows for the year ended December 31, 2010. Also included is a comparison of the results of operations and cash flows for the year ended December 31, 2010 to the results of operations and cash flows for the year ended December 31, 2009. This information should be read in conjunction with the accompanying consolidated financial statements and notes thereto.

        The financial statements reflect the following acquisitions, dispositions and changes in ownership subsequent to the occurrence of each transaction.

        In June 2009, the Company recorded an impairment charge of $1.0 million related to the anticipated loss on the sale of Village Center, a 170,801 square foot urban village property, in July 2009. The Company subsequently sold the property on July 14, 2009 for $11.9 million in total proceeds, resulting in a gain of $0.1 million related to a change in estimate in transaction costs. The Company used the proceeds from the sale to pay down the term loan and for general corporate purposes.

        On July 30, 2009, the Company sold a 49% ownership interest in Queens Center to a third party for approximately $152.7 million, resulting in a gain on sale of assets of $154.2 million. The Company used the proceeds from the sale of the ownership interest in the property to pay down the Company's term loan and for general corporate purposes. As of the date of the sale, the Company has accounted for the operations of Queens Center under the equity method of accounting.

        On September 3, 2009, the Company formed a joint venture with a third party whereby the Company sold a 75% interest in FlatIron Crossing. As part of this transaction, the Company issued three warrants for an aggregate of 1,250,000 shares of common stock of the Company (See Note 15—Stockholders' Equity in the Notes to Company's Consolidated Financial Statements.) The Company received $123.8 million in cash proceeds for the overall transaction, of which $8.1 million was attributed to the warrants. The proceeds attributable to the interest sold exceeded the Company's carrying value in the interest sold by $28.7 million. However, due to certain contractual rights afforded to the buyer of the interest in FlatIron Crossing, the Company has only recognized a gain on sale of $2.5 million. The Company used the proceeds from the sale of the ownership interest to pay down the term loan and for general corporate purposes. As of the date of the sale, the Company has accounted for the operations of FlatIron Crossing under the equity method of accounting.

        Queens Center and FlatIron Crossing are referred to herein as the "Joint Venture Centers."

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        During the fourth quarter of 2009, the Company sold five non-core community centers for $71.3 million, resulting in an aggregate loss on sales of $16.9 million. The Company used the proceeds from these sales to pay down the Company's line of credit and for general corporate purposes.

        On February 24, 2011, the Company increased its ownership interest in Kierland Commons, a 434,642 square foot community center in Scottsdale, Arizona, from 24.5% to 50%. The Company's share of the purchase price for this transaction was $34.2 million in cash and the assumption of $18.6 million of existing debt.

        On February 28, 2011, the Company, in a 50/50 joint venture, acquired The Shops at Atlas Park, a 377,924 square foot community center in Queens, New York, for a total purchase price of $53.8 million. The Company's share of the purchase price was $26.9 million and was funded from the Company's cash on hand.

        On February 28, 2011, the Company acquired the additional 50% ownership interest in Desert Sky Mall, an 893,863 square foot regional shopping center in Phoenix, Arizona, that it did not own. The total purchase price was $27.6 million, which included the assumption of the third party's pro rata share of the mortgage note payable on the property of $25.7 million. Concurrent with the purchase of the partnership interest, the Company paid off the $51.5 million loan on the property.

        On April 29, 2011, the Company purchased a fee interest in a freestanding Kohl's store at Capitola Mall in Capitola, California for $28.5 million. The purchase price was paid from cash on hand.

        On June 3, 2011, the Company acquired an additional 33.3% ownership interest in Arrowhead Towne Center, a 1,197,006 square foot regional shopping center in Glendale, Arizona, an additional 33.3% ownership interest in Superstition Springs Center, a 1,204,540 square foot regional shopping center in Mesa, Arizona, and an additional 50% ownership interest in the land under Superstition Springs Center in exchange for the Company's ownership interest in six anchor stores, including five former Mervyn's stores and a cash payment of $75.0 million. The cash purchase price was funded from borrowings under the Company's line of credit. This transaction is referred herein as the "GGP Exchange".

        On July 22, 2011, the Company acquired the Fashion Outlets of Niagara, a 529,059 square foot outlet center in Niagara Falls, New York. The initial purchase price of $200.0 million was funded by a cash payment of $78.6 million and the assumption of the mortgage note payable of $121.4 million. The cash purchase price was funded from borrowings under the Company's line of credit. The purchase and sale agreement includes contingent consideration based on the performance of the Fashion Outlets of Niagara from the acquisition date through July 21, 2014 that could increase the purchase price from the initial $200.0 million up to a maximum of $218.7 million. The Company estimated the fair value of the contingent consideration as of December 31, 2011 to be $14.8 million, which has been included in other accrued liabilities.

        On December 31, 2011, the Company and its joint venture partner reached agreement for the distribution and conveyance of interests in SDG Macerich that owned 11 regional malls in a 50/50 partnership. Six of the eleven assets were distributed to the Company on December 31, 2011. The Company received 100% ownership of Eastland Mall in Evansville, Indiana, Lake Square Mall in Leesburg, Florida, SouthPark Mall in Moline, Illinois, Southridge Mall in Des Moines, Iowa, NorthPark Mall in Davenport, Iowa and Valley Mall in Harrisonburg, Virginia (collectively referred to herein as the "SDG Acquisition Properties"). These wholly-owned assets were recorded at fair value at the date of transfer, which resulted in a gain of $188.3 million. The gain reflected the fair value of the net assets received in excess of the book value of the Company's interest in SDG Macerich. The distribution and conveyance of the properties from SDG Macerich to the Company is referred to herein as the "SDG Transaction".

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        Desert Sky Mall, the Kohl's store at Capitola Mall, the land under Superstition Springs Center and the Fashion Outlets of Niagara are referred to herein as the "Acquisition Properties".

        In December 2007, the Company purchased a portfolio of ground leasehold interest and/or fee interests in 39 freestanding Mervyn's stores located in the Southwest United States. In January 2008, the Company purchased a ground leasehold interest in a freestanding Mervyn's store located in Hayward, California and in February 2008, the Company purchased a fee simple interest in a freestanding Mervyn's store located in Monrovia, California. These former Mervyn's stores are referred to herein as the "Mervyn's Properties." Mervyn's filed for bankruptcy protection in July 2008 and rejected all of its leases during the remainder of the year.

        In June 2009, the Company recorded an impairment charge of $26.0 million, as it relates to the fee and/or ground leasehold interests in five former Mervyn's stores due to the anticipated loss on the sale of these properties in July 2009. The Company subsequently sold the properties in July 2009 for $52.7 million in total proceeds, resulting in an additional $0.5 million loss related to transaction costs. The Company used the proceeds from the sales to pay down the Company's term loan and for general corporate purposes.

        On September 29, 2009, the Company sold a leasehold interest in a former Mervyn's store for $4.5 million, resulting in a gain on sale of $4.1 million. The Company used the proceeds from the sale to pay down the Company's line of credit and for general corporate purposes.

        On March 4, 2011, the Company sold a fee interest in a former Mervyn's store for $3.7 million, resulting in a loss on sale of $1.9 million. The Company used the proceeds from the sale for general corporate purposes.

        On June 3, 2011, the Company disposed of five former Mervyn's stores in connection with the GGP Exchange (See "Acquisitions").

        On October 14, 2011, the Company sold a former Mervyn's store in Salt Lake City, Utah, for $8.1 million, resulting in a gain of $3.8 million. The proceeds from the sale were used for general corporate purposes.

        On November 30, 2011, the Company sold a former Mervyn's store in West Valley City, Utah, for $2.3 million, resulting in a loss of $0.2 million. The proceeds from the sale were used for general corporate purposes.

        As of December 31, 2011, five former Mervyn's stores in the Company's portfolio remain vacant. The Company is currently seeking replacement tenants for these spaces.

        On July 15, 2010, a court appointed receiver assumed operational control of Valley View Center and responsibility for managing all aspects of the property. The Company anticipates the disposition of the asset, which is under the control of the receiver, will be executed through foreclosure, deed-in-lieu of foreclosure, or by some other means, and will be completed in the near future. Although the Company is no longer funding any cash shortfall, it continues to record the operations of Valley View Center until the title for the Center is transferred and its obligation for the loan is discharged. Once title to the Center is transferred, the Company will remove the net assets and liabilities from the Company's consolidated balance sheets. The mortgage note payable on Valley View Center is non-recourse to the Company.

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        On April 1, 2011, the Company's joint venture in SDG Macerich conveyed Granite Run Mall to the mortgage note lender by a deed-in-lieu of foreclosure. The mortgage note was non-recourse. The Company's pro rata share of gain on early extinguishment of debt was $7.8 million.

        On May 11, 2011, the non-recourse mortgage note payable on Shoppingtown Mall went into maturity default. As a result of the maturity default and the corresponding reduction of the estimated holding period, the Company recognized an impairment charge of $35.7 million to write-down the carrying value of the long-lived assets to its estimated fair value. On September 14, 2011, the Company exercised its right and redeemed the outside ownership interests in Shoppingtown Mall for a cash payment of $11.4 million. On December 30, 2011, the Company conveyed Shoppingtown Mall to the mortgage note lender by a deed-in-lieu of foreclosure. As a result of the conveyance, the Company recognized an additional $3.9 million loss on the disposal of the property.

        As of December 1, 2011, the Prescott Gateway non-recourse loan was in maturity default. The Company is negotiating with the lender and the outcome is uncertain at this time.

        In August 2011, the Company entered into a joint venture agreement with a subsidiary of AWE/Talisman for the development of the Fashion Outlets of Chicago in the Village of Rosemont, Illinois. The Company will own 60% of the joint venture and AWE/Talisman will own 40%. The Center will be a fully enclosed two level, 528,000 square foot outlet center. The site is located within a mile of O'Hare International Airport. The project broke ground in November, 2011 and is expected to be completed in Summer 2013. The total estimated project cost is approximately $200.0 million.

        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 6% to 15% of the leases 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.

        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.

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.

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        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, and estimates for environmental matters. 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.

        Minimum rental revenues are recognized on a straight-line basis over the term 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 line rent adjustment." Currently, 62% of the Mall Store and Freestanding Store leases contain provisions for CPI rent increases periodically throughout the term of the lease. The Company believes that using an annual multiple of CPI increases, rather than fixed contractual rent increases, results in revenue recognition that more closely matches the cash revenue from each lease and will provide more consistent rent growth throughout the term of the leases. Percentage rents are recognized when the 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' revenues are recognized on a straight-line basis over the term of the related leases.

        The Company capitalizes costs incurred in redevelopment and development of properties. The costs of land and buildings under development include specifically identifiable costs. 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. Capitalized costs are allocated to the specific components of a project that are benefited. The Company considers a construction project as completed and held available for occupancy and ceases capitalization of costs when the areas under development have been substantially completed.

        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 improvements

  5 - 40 years

Tenant improvements

  5 - 7 years

Equipment and furnishings

  5 - 7 years

        The Company first determines the value of land and buildings utilizing an "as if vacant" methodology. The Company then assigns a fair value to any debt assumed at acquisition. The Company then allocates the purchase price based on fair value of the land, building, tenant improvements and identifiable intangible assets received and liabilities assumed. 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

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property and are depreciated over the remaining lease terms. Identifiable intangible assets and liabilities relate to the value of in-place operating leases which come in three forms: (i) leasing commissions and legal costs, which represent the value associated with "cost avoidance" of acquiring in-place leases, such as lease commissions paid under terms generally experienced in the Company's markets; (ii) value of in-place leases, which represents the estimated loss of revenue and of costs incurred for the period required to lease the "assumed vacant" property to the occupancy level when purchased; and (iii) above or below market value of in-place leases, which represents the difference between the contractual rents and market rents at the time of the acquisition, discounted for tenant credit risks. Leasing commissions and legal costs are recorded in deferred charges and other assets and are amortized over the remaining lease terms. The value of in-place leases are recorded in deferred charges and other assets and amortized over the remaining lease terms plus an estimate of renewal of the acquired leases. 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 allocated values of above and below-market leases are amortized into minimum rents on a straight-line basis over the individual remaining lease terms. 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 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 its 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.

        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

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unobservable inputs for the asset or liability, which is typically based on an entity's own assumptions, as there is little, if any, related market activity. In instances where the determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level input that is significant to the fair value measurement in its entirety. The Company's assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the asset or liability.

        The Company calculates the fair value of financial instruments and includes this additional information in the notes to 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.

        Costs relating to obtaining tenant leases are deferred and amortized over the initial term of the agreement using the straight-line method. As these deferred leasing costs represent productive assets incurred in connection with the Company's provision of leasing arrangements at the Centers, the related cash flows are classified as investing activities within the Company's 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. In-place lease values are amortized over the remaining lease term plus an estimate of the renewal term. Leasing commissions and legal costs are amortized on a straight-line basis over the individual remaining lease years. The ranges of the terms of the agreements are as follows:

Deferred lease costs

  1 - 15 years

Deferred financing costs

  1 - 15 years

In-place lease values

  Remaining lease term plus an estimate for renewal

Leasing commissions and legal costs

  5 - 10 years

Results of Operations

        Many of the variations in the results of operations, discussed below, occurred due to the foregoing transactions involving the Acquisition Properties, the Joint Venture Centers, the Mervyn's Properties and the Redevelopment Center(s), as defined below. For the comparison of the year ended December 31, 2011 to the year ended December 31, 2010, the "Same Centers" include all Consolidated Centers, excluding the Mervyn's Properties, the Acquisition Properties and the Redevelopment Center as defined below. For the comparison of the year ended December 31, 2010 to the year ended December 31, 2009, the "Same Centers" include all Consolidated Centers, excluding the Mervyn's Properties, the Joint Venture Centers and the Redevelopment Centers as defined below.

        For the comparison of the year ended December 31, 2011 to the year ended December 31, 2010, the "Redevelopment Center" is Santa Monica Place. For the comparison of the year ended December 31, 2010 to the year ended December 31, 2009, the "Redevelopment Centers" include Northgate Mall and Santa Monica Place.

        One of the principal reasons for the changes in the results of operations, discussed below, from the year ended December 31, 2010 compared to the year ended December 31, 2009 is because of the change in how the Company classified the Joint Venture Centers. The Joint Venture Centers were classified as Consolidated Centers until the sale of a partial ownership interest in Queens Center and FlatIron Crossing on July 30, 2009 and September 3, 2009, respectively. Therefore, the results of operations of Queens Center for the period of January 1, 2009 to July 29, 2009 and FlatIron Crossing

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for the period of January 1, 2009 to September 2, 2009 are included in the Company's financial statements as Consolidated Centers. Results of operations subsequent to the sale of the ownership interest in each Joint Venture Center are included in "Equity in income of unconsolidated joint ventures" (See "Acquisitions and Dispositions" in Management's Overview and Summary).

        The increase in revenue and expenses of the Redevelopment Center during the year ended December 31, 2011 in comparison to the year ended December 31, 2010 and during the year ended December 31, 2010 in comparison to the year ended December 31, 2009 is primarily due to the opening of Santa Monica Place in August 2010.

        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 12 months or longer and under 10,000 square feet), occupancy rates (excluding Anchors) for the Centers and releasing spreads (i.e. a comparison of average base rent per square foot on leases executed during the trailing twelve months to average base rent per square foot on leases expiring during the year) to be key performance indicators of the Company's internal growth.

        Tenant sales per square foot increased from $433 for the year ended December 31, 2010 to $489 for the year ended December 31, 2011. Occupancy rate decreased from 93.1% at December 31, 2010 to 92.7% at December 31, 2011. Releasing spreads increased 13.7% for the year ended December 31, 2011 from the year ended December 31, 2010. These calculations exclude Valley View Center, Granite Run Mall, Shoppingtown Mall and Centers under development or redevelopment.

        The Company's recent trend of retail sales growth continued this year with tenant sales per square foot increasing compared to the year ended December 31, 2010. The releasing spreads also increased for the year ended December 31, 2011 and the Company expects that releasing spreads will continue to increase during 2012 as it renews or relets leases that are scheduled to expire during the year. The Company's occupancy rate as of December 31, 2011 decreased compared to December 31, 2010 primarily because of the liquidation of one tenant. Although certain aspects of the U.S. economy, the retail industry as well as the Company's operating results improved during the year ended December 31, 2011, continued worldwide economic and political uncertainty remains. In addition, the U.S. economy is still experiencing weakness, high levels of unemployment have persisted and rental rates and valuations for retail space have not fully recovered to pre-recession levels. Any further continuation of these adverse conditions could harm the Company's business, results of operations and financial condition.

Comparison of Years Ended December 31, 2011 and 2010

        Minimum and percentage rents (collectively referred to as "rental revenue") increased by $34.9 million, or 8.1%, from 2010 to 2011. The increase in rental revenue is attributed to an increase of $17.8 million from the Acquisition Properties, $11.6 million from the Redevelopment Center, $3.9 million from the Mervyn's Properties and $1.6 million from the Same Centers. The increase in rental revenue at the Mervyns' Properties is due to the leasing of former vacant spaces.

        Rental 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 $7.3 million in 2010 to $9.7 million in 2011. The amortization of straight-lined rents increased from $4.8 million in 2010 to $5.1 million in 2011. Lease termination income increased from $4.4 million in 2010 to $5.9 million in 2011.

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        Tenant recoveries increased $11.8 million, or 5.0%, from 2010 to 2011. The increase in tenant recoveries is attributed to an increase of $7.4 million from the Redevelopment Center, $6.1 million from the Acquisition Properties and $0.3 million from the Mervyn's Properties offset in part by a decrease of $2.0 million from the Same Centers. The decrease in tenant recoveries from the Same Centers is primarily due to a decrease in recoverable expenses.

        Management Companies revenue decreased from $42.9 million in 2010 to $40.4 million in 2011 primarily due to a decrease in development fees.

        Shopping center and operating expenses increased $18.6 million, or 7.9%, from 2010 to 2011. The increase in shopping center and operating expenses is attributed to an increase of $10.1 million from the Acquisition Properties, $8.1 million from the Redevelopment Center and $1.2 million from the Mervyn's Properties offset in part by a decrease of $0.8 million from the Same Centers.

        Management Companies' operating expenses decreased $3.8 million from 2010 to 2011 due to a decrease in compensation costs.

        REIT general and administrative expenses increased by $0.4 million from 2010 to 2011.

        Depreciation and amortization increased $25.3 million from 2010 to 2011. The increase in depreciation and amortization is primarily attributed to an increase of $10.1 million from the Redevelopment Center, $9.4 million from the Acquisition Properties and $5.8 million from the Same Centers.

        Interest expense decreased $14.9 million from 2010 to 2011. The decrease in interest expense was primarily attributed to a decrease of $19.4 million from interest rate swap agreements, $6.2 million from the Same Centers and $2.3 million from the Senior Notes offset in part by an increase of $6.7 million from the Redevelopment Center, $3.5 million from the Acquisition Properties, $2.6 million from the borrowings under the line of credit and $0.2 million from the term loans. The decrease resulting from the interest rate swap agreements is due to the maturity of a $450.0 million interest rate swap agreement in April 2010 and the maturity of a $400.0 million interest rate swap agreement in April 2011.

        The above interest expense items are net of capitalized interest, which decreased from $25.7 million in 2010 to $11.9 million in 2011, primarily due to a decrease in redevelopment activity.

        Loss on early extinguishment of debt increased $14.2 million from 2010 to 2011. The increase in loss on early extinguishment of debt is primarily attributed to a $9.1 million loss from the prepayment of the mortgage note payable on Chesterfield Towne Center in 2011 and a $1.4 million loss from the repurchase of the Senior Notes in 2011 offset in part by the $4.2 million gain on the refinancing of two mortgage notes payable in 2010.

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        Equity in income of unconsolidated joint ventures increased $215.1 million from 2010 to 2011. The increase in equity in income of unconsolidated joint ventures is primarily attributed to the Company's pro rata share of the gain of $188.3 million in connection with the SDG Transaction (See "Acquisitions and Dispositions" in Management's Overview and Summary) in 2011. The remaining increase in equity in income from unconsolidated joint ventures is attributed to the Company's $12.5 million pro rata share of the remeasurement gain on the acquisition of an underlying ownership interest in Kierland Commons in 2011 (See "Acquisitions and Dispositions" in Management's Overview and Summary), and the Company's $7.8 million pro rata share of the gain on early extinguishment of debt of its joint venture in Granite Run Mall. (See "Other Transactions and Events" in Management's Overview and Summary).

        Loss on remeasurement, sale or write down of assets increased $42.8 million from 2010 to 2011. The increase in loss is primarily attributed to the $45.5 million impairment charge in 2011 (See Note 6—Property to the Company's Consolidated Financial Statements).

        The loss from discontinued operations increased $37.0 million from 2010 to 2011. The increase in loss from discontinued operations is primarily attributed to the $39.6 million loss on the disposal of Shoppingtown Mall in 2011 (See "Other Transactions and Events" in Management's Overview and Summary).

        Net income increased $140.7 million from 2010 to 2011. The increase in net income is primarily attributed to the Company's pro rata share of the $188.3 million gain on the SDG Transaction (See "Acquisitions and Dispositions" in Management's Overview and Summary) offset in part by the loss on the disposal of Shoppingtown Mall of $39.6 million (See "Other Transactions and Events" in Management's Overview and Summary).

        Primarily as a result of the factors mentioned above, FFO—diluted increased 13.7% from $351.3 million in 2010 to $399.6 million in 2011. For a reconciliation of FFO and FFO—diluted to net income available to common stockholders, the most directly comparable GAAP financial measure, see "Funds From Operations and Adjusted Funds From Operations."

        Cash provided by operating activities increased from $200.4 million in 2010 to $237.3 million in 2011. The increase was primarily due to changes in assets and liabilities and the results at the Centers as discussed above.

        Cash used in investing activities increased from $142.2 million in 2010 to $212.1 million in 2011. The increase was primarily due to an increase of $138.7 million in contributions to unconsolidated joint ventures offset in part by an increase of $102.5 million in distributions from unconsolidated joint ventures. The increase in contributions to unconsolidated joint ventures is primarily attributed to the Kierland Commons, The Shops at Atlas Park, Arrowhead Towne Center and Superstition Springs

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transactions (See "Acquisitions and Dispositions" in Management's Overview and Summary). The increase in distributions from the unconsolidated joint ventures is primarily due to the distribution of the Company's pro rata share of the excess refinancing proceeds of the loan on Arrowhead Towne Center in 2011 (See "Item 1. Business—Recent Developments—Financing Activity").

        Cash from financing activities decreased from a surplus of $294.1 million in 2010 to a deficit of $403.6 million in 2011. The increase in cash used was primarily due to the $1.2 billion stock offering in 2010, a decrease in proceeds from mortgages, bank and other notes payable of $170.5 million, an increase in the repurchase of the Senior Notes of $162.1 million and an increase in dividends and distributions of $71.0 million offset in part by a decrease in payments on mortgages, bank and other notes payable of $940.8 million.

Comparison of Years Ended December 31, 2010 and 2009

        Rental revenue decreased by $51.0 million, or 10.6%, from 2009 to 2010. The decrease in rental revenue is attributed to a decrease of $48.6 million from the Joint Venture Centers and $14.2 million from the Same Centers which was offset in part by an increase of $11.5 million from the Redevelopment Centers and $0.3 million from the Mervyn's Properties. The decrease in Same Centers rental revenue is primarily attributed to a decrease in lease termination income.

        The amortization of above and below market leases decreased from $9.4 million in 2009 to $7.3 million in 2010. The amortization of straight-line rents decreased from $5.1 million in 2009 to $4.8 million in 2010. Lease termination income decreased from $16.1 million in 2009 to $4.4 million in 2010.

        Tenant recoveries decreased by $1.7 million from 2009 to 2010. The decrease in tenant recoveries of $22.5 million from the Joint Venture Centers was offset by an increase of $12.6 million from the Same Centers, $7.5 million from the Redevelopment Centers and $0.7 million from the Mervyn's Properties.

        Shopping center and operating expenses decreased $11.6 million, or 4.7%, from 2009 to 2010. The decrease in shopping center and operating expenses is attributed to a decrease of $25.7 million from the Joint Venture Centers and $0.9 million from the Mervyn's Properties offset in part by an increase of $8.0 million from the Same Centers and $7.0 million from the Redevelopment Centers.

        Management Companies' operating expenses increased $11.1 million from 2009 to 2010 due to an increase in compensation costs in 2010 offset in part by severance costs paid in connection with the implementation of the Company's workforce reduction plan in 2009.

        REIT general and administrative expenses decreased by $5.2 million from 2009 to 2010. The decrease is primarily due to closing costs incurred in connection with the formation of the co-venture arrangement in 2009 (See "Other Transactions and Events" in Management's Overview and Summary).

        Depreciation and amortization decreased $15.2 million from 2009 to 2010. The decrease in depreciation and amortization is primarily attributed to a decrease of $17.0 million from the Mervyn's Properties and $13.0 million from the Joint Venture Centers offset in part by an increase of $8.3 million from the Redevelopment Centers and $5.0 million from the Same Centers.

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        Interest expense decreased $54.1 million from 2009 to 2010. The decrease in interest expense is attributed to a decrease of $20.0 million from the Joint Venture Centers, $14.0 million from interest rate swap agreements, $11.7 million from borrowings under the Company's line of credit, $5.5 million from term loans, $2.4 million from the Senior Notes, $0.4 million from Same Centers and $0.1 million from the Redevelopment Centers. The decrease from interest rate swap agreements is due to the maturity of a $450.0 million interest rate swap agreement in April 2010.

        The above interest expense items are net of capitalized interest, which increased from $21.3 million in 2009 to $25.7 million in 2010 due to an increase in redevelopment activity in 2010.

        The gain on early extinguishment of debt decreased from $29.2 million in 2009 to $3.7 million in 2010. The decrease in gain is due to a decrease in repurchases of the Senior Notes in 2010. (See Liquidity and Capital Resources).

        Equity in income of unconsolidated joint ventures increased $11.4 million from 2009 to 2010. The increase in equity in income from unconsolidated joint ventures is primarily attributed to the $7.6 million write-down at certain joint ventures in 2009 and the deconsolidation of the Joint Venture Centers upon sale in 2009 (See "Acquisitions and Dispositions" in Management's Overview and Summary).

        Loss from discontinued operations decreased from $42.0 million in 2009 to $3.1 million in 2010. The decrease in loss is primarily attributed to a loss of $40.2 million on the sales of six former Mervyn's stores and five non-core community centers in 2009.

        Net income decreased $110.8 million from 2009 to 2010. The decrease in net income is primarily attributed to the $154.2 million gain on the sale of the 49% ownership interest in Queens Center in 2009 (See "Acquisitions and Dispositions" in Management's Overview and Summary) offset in part by the $16.9 million loss on the sale of five non-core community centers in 2009 (See "Acquisitions and Dispositions" in Management's Overview and Summary) and a $19.2 million impairment charge in 2009 to reduce the carrying value of land held for development.

        Primarily as a result of the factors mentioned above, FFO—diluted decreased 7.6% from $380.0 million in 2009 to $351.3 million in 2010. For disclosure of net income, the most directly comparable GAAP financial measure, for the periods and a reconciliation of FFO and FFO—diluted to net income available to common stockholders, (See "Funds From Operations and Adjusted Funds From Operations").

        Cash provided by operations increased from $120.9 million in 2009 to $200.4 million in 2010. The increase was primarily due to changes in assets and liabilities and the results at the Centers as discussed above and an increase of $8.4 million in distribution of income from unconsolidated joint ventures.

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        Cash from investing activities decreased from a surplus of $302.4 million in 2009 to a deficit of $142.2 million in 2010. The decrease was primarily due to the decrease in proceeds received from the sale of assets of $417.5 million in 2009, a decrease in distributions from unconsolidated joint ventures of $51.9 million, offset in part by a decrease in contributions to unconsolidated joint ventures of $33.7 million.

        Cash from financing activities increased from a deficit of $396.5 million in 2009 to a surplus of $294.1 million in 2010. The increase was primarily attributed to the net proceeds from the stock offering of $1.2 billion in 2010 (See Liquidity and Capital Resources) and an increase in proceeds from the mortgages, bank and other notes payable of $501.8 million offset in part by net proceeds from the stock offering in 2009 of $383.5 million, an increase in payments on mortgages, bank and other notes payable of $339.1 million, a decrease in contributions from the co-venture partner of $168.2 million and an increase in dividends and distributions of $130.3 million.

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. On May 2, 2011, the Company obtained a new $1.5 billion revolving line of credit, which provides the Company with additional liquidity (See Item 1. Business—Recent Developments—"Financing Activity").

        The following tables summarize capital expenditures and lease acquisition costs incurred at the Centers for the years ended December 31:

(Dollars in thousands)
  2011   2010   2009  

Consolidated Centers:

                   

Acquisitions of property and equipment

  $ 314,575   $ 12,888   $ 11,001  

Development, redevelopment and expansion of Centers

    88,842     214,796     226,192  

Tenant allowances

    19,418     21,993     10,830  

Deferred leasing charges

    29,280     24,528     19,960  
               

  $ 452,115   $ 274,205   $ 267,983  
               

Joint Venture Centers (at Company's pro rata share):

                   

Acquisitions of property and equipment

  $ 143,390   $ 6,095   $ 5,443  

Development, redevelopment and expansion of Centers

    37,712     42,289     61,184  

Tenant allowances

    8,406     8,130     5,092  

Deferred leasing charges

    4,910     4,664     3,852  
               

  $ 194,418   $ 61,178   $ 75,571  
               

        The Company expects amounts to be incurred in future years for tenant allowances and deferred leasing charges to be comparable or less than 2011 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. The Company expects to incur between $200 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 include borrowings under the Company's line of credit and construction loans. In addition to the Company's April 2010 equity offering and property refinancings, the Company has also generated additional liquidity in the past

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through joint venture transactions and the sale of non-core assets, and has plans to sell additional non-core assets in 2012. Furthermore, on September 9, 2011, the Company filed a shelf registration statement which registered an unspecified amount of common stock, preferred stock, depositary shares, debt securities, warrants, rights and units.

        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, including its new $1.5 billion line of credit and April 2010 equity offering, the Company has recently 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 create 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.

        The Company's total outstanding loan indebtedness at December 31, 2011 was $6.2 billion (including $852.8 million of unsecured debt and $1.9 billion of its pro rata share of joint venture debt). The majority of the Company's debt consists of fixed-rate conventional mortgages payable collateralized by individual properties. The Company expects that all of the maturities during the next twelve months, except the mortgage notes payable on Valley View Center and Prescott Gateway, will be refinanced, restructured, extended and/or paid off from the Company's line of credit or cash on hand. The Company's obligation for the loan on Valley View Center is expected to be discharged in the near future (See "Management's Overview and Summary—Other Transactions and Events").

        The Senior Notes bear interest at 3.25%, payable semiannually, mature on March 15, 2012. The Senior Notes are senior to unsecured debt of the Company and are guaranteed by the Operating Partnership. In October 2011, the Company repurchased $180.3 million of Senior Notes at par value. The repurchases were funded by additional borrowings under the Company's line of credit. As of December 31, 2011, there were $437.8 million of the Senior Notes outstanding.

        The Company believes it has various sources of liquidity to pay off the Senior Notes upon their maturity, including anticipated proceeds from the financing and refinancing of various properties and/or capacity under its line of credit. See Note 11—Bank and Other Notes Payable in the Company's Notes to the Consolidated Financial Statements.

        The Company had, through the Operating Partnership, a $1.5 billion revolving line of credit that bore interest at LIBOR plus a spread of 0.75% to 1.10% that matured on April 25, 2011. On May 2, 2011, the Company, through the Operating Partnership, obtained a new $1.5 billion revolving line of credit that bears interest at LIBOR plus a spread of 1.75% to 3.0% depending on the Company's overall leverage and matures on May 2, 2015 with a one-year extension option. Based on the Company's current leverage levels, the borrowing rate on the new facility is LIBOR plus 2.0%. The line of credit can be expanded, depending on certain conditions, up to a total facility of $2.0 billion less the outstanding balance of the $125.0 million unsecured term loan, as discussed below. All obligations under the line of credit are unconditionally guaranteed by the Company and certain of its direct and indirect subsidiaries and are secured, subject to certain exceptions, by pledges of direct and indirect ownership interests in certain of the subsidiary guarantors. At December 31, 2011, total borrowings under the line of credit were $290.0 million with an average effective interest rate of 2.96%.

        On December 8, 2011, the Company obtained a seven-year, $125.0 million unsecured term loan under the Company's line of credit that bears interest at LIBOR plus a spread of 1.95 to 3.20% depending on the Company's overall leverage and matures on December 8, 2018. Based on the Company's current leverage levels, the borrowing rate is LIBOR plus 2.20%. As of December 31, 2011, the total interest rate was 2.42%. The proceeds were used to pay down the Company's line of credit.

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        Cash dividends and distributions for the year ended December 31, 2011 were $296.9 million. A total of $237.3 million was funded by cash flows provided by operations. The remaining $59.6 million was funded through distributions received from unconsolidated joint ventures which are included in the cash flows from investing activities section of the Company's Consolidated Statement of Cash Flows.

        At December 31, 2011, the Company was in compliance with all applicable loan covenants under its agreements.

        At December 31, 2011, the Company had cash and cash equivalents available of $67.2 million.

        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."

        In addition, certain joint ventures have secured debt that could become recourse debt to the Company or its subsidiaries, in excess of the Company's pro rata share, should the joint ventures be unable to discharge the obligations of the related debt. At December 31, 2011, the balance of the debt that could be recourse to the Company was $380.3 million offset in part by indemnity agreements from joint venture partners for $182.6 million. The maturities of the recourse debt, net of indemnification, are $169.8 million in 2013, $16.8 million in 2015 and $11.1 million in 2016.

        Additionally, as of December 31, 2011, the Company is contingently liable for $19.6 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.

        The following is a schedule of contractual obligations as of December 31, 2011 for the consolidated Centers over the periods in which they are expected to be paid (in thousands):

 
  Payment Due by Period  
Contractual Obligations
  Total   Less than
1 year
  1 - 3 years   3 - 5 years   More than
five years
 

Long-term debt obligations (includes expected interest payments)

  $ 4,400,388   $ 1,357,487   $ 1,171,017   $ 1,275,125   $ 596,759  

Operating lease obligations(1)

    846,723     14,641     28,358     24,916     778,808  

Purchase obligations(1)

    2,131     2,131              

Other long-term liabilities

    279,052     235,092     4,300     3,908     35,752  
                       

  $ 5,528,294   $ 1,609,351   $ 1,203,675   $ 1,303,949   $ 1,411,319  
                       

(1)
See Note 19—Commitments and Contingencies in the Company's Notes to the Consolidated Financial Statements.

Funds From Operations ("FFO") and Adjusted Funds From Operations ("AFFO")

        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 Generally Accepted Accounting Principles ("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 extraordinary items and sales of

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depreciated operating properties, plus real estate related depreciation and amortization, impairment write-downs of real estate and write-downs of investments in an affiliate where the write-downs have been driven by a decrease in the value of real estate held by the affiliate and after adjustments for unconsolidated joint ventures. Adjustments for unconsolidated joint ventures are calculated to reflect FFO on the same basis. The Company also adjusts FFO for the noncontrolling interest due to redemption value on the Rochester Properties (See Item 6—Selected Financial Data).

        AFFO excludes the negative FFO impact of Shoppingtown Mall and Valley View Center for the year ended December 31, 2011. In December 2011, the Company conveyed Shoppingtown Mall to the lender by a deed-in-lieu of foreclosure and Valley View Center is in receivership.

        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. In addition, consistent with the key objective of FFO as a measure of operating performance, the adjustment of FFO for the noncontrolling interest in redemption value provides a more meaningful measure of the Company's operating performance between periods without reference to the non-cash charge related to the adjustment in noncontrolling interest due to redemption value. The Company believes that such a presentation also provides investors with a more meaningful measure of its operating results in comparison to the operating results of other REITs. The Company believes that AFFO and AFFO on a diluted basis 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 allow investors to more easily compare the Company's results without taking into account the unrelated non-cash charges on properties controlled by either a receiver or loan servicer, which are non-routine items. FFO and AFFO on a diluted basis are measures investors find most useful in measuring the dilutive impact of outstanding convertible securities.

        FFO and AFFO do 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 are not indicative of cash available to fund all cash flow needs. The Company also cautions that FFO and AFFO, as presented, may not be comparable to similarly titled measures reported by other real estate investment trusts.

        NAREIT recently clarified that under its definition of FFO, impairment write-downs of real estate should be added back to net income. Beginning with the year ended December 31, 2011, the Company has revised its definition of FFO to add back impairment write-downs of real estate to its net income. Accordingly, the Company removed the adjustment for impairment write-downs of $35.9 million and $27.5 million, as previously reported during the years ended December 31, 2009 and 2008, respectively. There was no impairment write-downs of real estate during the years ended December 31, 2010 and 2007. The reconciliation of FFO and AFFO and FFO and AFFO-diluted to net income available to common stockholders is provided below.

        Management compensates for the limitations of FFO and AFFO by providing investors with financial statements prepared according to GAAP, along with this detailed discussion of FFO and AFFO and a reconciliation of FFO and AFFO and FFO and AFFO-diluted to net income available to common stockholders. Management believes that to further understand the Company's performance, FFO and AFFO 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.

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        The following reconciles net income available to common stockholders to FFO and FFO-diluted for the years ended December 31, 2011, 2010, 2009, 2008 and 2007 and FFO and FFO—diluted to AFFO and AFFO—diluted for the same periods (dollars and shares in thousands):

 
  2011   2010   2009   2008   2007  

Net income—available to common stockholders

  $ 156,866   $ 25,190   $ 120,742   $ 161,925   $ 64,131  

Adjustments to reconcile net income to FFO—basic:

                               

Noncontrolling interest in the Operating Partnership

    13,529     2,497     17,517     27,230     11,238  

Loss (gain) on remeasurement, sale or write-down of consolidated assets

    76,338     (474 )   (121,766 )   (68,714 )   (9,771 )

Adjustment for redemption value of redeemable noncontrolling interests

                    2,046  

Add: gain on undepreciated assets—consolidated assets

    2,277         4,762     798     8,047  

Add: noncontrolling interest share of (gain) loss on sale of consolidated joint ventures

    (1,441 )   2     310     185     760  

(Gain) loss on remeasurement, sale of assets from unconsolidated joint ventures(1)

    (200,828 )   (823 )   7,642     (3,432 )   (400 )

Add: gain (loss) on sale of undepreciated assets—from unconsolidated joint ventures(1)

    51     613     (152 )   3,039     2,793  

Add noncontrolling interest on sale of undepreciated assets—consolidated joint ventures

                487      

Depreciation and amortization on consolidated assets

    269,286     246,812     266,164     279,339     231,860  

Less: depreciation and amortization attributable to noncontrolling interest on consolidated joint ventures

    (18,022 )   (17,979 )   (7,871 )   (3,395 )   (4,769 )

Depreciation and amortization on unconsolidated joint ventures(1)

    115,431     109,906     106,435     96,441     88,807  

Less: depreciation on personal property

    (13,928 )   (14,436 )   (13,740 )   (9,952 )   (8,244 )
                       

FFO—basic

    399,559     351,308     380,043     483,951     386,498  

Additional adjustments to arrive at FFO—diluted:

                               

Impact of convertible preferred stock

                4,124     10,058  

Impact of non-participating convertible preferred units

                979      
                       

FFO—diluted

    399,559     351,308     380,043     489,054     396,556  

Add: Shoppingtown Mall negative FFO

    3,491                  

Add: Valley View Center negative FFO

    8,786                  
                       

AFFO and AFFO—diluted

  $ 411,836   $ 351,308   $ 380,043   $ 489,054   $ 396,556  
                       

Weighted average number of FFO shares outstanding for:

                               

FFO—basic(2)

    142,986     132,283     93,010     86,794     84,467  

Adjustments for the impact of dilutive securities in computing FFO—diluted:

                               

Convertible preferred stock

                1,447     3,512  

Non-participating convertible preferred units

                205      

Share and unit-based compensation plans

                    293  
                       

FFO—diluted(3)

    142,986     132,283     93,010     88,446     88,272  
                       

(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. As of December 31, 2011, 2010, 2009, 2008 and 2007, there were 11.0 million, 11.6 million, 12.0 million, 11.6 million and 12.5 million OP Units outstanding, respectively.

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(3)
The computation of FFO and AFFO—diluted shares outstanding includes the effect of share and unit-based compensation plans and the 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 and AFFO-diluted computation. On February 25, 1998, the Company sold $100 million of its Series A Preferred Stock. The holder of the Series A Preferred Stock converted 0.6 million, 0.7 million, 1.3 million and 1.0 million shares to common shares on October 18, 2007, May 6, 2008, May 8, 2008 and September 17, 2008, respectively. The preferred stock was convertible on a one-for-one basis for common stock and was fully converted as of December 31, 2008. The then outstanding preferred shares were assumed converted for purposes of 2008 and 2007 FFO—diluted as they were dilutive to that calculation.

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 appropriately matching maturities, (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, 2011 concerning the Company's long term debt obligations, including principal cash flows by scheduled maturity, weighted average interest rates and estimated fair value ("FV") (dollars in thousands):

 
  For the years ended December 31,    
   
   
 
 
  2012   2013   2014   2015   2016   Thereafter   Total   FV  

CONSOLIDATED CENTERS:

                                                 

Long term debt:

                                                 

Fixed rate

  $ 881,517   $ 247,170   $ 18,705   $ 471,961   $ 471,024   $ 552,633   $ 2,643,010   $ 2,769,914  

Average interest rate

    5.53 %   5.48 %   5.32 %   6.14 %   5.74 %   4.83 %   5.53 %      

Floating rate

        785,394     88,413     171,305     392,952     125,000     1,563,064     1,585,782  

Average interest rate

        2.62 %   6.15 %   4.32 %   3.00 %   2.42 %   3.09 %      
                                   

Total debt—Consolidated Centers

  $ 881,517   $ 1,032,564   $ 107,118   $ 643,266   $ 863,976   $ 677,633   $ 4,206,074   $ 4,355,696  
                                   

UNCONSOLIDATED JOINT VENTURE CENTERS:

                                                 

Long term debt (at Company's pro rata share):

                                                 

Fixed rate

  $ 229,909   $ 530,855   $ 216,260   $ 265,452   $ 263,921   $ 282,031   $ 1,788,428   $ 1,904,545  

Average interest rate

    6.91 %   6.13 %   5.64 %   5.61 %   6.72 %   4.44 %   5.92 %      

Floating rate

    193     68,977         13,310     78,749         161,229     165,515  

Average interest rate

    3.11 %   4.89 %         3.25 %   3.09 %         3.88 %      
                                   

Total debt—Unconsolidated Joint Venture Centers

  $ 230,102   $ 599,832   $ 216,260   $ 278,762   $ 342,670   $ 282,031   $ 1,949,657   $ 2,070,060  
                                   

        The Consolidated Centers' total fixed rate debt at December 31, 2011 and 2010 was $2.6 billion and $3.1 billion, respectively. The average interest rate on such fixed rate debt at December 31, 2011 and 2010 was 5.53% and 5.98%, respectively. The Consolidated Centers' total floating rate debt at December 31, 2011 and 2010 was $1.6 billion and $766.9 million, respectively. The average interest rate on floating rate debt at December 31, 2011 and 2010 was 3.09% and 3.85%, respectively.

        The Company's pro rata share of the Joint Venture Centers' fixed rate debt at December 31, 2011 and 2010 was $1.8 billion and $2.0 billion, respectively. The average interest rate on such fixed rate debt at December 31, 2011 and 2010 was 5.92% and 6.11%, respectively. The Company's pro rata share of the Joint Venture Centers' floating rate debt at December 31, 2011 and 2010 was $161.2 million and

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$241.7 million, respectively. The average interest rate on such floating rate debt at December 31, 2011 and 2010 was 3.88% and 2.24%, respectively.

        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 (See Note 5—Derivative Instruments and Hedging Activities in the Company's Notes to the Consolidated Financial Statements).

        The following derivative at December 31, 2011 was outstanding (amounts in thousands):

Property/Entity
  Notional
Amount
  Product   Rate   Maturity   Company's
Ownership
  Fair
Value
 

Westside Pavilion

    175,000   Cap     5.50 %   6/5/2012     100 %    

        Interest rate cap agreements ("Cap") offer protection against floating rates on the notional amount from exceeding the rates noted in the above schedule, and interest rate swap agreements ("Swap") effectively replace a floating rate on the notional amount with a fixed rate as noted above.

        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 $17.2 million per year based on $1.7 billion of floating rate debt outstanding at December 31, 2011.

        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).

ITEM 8.    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

        Refer to the Index to 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

        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, 2011, 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.

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        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, 2011. 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. The Company's management concluded that, as of December 31, 2011, 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 2011 and 2010 consolidated financial statements included in this Annual Report on Form 10-K, has issued an report on the Company's internal control over financial reporting which follows below.

        There were no changes in the Company's internal control over financial reporting during the quarter ended December 31, 2011 that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.

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Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders of
The Macerich Company:

        We have audited The Macerich Company's (the "Company") internal control over financial reporting as of December 31, 2011, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). 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 conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). 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 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.

        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.

        In our opinion, The Macerich Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2011, based on criteria established in Internal Control—Integrated Framework 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), the consolidated balance sheets of the Company as of December 31, 2011 and 2010, and the related consolidated statements of operations, equity and redeemable noncontrolling interests and cash flows for each of the years in the two-year period ended December 31, 2011, and the related 2011 and 2010 information in the financial statement schedule III—Real Estate and Accumulated Depreciation, and our report dated February 24, 2012 expressed an unqualified opinion on those consolidated financial statements and the related 2011 and 2010 information in the financial statement schedule.

/s/ KPMG LLP

Los Angeles, California
February 24, 2012

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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," "Section 16(a) Beneficial Ownership Reporting Compliance," "Audit Committee Matters" and "The Board of Directors and its Committees—Codes of Ethics" in the Company's definitive proxy statement for its 2012 Annual Meeting of Stockholders that is responsive to the information required by this Item.

        During 2011, there were no material changes to the procedures described in the Company's proxy statement relating to the 2011 Annual Meeting of Stockholders by which stockholders may recommend nominees to the Company.

ITEM 11.    EXECUTIVE COMPENSATION

        There is hereby incorporated by reference the information which appears under the caption "Election of Directors" in the Company's definitive proxy statement for its 2012 Annual Meeting of Stockholders that is responsive to the information required by this Item. Notwithstanding the foregoing, the Compensation Committee Report set forth therein shall not 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 Exchange Act, except to the extent the Company specifically incorporates such report by reference therein and shall not be otherwise deemed filed under either of such Acts.

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 Nominees and Directors," "Executive Officers" and "Equity Compensation Plan Information" in the C