Item 1. Business
ITEM 1. BUSINESS
General
The Company is involved in the acquisition, ownership, development, redevelopment, management and leasing of regional and community/power shopping centers located throughout the United States. The Company is the sole general partner of, and owns a majority of the ownership interests in, The Macerich Partnership, L.P., a Delaware limited partnership (the "Operating Partnership"). As of December 31, 2021, the Operating Partnership owned or had an ownership interest in 44 regional town centers and five community/power shopping centers. These 49 regional town centers and community/power shopping centers (which include any adjoining mixed-use improvements) consist of approximately 48 million square feet of gross leasable area (“GLA”) and are referred to herein as the “Centers”. The Centers consist of consolidated Centers (“Consolidated Centers”) and unconsolidated joint venture Centers (“Unconsolidated Joint Venture Centers”), as set forth in “Item 2. Properties,” unless the context otherwise requires.
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The Company is a self-administered and self-managed real estate investment trust ("REIT") and conducts all of its operations through the Operating Partnership and the Company's management companies, Macerich Property Management Company, LLC, a single member Delaware limited liability company, Macerich Management Company, a California corporation, Macerich Arizona Partners LLC, a single member Arizona limited liability company, Macerich Arizona Management LLC, a single member Delaware limited liability company, Macerich Partners of Colorado LLC, a single member Colorado limited liability company, MACW Mall Management, Inc., a New York corporation, and MACW Property Management, LLC, a single member New York limited liability company. All seven of the management companies are owned by the Company and are collectively referred to herein as the "Management Companies."
The Company was organized as a Maryland corporation in September 1993. All references to the Company in this Annual Report on Form 10-K include the Company, those entities owned or controlled by the Company and predecessors of the Company, unless the context indicates otherwise.
Financial information regarding the Company for each of the last three fiscal years is contained in the Company's Consolidated Financial Statements included in "Item 15. Exhibits and Financial Statement Schedules."
Recent Developments
Dispositions:
On March 29, 2021, the Company sold Paradise Valley Mall in Phoenix, Arizona to a newly formed joint venture for $100 million, resulting in a gain on sale of assets of approximately $5.6 million. Concurrent with the sale, the Company elected to reinvest into the new joint venture at a 5% ownership interest. The Company used the $95.3 million of net proceeds from the sale to pay down its line of credit (See “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources”).
On September 17, 2021, the Company sold Tucson La Encantada in Tucson, Arizona for $165.3 million, resulting in a gain on sale of assets of approximately $117.2 million. The Company used the net cash proceeds of approximately $100.1 million to pay down debt (See “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources”).
On December 31, 2021, the Company assigned its joint venture interest in The Shops at North Bridge in Chicago, Illinois to its partner in the joint venture. The assignment included the assumption by the joint venture partner of the Company’s share of the debt owed by the joint venture and no cash consideration was received by the Company. The Company recognized a loss of approximately $28.3 million in connection with the assignment.
On December 31, 2021, the Company sold its joint venture interest in the undeveloped property at 443 North Wabash Avenue in Chicago, Illinois to its partner in the joint venture for $21.0 million. The Company recognized an immaterial gain in connection with the sale.
For the twelve months ended December 31, 2021, the Company and certain joint venture partners sold various land parcels in separate transactions, resulting in the Company’s share of the gain on sale of land of $19.6 million. The Company used its share of the proceeds from these sales of $46.5 million to pay down debt and for other general corporate purposes.
Financing Activities:
On January 22, 2021, the Company closed on a one-year extension for the Green Acres Mall $258.2 million loan to February 3, 2022, which also included a one-year extension option to February 3, 2023 which has been exercised. The interest rate remained unchanged, and the Company repaid $9 million of the outstanding loan balance at closing.
On March 25, 2021, the Company closed on a two-year extension for the Green Acres Commons $124.6 million loan to March 29, 2023. The interest rate is LIBOR plus 2.75% and the Company repaid $4.7 million of the outstanding loan balance at closing.
On April 14, 2021, the Company terminated its existing credit facility and entered into a new credit agreement, which provides for an aggregate $700 million facility, including a $525 million revolving loan facility that matures on April 14, 2023, with a one-year extension option, and a $175 million term loan facility that matures on April 14, 2024 (See "Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources”).
On October 26, 2021, the Company's joint venture in The Shops at Atlas Park replaced the existing loan on the property with a new $65 million loan that bears interest at a floating rate of LIBOR plus 4.15% and matures on November 9, 2026, including extension options. The loan is covered by an interest rate cap agreement that effectively prevents LIBOR from exceeding 3.0% through November 7, 2023.
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On February 2, 2022, the Company’s joint venture in FlatIron Crossing replaced the existing $197 million loan on the property with a new $175 million loan that bears interest at SOFR plus 3.45% and matures on February 9, 2027, including extension options. The loan is covered by an interest rate cap agreement that effectively prevents SOFR from exceeding 4.0% through February 15, 2024.
Redevelopment and Development Activities:
The Company's joint venture with Hudson Pacific Properties is redeveloping One Westside into 584,000 square feet of creative office space and 96,000 square feet of dining and entertainment space. The entire creative office space has been leased to Google and is expected to be completed in 2022. During the fourth quarter of 2021, the joint venture delivered the office space to Google for tenant improvement work, which Google has commenced. The total cost of the project is estimated to be between $500.0 million and $550.0 million, with $125.0 million to $137.5 million estimated to be the Company's pro rata share. The Company has incurred $106.9 million of the total $427.7 million incurred by the joint venture as of December 31, 2021. The joint venture expects to fund the remaining costs of the development with its $414.6 million construction loan.
The Company has a 50/50 joint venture with Simon Property Group, which was initially formed to develop Los Angeles Premium Outlets, a premium outlet center in Carson, California. The Company has funded $41.4 million of the total $82.8 million incurred by the joint venture as of December 31, 2021.
In connection with the closures and lease rejections of several Sears stores owned or partially owned by the Company, the Company anticipates spending between $130.0 million to $160.0 million at the Company’s pro rata share to redevelop the Sears stores. The anticipated openings of such redevelopments are expected to occur over several years. The estimated range of redevelopment costs could increase if the Company or its joint venture decides to expand the scope of the redevelopments. The Company has funded $40.9 million at its pro rata share as of December 31, 2021.
Other Transactions and Events:
In March 2020, the COVID-19 outbreak was declared a pandemic by the World Health Organization. As a result, all of the markets that the Company operates in were subject to stay-at-home orders, and the majority of its properties were temporarily closed in part or completely. Following staggered re-openings during 2020, all Centers have been open and operating since October 7, 2020. As of the date of this Annual Report on Form 10-K, government-imposed capacity restrictions resulting from COVID-19 have been essentially eliminated across the Company’s markets. Although overall fundamentals at the Centers continued to improve during 2021, the Company expects that the COVID-19 pandemic, including the emergence of new variants, will continue to negatively impact its results for 2022 due, in part, to reduced occupancy relative to pre-COVID levels and additional Anchor closures, among other factors. See “Outlook” in Results of Operations for a further discussion of the forward-looking impact of COVID-19 and the Company’s strategic plan to mitigate the anticipated negative impact on its financial condition and results of operations.
The Company declared a cash dividend of $0.15 per share of its common stock for each quarter in the year ended December 31, 2021. On January 27, 2022, the Company declared a first quarter cash dividend of $0.15 per share of its common stock, which will be paid on March 3, 2022 to stockholders of record on February 18, 2022. The dividend amount will be reviewed by the Board on a quarterly basis.
In connection with the commencement of separate "at the market" offering programs, on each of February 1, 2021 and March 26, 2021, which are referred to as the "February 2021 ATM Program" and the "March 2021 ATM Program," respectively, and collectively as the "ATM Programs," the Company entered into separate equity distribution agreements with certain sales agents pursuant to which the Company may issue and sell shares of its common stock having an aggregate offering price of up to $500 million under each of the February 2021 ATM Program and the March 2021 ATM Program, or a total of $1 billion under the ATM Programs. As of December 31, 2021, the Company had approximately $151.7 million of gross sales of its common stock available under the March 2021 ATM Program. The February 2021 ATM Program was fully utilized as of June 30, 2021 and is no longer active.
See “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources” for a further discussion of the Company’s anticipated liquidity needs, and the measures taken by the Company to meet those needs.
The Shopping Center Industry
General:
There are several types of retail shopping centers, which are differentiated primarily based on size and marketing strategy. Regional shopping centers generally contain in excess of 400,000 square feet of GLA and are typically anchored by two or more department or large retail stores ("Anchors") and are referred to as "Regional Town Centers" or "Malls." Regional
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Town Centers also typically contain numerous diversified retail stores ("Mall Stores"), most of which are national or regional retailers typically located along corridors connecting the Anchors. "Strip centers", "urban villages" or "specialty centers" ("Community/Power Shopping Centers") are retail shopping centers that are designed to attract local or neighborhood customers and are typically anchored by one or more supermarkets, discount department stores and/or drug stores. Community/Power Shopping Centers typically contain 100,000 to 400,000 square feet of GLA. Outlet Centers generally contain a wide variety of designer and manufacturer stores, often located in an open-air center, and typically range in size from 200,000 to 850,000 square feet of GLA ("Outlet Centers"). In addition, freestanding retail stores are located along the perimeter of the shopping centers ("Freestanding Stores"). Mall Stores and Freestanding Stores over 10,000 square feet of GLA are also referred to as "Big Box." Anchors, Mall Stores, Freestanding Stores and other tenants typically contribute funds for the maintenance of the common areas, property taxes, insurance, advertising and other expenditures related to the operation of the shopping center.
Regional Town Centers:
A Regional Town 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 Town Centers provide an array of retail shops and entertainment facilities and often serve as the town center and a gathering place for community, charity and promotional events.
Regional Town 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 Town Centers in their trade areas.
Regional Town 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 Town Center.
Business of the Company
Strategy:
The Company has a long-term four-pronged business strategy that focuses on the acquisition, leasing and management, redevelopment and development of Regional Town Centers.
Acquisitions. The Company principally focuses on well-located, quality Regional Town Centers that can be dominant in their trade area and have strong revenue enhancement potential. In addition, the Company pursues other opportunistic acquisitions of property that include retail and will complement the Company's portfolio such as Outlet Centers. The Company subsequently seeks to improve operating performance and returns from these properties through leasing, management and redevelopment. Since its initial public offering, the Company has acquired interests in shopping centers nationwide. The Company believes that it is geographically well positioned to cultivate and maintain ongoing relationships with potential sellers and financial institutions and to act quickly when acquisition opportunities arise.
Leasing and Management. The Company believes that the shopping center business requires specialized skills across a broad array of disciplines for effective and profitable operations. For this reason, the Company has developed a fully integrated real estate organization with in-house acquisition, accounting, development, finance, information technology, leasing, legal, marketing, property management and redevelopment expertise. In addition, the Company emphasizes a philosophy of decentralized property management, leasing and marketing performed by on-site professionals. The Company believes that this strategy results in the optimal operation, tenant mix and drawing power of each Center, as well as the ability to quickly respond to changing competitive conditions of the Center's trade area.
The Company believes that on-site property managers can most effectively operate the Centers. Each Center's property manager is responsible for overseeing the operations, marketing, maintenance and security functions at the Center. Property managers focus special attention on controlling operating costs, a key element in the profitability of the Centers, and seek to develop strong relationships with, and be responsive to, the needs of retailers.
The Company generally utilizes regionally located leasing managers to better understand the market and the community in which a Center is located. The Company continually assesses and fine tunes each Center's tenant mix, identifies and replaces underperforming tenants and seeks to optimize existing tenant sizes and configurations.
On a selective basis, the Company provides property management and leasing services for third parties. The Company currently manages two regional town centers and two community centers for third party owners on a fee basis.
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Redevelopment. One of the major components of the Company's growth strategy is its ability to redevelop acquired properties. On a selective basis, the Company's business strategy may include mixed-use densification to maximize space at the Company’s Regional Town Centers, including by developing available land at the Regional Town Centers or by demolishing underperforming department store boxes and redeveloping the land. For this reason, the Company has built a staff of redevelopment professionals who have primary responsibility for identifying redevelopment opportunities that they believe will result in enhanced long-term financial returns and market position for the Centers. The redevelopment professionals oversee the design and construction of the projects in addition to obtaining required governmental approvals (See "Redevelopment and Development Activities" in Recent Developments).
Development. The Company pursues ground-up development projects on a selective basis. The Company has supplemented its strong acquisition, operations and redevelopment skills with its ground-up development expertise to further increase growth opportunities.
The Centers:
As of December 31, 2021, the Centers primarily included 44 Regional Town Centers and five Community/Power Shopping Centers totaling approximately 48 million square feet of GLA. These 49 Centers average approximately 911,000 square feet of GLA and range in size from 3.3 million square feet of GLA at Tysons Corner Center to 185,000 square feet of GLA at Boulevard Shops. As of December 31, 2021, the Centers primarily includ e d 163 Anchors totaling approximately 21.8 million square feet of GLA and approximately 5,000 Mall Stores and Freestanding Stores totaling approximate ly 23.6 million square feet of GLA.
Competition:
Numerous owners, developers and managers of malls, shopping centers and other retail-oriented real estate compete with the Company for the acquisition of properties and in attracting tenants or Anchors to occupy space. There are a number of other publicly traded mall companies and several large private mall companies in the United States, any of which under certain circumstances could compete against the Company for an Anchor or a tenant. In addition, these companies, as well as other REITs, private real estate companies or investors compete with the Company in terms of property acquisitions. This results in competition both for the acquisition of properties or centers and for tenants or Anchors to occupy space. Competition for property acquisitions may result in increased purchase prices and may adversely affect the Company's ability to make suitable property acquisitions on favorable terms. The existence of competing shopping centers could have a material adverse impact on the Company's ability to lease space and on the level of rents that can be achieved. There is also increasing competition from other retail formats and technologies, such as lifestyle centers, power centers, outlet centers and online retail shopping 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.
Major Tenants:
For the year ended December 31, 2021, the Centers derived approximately 72% of their total rents from Mall Stores and Freestanding Stores under 10,000 square feet and 28% of their total rents from Big Box and Anchor tenants. Total rents as set forth in "Item 1. Business" include minimum rents and percentage rents.
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The following retailers (including their subsidiaries) represent the 10 largest tenants in the Centers based upon total rents in place as of December 31, 2021:
Tenant Primary DBAs Number of
Locations
in the
Portfolio % of Total
Rents
Best Buy Co., Inc. Best Buy 7 2.4 %
H & M Hennes & Mauritz L.P. H&M 27 2.4 %
Foot Locker, Inc. Champs Sports, Foot Locker, Kids Foot Locker, Lady Foot Locker, Foot Action, House of Hoops, and others 71 2.3 %
SPARC Group Aeropostale, Brooks Brothers, Eddie Bauer, Forever 21, Lucky Brands, Nautica 72 2.1 %
Victoria's Secret & Co. Victoria's Secret, PINK 48 2.1 %
Gap, Inc., The Athleta, Banana Republic, Gap, Gap Kids, Old Navy, and others 41 1.9 %
Signet Jewelers Limited Kay Jewelers, Jared, Piercing Pagoda, Zales, and others 94 1.8 %
Dick's Sporting Goods, Inc. Dick's Sporting Goods 17 1.7 %
American Eagle Outfitters, Inc. American Eagle Outfitters, Aerie 37 1.4 %
Abercrombie & Fitch Co. Abercrombie & Fitch, Hollister Co. 44 1.2 %
Mall Stores and Freestanding Stores:
Mall Store and Freestanding Store leases generally provide for tenants to pay rent comprised of a base (or "minimum") rent and a percentage rent based on sales. In some cases, tenants pay only minimum rent, and in other cases, tenants pay only percentage rent. The Company generally enters into leases for Mall Stores and Freestanding Stores that also require tenants to pay a stated amount for operating expenses, generally excluding property taxes, regardless of the expenses the Company actually incurs at any Center. However, certain leases for Mall Stores and Freestanding Stores contain provisions that only require tenants to pay their pro rata share of maintenance of the common areas, property taxes, insurance, advertising and other expenditures related to the operations of the Center.
Tenant space of 10,000 square feet and under in the Company's portfolio at December 31, 2021 comprises approximately 63% of all Mall Store and Freestanding Store space. The Company uses tenant spaces of 10,000 square feet and under for comparing rental rate activity because this space is more consistent in terms of shape and configuration and, as such, the Company is able to provide a meaningful comparison of rental rate activity for this space. Mall Store and Freestanding Store space greater than 10,000 square feet is inconsistent in size and configuration throughout the Company's portfolio and as a result does not lend itself to a meaningful comparison of rental rate activity with the Company's other space. Much of the non-Anchor space over 10,000 square feet is not physically connected to the mall, does not share the same common area amenities and does not benefit from the foot traffic in the mall. As a result, space greater than 10,000 square feet has a unique rent structure that is inconsistent with mall space under 10,000 square feet.
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The following tables set forth the average base rent per square foot for the Centers, as of December 31 for each of the past five years:
Mall Stores and Freestanding Stores under 10,000 square feet:
For the Years Ended December 31, Avg. Base
Rent Per
Sq. Ft.(1)(2) Avg. Base Rent
Per Sq. Ft. on
Leases Executed
During the Year(2)(3) Avg. Base Rent
Per Sq. Ft.
on Leases Expiring
During the Year(2)(4)
Consolidated Centers (at the Company's pro rata share):
2021 $ 59.86 $ 56.39 $ 55.91
2020 $ 59.63 $ 48.06 $ 52.60
2019 $ 58.76 $ 53.29 $ 53.20
2018 $ 56.82 $ 54.00 $ 49.07
2017 $ 55.08 $ 57.36 $ 49.61
Unconsolidated Joint Venture Centers (at the Company's pro rata share):
2021 $ 66.12 $ 66.98 $ 60.48
2020 $ 66.34 $ 57.23 $ 52.62
2019 $ 65.67 $ 73.05 $ 65.22
2018 $ 63.84 $ 66.95 $ 59.49
2017 $ 60.99 $ 63.50 $ 55.50
Big Box and Anchors:
For the Years Ended December 31, Avg. Base
Rent Per
Sq. Ft.(1)(2) Avg. Base Rent
Per Sq. Ft. on
Leases Executed
During the Year(2)(3) Number of
Leases
Executed
During
the Year Avg. Base Rent
Per Sq. Ft.
on Leases Expiring
During the Year(2)(4) Number of
Leases
Expiring
During
the Year
Consolidated Centers (at the Company's pro rata share):
2021 $ 17.26 $ 11.08 15 $ 8.57 15
2020 $ 17.58 $ 24.14 8 $ 11.03 10
2019 $ 16.51 $ 15.47 24 $ 10.37 11
2018 $ 15.29 $ 14.03 23 $ 16.83 13
2017 $ 14.13 $ 18.19 24 $ 14.85 21
Unconsolidated Joint Venture Centers (at the Company's pro rata share):
2021 $ 16.72 $ 27.71 11 $ 37.45 15
2020 $ 17.18 $ 39.81 10 $ 27.31 15
2019 $ 17.20 $ 25.62 13 $ 19.28 8
2018 $ 17.40 $ 38.98 11 $ 38.20 7
2017 $ 16.87 $ 26.33 15 $ 33.25 8
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(1) Average base rent per square foot is based on spaces occupied as of December 31 for each of the Centers and gives effect to the terms of each lease in effect, as of such date, including any concessions, abatements and other adjustments or allowances that have been granted to the tenants.
(2) Centers under development and redevelopment are excluded from average base rents. As a result, the leases for Fashion District Philadelphia, Paradise Valley Mall and One Westside are excluded for the years ended December 31, 2020, 2019, 2018 and 2017. Also, the leases for Paradise Valley Mall and One Westside are excluded for the year ended December 31, 2021.
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(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.
Lease Expirations:
The following tables show scheduled lease expirations for Centers owned as of December 31, 2021 for the next ten years, assuming that none of the tenants exercise renewal options:
Mall Stores and Freestanding Stores under 10,000 square feet:
Year Ending December 31, Number of
Leases
Expiring Approximate
GLA of Leases
Expiring(1) % of Total Leased
GLA Represented
by Expiring
Leases(1) Ending Base Rent
per Square Foot of
Expiring Leases(1) % of Base Rent
Represented
by Expiring
Leases(1)
Consolidated Centers (at the Company's pro rata share):
2022 367 695,067 18.39 % $ 57.87 16.21 %
2023 295 592,688 15.68 % $ 53.98 12.89 %
2024 278 612,556 16.20 % $ 65.95 16.28 %
2025 188 407,217 10.77 % $ 73.48 12.06 %
2026 156 437,482 11.57 % $ 71.20 12.55 %
2027 108 259,836 6.87 % $ 76.32 7.99 %
2028 74 191,970 5.08 % $ 73.06 5.65 %
2029 93 253,132 6.70 % $ 72.63 7.41 %
2030 73 187,583 4.96 % $ 60.89 4.60 %
2031 39 94,495 2.50 % $ 63.14 2.40 %
Unconsolidated Joint Venture Centers (at the Company's pro rata share):
2022 233 263,995 14.00 % $ 63.61 12.06 %
2023 179 276,752 14.68 % $ 60.31 11.99 %
2024 188 252,397 13.39 % $ 69.24 12.55 %
2025 156 215,375 11.42 % $ 74.89 11.58 %
2026 176 250,251 13.27 % $ 79.86 14.35 %
2027 111 177,893 9.44 % $ 80.52 10.29 %
2028 103 166,510 8.83 % $ 85.76 10.26 %
2029 72 89,764 4.76 % $ 83.41 5.38 %
2030 59 80,683 4.28 % $ 91.83 5.32 %
2031 45 68,514 3.63 % $ 73.26 3.61 %
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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 (at the Company's pro rata share):
2022 14 413,323 5.05 % $ 32.15 8.58 %
2023 26 648,519 7.92 % $ 18.65 7.81 %
2024 28 673,305 8.22 % $ 25.45 11.06 %
2025 32 1,154,741 14.10 % $ 13.38 9.98 %
2026 28 1,573,930 19.21 % $ 10.66 10.83 %
2027 26 892,515 10.90 % $ 24.72 14.24 %
2028 15 794,611 9.70 % $ 16.67 8.55 %
2029 11 199,553 2.44 % $ 23.11 2.98 %
2030 11 291,507 3.56 % $ 19.24 3.62 %
2031 9 411,117 5.02 % $ 22.39 5.94 %
Unconsolidated Joint Venture Centers (at the Company's pro rata share):
2022 12 311,535 8.57 % $ 15.81 7.40 %
2023 21 239,180 6.58 % $ 27.50 9.88 %
2024 23 297,123 8.17 % $ 36.03 16.08 %
2025 22 747,922 20.57 % $ 10.92 12.27 %
2026 19 324,360 8.92 % $ 30.82 15.02 %
2027 13 222,406 6.12 % $ 25.71 8.59 %
2028 11 462,853 12.73 % $ 12.34 8.58 %
2029 8 284,559 7.82 % $ 13.07 5.59 %
2030 5 251,601 6.92 % $ 5.60 2.12 %
2031 6 295,933 8.14 % $ 11.21 4.98 %
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(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.
Anchors:
Anchors have traditionally been a major factor in the public's identification with Regional Town 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 6.4% of the Company's total rents for the year ended December 31, 2021.
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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, 2021.
Name Number of
Anchor
Stores GLA Owned
by Anchor GLA Leased
by Anchor Total GLA
Occupied by
Anchor
Macy's Inc.
Macy's 34 4,402,000 1,931,000 6,333,000
Bloomingdale's 1 — 253,000 253,000
35 4,402,000 2,184,000 6,586,000
JCPenney 25 1,641,000 2,090,000 3,731,000
Dillard's 12 1,915,000 257,000 2,172,000
Nordstrom 8 267,000 1,079,000 1,346,000
Dick's Sporting Goods 16 — 1,048,000 1,048,000
Target(1) 5 304,000 368,000 672,000
Forever 21 5 — 469,000 469,000
Home Depot 3 — 395,000 395,000
Primark(2) 6 — 348,000 348,000
Burlington 4 187,000 140,000 327,000
Costco 2 — 321,000 321,000
Von Maur 2 187,000 — 187,000
Walmart 1 — 173,000 173,000
Shoppers World 2 — 170,000 170,000
La Curacao 1 — 165,000 165,000
Boscov's 1 — 161,000 161,000
Scheels All Sports(3) 1 144,000 — 144,000
Belk 2 — 139,000 139,000
BJ's Wholesale Club 1 — 123,000 123,000
Lowe's 1 — 114,000 114,000
Neiman Marcus 1 — 100,000 100,000
Hudson Bay Company
Saks Fifth Avenue 1 — 92,000 92,000
Kohl's 1 — 84,000 84,000
Mercado de los Cielos 1 — 78,000 78,000
Best Buy 1 66,000 — 66,000
Des Moines Area Community College 1 64,000 — 64,000
Vacant Anchors(4) 23 149,000 2,249,000 2,398,000
162 9,326,000 12,347,000 21,673,000
Anchors at Centers not owned by the Company(5):
Kohl's 1 — 83,000 83,000
Total 163 9,326,000 12,430,000 21,756,000
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(1) Target has announced plans to open a three-level 90,000 square foot store at Kings Plaza.
(2) Primark has announced plans to open two new two-level stores at Green Acres Mall and Tysons Corner Center.
(3) Scheels All Sports has announced plans to expand and build a two-level, 222,000 square foot store at Chandler Fashion Center utilizing the vacant 144,000 square foot location formerly occupied by Nordstrom. The store is anticipated to open in fall 2023.
(4) The Company is actively seeking replacement tenants or has entered into replacement leases for many of these vacant sites and/or is currently executing on or considering redevelopment opportunities for these locations. The Company continues to collect rent under the terms of an agreement regarding four of these vacant Anchors.
(5) The Company owns an office building and four stores located at shopping centers not owned by the Company. Of these four stores, one is leased to Kohl's, and three have been leased for non-Anchor usage.
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Governmental Regulations
Compliance with various governmental regulations has an impact on the Company’s business, including its capital expenditures, earnings and competitive position, which can be material. The Company incurs costs to monitor, and takes actions to comply with, governmental regulations that are applicable to its business, which include, among others, federal securities laws and regulations, applicable stock exchange requirements, REIT and other tax laws and regulations, environmental and health and safety laws and regulations, local zoning, usage and other regulations relating to real property, the Americans with Disabilities Act of 1990 (the "ADA") and related laws and regulations.
See “Item 1A. Risk Factors” for a discussion of material risks to the Company, including, to the extent material, to its competitive position, relating to governmental regulations, and see “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” together with the Company’s Consolidated Financial Statements, including the related notes included therein, for a discussion of material information relevant to an assessment of the Company’s financial condition and results of operations, including, to the extent material, the effects that compliance with governmental regulations may have upon its capital expenditures and earnings.
Insurance
Each of the Centers has comprehensive liability, fire, extended coverage and rental loss insurance with insured limits customarily carried for similar properties. The Company does not insure certain types of losses (such as losses from wars), because they are either uninsurable or not economically insurable. In addition, while the Company or the relevant joint venture, as applicable, carry specific earthquake insurance on the Centers located in California, the policies are subject to a deductible equal to 5% of the total insured value of each Center, a $148,000 per occurrence minimum and a combined annual aggregate loss limit of $100 million on these Centers. The Company or the relevant joint venture, as applicable, carry specific earthquake insurance on the Centers located in the Pacific Northwest and in the New Madrid Seismic Zone. However, the policies are subject to a deductible equal to 2% of the total insured value of each Center, a $114,000 per occurrence minimum and a combined annual aggregate loss limit of $100 million on these Centers. While the Company or the relevant joint venture also carry standalone terrorism insurance on the Centers, the policies are subject to a $25,000 deductible and a combined annual aggregate loss limit of $1.0 billion. Each Center has environmental insurance covering eligible third-party losses, remediation and non-owned disposal sites, subject to a $100,000 retention and a $50 million three-year aggregate loss limit, with the exception of one Center, which has a $5 million ten-year aggregate loss limit and another Center, which has a $20 million ten-year aggregate loss limit. Some environmental losses are not covered by this insurance because they are uninsurable or not economically insurable. Furthermore, the Company carries title insurance on substantially all of the Centers for generally less than their full value.
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 and Human Capital
As of December 31, 2021, the Company had approximately 640 employees, of which 639 were full-time and one was part-time. The Company believes that relations with its employees are good.
The Company, with oversight from senior management and its Board of Directors, puts great effort into cultivating an inclusive company culture that attracts top talent and creates an environment that fosters collaboration, innovation and diversity, while providing professional development opportunities and training. The Company’s human capital objectives include, as applicable, identifying, recruiting, retaining, developing, incentivizing and integrating the Company’s existing and prospective employees. To further these objectives, the Company has established a number of policies and programs and undertaken various initiatives, including:
Diversity and Inclusion: The Company recognizes the value in strengthening its workforce with diverse thought, ideas and people and maintains employment policies that comply with federal, state and local labor laws. As an equal opportunity employer, it is committed to diversity, recognition and inclusion and rewards its employees based on merit and their contributions in accordance with the principles and requirements of the Equal Employment Opportunities Commission and the principles and requirements of the ADA. The Company’s policies set forth its commitment to provide equal employment opportunity and to recruit, hire and promote at all levels without regard to race, national origin, religion, age, color, sex, sexual
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orientation, gender identity, disability, protected veteran status or any other characteristic protected by local, state or federal laws. As of December 31, 2021, approximately 58% and 28% of the Company’s employees were female and non-white, respectively.
Employee Compensation and Benefits: The Company maintains cash- and equity-based compensation programs designed to attract, retain and motivate its employees. The Company offers full-time employees a strong benefits package, including:
• Company-matched retirement savings through tax-advantaged 401(k) plans;
• basic life and long-term disability insurance, as well as medical, dental and vision insurance;
• critical illness coverage and supplemental accident insurance;
• paid vacation, sick time and company observed holidays;
• healthcare and dependent care flexible spending accounts;
• referral bonus awards;
• financial, legal, family or personal assistance through the employee assistance program;
• an employee stock purchase program;
• a tax-advantaged 529 educational savings program;
• scholarship program to help fund post high-school education for dependents of employees;
• Company-sponsored donor advised fund to support philanthropic efforts of employees, which provides a Company matching program and paid time off program for philanthropic volunteerism;
• paid time off for volunteer efforts; and
• paid time off for employees to bond with a new child.
Employee Training and Professional Development: The Company values the professional development of its employees and seeks to foster their talent and growth by providing training and education at all levels. In addition to training programs geared towards specific job functions, the Company offers training related to company policies, diversity, skill development, privacy and cybersecurity. In 2020, the Company launched its first-ever diversity, equity and inclusion (“DE&I”) training module designed to broaden employee understanding of DE&I and how embracing of diversity furthers organizational goals. The Company believes these training and development opportunities support workforce retention. As of December 31, 2021, the average tenure of the Company’s employees is approximately 11.6 years and that of the Company’s senior management is 20 years. In 2021, the Company’s workforce turnover rate was 13%, which includes all employees.
Employee Health and Safety: The Company is also committed to ensuring that the operations at all of its Centers and corporate offices are conducted in a manner that safeguards the health and safety of employees, tenants, contractors, customers and members of the public who are either present at, or affected by, its operations. This commitment became supremely important as a result of the unique challenges posed by the COVID-19 pandemic and the Company continues to work with all stakeholders to mitigate the pandemic’s impact. The Company has developed and implemented a long list of operational protocols at each of its Centers and its offices that meet or exceed recommendations from the Centers for Disease Control and Prevention and are designed to ensure the safety of its employees, tenants, service providers and shoppers. All of the Company’s retail properties achieved SafeGuard certification from Bureau Veritas, an internationally recognized testing and certification board. This program is considered to be the gold standard audit for disinfection, cleaning and COVID-19 safety protocols. See “Item 7. Management’s Discussion And Analysis of Financial Condition And Results of Operations—Management’s Overview and Summary—Other Transactions and Events.”
Seasonality
The shopping center industry is seasonal in nature, particularly in the fourth quarter during the holiday season when retailer occupancy and retail sales are typically at their highest levels. In addition, shopping malls achieve a substantial portion of their specialty (temporary retailer) rents during the holiday season and the majority of percentage rent is recognized in the fourth quarter. As a result of the above, earnings are generally higher in the fourth quarter.
Sustainability
A recognized leader in sustainability, the Company has achieved the #1 GRESB ranking in the North American Retail Sector for seven straight years 2015 – 2021. Additional information about the Company’s Environmental, Social and
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Governance programs can be obtained from the Company's website at w ww.macerich.com . Information provided on the Company's website is not incorporated by reference into this Form 10-K.
Available Information; Website Disclosure; Corporate Governance Documents
The Company's corporate website address is www.macerich.com . The Company makes available free-of-charge through this website its reports on Forms 10-K, 10-Q and 8-K and all amendments thereto, as soon as reasonably practicable after the reports have been filed with, or furnished to, the SEC. These reports are available under the heading "Investors—Financial Information—SEC Filings", through a free hyperlink to a third-party service. Information provided on the Company's website is not incorporated by reference into this Form 10-K. The following documents relating to Corporate Governance are available on the Company's website at www.macerich.com under "Investors—Corporate Governance":
Guidelines on Corporate Governance
Code of Business Conduct and Ethics
Code of Ethics for CEO and Senior Financial Officers
Audit Committee Charter
Compensation Committee Charter
Executive Committee Charter
Nominating and Corporate Governance Committee Charter
You may also request copies of any of these documents by writing to:
Attention: Corporate Secretary
The Macerich Company
401 Wilshire Blvd., Suite 700
Santa Monica, CA 90401