10-K 1 a2130493z10-k.htm 10-K
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		Securities and Exchange Commission Washington, D.C. 20549 FORM 10-K
ý		Annual Report Pursuant to Section 13 or 15(D) of the Securities Exchange Act of 1934 For the fiscal year ended December 31, 2003 or
o		Transition Report Pursuant to Section 13 or 15(D) of the Securities Exchange Act of 1934 (no fee required)
		For the transition period from to
		Commission File Number 1-12504
		The Macerich Company (Exact name of registrant as specified in its charter)
		Maryland (State or other jurisdiction of Incorporation or organization)
		401 Wilshire Boulevard, Suite 700 Santa Monica, California 90401 (Address of principal executive offices and zip code)
		95-4448705 (I.R.S. Employer Identification No.)
		Registrant's telephone number, including area code: (310) 394-6000
		Securities registered pursuant to Section 12(b) of the Act:
		Title of each class Common Stock, $0.01 Par Value Preferred Share Purchase Rights
		Name of each exchange on which registered New York Stock Exchange New York Stock Exchange
		Securities registered pursuant to Section 12(g) of the Act: None
		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 periods that the registrant was required to file such report(s)) and (2) has been subject to such filing requirements for the past 90 days. Yes ý No o.
		Indicate by a 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 the registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to the Form 10-K. o
		Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2). Yes ý No o
		As of June 30, 2003, the aggregate market value of the 37,225,137 shares of Common Stock held by non-affiliates of the registrant was $1.3 billion based upon the closing price ($35.13) on the New York Stock Exchange composite tape on such date. (For this computation, the registrant has excluded the market value of all shares of its Common Stock reported as beneficially owned by executive officers and directors of the registrant and certain other shareholders; such exclusion shall not be deemed to constitute an admission that any such person is an "affiliate" of the registrant.) As of February 27, 2004, there were 58,885,017 shares of Common Stock outstanding.
		DOCUMENTS INCORPORATED BY REFERENCE Portions of the proxy statement for the annual stockholders meeting to be held in 2004 are incorporated by reference into Part III.

THE MACERICH COMPANY

Annual Report on Form 10-K

For the Year Ended December 31, 2003

TABLE OF CONTENTS

Item No.		Page No.

Part I

1.	Business	1-13

2.	Properties	14-25

3.	Legal Proceedings	25

4.	Submission of Matters to a Vote of Security Holders	25

Part II

5.	Market for the Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	26-28

6.	Selected Financial Data	29-32

7.	Management's Discussion and Analysis of Financial Condition and Results of Operations	33-57

7A.	Quantitative and Qualitative Disclosures About Market Risk	57-59

8.	Financial Statements and Supplementary Data	59

9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	59

9A.	Controls and Procedures	59

Part III

10.	Directors and Executive Officers of the Company	59

11.	Executive Compensation	59

12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholders Matters	60

13.	Certain Relationships and Related Transactions	60

14.	Principal Accountant Fees and Services	60

Part IV

15.	Exhibits, Financial Statements, Financial Statement Schedules and Reports on Form 8-K	61-136

Signatures		137-138

Certifications		156-158

Part I.

Item I. Business

General

The Macerich Company (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, 2003, the Operating Partnership owned or had an ownership interest in 58 regional shopping centers, 18 community shopping centers and two development properties aggregating approximately 58 million square feet of gross leasable area ("GLA"). These 78 regional, community and development shopping centers are referred to hereinafter as the "Centers", 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, Westcor Partners, LLC, a single member Arizona limited liability company, Macerich Westcor Management, LLC, a single member Delaware limited liability company and Westcor Partners of Colorado, LLC, a Colorado limited liability company. The three Westcor management companies are collectively referred to as the "Westcor Management Companies."

The Company was organized as a Maryland corporation in September 1993 to continue and expand the shopping center operations of Mace Siegel, Arthur M. Coppola, Dana K. Anderson and Edward C. Coppola and certain of their business associates.

All references to the Company in this Form 10-K include the Company, those entities owned or controlled by the Company and predecessors of the Company, unless the context indicates otherwise.

Recent Developments

A. Acquisitions

On January 31, 2003, the Company purchased its joint venture partner's 50% interest in FlatIron Crossing. The purchase price consisted of approximately $68.3 million in cash plus the assumption of the joint venture partner's share of debt of $90.0 million.

On September 15, 2003, the Company acquired Northridge Mall, an 864,071 square foot super-regional mall in Salinas, California. The total purchase price was $128.5 million and was funded by sale proceeds from Bristol Center (see "Dispositions") and borrowings under the Company's line of credit.

On December 18, 2003, the Company acquired Biltmore Fashion Park, a 610,477 square foot regional mall in Phoenix, Arizona. The total purchase price was $158.5 million, which included the assumption of $77.4 million of debt. The Company also issued 705,636 partnership units of the Operating Partnership at a price of $42.80 per unit. The balance of the Company's 50% share of the purchase price of $10.5 million was

The Macerich Company 1

funded by cash and borrowings under the Company's line of credit. Biltmore Fashion Park is owned in a ⁵⁰/50 partnership with an institutional partner.

On January 30, 2004, the Company, in a 50/50 joint venture with a private investment company, acquired Inland Center, a 1 million square foot super-regional mall in San Bernardino, California. The total purchase price was $63.3 million and concurrently with the acquisition, the joint venture placed a $54 million fixed rate loan on the property. The Company's share of the remainder of the purchase price was funded by cash and borrowings under the Company's line of credit.

B. Financing Activitiy

On May 13, 2003, the Company issued $250 million in unsecured notes maturing in May 2007 with a one-year extension option bearing interest at LIBOR plus 2.50%. The proceeds were used to pay down and create more availability under the Company's line of credit. In October 2003, the Company entered into an interest rate swap agreement which will effectively fix the interest rate at 4.45% from November 2003 to October 13, 2005.

On August 7, 2003, the Company paid off the loan at Greeley Mall and placed a new $30.0 million ten-year fixed rate loan on the property with an interest rate of 6.18%.

In September 2003, the Company replaced floating rate loans at Chandler Festival and Chandler Gateway with new five year fixed rate loans of $32.0 million and $20.0 million, respectively.

On November 4, 2003, the Company closed on a $200 million fixed rate ten-year loan on FlatIron Crossing bearing interest at 5.23%. Loan proceeds were used to pay off a $180 million floating rate loan secured by the property.

The Company has reached agreement on an $85.0 million, five-year fixed rate loan with an interest rate of 4.63% on Northridge Mall. The rate on the loan is locked and this financing is expected to close in April 2004. Loan proceeds are expected to pay down the Company's unsecured floating rate debt.

C. Redevelopment and Development Activity

At Queens Center, the redevelopment and expansion continued. The project will increase the size of the center from 622,297 square feet to approximately 1 million square feet. Completion is planned in phases starting in 2004 with stabilization expected in 2005.

At Lakewood Mall, Target opened a two-level Target store in the location formerly occupied by Montgomery Ward in October 2003.

At Redmond Town Center, Bon Marche opened a new department store in July 2003.

Construction continues at Scottsdale 101, a 420,824 square foot power center in north Phoenix and construction also continues at La Encantada, a 255,325 square foot specialty center in Tucson, Arizona. Both of these projects are planned to open in phases through 2004.

2 The Macerich Company

At Somersville Town Center in Antioch, California, a new 106,685 square foot Macy's store is under construction and is expected to open in the fall of 2004.

Nordstrom announced plans to open a 144,000 square foot store at The Oaks Mall in Thousand Oaks, California. This store opening is planned in conjunction with an expansion of the existing mall tentatively scheduled to open in 2007.

D. Dispositions

On January 2, 2003, the Company sold its 67% interest in Paradise Village Gateway, a 296,153 square foot Phoenix area urban village, for approximately $29.4 million. The proceeds from the sale were used to repay a portion of the Company's term loan. The sale resulted in a loss on sale of asset of $0.2 million.

On May 15, 2003, the Company sold 49.9% of its partnership interest in the Village at Corte Madera for a total purchase price of approximately $65.9 million, which included the assumption of a proportionate amount of the partnership debt in the amount of approximately $34.7 million. The Company is retaining a 50.1% partnership interest and will continue leasing and managing the asset. The sale resulted in a gain on sale of asset of $8.8 million.

On June 6, 2003, the Shops at Gainey Village, a 138,000 square foot Phoenix area specialty center, was sold for $55.7 million. The Company, which owned 50% of this property, received total proceeds of $15.8 million and recorded a gain on sale of asset of $2.8 million.

On August 4, 2003, the Company sold Bristol Center, a 161,000 square foot community center in Santa Ana, California. The sales price was approximately $30.0 million and the Company recorded a gain on sale of asset of $22.2 million which is reflected in discontinued operations.

The Shopping Center Industry

General

There are several types of retail shopping centers, which are differentiated primarily based on size and marketing strategy. Regional shopping centers generally contain in excess of 400,000 square feet of GLA and are typically anchored by two or more department or large retail stores ("Anchors") and are referred to as "Regional Shopping Centers" or "Malls". Regional Shopping Centers also typically contain numerous diversified retail stores ("Mall Stores"), most of which are national or regional retailers typically located along corridors connecting the Anchors. Community Shopping Centers, also referred to as "strip centers" or "urban villages" 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. In addition, freestanding retail stores are located along the perimeter of the shopping centers ("Freestanding Stores"). Anchors, Mall 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.

The Macerich Company 3

Regional Shopping Centers

A Regional Shopping Center draws from its trade area by offering a variety of fashion merchandise, hard goods and services and entertainment, often in an enclosed, climate controlled environment with convenient parking. Regional Shopping Centers provide an array of retail shops and entertainment facilities and often serve as the town center and the preferred gathering place for community, charity, and promotional events.

Regional Shopping Centers have generally provided owners with relatively stable growth in 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. Anchor tenants 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 gross leasable area 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 four-pronged business strategy which focuses on the acquisition, leasing and management, redevelopment and development of Regional Shopping Centers.

Acquisitions. The Company focuses on well-located, quality regional shopping centers that are or can be dominant in their trade area and have strong capital appreciation potential. The Company subsequently improves operating performance and returns from these properties through leasing, management and redevelopment. Since its initial public offering ("IPO"), 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, 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 to be responsive to the needs of retailers.

4 The Macerich Company

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. Leasing managers are charged with more than the responsibility of leasing space. 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 also does property management and leasing for third parties. The Company currently manages three malls for third party owners on a fee basis. In addition, the Company manages eight community centers for a related party. (See—"Item 13—Certain Relationships and Related Transactions").

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 professionals who have primary responsibility for identifying redevelopment opportunities that 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 is pursuing ground-up development projects on a selective basis. The Company believes it can supplement 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").

The Centers. As of December 31, 2003, the Centers consist of 58 Regional Shopping Centers, 18 Community Shopping Centers and two development properties aggregating approximately 58 million square feet of GLA. The 58 Regional Shopping Centers in the Company's portfolio average approximately 924,209 square feet of GLA and range in size from 2.1 million square feet of GLA at Lakewood Mall to 328,341 square feet of GLA at Panorama Mall. The Company's 18 Community Shopping Centers have an average of 219,093 square feet of GLA. The 58 Regional Shopping Centers presently include 241 Anchors totaling approximately 31.3 million square feet of GLA and approximately 8,000 Mall and Freestanding Stores totaling approximately 27.1 million square feet of GLA.

Total revenues, including joint ventures at their pro rata share of $243.2 million in 2003 and $212.7 million in 2002, increased to $729.2 million in 2003 from $585.2 million in 2002 primarily due to the 2002 acquisitions of The Oaks and the Westcor portfolio. See "Management's Discussion and Analysis of Financial Condition and Results of Operations." No Center generated more than 10% of total shopping center revenues during 2003 and 2002.

Cost of Occupancy

The Company's management believes that in order to maximize the Company's operating cash flow, the Centers' Mall Store tenants must be able to operate profitably. A major factor contributing to tenant profitability

The Macerich Company 5

is cost of occupancy. The following table summarizes occupancy costs for Mall Store tenants in the Centers as a percentage of total Mall Store sales for the last three years:

	For the years ended December 31,
	2001		2002		2003

Minimum rents	7.7	%	8.4	%	8.4	%
Percentage rents	0.4	%	0.3	%	0.4	%
Expense recoveries(1)	3.1	%	3.4	%	3.4	%

Mall tenant occupancy costs	11.2	%	12.1	%	12.2	%

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

Competition

There are numerous owners and developers of real estate that compete with the Company in its trade areas. There are nine other publicly traded mall companies and several large private mall companies, any of which under certain circumstances could compete against the Company for an acquisition, an Anchor or a tenant. This results in competition for both acquisition of centers and for tenants or Anchors to occupy space. The existence of competing shopping centers could have a material impact on the Company's ability to lease space and on the level of rent that can be achieved. There is also increasing competition from other retail formats and technologies, such as lifestyle centers, power centers, internet shopping and home shopping networks, factory outlet centers, discount shopping clubs and mail-order services that could adversely affect the Company's revenues.

Major Tenants

The Centers derived approximately 93.6% of their total rents for the year ended December 31, 2003 from Mall and Freestanding Stores. One tenant accounted for approximately 4.3% of minimum rents of the Company, and no other single tenant accounted for more than 3.2% as of December 31, 2003.

6 The Macerich Company

The following tenants (including their subsidiaries) represent the 10 largest tenants in the Company's portfolio (including joint ventures) based upon minimum rents in place as of December 31, 2003:

Tenant	Number of Locations in the Portfolio	% of Total Minimum Rents as of December 31, 2003

Limited Brands, Inc.	192	4.3%
The Gap, Inc.	91	3.2%
AT&T Wireless Services (1)	17	2.1%
Foot Locker, Inc.	125	2.0%
J.C. Penney Company, Inc.	39	1.4%
Luxottica Group, Inc.	106	1.1%
Zale Corporation	91	1.1%
Sun Capital Partners, Inc.	55	1.0%
Federated Department Stores	25	0.9%
Abercrombie & Fitch	28	0.9%

(1): Includes AT&T Wireless Office headquarters located at Redmond Town Center.

Mall and Freestanding Stores

Mall and Freestanding Store leases generally provide for tenants to pay rent comprised of a fixed base (or "minimum") rent and a percentage rent based on sales. In some cases, tenants pay only a fixed minimum rent, and in some cases, tenants pay only percentage rents. Most leases for Mall and Freestanding Stores contain provisions that allow the Centers to recover their costs for maintenance of the common areas, property taxes, insurance, advertising and other expenditures related to the operations of the Center.

The Company uses tenant spaces of 10,000 square feet and under for comparing rental rate activity. Tenant space of 10,000 square feet and under in the portfolio at December 31, 2003 comprises 61.9% of all Mall and Freestanding Store space. The Company believes that to include space over 10,000 square feet would provide a less meaningful comparison.

When an existing lease expires, the Company is often able to enter into a new lease with a higher base rent component. The average base rent for new Mall and Freestanding Store leases, 10,000 square feet and under, commencing during 2003 was $36.96 per square foot, or 17.1% higher than the average base rent for all Mall and Freestanding Stores (10,000 square feet and under) at December 31, 2003 of $31.55 per square foot.

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The following table sets forth for the Centers the average base rent per square foot of Mall and Freestanding GLA, for tenants 10,000 square feet and under, as of December 31 for each of the past three years:

December 31,	Average Base Rent Per Square Foot(1)	Average Base Rent Per Sq. Ft. on Leases Commencing During the Year(2)	Average Base Rent Per Sq. Ft. on Leases Expiring During the Year(3)

2001	$28.13	$33.33	$27.12
2002	$30.66	$38.90	$31.06
2003	$31.55	$36.96	$30.87

(1): Average base rent per square foot is based on Mall and Freestanding Store GLA for spaces 10,000 square feet and under occupied as of December 31 for each of the Centers owned by the Company in 2001, 2002 and 2003.
(2): The average base rent on lease signings commencing during the year represents the actual rent to be paid on a per square foot basis during the first twelve months. Additionally, lease signings for the expansion area of Queens Center, Scottsdale 101 and La Encantada are excluded.
(3): The average base rent per square foot on leases expiring during the year represents the final year minimum rent, on a cash basis, for all tenant leases 10,000 square feet and under expiring during the year.

Bankruptcy and/or Closure of Retail Stores

A decision by an Anchor or a significant tenant to cease operations at a Center could have an adverse effect on the Company's financial condition. The bankruptcy and/or closure of an Anchor, or its sale to a less desirable retailer, could adversely affect customer traffic in a Center and thereby reduce the income generated by that Center or otherwise adversely affect the Company's financial position. Furthermore, the closing of an Anchor could, under certain circumstances, allow certain other Anchors or other tenants to terminate their leases or cease operating their stores at the Center or otherwise adversely affect occupancy at the Center. In addition, mergers, acquisitions, consolidations or dispositions in the retail industry could result in the loss of Anchors or tenants at one or more Centers.

Retail stores at the Centers other than Anchors may also seek the protection of the bankruptcy laws and/or close stores, which could result in the termination of such tenants' leases and thus cause a reduction in the cash flow generated by the Centers. Although no single retailer accounts for greater than 4.3% of total minimum rents, the bankruptcy and/or closure of stores could result in decreased occupancy levels, reduced rental income or otherwise adversely impact the Centers. Although certain tenants have filed for bankruptcy, the Company does not believe such filings and any subsequent closures of their stores will have a material adverse impact on its operations.

8 The Macerich Company

Lease Expirations

The following table shows scheduled lease expirations (for Centers owned as of December 31, 2003, except as otherwise noted) of Mall and Freestanding Stores 10,000 square feet and under for the next ten years, assuming that none of the tenants exercise renewal options:

Year Ending December 31,	Number of Leases Expiring	Approximate GLA of Expiring Leases (1)	Leased GLA Represented by Expiring Leases (2)	Base Rent per Square Foot of Expiring Leases (1)

2004	620	957,125	10.03%	$28.99
2005	682	1,123,900	11.78%	$30.17
2006	653	1,088,258	11.41%	$31.03
2007	590	1,035,605	10.85%	$30.48
2008	582	932,905	9.78%	$33.78
2009	419	721,330	7.56%	$35.29
2010	497	892,698	9.36%	$37.25
2011	528	1,089,329	11.42%	$37.78
2012	379	810,971	8.50%	$34.22
2013	265	491,215	5.15%	$36.61

(1): Includes joint ventures at pro rata share. Currently, 29% of leases have provisions for using an annual multiple of future consumer price index increases which are not reflected in ending lease rent.
(2): For leases 10,000 square feet and under.

Anchors

Anchors have traditionally been a major factor in the public's identification with Regional Shopping Centers. Anchors are generally department stores whose merchandise appeals to a broad range of shoppers. Although the Centers receive a smaller percentage of their operating income from Anchors than from Mall and Freestanding Stores, strong Anchors play an important part in maintaining customer traffic and making the Centers desirable locations for Mall 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 and Freestanding Stores. Each Anchor, which owns its own store, and certain Anchors which 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 rent for the year ended December 31, 2003.

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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, 2003:

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

J.C. Penney			39	1,812,276	3,434,954	5,247,230
Sears			38	2,917,603	1,903,705	4,821,308
Target Corp.
	Marshall Field's		2	115,193	100,790	215,983
	Mervyn's		18	813,761	627,412	1,441,173
	Target		10	514,782	651,675	1,166,457

		Total	30	1,443,736	1,379,877	2,823,613
Federated Department Stores
	Macy's(1)		21	2,426,653	1,022,026	3,448,679
	Lazarus		1	159,068	—	159,068
	The Bon Marche		4	—	341,625	341,625

		Total	26	2,585,721	1,363,651	3,949,372
May Department Stores Co.
	Robinsons-May		13	1,482,668	919,491	2,402,159
	Foley's		5	905,316	—	905,316
	Hechts		2	140,000	143,426	283,426
	Famous Barr		1	180,000	—	180,000
	Lord and Taylor		1	120,000	—	120,000
	Meier & Frank		2	242,505	200,000	442,505

		Total	24	3,070,489	1,262,917	4,333,406
Dillard's(2)			26	3,066,974	818,202	3,885,176
Saks, Inc.
	Saks Fifth Avenue		1	—	92,000	92,000
	Younker's		6	—	609,177	609,177
	Herberger's		5	269,969	202,778	472,747

		Total	12	269,969	903,955	1,173,924
Nordstrom			8	530,016	728,369	1,258,385
Gottschalks			6	332,638	333,772	666,410
Burlington Coat Factory			3	186,570	100,709	287,279
Von Maur			3	186,686	59,563	246,249
Belk			2	—	149,685	149,685
Best Buy			2	129,441	—	129,441
Boscov's			2	—	314,717	314,717
Wal-Mart			2	281,455	—	281,455
Beall's			1	—	40,000	40,000
Gordman's			1	—	60,000	60,000
Home Depot (Expo Design Center)			2	—	234,403	234,403
Kohl's			1	—	119,566	119,566
The Limited Inc. (Gaylans Trading Company)			1	—	97,241	97,241
Lowe's			1	135,197	—	135,197
Neiman Marcus Group, Inc. The			1	—	100,071	100,071
Peebles			1	—	42,090	42,090
Vacant			9	620,735	318,145	938,880

			241	17,569,506	13,765,592	31,335,098

(1): Federated Department Stores is scheduled to open a new 106,685 square foot Macy's store at Somersville Town Center in the fall of 2004.
(2): The Dillard's at SouthPark Mall is planned for a September 2004 opening.

10 The Macerich Company

Environmental Matters

Under various federal, state and local laws, ordinances and regulations, a current or prior owner or operator of real estate may be liable for the costs of removal or remediation of certain hazardous or toxic substances on, under or in such property. Such laws often impose such liability without regard to whether the owner or operator knew of, or was responsible for, the presence of such hazardous or toxic substances. The costs of investigation, removal or remediation of such substances may be substantial, and the presence of such substances, or the failure to properly remediate such substances, may adversely affect the owner's or operator's ability to sell or rent such property or to borrow using such property as collateral. Persons or entities who arrange for the disposal or treatment of hazardous or toxic substances may also be liable for the costs of removal or remediation of a release of such substances at a disposal or treatment facility, whether or not such facility is owned or operated by such person or entity. Certain environmental laws impose liability for release of asbestos-containing materials ("ACMs") into the air and third parties may seek recovery from owners or operators of real properties for personal injury associated with exposure to ACMs. In connection with the ownership (direct or indirect), operation, management and development of real properties, the Company may be considered an owner or operator of such properties or as having arranged for the disposal or treatment of hazardous or toxic substances and therefore potentially liable for removal or remediation costs, as well as certain other related costs, including governmental fines and injuries to persons and property.

Each of the Centers has been subjected to a Phase I audit (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 audits, and on other information, the Company is aware of the following environmental issues that are reasonably possible to result in costs associated with future investigation or remediation, or in environmental liability:

•: Asbestos. The Company has conducted ACM surveys at various locations within the Centers. The surveys indicate that ACMs are present or suspected in certain areas, primarily vinyl floor tiles, mastics, roofing materials, drywall tape and joint compounds. The identified ACMs are generally non-friable, in good condition, and possess low probabilities for disturbance. At certain Centers where ACMs are present or suspected, however, some ACMs have been or may be classified as "friable," and ultimately may require removal under certain conditions. The Company has developed and implemented an operations and maintenance (O&M) plan to manage ACMs in place.
•: Underground Storage Tanks. Underground storage tanks ("USTs") are or were present at certain of the Centers, often in connection with tenant operations at gasoline stations or automotive tire, battery and accessory service centers located at such Centers. USTs also may be or have been present at properties neighboring certain Centers. Some of these tanks have either leaked or are suspected to have leaked. Where leakage has occurred, investigation, remediation, and monitoring costs may be incurred by the Company if responsible current or former tenants, or other responsible parties, are unavailable to pay such costs.

The Macerich Company 11

•: Chlorinated Hydrocarbons. The presence of chlorinated hydrocarbons such as perchloroethylene ("PCE") and its degradation byproducts have been detected at certain of the Centers, often in connection with tenant dry cleaning operations. Where PCE has been detected, the Company may incur investigation, remediation and monitoring costs if responsible current or former tenants, or other responsible parties, are unavailable to pay such costs.

PCE has been detected in soil and groundwater in the vicinity of a dry cleaning establishment at North Valley Plaza, formerly owned by a joint venture of which the Company was a 50% member. The property was sold on December 18, 1997. The California Department of Toxic Substances Control ("DTSC") advised the Company in 1995 that very low levels of Dichloroethylene ("1,2 DCE"), a degradation byproduct of PCE, had been detected in a municipal water well located ¹/4 mile west of the dry cleaners, and that the dry cleaning facility may have contributed to the introduction of 1,2 DCE into the water well. According to DTSC, the maximum contaminant level ("MCL") for 1,2 DCE which is permitted in drinking water is 6 parts per billion ("ppb"). The 1,2 DCE was detected in the water well at a concentration of 1.2 ppb, which is below the MCL. The Company has retained an environmental consultant and has initiated extensive testing of the site. The joint venture agreed (between itself and the buyer) that it would be responsible for continuing to pursue the investigation and remediation of impacted soil and groundwater resulting from releases of PCE from the former dry cleaner. A total of $77,803 and $211,092 have already been incurred by the joint venture for remediation, professional and legal fees for the years ending December 31, 2003 and 2002, respectively. The joint venture has been sharing costs with former owners of the property.

The Company acquired Fresno Fashion Fair in December 1996. Asbestos was detected in structural fireproofing throughout much of the Center. Testing data conducted by professional environmental consulting firms indicates that the fireproofing is largely inaccessible to building occupants and is well adhered to the structural members. Additionally, airborne concentrations of asbestos were well within OSHA's permissible exposure limit ("PEL") of .1 fcc. The accounting at acquisition included a reserve of $3.3 million to cover future removal of this asbestos, as necessary. The Center was recently renovated and a substantial amount of the asbestos was removed. The Company incurred $1,622,269 and $247,478 in remediation costs for the years ending December 31, 2003 and 2002, respectively. An additional $0.7 million remains reserved at December 31, 2003.

Insurance

The Centers have comprehensive liability, fire, flood, terrorism, extended coverage and rental loss insurance. The Company or the joint venture owner, as applicable, also currently carries earthquake insurance covering the Centers located in California. Such 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 $200 million on the Centers located in California. Management believes that such insurance policies have specifications and insured limits customarily carried for similar properties. See—"Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations—Uninsured Losses."

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

12 The Macerich Company

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, 2003, the Company and the management companies employ 2,175 persons, including eight executive officers, personnel in the areas of acquisitions and business development (9), property management (762), leasing (100), redevelopment/construction (34), development (21), financial services (135) and legal affairs (55). In addition, in an effort to minimize operating costs, the Company generally maintains its own security staff (972) and maintenance staff (79). A union represents 13 of these employees. The Company believes that relations with its employees are good.

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 Securities and Exchange Commission. These reports are available under the heading "Investing—SEC Filings," through a free hyperlink to a third-party service.

The following documents relating to Corporate Governance are available on the Company's website at www.macerich.com under "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 North Wilshire Blvd., Suite 700
Santa Monica, CA 90401

The Macerich Company 13

Item 2. Properties

Company's Ownership	Name of Center/ Location(1)	Year of Original Construction/ Acquisition	Year of Most Recent Expansion/ Renovation	Total GLA(2)	Mall and Freestanding GLA	Percentage of Mall and Freestanding GLA Leased	Anchors	Sales Per Square Foot(3)

33%	Arrowhead Towne Center Glendale, Arizona	1993/2002	—	1,131,983	393,569	94.2%	Dillard's, Robinsons-May, J.C. Penney, Sears, Mervyn's	$424
50%	Biltmore Fashion Park Phoenix, Arizona	1963/2003	1993	610,477	305,477	89.9%	Macy's, Saks Fifth Avenue	490
50%	Broadway Plaza(4) Walnut Creek, California	1951/1985	1994	698,020	252,523	99.4%	Macy's (two), Nordstrom	676
100%	Capitola Mall(4) Capitola, California	1977/1995	1988	586,669	196,952	97.8%	Gottschalks, Macy's, Mervyn's, Sears	320
100%	Carmel Plaza Carmel, California	1974/1998	1993	114,958	114,958	91.8%	—	385
100%	Chandler Fashion Center Chandler, Arizona	2001/2002	—	1,268,056	619,933	99.0%	Dillard's, Robinsons-May, Nordstrom, Sears	400
100%	Chesterfield Towne Center Richmond, Virginia	1975/1994	1997	1,035,057	424,668	96.0%	Dillard's (two), Hechts, Sears, J.C. Penney	330
100%	Citadel, The Colorado Springs, Colorado	1972/1997	1995	1,048,050	452,710	83.8%	Dillard's, Foley's, J.C. Penney, Mervyn's	302
50.1%	Corte Madera, Village at(5) Corte Madera, California	1985/1998	1994	430,351	212,351	95.7%	Macy's, Nordstrom	466
100%	Crossroads Mall Oklahoma City, Oklahoma	1974/1994	1991	1,266,413	526,725	89.1%	Dillard's, Foley's, J.C. Penney(6)	239
50%	Desert Sky Mall Phoenix, Arizona	1981/2002	1993	897,319	302,730	90.7%	Sears, Dillard's, Burlington Coat Factory, Mervyn's(6)	258
100%	Flagstaff Mall Flagstaff, Arizona	1979/2002	1986	354,132	150,120	99.7%	Dillard's, J.C. Penney, Sears	313
100%	FlatIron Crossing(7) Broomfield, Colorado	2000/2002	—	1,544,397	780,656	97.1%	Dillard's, Foley's, Nordstrom, Lord & Taylor, Galyan's Trading Co.	375
100%	Fresno Fashion Fair Fresno, California	1970/1996	2003	870,900	310,019	99.3%	Gottschalks, J.C. Penney, Macy's (two)	442
100%	Great Falls Marketplace Great Falls, Montana	1997/1997	—	215,024	215,024	97.5%	—	183
100%	Greeley Mall Greeley, Colorado	1973/1986	2003	548,407	278,503	94.7%	Dillard's (two), J.C. Penney, Sears	245
100%	Green Tree Mall Clarksville, Indiana	1968/1975	1995	781,057	337,061	82.5%	Dillard's, J.C. Penney, Sears, Target	332

14 The Macerich Company

100%	Holiday Village Mall(4) Great Falls, Montana	1959/1979	1992	566,345	262,507	71.2%	Herberger's, J.C. Penney, Sears(6)	$218
100%	Northgate Mall San Rafael, California	1964/1986	1987	741,239	270,908	88.8%	Macy's, Mervyn's, Sears	354
100%	Northridge Mall Salinas, California	1972/2003	1994	864,071	327,091	96.8%	J.C. Penney, Macy's, Mervyn's, Sears	351
100%	Northwest Arkansas Mall Fayetteville, Arkansas	1972/1998	1997	819,729	306,059	97.8%	Dillard's (two), J.C. Penney, Sears	316
100%	Pacific View Ventura, California	1965/1996	2001	1,044,236	410,422	98.9%	J.C. Penney, Macy's, Robinsons-May, Sears	361
100%	Panorama Mall Panorama, California	1955/1979	1980	328,341	163,341	100.0%	Wal-Mart	318
100%	Paradise Valley Mall Phoenix, Arizona	1979/2002	1990	1,223,217	417,789	98.2%	Dillard's, J.C. Penney, Macy's, Robinsons-May, Sears	319
100%	Prescott Gateway Prescott, Arizona	2002/2002	2002	547,335	303,147	81.8%	Dillard's, Sears, J.C. Penney	210
100%	Queens Center(13) Queens, New York	1973/1995	2003 ongoing	622,297	154,154	100.0%	J.C. Penney, Macy's	816
100%	Rimrock Mall Billings, Montana	1978/1996	1980	612,629	297,189	94.3%	Dillard's (two), Herberger's, J.C. Penney	296
100%	Salisbury, Centre at Salisbury, Maryland	1990/1995	1990	878,770	273,789	94.3%	Boscov's, J.C. Penney, Hechts, Sears(6)	358
100%	Santa Monica Place Santa Monica, California	1980/1999	1990	560,685	277,435	70.5%	Macy's, Robinsons-May	349
50%	Scottsdale Fashion Square(10) Scottsdale, Arizona	1961/2002	1998	2,031,025	829,606	94.1%	Dillard's, Robinsons-May, Macy's, Nordstrom, Neiman Marcus	520
100%	Somersville Towne Center Antioch, California	1966/1986	1989	503,456	175,234	88.2%	Sears, Gottschalks, Macy's Mervyn's(8)	299
100%	South Plains Mall Lubbock, Texas	1972/1998	1995	1,143,557	401,770	92.9%	Beall's, Dillard's (two), J.C. Penney, Meryvn's, Sears	327
100%	South Towne Center Sandy, Utah	1987/1997	1997	1,268,686	492,174	93.8%	Dillard's, J.C. Penney, Mervyn's, Target, Meier & Frank	326
33%	Superstition Springs Center(4) Mesa, Arizona	1990/2002	2002	1,265,330	418,791	92.5%	Burlington Coat Factory, Dillard's, Robinsons-May, J.C. Penney, Sears, Mervyn's, Best Buy	353

The Macerich Company 15

100%	The Oaks Thousand Oaks, California	1978/2002	1993	1,082,863	356,788	96.5%	J.C. Penney, Macy's (two), Robinsons-May (two)	$468
100%	Valley View Center Dallas, Texas	1973/1997	1996	1,573,850	515,953	93.0%	Dillard's, Foley's, J.C. Penney, Sears	269
100%	Vintage Faire Mall Modesto, California	1977/1996	2001	1,079,843	379,924	98.5%	Gottschalks, J.C. Penney, Macy's (two), Sears	429
19%	West Acres Fargo, North Dakota	1972/1986	2001	951,290	398,735	99.8%	Marshall Field's, Herberger's, J.C. Penney, Sears	377
100%	Westside Pavilion Los Angeles, California	1985/1998	2000	758,077	399,949	81.7%	Nordstrom, Robinsons-May	410

	Total/Average			33,868,141	13,706,734	93.0%		$373

PACIFIC PREMIER RETAIL TRUST PROPERTIES:
51%	Cascade Mall Burlington, Washington	1989/1999	1998	587,942	263,706	90.9%	The Bon Marche (two), J.C. Penney, Sears, Target	$322
51%	Kitsap Mall Silverdale, Washington	1985/1999	1997	844,553	334,570	93.7%	The Bon Marche, J.C. Penney, Gottschalks, Mervyn's, Sears	399
51%	Lakewood Mall Lakewood, California	1953/1975	2001	2,092,903	984,919	97.5%	Home Depot, Target, J.C. Penney, Macy's, Mervyn's, Robinsons-May	355
51%	Los Cerritos Center Cerritos, California	1971/1999	1998	1,287,823	486,542	96.8%	Macy's, Mervyn's, Nordstrom, Robinsons-May, Sears	444
51%	Redmond Town Center(10)(4) Redmond, Washington	1997/1999	2000	1,283,915	1,173,915	96.7%	The Bon Marche(11)	342
51%	Stonewood Mall(4) Downey, California	1953/1997	1991	940,093	369,346	95.7%	J.C. Penney, Mervyn's, Robinsons-May, Sears	362
51%	Washington Square Portland, Oregon	1974/1999	1995	1,357,493	423,157	94.1%	J.C. Penney, Meier & Frank, Mervyn's, Nordstrom, Sears	553

	Total/Average Pacific Premier Retail Trust Properties			8,394,722	4,036,155	95.9%		$402

16 The Macerich Company

SDG MACERICH PROPERTIES, L.P. PROPERTIES:
50%	Eastland Mall(4) Evansville, Indiana	1978/1998	1996	1,074,240	541,285	97.8%	Famous Barr, J.C. Penney, Lazarus(6)	$369
50%	Empire Mall(4) Sioux Falls, South Dakota	1975/1998	2000	1,338,439	587,710	89.9%	Marshall Field's, J.C. Penney, Gordman's, Kohl's, Sears, Target, Younker's	360
50%	Granite Run Mall Media, Pennsylvania	1974/1998	1993	1,047,167	546,358	93.5%	Boscov's, J.C. Penney, Sears	290
50%	Lake Square Mall Leesburg, Florida	1980/1998	1995	560,967	264,930	85.8%	Belk, J.C. Penney, Sears, Target	274
50%	Lindale Mall Cedar Rapids, Iowa	1963/1998	1997	690,450	384,887	90.2%	Sears, Von Maur, Younker's	311
50%	Mesa Mall Grand Junction, Colorado	1980/1998	1991	865,021	439,204	93.7%	Herberger's, J.C. Penney, Mervyn's, Sears, Target	318
50%	NorthPark Mall Davenport, Iowa	1973/1998	2001	1,061,993	410,460	88.5%	J.C. Penney, Dillard's, Sears, Von Maur, Younker's	247
50%	Rushmore Mall Rapid City, South Dakota	1978/1998	1992	833,218	428,558	98.3%	Herberger's, J.C. Penney, Sears, Target	296
50%	Southern Hills Mall Sioux City, Iowa	1980/1998	—	795,379	481,802	91.7%	Sears, Younker's(6)	300
50%	SouthPark Mall Moline, Illinois	1974/1998	1990	1,026,053	447,997	86.8%	Dillard's(9), J.C. Penney, Sears, Younker's, Von Maur	216
50%	SouthRidge Mall Des Moines, Iowa	1975/1998	1998	987,044	489,238	81.6%	Sears, Younker's, J.C. Penney, Target(6)	195
50%	Valley Mall Harrisonburg, Virginia	1978/1998	1992	487,429	179,631	98.3%	Belk, J.C. Penney, Wal-Mart, Peebles	272

	Total/Average SDG Macerich Properties, L.P. Properties			10,767,400	5,202,060	91.2%		$291

SPECIALTY RETAIL:
100%	Borgata Scottsdale, Arizona	1981/2002	—	88,740	88,740	87.3%	—	$376
50%	Hilton Village(4)(10) Scottsdale, Arizona	1982/2002	—	96,641	96,641	91.8%	—	418

Specialty Retail				185,381	185,381	89.6%		$395

	Total/Average before Urban Villages			53,215,644	23,130,330	93.1%		$361

The Macerich Company 17

URBAN VILLAGES:
50%	Arizona Lifestyles Galleries Phoenix, Arizona	1982/2002	—	125,092	125,092	98.2%	—	$493
75%	Camelback Colonnade Phoenix, Arizona	1961/2002	1994	624,287	544,287	97.0%	Mervyn's	271
50%	Chandler Festival Chandler, Arizona	2001/2002	—	503,735	368,538	98.6%	Lowe's	252
50%	Chandler Gateway Chandler, Arizona	2001/2002	2002	257,452	124,252	90.2%	The Great Indoors	335
50%	Paradise Village Office Park II(10) Phoenix, Arizona	1982/2002	—	47,466	47,466	93.0%	—	N/A
50%	Promenade Sun City, Arizona	1983/2002	—	70,125	70,125	79.0%	—	198
50%	Village Center Phoenix, Arizona	1985/2002	—	170,801	59,055	90.4%	Target	240
50%	Village Crossroads Phoenix, Arizona	1993/2002	—	187,335	86,626	97.6%	Burlington Coat Factory	365
50%	Village Fair Phoenix, Arizona	1989/2002	—	271,417	207,817	92.7%	Best Buy	213
100%	Village Plaza Phoenix, Arizona	1978/2002	—	81,830	81,830	98.7%	—	266
100%	Village Square I Phoenix, Arizona	1978/2002	—	21,606	21,606	100.0%	—	167
100%	Village Square II Phoenix, Arizona	1978/2002	—	146,193	70,393	100.0%	Mervyn's	184
100%	Westbar Phoenix, Arizona	1973/2002	—	758,549	758,549	94.1%	—	141

	Total/Average Urban Villages			3,265,888	2,565,636	95.2%	$252

	Total before major development and redevelopment properties and other assets			56,481,532	25,695,966	93.3%	$356

MAJOR DEVELOPMENT AND REDEVELOPMENT PROPERTIES:
50%	Chandler Blvd. Shops Chandler, Arizona	2001/2002	2003	162,430	162,430	(12)	—	N/A
100%	Crossroads Mall(4) Boulder, Colorado	1963/1979	1998 ongoing	533,909	215,472	(12)	Foley's(6)	N/A
100%	La Encantada Tucson, Arizona	2002/2002	2003 ongoing	255,325	255,325	(12)	—	N/A
100%	Park Lane Mall(4) Reno, Nevada	1967/1978	1998 ongoing	369,922	240,202	(12)	Gottschalks	N/A
46%	Scottsdale 101(4) Phoenix, Arizona	2002/2002	2003 ongoing	420,824	319,449	(12)	Expo Design Center	N/A

	Total Major Development and Redevelopment Properties			1,742,410	1,192,878

OTHER ASSETS:
50%	Paradise Village Investment Co. ground leases	—/2002		169,740	169,740	100%	—	N/A

	Total Other Assets			169,740	169,740

	Grand Total at December 31, 2003			58,393,682	27,058,584

18 The Macerich Company

(1): With respect to 66 Centers, the underlying land controlled by the Company is owned in fee entirely by the Company, or, in the case of jointly-owned Centers, by the joint venture property partnership or limited liability company. With respect to the remaining 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 2005 to 2132.
(2): Includes GLA attributable to Anchors (whether owned or non-owned) and Mall and Freestanding Stores as of December 31, 2003.
(3): Sales are based on reports by retailers leasing Mall and Freestanding Stores for the twelve months ending December 31, 2003 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, excluding theaters, that occupied their space for the entire year.
(4): Portions of the land on which the Center is situated are subject to one or more ground leases.
(5): On May 15, 2003, the Company sold 49.9% of its partnership interest to a joint venture partner.
(6): These properties have a vacant Anchor location. The Company is contemplating various replacement tenant/redevelopment opportunities for these vacant sites.
(7): On January 31, 2003, the Company purchased its joint venture partner's 50% interest in this Center for approximately $68.3 million in cash plus the assumption of the Company's joint venture partner's share of debt.
(8): Federated Department Stores is scheduled to open a new 106,685 square foot Macy's store in Fall 2004.
(9): The Dillard's at SouthPark is planned for a September 2004 opening.
(10): The office portion of this mixed-use development does not have retail sales.
(11): Federated Department Stores opened a new 110,000 square foot Bon Marche store at Redmond Town Center in July 2003.
(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 and the sales per square foot at these major redevelopment properties is not meaningful data.
(13): Queens Center is currently under expansion. The project will increase the size of the center from 622,297 square feet to approximately 1 million square feet. Completion is planned in phases starting in 2004 with stabilization expected in 2005. The data provided respresents information concerning the portion of the Center that is not under expansion.

The Macerich Company 19

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, 2003.

Debt premiums represent the excess of the fair value of debt over the principal value of debt assumed in various acquisitions subsequent to March, 1994 (with interest rates ranging from 3.81% to 7.68%). The debt premiums are being amortized into interest expense over the term of the related debt on a straight-line basis, which approximates the effective interest method. The balances below include the unamortized premiums as of December 31, 2003.

Property Pledged as Collateral	Fixed or Floating	Annual Interest Rate	12-31-03 Balance (000's)	Annual Debt Service (000's)	Maturity Date	Balance Due on Maturity (000's)	Earliest Date on which all Notes Can Be Defeased or Be Prepaid

CONSOLIDATED CENTERS:
Arizona Lifestyle Galleries (50%)(1)	Fixed	3.81%	$446	$120	12/1/2004	$446	Any Time
Borgata(2)	Fixed	5.39%	16,439	1,380	10/11/2007	14,352	Any Time
Capitola Mall	Fixed	7.13%	45,402	4,558	5/15/2011	32,724	Any Time
Carmel Plaza	Fixed	8.18%	27,762	2,421	5/1/2009	25,642	Any Time
Chandler Fashion Center	Fixed	5.48%	181,077	12,516	11/1/2012	152,097	11/11/2005
Chesterfield Towne Center(3)	Fixed	9.07%	60,804	6,580	1/1/2024	1,087	1/1/2006
Citadel	Fixed	7.20%	67,626	6,648	1/1/2008	59,962	Any Time
Crossroads Mall-Boulder(4)	Fixed	7.08%	33,016	2,928	12/15/2010	28,107	Any Time
Flagstaff Mall(5)	Fixed	5.39%	14,319	1,452	1/1/2006	12,894	2/1/2006
FlatIron Crossing (6)	Fixed	5.23%	199,770	13,224	12/1/2013	164,187	11/1/2005
Fresno Fashion Fair	Fixed	6.52%	67,228	5,244	8/10/2008	62,890	Any Time
Greeley Mall(7)	Fixed	6.18%	29,878	2,359	9/1/2013	23,446	8/31/2006
La Encantada(8)	Floating	3.18%	28,460	905	12/1/2005	28,460	Any Time
Northwest Arkansas Mall	Fixed	7.33%	57,336	5,209	1/10/2009	49,304	1/1/2004
Pacific View(9)	Fixed	7.16%	93,723	7,779	8/31/2011	83,046	Any Time
Panorama Mall(10)	Floating	3.22%	32,250	1,038	12/31/2005	32,250	Any Time
Paradise Valley Mall(11)	Fixed	5.89%	24,628	2,196	5/1/2009	19,863	5/1/2004
Paradise Valley Mall(12)	Fixed	5.39%	80,515	6,072	1/1/2007	74,889	Any Time
Prescott Gateway(13)	Floating	3.52%	40,753	1,434	5/29/2004	40,753	Any Time
PVIC Ground Leases (50%)(1)(14)	Fixed	5.39%	3,864	336	3/1/2006	3,567	Any Time
PVOP II (50%)(1)(15)	Fixed	5.85%	1,536	138	6/26/2009	1,235	Any Time
Queens Center	Fixed	6.88%	96,020	7,595	3/1/2009	88,651	Any Time
Queens Center(16)	Floating	3.62%	101,333	3,668	3/1/2013	101,333	2/19/2008
Rimrock Mall	Fixed	7.45%	45,071	3,841	10/1/2011	40,025	Any Time
Santa Monica Place	Fixed	7.70%	82,779	7,272	11/1/2010	75,439	Any Time
South Plains Mall	Fixed	8.22%	62,120	5,448	3/1/2009	57,557	Any Time
South Towne Center	Fixed	6.61%	64,000	4,289	10/10/2008	64,000	Any Time
The Oaks(17)	Floating	2.32%	108,000	2,506	7/1/2004	108,000	Any Time
Valley View Mall	Fixed	7.89%	51,000	4,080	10/10/2006	51,000	Any Time
Village Center (50%)(1)(18)	Fixed	5.39%	3,801	372	4/1/2006	3,391	Any Time
Village Crossroads (50%)(1)(19)	Fixed	4.81%	2,453	222	9/1/2005	2,269	Any Time
Village Fair North (50%)(1)(20)	Fixed	5.89%	6,055	492	7/15/2008	5,355	Any Time
Village Plaza(21)	Fixed	5.39%	5,586	564	11/1/2006	4,757	Any Time
Village Square I & II(22)	Fixed	5.39%	4,892	492	2/1/2006	4,394	Any Time
Vintage Faire Mall	Fixed	7.89%	67,873	6,099	9/1/2010	61,372	Any Time
Westbar(23)	Fixed	4.22%	4,216	420	1/1/2005	3,970	Any Time
Westbar(24)	Fixed	4.22%	7,380	792	2/10/2004	7,325	Any Time
Westside Pavilion	Fixed	6.67%	97,387	7,538	7/1/2008	91,133	Any Time

Total—Consolidated Centers			$1,916,798

20 The Macerich Company

JOINT VENTURE CENTERS (AT PRO RATA SHARE):
Arrowhead Towne Center (33.33%)(25)		Fixed	6.38%	$28,501	$2,240	10/1/2011	$24,256	7/3/2011
Biltmore Fashion Park (50%)(26)		Fixed	4.68%	44,305	2,433	7/10/2009	34,972	Any Time
Boulevard Shops (50%)(27)		Floating	3.14%	5,236	164	1/1/2005	5,236	Any Time
Broadway Plaza (50%)		Fixed	6.68%	33,772	3,089	8/1/2008	29,315	Any Time
Camelback Colonnade (75%)(28)		Fixed	4.81%	25,507	2,529	1/1/2006	22,719	7/5/2005
Chandler Festival (50%)(29)		Fixed	4.37%	15,939	960	10/1/2008	14,583	7/1/2008
Chandler Gateway (50%)(30)		Fixed	5.19%	9,968	660	10/1/2008	9,223	7/1/2008
Corte Madera, Village at (50.1%)		Fixed	7.75%	34,610	3,101	11/1/2009	31,533	Any Time
Desert Sky Mall (50%)		Fixed	5.42%	13,698	1,020	1/1/2005	13,412	Any Time
East Mesa Land (50%)(31)		Floating	2.28%	2,118	120	11/1/2004	2,118	Any Time
East Mesa Land (50%)(31)		Fixed	5.39%	632	36	11/1/2006	611	9/2/2006
Hilton Village (50%)(32)		Fixed	5.39%	4,545	414	1/1/2007	3,987	8/3/2007
Pacific Premier Retail Trust (51%):
	Cascade Mall	Fixed	6.50%	11,281	1,461	8/1/2014	256	3/1/2004
	Kitsap Mall/Kitsap Place	Fixed	8.06%	30,574	2,755	6/1/2010	28,143	Any Time
	Lakewood Mall(33)	Fixed	7.20%	64,770	4,661	8/10/2005	64,770	Any Time
	Lakewood Mall(34)	Floating	2.93%	8,746	308	7/25/2005	8,746	Any Time
	Los Cerritos Center	Fixed	7.13%	57,628	5,054	7/1/2006	54,955	Any Time
	North Point Plaza	Fixed	6.50%	1,585	190	12/1/2015	47	2/7/2004
	Redmond Town Center-Retail	Fixed	6.50%	30,212	2,686	2/1/2011	23,850	Any Time
	Redmond Town Center-Office	Fixed	6.77%	41,246	3,575	7/10/2009	26,223	Any Time
	Stonewood Mall	Fixed	7.41%	39,322	3,298	12/11/2010	36,192	Any Time
	Washington Square	Fixed	6.70%	55,901	5,051	1/1/2009	48,289	3/1/2004
	Washington Square Too	Fixed	6.50%	5,580	634	12/1/2016	116	2/17/2004
Promenade (50%)(35)		Fixed	5.39%	2,513	234	9/1/2006	2,226	6/3/2006
Scottsdale Fashion Square-Series I (50%)(36)		Fixed	5.39%	82,710	4,458	8/31/2007	78,000	6/2/2007
Scottsdale Fashion Square-Series II (50%)(37)		Fixed	5.39%	36,453	1,965	8/31/2007	33,253	6/2/2007
Scottsdale/101 Associates (46%)(38)		Floating	3.46%	12,391	429	5/1/2006	12,391	Any Time
SDG Macerich Properites L.P. (50%)(39)		Fixed	6.54%	182,449	13,440	5/15/2006	178,550	Any Time
SDG Macerich Properites L.P. (50%)(39)		Floating	1.57%	93,250	1,771	5/15/2006	93,250	Any Time
SDG Macerich Properites L.P. (50%)(39)		Floating	1.53%	40,700	729	5/15/2006	40,700	Any Time
Superstition Springs (33.33%)(40)		Floating	2.28%	16,235	902	11/1/2004	15,949	Any Time
Superstition Springs (33.33%)(40)		Fixed	5.39%	4,850	270	11/1/2006	4,682	9/2/2006
West Acres Center (19%)		Fixed	6.52%	7,006	681	1/1/2009	5,684	Any Time
West Acres Center (19%)		Fixed	9.17%	1,809	212	1/1/2009	1,517	Any Time

Total-Joint Venture Centers				$1,046,042

The Macerich Company 21

Notes:

(1): As of December 31, 2003, these properties are being held by the owners as tenants in common and the Company has a direct undivided 50% interest in these properties.
(2): At December 31, 2003, the unamortized premium was $1.1 million.
(3): The annual debt service payment represents the payment of principal and interest. In addition, contingent interest, as defined in the loan agreement, may be due to the extent that 35% of the amount by which the property's gross receipts (as defined in the loan agreement) exceeds a base amount specified therein. Contingent interest expense recognized by the Company was $823,546, $882,311 and $583,751 for the years ended December 31, 2003, 2002 and 2001, respectively.
(4): This note was issued at a discount. The discount was being amortized over the life of the loan using the effective interest method. At December 31, 2003 and 2002, the unamortized discount was $231,383 and $264,433, respectively. This loan was paid off in full on February 3, 2004.
(5): At December 31, 2003, the unamortized premium was $0.6 million.
(6): This loan was entered into on November 4, 2003 and the old floating rate loans were paid off in full upon the closing of the transaction.
(7): On August 7, 2003, the Company paid off the old loan and placed a new $30.0 million ten-year fixed rate loan at an interest rate of 6.18%. The Company recognized a $0.1 million loss on early extinguishment of the old debt.
(8): This represents a construction loan which may not exceed $51.0 million bearing an interest rate at LIBOR plus 2%. At December 31, 2003, the weighted average interest rate was 3.18%.
(9): This loan was issued on July 10, 2001 for $89.0 million, and may be increased up to $96.0 million subject to certain conditions. In April 2003, the additional $7.0 million was funded at a fixed rate of 7.0% until maturity.
(10): In January 2003, the Company placed a $32.2 million floating rate note on the property bearing interest at LIBOR plus 1.65% and maturing December 31, 2005. The total interest rate at December 31, 2003 was 3.22%.
(11): At December 31, 2003, the unamortized premium was $1.6 million.
(12): At December 31, 2003, the unamortized premium was $2.4 million.
(13): This represents a construction loan which may not exceed $46.3 million bearing interest at LIBOR plus 2.25%. At December 31, 2003, the total interest rate was 3.52%.
(14): At December 31, 2003, the unamortized premium was $0.1 million.
(15): At December 31, 2003, the unamortized premium was $0.1 million.
(16): This represents a $225.0 million construction loan bearing interest at LIBOR plus 2.50%. The loan converts to a permanent fixed rate loan at 7% subject to certain conditions including completion and stabilization of the expansion and redevelopment project. As of December 31, 2003, the total interest rate was 3.62%. Northwestern Mutual Life ("NML") is the lender for 50% of the construction loan. The funds advanced by NML are considered related party debt as they are a joint venture partner with the Company in Macerich Northwestern Associates.
(17): Concurrent with the acquisition of the mall, the Company placed a $108.0 million loan bearing interest at LIBOR plus 1.15% and maturing July 1, 2004 with three consecutive one year options. $92.0 million of the loan is at LIBOR plus 0.7% and $16.0 million is at LIBOR plus 3.75%. This variable rate debt is covered by an interest rate

22 The Macerich Company

cap agreement over two years which effectively prevents the LIBOR interest rate from exceeding 7.10%. At December 31, 2003, the total weighted average interest rate was 2.32%.

(18): At December 31, 2003, the unamortized premium was $0.2 million.
(19): At December 31, 2003, the unamortized premium was $0.1 million.
(20): At December 31, 2003, the unamortized premium was $0.2 million.
(21): At December 31, 2003, the unamortized premium was $0.4 million.
(22): At December 31, 2003, the unamortized premium was $0.2 million.
(23): At December 31, 2003, the unamortized premium was $0.2 million.
(24): At December 31, 2003, the unamortized premium was $33,000. This entire loan was paid off in full on February 10, 2004.
(25): At December 31, 2003, the unamortized premium was $0.9 million.
(26): In connection with the acquisition of this property, the joint venture assumed $77.4 million of debt at a fixed interest rate of 7.68%. The debt premium of $11.3 million recorded by the joint venture at the date of acquisition represents the excess of the fair value over the principal value of debt. At December 31, 2003, the unamortized premium, representing the Company's pro rata share, was $5.6 million.
(27): This represents a construction loan which shall not exceed $13.3 million bearing interest at LIBOR plus 2.0%. At December 31, 2003, the weighted average interest rate was 3.14%. Effective January 2004, the loan commitment was reduced to $11.4 million.
(28): At December 31, 2003, the unamortized premium was $1.3 million.
(29): This represented a construction loan which was not to exceed $35.0 million and bore interest at LIBOR plus 1.60%. At December 31, 2002, the total interest rate was 3.04%. On September 23, 2003, the joint venture obtained a new $32.0 million permanent fixed rate loan of 4.37% maturing in October 2008.
(30): This represented a construction loan which was not to exceed $17.0 million and bore interest at LIBOR plus 2.0%. At December 31, 2002, the total interest rate was 3.55%. On September 25, 2003, the joint venture obtained a new $20.0 million permanent fixed rate loan at 5.19% maturing in October 2008.
(31): This note was assumed at acquisition. The loan consists of 14 traunches, with a range of maturities from 36 months (with two 18-month extension options) to 60 months. The variable rate debt ranges from LIBOR plus 60 basis points to LIBOR plus 250 basis points, and fixed rate debt ranges from 5.01% to 6.18%. An interest rate swap was entered into to convert $1.5 million of floating rate debt with a weighted average interest rate of 3.97% to a fixed rate of 5.39%. The interest rate swap has been designated as a hedge in accordance with SFAS 133. Additionally, interest rate caps were entered into on a portion of the debt and reverse interest rate caps were simultaneously sold to offset the effect of the interest rate cap agreements. These interest rate caps do not qualify for hedge accounting in accordance with SFAS 133.
(32): At December 31, 2003, the unamortized premium was $0.4 million.
(33): In connection with the acquisition of this property, the joint venture assumed $127.0 million of collateralized fixed rate notes (the "Notes"). The Notes bear interest at an average fixed rate of 7.20% and mature in August 2005. The Notes require the joint venture to deposit all cash flow from the property operations with a trustee to meet its obligations under the Notes. Cash in excess of the required amount, as defined, is released. Included in cash and cash equivalents is $750,000 of restricted cash deposited with the trustee at December 31, 2003 and December 31, 2002.

The Macerich Company 23

(34): On July 28, 2000, the joint venture placed a $16.1 million floating rate note on the property bearing interest at LIBOR plus 2.25% and maturing July 2003. On August 24, 2003, the joint venture negotiated a two-year loan extension with the lender and the loan was increased to $17.1 million. At December 31, 2003 and 2002, the total interest rate was 2.93% and 3.75%, respectively.
(35): At December 31, 2003, the unamortized premium was $0.2 million.
(36): At December 31, 2003, the unamortized premium was $4.7 million.
(37): At December 31, 2003, the unamortized premium was $3.2 million.
(38): This represents a construction loan which shall not exceed $54.0 million bearing an interest rate at LIBOR plus 2.25%. At December 31, 2003, the total interest rate was 3.46%.
(39): In connection with the acquisition of these Centers, the joint venture assumed $485.0 million of mortgage notes payable which are collateralized by the properties. At acquisition, the $300.0 million fixed rate portion of this debt reflected a fair value of $322.7 million, which included an unamortized premium of $22.7 million. This premium is being amortized as interest expense over the life of the loan using the effective interest method. At December 31, 2003 and 2002, the unamortized balance of the debt premium was $7.8 million and $10.7 million, respectively. This debt is due in May 2006 and requires monthly payments of $1.9 million based on the fixed rate debt in place as of December 31, 2003. $184.5 million of this debt was refinanced in May 2003 with a new note of $186.5 million that requires monthly interest payments at a variable weighted average rate (based on LIBOR) of 1.57% and 1.92% at December 31, 2003 and 2002, respectively. This variable rate debt is covered by interest rate cap agreements, which effectively prevents the interest rate from exceeding 10.63%.

On April 12, 2000, the joint venture issued $138.5 million of additional mortgage notes, which are collateralized by the properties and are due in May 2006. $57.1 million of this debt requires fixed monthly interest payments of $387,000 at a weighted average rate of 8.13% while the floating rate notes of $81.4 million require monthly interest payments at a variable weighted average rate (based on LIBOR) of 1.53% and 1.79% at December 31, 2003 and 2002, respectively. This variable rate debt is covered by an interest rate cap agreement which effectively prevents the interest rate from exceeding 11.83%.
(40): This note was assumed at acquisition. The loan consists of 14 traunches, with a range of maturities from 36 months (with two 18-month extension options) to 60 months. The variable rate debt ranges from LIBOR plus 60 basis points to LIBOR plus 250 basis points, and fixed rate debt ranges from 5.01% to 6.18%. An interest rate swap was entered into to convert $11.4 million of floating rate debt with a weighted average interest rate of 3.97% to a fixed rate of 5.39%. The interest rate swap has been designated as a hedge in accordance with SFAS 133. Additionally, interest rate caps were entered into on a portion of the debt and reverse interest rate caps were simultaneously sold to offset the effect of the interest rate cap agreements. These interest rate caps do not qualify for hedge accounting in accordance with SFAS 133.

The Company has a $425.0 million revolving line of credit. This revolving line of credit has a three-year term plus a one-year extension. The interest rate fluctuates from LIBOR plus 1.75% to LIBOR plus 3.00% depending on the Company's overall leverage level. As of December 31, 2003 and 2002, $319.0 million and $344.0 million of borrowings were outstanding under this credit facility at an average interest rate of 3.69% and 4.72%, respectively. The Company, through its acquisition of Westcor, had an interest rate swap with a $50.0 million notional amount. The swap matured December 1, 2003, and was designated as a cash flow hedge. This swap served to reduce exposure to interest rate risk effectively converting the LIBOR rate on $50.0 million of the Company's variable interest rate borrowings to a fixed rate of 3.215%. The swap was reported at fair value, with changes in fair value recorded as a component of other comprehensive income. Net receipts or payments under the agreement were recorded as an adjustment to interest expense.

24 The Macerich Company

Concurrent with the acquisition of Westcor, the Company placed a $380.0 million interim loan with a term of six months, plus two six-month extension options bearing interest at an average rate of LIBOR plus 3.25% and a $250.0 million term loan with a maturity of up to three years with two one-year extension options with an interest rate ranging from LIBOR plus 2.75% to LIBOR plus 3.00% depending on the Company's overall leverage level. On November 27, 2002, the entire interim loan was paid off. At December 31, 2003 and 2002, $196.8 and $204.8 million of the term loan was outstanding at an interest rate of 3.95% and 4.78%, respectively.

On May 13, 2003, the Company issued $250.0 million in unsecured notes maturing in May 2007 with a one-year extension option bearing interest at LIBOR plus 2.50%. The proceeds were used to pay down and create more availability under the Company's line of credit. At December 31, 2003, the entire $250.0 million was outstanding at an interest rate of 4.45%. In October 2003, the Company entered into an interest rate swap agreement which effectively fixed the interest rate at 4.45% from November 2003 to October 13, 2005.

Additionally, as of December 31, 2003, the Company has contingent obligations of $29.6 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.

Item 3. Legal Proceedings.

The Company, the Operating Partnership, Macerich Management Company, the Westcor Management Companies and their respective affiliates are not currently involved in any material litigation nor, to the Company's knowledge, is any material litigation currently threatened against such entities or the Centers, other than routine litigation arising in the ordinary course of business, most of which is expected to be covered by liability insurance. For information about certain environmental matters, see "Business—Environmental Matters."

Item 4. Submission of Matters to a Vote of Security Holders.

None.

The Macerich Company 25

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 ("NYSE") under the symbol "MAC". The common stock began trading on March 10, 1994 at a price of $19 per share. In 2003, the Company's shares traded at a high of $45.16 and a low of $28.65.

As of February 27, 2004, there were approximately 666 stockholders of record. The following table shows high and low closing prices per share of common stock during each quarter in 2002 and 2003 and dividends/distributions per share of common stock declared and paid by quarter:

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

March 31, 2002	$30.15	$26.30	$0.55
June 30, 2002	31.48	28.10	0.55
September 30, 2002	31.04	26.65	0.55
December 31, 2002	31.17	27.53	0.57
March 31, 2003	$33.17	$28.82	$0.57
June 30, 2003	36.47	32.15	0.57
September 30, 2003	38.44	35.62	0.57
December 31, 2003	44.50	38.30	0.61

The Company has issued 3,627,131 shares of its Series A cumulative convertible redeemable preferred stock ("Series A Preferred Stock"), and 5,487,471 shares of its Series B cumulative convertible redeemable preferred stock ("Series B Preferred Stock"). There is no established public trading market for either the Series A Preferred Stock or the Series B Preferred Stock. The Series A Preferred Stock and Series B Preferred Stock were issued on February 25, 1998 and June 16, 1998, respectively. On September 9, 2003, all of the shares of Series B Preferred Stock were converted to common stock. Preferred stock dividends are accrued quarterly and paid in arrears. The Series A Preferred Stock can be converted on a one for one basis into common stock and will pay a quarterly dividend equal to the greater of $0.46 per share, or the dividend then payable on a share of common stock. No dividends will be declared or paid on any class of common or other junior stock

26 The Macerich Company

to the extent that dividends on Series A Preferred Stock have not been declared and/or paid. The following table shows the dividends per share of preferred stock declared and paid for each quarter in 2002 and 2003:

	Series A Preferred Stock Dividends		Series B Preferred Stock Dividends
Quarters Ended	Declared	Paid	Declared	Paid

March 31, 2002	$0.55	$0.55	$0.55	$0.55
June 30, 2002	$0.55	$0.55	$0.55	$0.55
September 30, 2002	$0.57	$0.55	$0.57	$0.55
December 31, 2002	$0.57	$0.57	$0.57	$0.57

Quarters Ended

March 31, 2003	$0.57	$0.57	$0.57	$0.57
June 30, 2003	$0.57	$0.57	$0.57	$0.57
September 30, 2003	$0.61	$0.57	N/A	N/A
December 31, 2003	$0.61	$0.61	N/A	N/A

The Company's existing financing agreements limit, and any other financing agreements that the Company enters into in the future will likely limit, the Company's ability to pay cash dividends. Specifically, the Company may pay cash dividends and make other distributions based on a formula derived from Funds from Operations and only if no event of default under the financing agreements has occurred, unless, under certain circumstances, payment of the distribution is necessary to enable the Company to qualify as a REIT under the Internal Revenue Code.

Equity Compensation Plan Information

The Company currently maintains two equity compensation plans for the granting of equity awards to directors, officers and employees: the 2003 Equity Incentive Plan ("2003 Plan") and the Eligible Directors' Deferred Compensation/Phantom Stock Plan ("Director Phantom Stock Plan"). Certain of the Company's outstanding stock awards were granted under other equity compensation plans which are no longer available for stock awards: the 1994 Eligible Directors' Stock Option Plan (the "Director Plan"), the Amended and Restated 1994 Incentive Plan (the "1994 Plan") and the 2000 Incentive Plan (the "2000 Plan").

The Macerich Company 27

Summary Table. The following table sets forth, for each of the Company's equity compensation plans, the number of share of Common Stock subject to outstanding awards, the weighted-average exercise of outstanding options, and the number of shares remaining available for future award grants as of December 31, 2003.

	Number of shares of Common Stock to be issued upon exercise of outstanding options, warrants and rights	Weighted average exercise price of outstanding options, warrants and rights(1)	Number of shares of Common Stock remaining available for future issuance under equity compensation plans (excluding shares reflected in column (a))
Plan Category	(a)	(b)	(c)

Equity Compensation Plans approved by stockholders	1,155,331(2)	$22.19	6,867,832(3)
Equity Compensation Plans not approved by stockholders	20,000(4)	$30.75	0(4)

Total	1,175,331		6,867,832

(1): Weighted average exercise price of outstanding options; does not include stock units.
(2): Represents 1,038,724 shares subject to outstanding options and 2,000 shares underlying stock units, payable on a one-for-one basis, credited to stock unit accounts under the 1994 Plan, 88,107 shares underlying stock units, payable on a one-for-one basis, credited to stock unit accounts under the Director Phantom Stock Plan, and 26,500 shares subject to outstanding options under the Director Plan.
(3): Of these shares, 5,955,939 were available for options, stock appreciation rights, restricted stock, stock units, stock bonuses, performance based awards, dividend equivalent rights and operating partnership units or other convertible or exchangeable units under the 2003 Plan, 161,893 were available for issuance under stock units under the Director Phantom Stock Plan and 750,000 were available for issuance under the Employee Stock Purchase Plan.
(4): Represents 20,000 shares subject to outstanding options under the 2000 Plan. The 2000 Plan did not require approval of, and has not been approved by, the Company's stockholders. No additional awards will be made under the 2000 Plan. The 2000 Plan generally provided for the grant of options, stock appreciation rights, restricted stock awards, stock units, stock bonuses and dividend equivalent rights to employees, directors and consultants of the Company or its subsidiaries. The only awards that were granted under the 2000 Plan were stock options and restricted stock. The stock options granted generally expire not more than 10 years after the date of grant and vest in three equal annual installments, commencing on the first anniversary of the grant date. The restricted stock grants generally vest over three years.

28 The Macerich Company

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 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.

The Selected Financial Data is presented on a consolidated basis. The limited partnership interests in the Operating Partnership (not owned by the REIT) are reflected as minority interest. Centers and entities in which the Company does not have a controlling ownership interest (Biltmore Fashion Park, Broadway Plaza, the Village at Corte Madera, Pacific Premier Retail Trust, SDG Macerich Properties, L.P., West Acres Shopping Center and certain Centers and entities in the Westcor portfolio) are referred to as the "Joint Venture Centers."

Effective March 29, 2001, the Macerich Property Management Company merged with and into Macerich Property Management Company, LLC, a wholly-owned subsidiary of the Operating Partnership ("MPMC, LLC") and the Company began consolidating the accounts of MPMC, LLC. Effective July 1, 2003, the Company began consolidating the accounts of Macerich Management Company, in accordance with FIN 46 (See Note 2 of the Company's Consolidated Financial Statements). Prior to March 29, 2001 and July 1, 2003, the Company accounted for Macerich Property Management Company and Macerich Management Company under the equity method of accounting, respectively. Accordingly, the net income from the Joint Venture Centers and the Macerich Management Companies that is allocable to the Company is included in the statement of operations as "Equity in income (loss) of unconsolidated joint ventures and management companies." The use of the terms "Macerich Management Companies" or "management companies" refers to Macerich Property Management Company prior to March 29, 2001 and Macerich Management Company prior to July 1, 2003 when their accounts were reflected in the Company's consolidated financial statements under the equity method of accounting.

The Macerich Company 29

(All amounts in thousands, except share and per share amounts)
				The Company
				2003	2002	2001	2000	1999

OPERATING DATA:
	Revenues:
		Minimum rents(1)		$295,487	$228,753	$197,140	$190,664	$200,474
		Percentage rents		12,999	11,145	12,214	12,260	14,850
		Tenant recoveries		159,769	120,574	108,322	103,150	98,138
		Other		17,749	12,028	11,476	8,125	8,608

			Total revenues	486,004	372,500	329,152	314,199	322,070
Shopping center and operating expenses(2)				171,681	127,080	109,480	100,369	99,099
REIT general and administrative expenses				10,724	7,435	6,780	5,509	5,488
Depreciation and amortization(1)				108,695	77,566	65,024	60,677	60,367
Interest expense				132,512	122,614	109,646	108,447	113,348

Income from continuing operations before minority interest, unconsolidated entities, gain (loss) on sale or write-down of assets and cumulative effect of change in accounting principle				62,392	37,805	38,222	39,197	43,768
Minority interest(3)				(28,907)	(20,189)	(19,001)	(12,168)	(38,335)
Equity in income of unconsolidated joint ventures and management companies(2)				58,897	43,049	32,930	30,322	25,945
Gain (loss) on sale or write down of assets				12,420	(3,820)	24,491	(2,773)	95,981
Loss on early extinguishment of debt				(155)	(3,605)	(2,034)	(304)	(1,478)
Cumulative effect of change in accounting principle(4)					—	—	(963)	—
Discontinued operations:(5)
	Gain on sale of asset			22,031	26,073	—	—	—
	Income from discontinued operations			1,356	2,069	3,115	3,618	3,130

Net income				128,034	81,382	77,723	56,929	129,011
Less preferred dividends				14,816	20,417	19,688	18,958	18,138

Net income available to common stockholders				$113,218	$60,965	$58,035	$37,971	$110,873

Earnings per share—basic:(6)
	Income from continuing operations before cumulative effect of change in accounting principle			$1.76	$1.06	$1.65	$1.05	$3.19
	Cumulative effect of change in accounting principle			—	—	—	(0.02)	—
	Discontinued operations			0.35	0.57	0.07	0.08	0.07

Net income per share—basic				$2.11	$1.63	$1.72	$1.11	$3.26

Earnings per share ("EPS")—diluted:(6)(8)(9)
	Income from continuing operations before cumulative effect of change in accounting principle			$1.74	$1.06	$1.65	$1.05	$2.94
	Cumulative effect of change in accounting principle			—	—	—	(0.02)	—
	Discontinued operations			0.35	0.56	0.07	0.08	0.05

Net income per share—diluted				$2.09	$1.62	$1.72	$1.11	$2.99

OTHER DATA:
Funds from operations ("FFO")-diluted(7)				$269,132	$194,643	$173,372	$166,281	$164,461
Cash flows provided by (used in):
	Operating activities			$261,680	$206,225	$140,506	$121,220	$139,576
	Investing activities			($383,782)	($918,258)	($57,319)	$2,083	($243,228)
	Financing activities			$115,703	$739,122	($92,990)	($127,485)	$118,964
Number of centers at year end				78	79	50	51	52
Weighted average number of shares outstanding—EPS basic				53,669	37,348	33,809	34,095	34,007
Weighted average number of shares outstanding—EPS diluted(8)(9)				75,198	50,066	44,963	45,050	60,893
Cash distribution declared per common share				$2.32	$2.22	$2.14	$2.06	$1.965

30 The Macerich Company

(All amounts in thousands)
	The Company December 31,
	2003	2002	2001	2000	1999

BALANCE SHEET DATA
Investment in real estate (before accumulated depreciation)	$3,702,359	$3,251,674	$2,227,833	$2,228,468	$2,174,535
Total assets	$4,145,593	$3,662,080	$2,294,502	$2,337,242	$2,404,293
Total mortgage, notes and debentures payable	$2,682,599	$2,291,908	$1,523,660	$1,550,935	$1,561,127
Minority interest(3)	$237,615	$221,497	$113,986	$120,500	$129,295
Series A and Series B Preferred Stock(7)	$98,934	$247,336	$247,336	$247,336	$247,336
Common stockholders' equity	$953,485	$797,798	$348,954	$362,272	$401,254

(1): During 2001, the Company adopted Statement of Financial Accounting Standards ("SFAS") No. 141, Business Combinations ("SFAS 141"). (See "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations—Statement on Critical Accounting Policies"). The amortization of below market leases, which is recorded in minimum rents was $6.1 million and $1.1 million for the twelve months ending December 31, 2003 and 2002, respectively.
(2): Unconsolidated joint ventures include all Centers and entities in which the Company does not have a controlling ownership interest and for Macerich Management Company through June 30, 2003 and for Macerich Property Management Company through March 28, 2001. Effective March 29, 2001, the Macerich Property Management Company merged with and into MPMC, LLC. The Company accounts for the joint ventures using the equity method of accounting. Effective March 29, 2001, the Company began consolidating the accounts for MPMC, LLC. Effective July 1, 2003, the Company began consolidating the accounts of Macerich Management Company, in accordance with FIN 46. (See "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations—New Pronouncements Issued").
(3): "Minority Interest" reflects the ownership interest in the Operating Partnership or other unconsolidated entities not owned by the REIT.
(4): In December 1999, the Securities and Exchange Commission issued Staff Accounting Bulletin 101, "Revenue Recognition in Financial Statements" ("SAB 101"), which became effective for periods beginning after December 15, 1999. This bulletin modified the timing of revenue recognition for percentage rent received from tenants. This change will defer recognition of a significant amount of percentage rent for the first three calendar quarters into the fourth quarter. The Company applied this change in accounting principle as of January 1, 2000. The cumulative effect of this change in accounting principle at the adoption date of January 1, 2000, including the pro rata share of joint ventures of $0.8 million, was approximately $1.8 million. If the Company had recorded percentage rent using the methodology prescribed in SAB 101, the Company's net income available to common stockholders would have been reduced by $1.3 million or $0.02 per diluted share for the year ended December 31, 1999.
(5): In October 2001, the Financial Accounting Standards Board ("FASB") issued SFAS 144, "Accounting for the Impairment or Disposal of Long-Lived Assets" ("SFAS 144"). SFAS 144 addresses financial accounting and reporting for the impairment or disposal of long-lived assets. This statement supersedes SFAS 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of" ("SFAS 121"). SFAS 144 establishes a single accounting model, based on the framework established in SFAS 121, for long-lived assets to be disposed of by sale. The Company adopted SFAS 144 on January 1, 2002. The Company sold Boulder Plaza on March 19, 2002 and in accordance with SFAS 144 the results of Boulder Plaza for the periods from January 1, 2002 to March 19, 2002 and for the years ended December 31, 2001, 2000 and 1999 have been reclassified into "discontinued operations". Total revenues associated with Boulder Plaza was approximately $0.5 million for the period January 1, 2002 to March 19, 2002 and $2.1 million, $2.7 million and $2.2 million for the years ended December 31, 2001, 2000 and 1999, respectively. Additionally, the Company sold its 67% interest in Paradise Village Gateway on January 2, 2003 (acquired in July 2002), and the loss on sale of $0.2 million has been reclassified to discontinued operations in 2003. Total revenue associated with Paradise Village Gateway for the period ending December 31, 2002 was $2.4 million. The Company sold Bristol Center on August 4, 2003, and the results for the period January 1, 2003 to August 4, 2003 and for the years ended December 31, 2002, 2001, 2000 and 1999 have been reclassified to discontinued operations. The sale of Bristol Center resulted in a gain on sale of asset of $22.2 million in 2003. Total revenues associated with Bristol

The Macerich Company 31

Center was approximately $2.5 million for the period January 1, 2003 to August 4, 2003 and $4.0 million, $3.3 million, $3.2 million and $3.1 million for the years ended December 31, 2002, 2001, 2000 and 1999, respectively.

(6)

Earnings per share is based on Statement of Financial Accounting Standards No. 128 ("SFAS No. 128") for all years presented.

(7)

The Company uses Funds from Operations ("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 and after adjustments for unconsolidated partnerships and joint ventures. Adjustments for unconsolidated partnerships and joint ventures are calculated to reflect FFO on the same basis. FFO and FFO on a fully 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. FFO on a fully diluted basis, is one of the measures investors find most useful in measuring the dilutive impact of outstanding convertible securities. FFO does not represent cash flow from operations as defined by GAAP, should not be considered as an alternative to net income as defined by GAAP and is not indicative of cash available to fund all cash flow needs. FFO as presented may not be comparable to similarly titled measures reported by other real estate investment trusts. For the reconciliation of FFO and FFO-diluted to net income see "Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations-Funds from Operations."

In compliance with the Securities and Exchange Commission's Regulation G and Amended Item 10 of Regulation S-K relating to non-GAAP financial measures, the Company has revised its FFO definition as of January 1, 2003 and for all periods presented, to include gain or loss on sales of peripheral land, impairment of assets, losses on debt-related transactions and the effect of SFAS No. 141 to amortize the below market leases which are recorded in minimum rents. The Company's revised definition is in accordance with the definition provided by NAREIT.

FFO for the years ended December 31, 2002, 2001, 2000 and 1999 have been restated to reflect the Company's share of impairment of assets and losses on debt-related transactions, the latter of which was previously reported as extraordinary items under GAAP. The Company's write-off of impairment of assets for 2002 was $13.3 million (including $10.2 million from joint ventures at pro rata). There were no write-offs of impairment of assets for the years ended December 31, 2001, 2000 or 1999. The Company's losses on debt-related transactions for the years ended December 31, 2002, 2001, 2000 and 1999 were $3.6 million, $2.0 million, $0.5 million (including $0.2 million from joint ventures at pro rata) and $1.5 million, respectively.

The computation of FFO-diluted includes the effect of outstanding common stock options and restricted stock using the treasury method. The Company had $125.1 million of convertible subordinated debentures (the "Debentures") which matured December 15, 2002. The Debentures were dilutive for the twelve month periods ending December 31, 2002, 2001, 2000 and 1999 and were included in the FFO calculation. The Debentures were paid off in full on December 13, 2002. On February 25, 1998, the Company sold $100 million of its Series A Preferred Stock. On June 16, 1998, the Company sold $150 million of its Series B Preferred Stock. The preferred stock can be converted on a one-for-one basis for common stock. The preferred stock was dilutive to FFO in 2003, 2002, 2001, 2000 and 1999 and the preferred stock and the convertible debentures were dilutive to net income in 1999 and the preferred stock were dilutive to net income in 2003. All of the Series B Preferred Stock were converted to common stock on September 9, 2003.

(8)

Assumes that all OP Units and Westcor partnership units are converted to common stock on a one-for-one basis.

(9)

Assumes issuance of common stock for in-the-money options and restricted stock calculated using the Treasury method in accordance with SFAS No. 128 for all years presented.

32 The Macerich Company

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations

General Background and Performance Measurement

The Company uses Funds from Operations ("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 and after adjustments for unconsolidated partnerships and joint ventures. Adjustments for unconsolidated partnerships and joint ventures are calculated to reflect FFO on the same basis. FFO and FFO on a fully dilutive 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. FFO on a fully diluted basis, is one of the measures investors find most useful in measuring the dilutive impact of outstanding convertible securities. FFO does not represent cash flow from operations as defined by GAAP, should not be considered as an alternative to net income as defined by GAAP and is not indicative of cash available to fund all cash flow needs. FFO, as presented, may not be comparable to similarly titled measures reported by other real estate investment trusts. For the reconciliation of FFO and FFO-diluted to net income available to common stockholders, see "Funds from Operations."

In compliance with the Securities and Exchange Commission's Registration G and Amended Item 10 of Registration S-K relating to non-GAAP financial measures, the Company has revised its FFO definition as of January 1, 2003 and for all periods presented, to include gain or loss or sales of peripheral land, impairment of assets, losses on debt-related transactions and the effect of SFAS No. 141 to amortize the market leases which are recorded in minimum rents. The Company's revised definition is in accordance with the definition provided by NAREIT.

Percentage rents generally increase or decrease with changes in tenant sales. As leases roll over, however, a portion of historical percentage rent is often converted to minimum rent. It is therefore common for percentage rents to decrease as minimum rents increase. Accordingly, in discussing financial performance, the Company combines minimum and percentage rents in order to better measure revenue growth.

The following discussion is based primarily on the consolidated financial statements of the Company for the years ended December 31, 2003, 2002 and 2001. The following discussion compares the activity for the year ended December 31, 2003 to results of operations for the year ended December 31, 2002. Also included is a comparison of the activities for the year ended December 31, 2002 to the results for the year ended December 31, 2001. This information should be read in conjunction with the accompanying consolidated financial statements and notes thereto.

Forward-Looking Statements

This Annual Report on Form 10-K contains or incorporates statements that constitute forward-looking statements. Those statements appear in a number of places in this Form 10-K and include statements regarding, among other matters, the Company's growth, acquisition, redevelopment and development

The Macerich Company 33

opportunities, the Company's acquisition and other strategies, regulatory matters pertaining to compliance with governmental regulations and other factors affecting the Company's financial condition or results of operations. Words such as "expects," "anticipates," "intends," "projects," "predicts," "plans," "believes," "seeks," "estimates," and "should" and variations of these words and similar expressions, are used in many cases to identify these forward-looking statements. 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 industry to vary materially from the Company's future results, performance or achievements, or those of the industry, expressed or implied in such forward-looking statements. Such factors include the matters described herein and the following factors among others: general industry, economic and business conditions, which will, among other things, affect demand for retail space or retail goods, availability and creditworthiness of current and prospective tenants, Anchor or tenant bankruptcies, closures, mergers or consolidations, lease rates and terms, availability and cost of financing, interest rate fluctuations and operating expenses; adverse changes in the real estate markets including, among other things, competition from other companies, retail formats and technologies, risks of real estate redevelopment, development, acquisitions and dispositions; governmental actions and initiatives (including legislative and regulatory changes); environmental and safety requirements; and terrorist activities that could adversely affect all of the above factors. The Company will not update any forward-looking information to reflect actual results or changes in the factors affecting the forward-looking information.

Statement on Critical Accounting Policies

The Securities and Exchange Commission ("SEC") defines "critical accounting policies" as those that require application of management's most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain and may change in subsequent periods.

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Some of these estimates and assumptions include judgements on revenue recognition, estimates for common area maintenance and real estate tax accruals, provisions for uncollectable 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 to the Consolidated Financial Statements. However, the following policies could be deemed to be critical within the SEC definition.

Revenue Recognition:

Minimum rental revenues are recognized on a straight-line basis over the terms of the related lease. The difference between the amount of rent due in a year and the amount recorded as rental income is referred to as the "straight lining of rent adjustment." Currently, 29% of the mall and freestanding leases contain provisions for Consumer Price Index ("CPI") rent increases periodically throughout the term of the lease.

34 The Macerich Company

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 in accordance with Staff Accounting Bulletin 101. Percentage rents are accrued when leasees specified sales targets have been met. Recoveries from tenants for real estate taxes, insurance and other shopping center operating expenses are recognized as revenues in the period the applicable expenses are incurred.

Property:

Costs related to the development, redevelopment, construction and improvement of properties are capitalized. Interest incurred or imputed on development, redevelopment and construction projects are capitalized until construction is substantially complete.

Maintenance and repairs 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, in accordance with SFAS No. 66—"Accounting for Sales of Real Estate."

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		initial term of related lease
Equipment and furnishings		5-7 years

The Company accounts for all acquisitions entered into subsequent to June 30, 2001 in accordance with Statement of Financial Accounting Standards ("SFAS") No. 141, Business Combinations ("SFAS 141"). The Company will first determine the value of the land and buildings utilizing an "as if vacant" methodology. The Company will then assign a fair value to any debt assumed at acquisition. The balance of the purchase price will be allocated to tenant improvements and identifiable intangible assets or liabilities. Tenant improvements represent the tangible assets associated with the existing leases valued on a historical basis prorated over the remaining lease terms. The tenant improvements are classified as an asset under real estate investments and are depreciated over the remaining lease terms. Identifiable intangible assets and liabiltities relate to the value of in-place operating leases which come in three forms: (i) origination value, which represents the value associated with "cost avoidance" of acquiring in-place leases, such as lease commissions paid under terms generally experienced in our 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. Origination value is recorded as an other asset and is amortized over the remaining lease terms. Value of in-place leases is recorded as an other asset and amortized over the remaining lease term plus an estimate of renewal of the acquired leases. Above or below market leases are classified as an other asset or liability, depending on whether the contractual terms are above or below market, and the asset or liability is amortized to rental revenue over the remaining terms of the leases.

The Macerich Company 35

When the Company acquires real estate properties, the Company allocates the components of these acquisitions using relative fair values computed using its estimates and assumptions. These estimates and assumptions impact the amount of costs allocated between various components as well as the amount of costs assigned to individual properties in multiple property acquisitions. These allocations also impact depreciation expense and gains or loses recorded on future sales of properties.

Depending on the materiality of the acquisition, the Company may engage a valuation firm to assist with the allocation.

The Company adopted SFAS 144 on January 1, 2002 which addresses financial accounting and reporting for the impairment or disposal of long-lived assets.

The Company assesses whether there has been an impairment in the value of its long-lived assets by considering factors such as expected future operating income, trends and prospects, as well as the effects of demand, competition and other economic factors. Such factors include the tenants' ability to perform their duties and pay rent under the terms of the leases. The Company may recognize an impairment loss if the cash flows are not sufficient to cover its investment. Such a loss would be determined as the difference between the carrying value and the fair value of a center.

Deferred Charges:

Costs relating to obtaining tenant leases are deferred and amortized over the initial term of the agreement using the straight-line method. Cost 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 renewal. The present value of leasing commissions and legal costs are amortized on a straight-line basis over the individual remaining lease years. The range 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 (weighted average 17 years)
Present value of leasing commissions and legal costs		5 years

Off-Balance Sheet Arrangements:

Debt guarantees:

The Company has an ownership interest in a number of joint ventures as detailed in Note 3 to the Company's Consolidated Financial Statements included herein. The Company accounts for those investments 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 and the Management Companies." A pro rata share of the mortgage debt on these properties is shown in Note 6 to the Company's Consolidated Financial Statements included herein. In addition, the following joint ventures also have debt that could become

36 The Macerich Company

recourse debt to the Company or its subsidiaries, in excess of its pro rata share, should the partnership be unable to discharge the obligations of the related debt:

Asset/Property	Maximum amount of debt principal that could be recourse to the Company (Dollars in thousands)	Maturity Date

Boulevard Shops	$10,472	1/1/2005
Scottsdale 101	26,938	5/1/2006

Total	$37,410

Additionally, as of December 31, 2003, the Company has certain obligations of $29.6 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.

Long-term contractual obligations:

The following is a schedule of long-term contractual obligations (as of December 31, 2003) for the consolidated Centers over the periods in which they are expected to be paid:

		Payment Due by Period
Contractual Obligations (Dollars in thousands)		Total		Less than 1 year		1-3 years		3-5 years		More than five years

Long-term debt obligations		$	2,682,599	$	181,427	$	715,441	$	672,261	$	1,113,470
Capital lease obligations			N/A		N/A		N/A		N/A		N/A
Operating lease obligations			162,736		1,270		2,540		2,540		156,386
Purchase obligations			70,400		70,400		—		—		—
Other long-term liabilities			172,960		172,960		—		—		—

	Total	$	3,088,695	$	426,057	$	717,981	$	674,801	$	1,269,856

The Macerich Company 37

The following table reflects the Company's acquisitions in 2002 and 2003. There were no acquisitions in 2001.

Property/Entity	Date Acquired	Location

2002 Acquisitions:
The Oaks	June 10, 2002	Thousand Oaks, California
Westcor Realty Limited Partnership	July 26, 2002	Nine regional and super-regional malls in Phoenix and Colorado and 18 urban villages or community centers. The aggregate gross leasable area was approximately 14.1 million square feet. Additionally, the portfolio included two retail properties under development, as well as rights to over 1,000 acres of undeveloped land.
2003 Acquisitions:
FlatIron Crossing	January 31, 2003	Broomfield, Colorado
Northridge Mall	September 15, 2003	Salinas, California
Biltmore Fashion Park	December 18, 2003	Phoenix, Arizona

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

On September 30, 2000, Manhattan Village, a 551,847 square foot, regional shopping center, which was owned 10% by the Operating Partnership, was sold. The joint venture sold the property for $89.0 million, including a note receivable from the buyer for $79.0 million at a fixed interest rate of 8.75% payable monthly, until its maturity date of September 30, 2001. On December 28, 2001, the note receivable was paid down by $5.0 million and the maturity date was extended to September 30, 2002 at a new fixed interest rate of 9.50%. On July 2, 2002, the note receivable of $74.0 million was paid off in full.

On December 14, 2001, Villa Marina Marketplace, a 448,262 square foot community shopping center located in Marina del Rey, California, a wholly-owned property of the Company, was sold. The center was sold for approximately $99.0 million, including the assumption of the existing mortgage of $58.0 million, which resulted in a $24.7 million gain. The Company used approximately $26 million of the net proceeds from this sale to retire $25.7 million of its outstanding convertible subordinated debentures due December 2002. The remaining balance of the proceeds was used for general corporate purposes.

On March 19, 2002, the Company sold Boulder Plaza, a 159,238 square foot community center in Boulder, Colorado for $24.7 million. The proceeds from the sale were used for general corporate purposes.

On June 10, 2002, the Company acquired The Oaks, a 1.1 million square foot super-regional mall in Thousand Oaks, California. The total purchase price was $152.5 million and was funded with $108.0 million of debt, bearing interest at LIBOR plus 1.15%, placed concurrently with the acquisition. The balance

38 The Macerich Company

of the purchase price was funded by cash and borrowings under the Company's line of credit. The Oaks is referred to herein as the "2002 Acquisition Center."

On July 26, 2002, the Operating Partnership acquired Westcor Realty Limited Partnership and its affiliated companies ("Westcor"). The total purchase price was approximately $1.475 billion including the assumption of $733 million in existing debt and the issuance of approximately $72 million of convertible preferred partnership units of the Operating Partnership at a price of $36.55 per unit. Additionally, $18.9 million of partnership units of Westcor Realty Limited Partnership were issued to limited partners of Westcor which, subject to certain conditions, can be converted on a one for one basis into partnership units of the Operating Partnership. The balance of the purchase price was paid in cash which was provided primarily from the $380.0 interim credit facility, which was subsequently paid in full in 2002 and a $250.0 million term loan with a maturity of up to three years with two one-year extension options and with an interest rate ranging from LIBOR plus 2.75% to LIBOR plus 3.00% depending on the Company's overall leverage level.

On November 8, 2002, the Company purchased its joint venture partner's interest in Panorama City Associates, which owns Panorama Mall in Panorama, California. The purchase price was approximately $23.7 million.

On December 24, 2002, the former Montgomery Ward site at Pacific View Mall in Ventura, California was sold for approximately $15.4 million. The proceeds from the sale were used to repay a portion of the term loan.

On January 2, 2003, the Company sold its 67% interest in Paradise Village Gateway, a 296,153 square foot Phoenix area urban village, for approximately $29.4 million. The proceeds from the sale were used to repay a portion of the term loan. The sale resulted in a loss on sale of asset of $0.2 million.

The Macerich Company 39

On September 15, 2003, the Company acquired Northridge Mall, an 864,071 square foot super-regional mall in Salinas, California. The total purchase price was $128.5 million and was funded by sale proceeds from Bristol Center and borrowings under the Company's line of credit. Northridge Mall is referred herein as the "2003 Acquisition Center."

A portion of the Westcor portfolio is comprised of joint ventures and those properties are reflected using the equity method of accounting. The results of these acquisitions and the 2003 acquisition of Biltmore Fashion Park are reflected in the consolidated results of operations of the Company in the income statement line item entitled "Equity in income of unconsolidated joint ventures and the management companies."

Many of the variations in the results of operations, discussed below, occurred due to the Westcor portfolio and the 2002 and 2003 Acquisition Centers. For purposes of the 2003 financial results, the term "Westcor portfolio" includes the Company's acquisition of the remaining 50% interest in FlatIron Crossing on January 31, 2003. Crossroads Mall-Boulder, Parklane Mall and Queens Center are currently under redevelopment and are referred to herein as the "Redevelopment Centers." All other Centers, excluding the Redevelopment Centers, the 2002 Acquisition Center, the Westcor portfolio (which includes the two development properties), the 2003 Acquisition Center and Biltmore Fashion Park, are referred to herein as the "Same Centers," unless the context otherwise requires.

Revenues include rents attributable to the accounting practice of straight-lining of rents which requires rent to be recognized each year in an amount equal to the average rent over the term of the lease, including fixed rent increases over that period. The amount of straight-lined rents, included in consolidated revenues, recognized in 2003 was $2.9 million compared to $1.2 million in 2002 and ($0.1) million in 2001. Additionally, the Company recognized through equity in income of unconsolidated joint ventures, $1.9 million as its pro rata share of straight-lined rents from joint ventures in 2003 compared to $2.3 million in 2002 and $1.4 million in 2001. These variances resulted from the Company structuring the majority of its new leases using an annual multiple of CPI increases, which generally do not require straight-lining treatment and are offset by increases of $2.6 million and $2.8 million relating to the 2002 Acquisition Center, the acquisition of the Westcor portfolio and the 2003 Acquisition Center for the years ended December 31, 2003 and 2002, respectively. Currently, 29% of the mall and freestanding 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.

The Company's historical growth in revenues, net income and Funds From Operations have been closely tied to the acquisition and redevelopment of shopping centers. Many factors, including the availability and cost of

40 The Macerich Company

capital, the Company's total amount of debt outstanding, interest rates and the availability of attractive acquisition targets, among others, will affect the Company's ability to acquire and redevelop additional properties in the future. The Company may not be successful in pursuing acquisition opportunities and newly acquired properties may not perform as well as expected in terms of achieving the anticipated financial and operating results. Increased competition for acquisitions may impact adversely the Company's ability to acquire additional properties on favorable terms. Expenses arising from the Company's efforts to complete acquisitions, redevelop properties or increase its market penetration may have an adverse effect on its business, financial condition and results of operations. In addition, the following describes some of the other significant factors that may impact the Company's future results of operations.

General Factors Affecting the Centers; Competition: Real property investments are subject to varying degrees of risk that may affect the ability of the 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 the Company and the Company's stockholders. Income from shopping center properties may be adversely affected by a number of factors, including: the national economic climate; the regional and local economy (which may be adversely impacted by plant closings, industry slowdowns, union activities, adverse weather conditions, natural disasters, terrorist activities, and other factors); local real estate conditions (such as an oversupply of, or a reduction in demand for, retail space or retail goods and the availability and creditworthiness of current and prospective tenants); perceptions by retailers or shoppers of the safety, convenience and attractiveness of the shopping center; and increased costs of maintenance, insurance and operations (including real estate taxes). A significant percentage of the Centers are located in California and the Westcor centers are concentrated in Arizona. To the extent that economic or other factors affect California or Arizona (or their respective regions generally) more severely than other areas of the country, the negative impact on the Company's economic performance could be significant. There are numerous shopping facilities that compete with the Centers in attracting tenants to lease space, and an increasing number of new retail formats and technologies other than retail shopping centers that compete with the Centers for retail sales (see "Business-Competition"). Increased competition could adversely affect the Company's revenues. Income from shopping center properties and shopping center values are also affected by such factors as applicable laws and regulations, including tax, environmental, safety and zoning laws (see "Business-Environmental Matters"), interest rate levels and the availability and cost of financing.

Dependence on Anchors/Tenants: The Company's revenues and funds available for distribution would be adversely affected if a significant number of the Company's lessees were unable (due to poor operating results, bankruptcy, terrorist activities or other reasons) to meet their obligations, if the Company were unable to lease a significant amount of space in the Centers on economically favorable terms, or if for any reason, the Company were unable to collect a significant amount of rental payments. A decision by an Anchor or a significant tenant to cease operations at a Center could also have an adverse effect on the Company. In addition, mergers, acquisitions, consolidations, dispositions or bankruptcies in the retail industry could result in the loss of Anchors or tenants at one or more Centers. (See "Business-Bankruptcy and/or Closure of Retail Stores.") Furthermore, if the store sales of retailers operating in the Centers were to decline sufficiently, tenants might be unable to pay their minimum rents or expense recovery charges. In the event of a default by a lessee, the Center may also experience delays and costs in enforcing its rights as lessor.

The Macerich Company 41

Real Estate Development Risks: The Company's business strategy has expanded to include the selective development and construction of retail properties. Any development, redevelopment and construction activities that the Company undertakes 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, occupancy and other required governmental permits and authorizations. If any of the above events occur, the ability to pay distributions and service the Company's indebtedness could be adversely affected.

Joint Venture Centers: The Company indirectly owns partial interests in 40 Joint Venture Centers as well as fee title to a site that is ground leased to the entity that owns a Joint Venture Center and several development sites. The Company may also 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. The Company may have fiduciary responsibilities to its partners that could affect decisions concerning the Joint Venture Centers. In certain cases, third parties share with the Company or have (with respect to one Joint Venture Center) control of major decisions relating to the Joint Venture Centers, including decisions with respect to sales, financings and the timing and amount of additional capital contributions, as well as decisions that could have an adverse impact on the Company's REIT status. In addition, some of the Company's outside partners control the day-to-day operations of seven Joint Venture Centers. The Company therefore does not control cash distributions from these Centers and the lack of cash distributions from these Centers could jeopardize the Company's ability to maintain its qualification as a REIT.

Uninsured Losses: Each of the Centers has comprehensive liability, fire, terrorism 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, carries 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 $200 million on these Centers. Furthermore, the Company carries title insurance on substantially all of the Centers for less than their full value. If an uninsured loss or a loss in excess of insured limits occurs, the Operating Partnership or the entity, as the case may be, that owns the affected Center could lose its capital invested in the Center, as well as the anticipated future revenue from the Center, while remaining obligated for any mortgage indebtedness or other financial obligations related to the Center. There is also no assurance that the Company will be able to maintain its current insurance coverage. An uninsured loss or loss in excess of insured limits may negatively impact the Company's financial condition.

REIT Qualification: 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 such as the Company that holds its assets in partnership form. The determination of various factual matters and circumstances not entirely within our control, including by the Company's partners in the Joint Venture Centers, may affect its ability to qualify as a REIT. In addition, legislation, new regulations, administrative

42 The Macerich Company

interpretations or court decisions could significantly change the tax laws with respect to the Company's qualification as a REIT or the federal income tax consequences of that qualification.

If in any taxable year the Company fails to qualify as a REIT, the Company will suffer the following negative results:

•: the Company will not be allowed a deduction for distributions to stockholders in computing its taxable income; and
•: the Company will be subject to federal income tax on its taxable income at regular corporate rates.

In addition, the Company will be disqualified from treatment as a REIT for the four taxable years following the year during which the qualification was lost, unless the Company was entitled to relief under statutory provisions. As a result, net income and the funds available for distribution to the Company's stockholders will be reduced for five years. It is also possible that future economic, market, legal, tax or other considerations might cause the Board of Directors to revoke the Company's REIT election.

Assets and Liabilities

Total assets increased to $4.1 billion at December 31, 2003 compared to $3.7 billion at December 31, 2002 and $2.3 billion at December 31, 2001. During that same period, total liabilities were $1.6 billion in 2001 and $2.4 billion in 2002 and increased to $2.9 billion in 2003. These changes were primarily a result of the acquisitions and various debt and equity transactions.

Recent Developments

A. Acquisitions

The Macerich Company 43

loan on the property. The Company's share of the remainder of the purchase price was funded by cash and borrowings under the Company's line of credit.

B. Financing Activitiy

On August 7, 2003, the Company paid off the loan at Greeley Mall and placed a new $30.0 million ten-year fixed rate loan on the property with an interest rate of 6.18%.

In September 2003, the Company replaced floating rate loans at Chandler Festival and Chandler Gateway with new five year fixed rate loans of $32.0 million and $20.0 million, respectively.

C. Redevelopment and Development Activity

At Lakewood Mall, Target opened a two-level Target store in the location formerly occupied by Montgomery Ward in October 2003.

At Redmond Town Center, Bon Marche opened a new department store in July 2003.

At Somersville Town Center in Antioch, California, a new 106,685 square foot Macy's store is under construction and is expected to open in the fall of 2004.

44 The Macerich Company

D. Dispositions

Comparison of Years Ended December 31, 2003 and 2002

Revenues

Minimum and percentage rents increased by 28.6% to $308.5 million in 2003 from $239.9 million in 2002. Approximately $60.1 million of the increase relates to the Westcor portfolio, $6.7 million of the increase relates to the 2002 Acquisition Center, $4.2 million relates to the Company acquiring 50% of its joint venture partner's interest in Panorama and $2.9 million relates to the 2003 Acquisition Center. Additionally, the Redevelopment Centers offset the increase in minimum and percentage rents by decreasing revenues by $1.0 million in 2003 compared to 2002 and a $5.3 million offset related to the Company's sale of 49.9% of its partnership interest in the Village at Corte Madera.

During 2001, the Company adopted SFAS 141. (See "Statement on Critical Accounting Policies"). The amortization of below market leases, which is recorded in minimum rents, increased to $6.1 million in 2003 from $1.1 million in 2002. The increase is primarily due to a full year's amortization in 2003 from the acquistitions during 2002 compared to a partial year in 2002.

Tenant recoveries increased to $159.8 million in 2003 from $120.6 in 2002. Approximately $31.8 million relates to the Westcor portfolio, $3.9 million relates to the 2002 Acquisition Center, $4.7 million relates to the Same Centers, $1.9 million relates to Panorama Mall and $1.3 million relates to the 2003 Acquisition Center. This is offset by a $1.0 million decrease relating to the Redevelopment Centers and a $2.3 million decrease relating to the sale of 49.9% partnership interest in the Village at Corte Madera.

Expenses

Shopping center and operating expenses increased to $171.7 million in 2003 compared to $127.1 million in 2002. The increase is a result of $42.9 million related to the Westcor Portfolio, the 2002 Acquisition

The Macerich Company 45

Center accounted for $3.1 million of the increase in expenses, $1.6 million relates to Panorama Mall, $1.4 million relates to increased property taxes, recoverable expenses and bad debt expense at the Redevelopment Centers and $3.1 million represents increased property taxes, insurance and other recoverable and non-recoverable expenses at the Same Centers. This is offset by a $2.0 million decrease relating to the sale of 49.9% partnership interest in the Village at Corte Madera and $5.5 million relating to consolidating Macerich Management Company effective July 1, 2003, in accordance with FIN 46. (See "New Pronouncements Issued"). Prior to July 1, 2003, the Macerich Management Company was accounted for using the equity method of accounting.

REIT General and Administrative Expenses

REIT general and administrative expenses increased to $10.7 million in 2003 from $7.4 million in 2002, primarily due to increases in professional services, travel expenses and stock-based compensation expense.

Depreciation and Amortization

Depreciation and amortization increased to $108.7 million in 2003 from $77.6 million in 2002. Approximately $1.6 million relates to additional capital costs at the Same Centers, $2.0 million relates to the 2002 Acquisition Center, $0.9 million relating to the 2003 Acquisition Center, $1.3 million relating to consolidating Macerich Management Company effective July 1, 2003, $0.4 million relates to Panorama Mall and $16.8 million relates to the Westcor portfolio. As a result of SFAS 141, an additional $9.5 million of depreciation and amortization was recorded based on a reclassification of the purchase price of the 2002 and 2003 Acquisition Centers and the Westcor portfolio between buildings and into the value of in-place leases, tenant improvements and lease commissions. This is offset by a $1.9 million decrease relating to the sale of 49.9% of the partnership interest in the Village at Corte Madera.

Interest Expense

Interest expense increased to $132.5 million in 2003 from $122.6 million in 2002. Approximately $16.8 million of the increase is related to the debt from the Westcor portfolio, $0.5 million from the 2002 Acquisition Center, $1.0 million relates to the new $32.3 million loan placed on Panorama Mall in January 2003 and $6.5 million is related to the $250.0 million of unsecured notes issued on May 13, 2003. In addition, the interest expense relating to the debentures paid off in December 2002 reduced interest expense by $8.6 million in 2003 compared to 2002 and the sale of 49.9% of the Company's partnership interest in the Village at Corte Madera resulted in a decrease of $3.4 million compared to 2002. Capitalized interest was $12.1 million in 2003, up from $7.8 million in 2002 primarily due to the redevelopment and expansion of Queens Center.

Minority Interest

The minority interest represents the 20.3% weighted average interest of the Operating Partnership by the Company during 2003. This compares to 24.7% not owned by the Company during 2002.

Equity in Income from Unconsolidated Joint Ventures and Macerich Management Companies

The income from unconsolidated joint ventures and the Macerich Management Companies was $58.9 million for 2003, compared to income of $43.0 million in 2002. $5.6 million was attributed to the acquisition of certain joint ventures in the Westcor portfolio and $0.5 million relating to the sale of a 49.9% partnership interest in the Village at Corte Madera. Additionally in 2002, a loss of $11.3 million was

46 The Macerich Company

included in unconsolidated joint ventures relating to the Company's investment in MerchantWired, LLC which included a $10.2 million write down of assets.

Gain (Loss) on Sale of Assets

A gain of $12.4 million in 2003 represents $8.5 million from the Company's sale of 49.9% of its partnership interest in the Village at Corte Madera on May 15, 2003, $2.8 million relates to the Company's sale of Gainey Village on June 6, 2003 and $1.0 million relates to gains on sales of peripheral land. This is compared to a loss of $3.8 million in 2002 representing primarily the write down of assets from the Company's various technology investments.

Loss on Early Extinguishment of Debt

In 2003, the Company recorded a loss from early extinguishment of debt of $0.2 million compared to $3.6 million in 2002.

Discontinued Operations

A gain of $22.0 million in 2003 relates to the gain on sale of Bristol Mall on August 4, 2003 of $22.2 million and $0.2 million relates to a loss on the Company's sale of its 67% interest in Paradise Village Gateway on January 2, 2003. This is compared to a gain of $26.1 million in 2002 as a result of the Company selling Boulder Plaza on March 19, 2002 and recognizing a gain on sale of $13.9 million and the Company recognizing a gain of $12.2 million as a result of the Company selling the former Montgomery Ward site at Pacific View Mall.

Net Income Available to Common Stockholders

Primarily as a result of the purchase of the 2002 and 2003 Acquisition Centers, the Westcor portfolio, the Bristol, the Village at Corte Madera and Gainey Village sales, the issuance of $420.3 million of equity in November 2002 which was used to pay off debt, and the foregoing results, net income available to common stockholders increased to $113.2 million in 2003 from $61.0 million in 2002. In 2002, the sales of Boulder Plaza and the former Montgomery Ward site at Pacific View Mall resulting in a total gain of $26.1 million and significantly increased net income available to common stockholders for the year ending December 31, 2002.

Operating Activities

Cash flow from operations was $261.7 million in 2003 compared to $206.2 million in 2002. The increase is primarily due to the Westcor portfolio, the 2002 and 2003 Acquisition Centers and increased net operating income at the Centers as mentioned above.

Investing Activities

Cash used in investing activities was $383.8 million in 2003 compared to cash used in investing activities of $918.3 million in 2002. The change resulted primarily from the acquisitions of the Westcor portfolio and 2002 and 2003 Acquisition Centers, the Company's purchase of its joint venture partner's 50% interest in FlatIron Crossing, the Company's sale of 49.9% of its partnership interest in the Village at Corte Madera, an increase in equity of income of unconsolidated joint ventures due to the Westcor portfolio, the loss of $10.2 million in 2002 from the Company's investment in Merchant Wired, LLC and a $126.6 million increase in development, redevelopment and expansion of Centers primarily due to the Queens Center

The Macerich Company 47

expansion. This is offset by $107.2 million of proceeds received from the sale of Paradise Village Gateway, the Shops at Gainey Village, Bristol Center and the 49.9% interest in the Village at Corte Madera and increased distributions from joint ventures primarily as a result of the Westcor portfolio.

Financing Activities

Cash flow provided by financing activities was $115.7 million in 2003 compared to cash flow provided by financing activities of $739.1 million in 2002. The change resulted primarily from the acquisitions of the Westcor portfolio in 2002 and the 2002 and 2003 Acquisition Centers, the construction loan at Queens Center of $101.3 million, the new loan of $32.2 million at Panorama Mall and the $250.0 million of unsecured notes issued on May 13, 2003. This is offset by $471.9 million of net proceeds from equity offerings in 2002 and a $108.0 million loan placed on the 2002 Acquisition Center.

Funds From Operations

Primarily as a result of the acquisitions of the Westcor portfolio, the purchase of the 2002 and 2003 Acquisition Centers and the other factors mentioned above, Funds from Operations—Diluted increased 38.3% to $269.1 million in 2003 from $194.6 million in 2002. For the reconciliation of FFO and FFO-diluted to net income available to common stockholders, see "Funds from Operations."

Comparison of Years Ended December 31, 2002 and 2001

Revenues

Minimum and percentage rents increased by 14.7% to $240.0 million in 2002 from $209.3 million in 2001. Approximately $7.5 million of the increase is attributed to the Same Centers primarily due to releasing space at higher rents, $7.1 million of the increase relates to the 2002 Acquisition Center, $0.7 million relates to the Company acquiring 50% of its joint venture partner's interest in Panorama and $28.3 million relates to the Westcor portfolio. This is offset by a $9.9 million decrease relating to the sale of Villa Marina Marketplace in 2001 and a $1.8 million decrease relating to the Redevelopment Centers.

During 2001, the Company adopted SFAS 141. (See "Statement on Critical Accounting Policies"). This resulted in the Company recording $1.1 million of minimum rents related to the amortization of below market leases in 2002.

Tenant recoveries increased to $120.6 million in 2002 from $108.3 million in 2001. Approximately $4.1 million of the increase is attributable to the 2002 Acquisition Center, $10.3 million relates to the Westcor portfolio and $0.5 million relates to the Same Centers. This is partially offset by $2.8 million relating to decreases from the sale of Villa Marina Marketplace.

Expenses

Shopping center and operating expenses increased to $127.1 million in 2002 compared to $109.5 million in 2001. The increase is a result of $5.0 million of increased property taxes, insurance and other recoverable and non-recoverable expenses at the Same Centers. Additionally, effective March 29, 2001, the Macerich Property Management Company merged with and into Macerich Property Management Company, LLC ("MPMC, LLC"). Expenses for MPMC, LLC for periods commencing March 29, 2001, were consolidated and represent $1.2 million of the change. Prior to March 29, 2001, Macerich Property Management

48 The Macerich Company

Company was an unconsolidated entity accounted for using the equity method of accounting. The 2002 Acquisition Center accounted for $4.2 million of the increase in expenses, $10.9 million of the increase related to Westcor and $0.7 million relates to the Redevelopment Centers. These increases are offset by decreases of approximately $2.9 million related to the sale of Villa Marina Marketplace.

REIT general and administrative expenses increased to $7.4 million in 2002 from $6.8 million in 2001, primarily due to increases in professional services, travel expenses and stock-based compensation expense.

Depreciation and Amortization

Depreciation and amortization increased to $77.6 million in 2002 from $65.0 million in 2001. Approximately $3.6 million relates to additional capital costs at the Same Centers, $2.3 million relates to the 2002 Acquisition Center and $7.6 million relates to Westcor. This increase is offset by a decrease of $2.3 million from the sale of Villa Marina Marketplace.

Interest Expense

Interest expense increased to $122.6 million in 2002 from $109.6 million in 2001. Approximately $18.4 million of the increase is related to the debt from the Westcor transaction and $1.8 million from the 2002 Acquisition Center. This increase is offset by decreases of approximately $4.0 million related to the sale of Villa Marina Marketplace and approximately $0.9 million related to the payoff of debt in 2001. In addition, the interest expense relating to the debentures paid off in December 2002 reduced interest expense by $2.3 million in 2002 compared to 2001. Capitalized interest was $7.8 million in 2002, up from $5.7 million in 2001.

Minority Interest

The minority interest represents the 24.7% weighted average interest of the Operating Partnership that was not owned by the Company during 2002. This compares to 24.8% not owned by the Company during 2001.

Equity in Income from Unconsolidated Joint Ventures and Macerich Management Companies

The income from unconsolidated joint ventures and the Macerich Management Companies was $43.0 million for 2002, compared to income of $32.9 million in 2001. Income from the Macerich Management Companies increased by $1.3 million primarily due to MPMC, LLC being consolidated effective March 29, 2001. SDG Macerich Properties, LP income increased by $3.1 million primarily due to lower interest expense on floating rate debt. Pacific Premier Retail Trust's income increased by $3.4 million primarily due to a $2.3 million gain on sale of a portion of land at Redmond Town Center in 2002 and approximately $1.1 million relating to increases in minimum and percentage rents. Additionally, $10.1 million was attributed to the acquisition of the Westcor portfolio which included $0.8 million of revenue relating to SFAS 141. These increases are offset by $10.2 million of loss from the write-down of the Company's investment in MerchantWired, LLC.

Gain (loss) on Sale or Write-Down of Assets

A loss of $3.8 million in 2002 compares to a gain of $24.5 million in 2001. Approximately $3.0 million of the loss in 2002 represents the write-down of assets from the Company's various technology investments

The Macerich Company 49

compared to a gain on sale of assets of $24.5 million in 2001 as a result of the Company selling Villa Marina Marketplace on December 14, 2001.

Loss from Early Extinguishment of Debt

In 2002, the Company recorded a loss from early extinguishment of debt of $3.6 million compared to a loss of $2.0 million in 2001.

Discontinued Operations

The 2002 gain of $26.1 million was a result of the Company selling Boulder Plaza and recognizing a $13.9 million gain on March 19, 2002, and the Company recognizing a gain of $12.2 million as a result of the Company selling the former Montgomery Ward site at Pacific View Mall.

Net Income Available to Common Stockholders

Primarily as a result of the sales of Boulder Plaza and the former Montgomery Ward site at Pacific View Mall, the 2002 Acquisition Center, the Westcor transaction, the income from Unconsolidated Joint Ventures and the foregoing results, net income available to common stockholders increased to $61.0 million in 2002 from $58.0 million in 2001.

Operating Activities

Cash flow from operations was $206.2 million in 2002 compared to $140.5 million in 2001. The increase is primarily due to the Westcor transaction, the 2002 Acquisition Center, consolidating the results of MPMC, LLC effective March 29, 2001, and increased net operating income at the Centers as mentioned above.

Investing Activities

Cash used in investing activities was $918.3 million in 2002 compared to cash used in investing activities of $57.3 million in 2001. The change resulted primarily from the Westcor transaction, the 2002 Acquisition Center and the write-down of assets of $10.2 million relating to MerchantWired, LLC, which is reflected in equity in income of unconsolidated joint ventures. These decreases are offset by the net cash proceeds received of $15.3 million in 2002 from the sales of Boulder Plaza and the former Montgomery Wards site at Pacific View Mall.

Financing Activities

Cash flow provided by financing activities was $739.1 million in 2002 compared to cash flow used in financing activities of $93.0 million in 2001. The change resulted primarily from the new debt from the Westcor transaction, the $471.9 million of net proceeds from the 2002 equity offerings, the financing of the 2002 Acquisition Center and the refinancing of Centers in 2001.

Funds From Operations

Primarily because of the factors mentioned above, Funds from Operations—Diluted increased 12.2% to $194.6 million in 2002 from $173.4 million in 2001. For the reconciliation of FFO and FFO-diluted to net income available to common stockholders, see "Funds from Operations."

50 The Macerich Company

Liquidity and Capital Resources

The Company intends to meet its short term liquidity requirements through cash generated from operations, working capital reserves, property secured borrowings and borrowing under the new revolving line of credit. The Company anticipates that revenues will continue to provide necessary funds for its operating expenses and debt service requirements, and to pay dividends to stockholders in accordance with REIT requirements. The Company anticipates that cash generated from operations, together with cash on hand, will be adequate to fund capital expenditures which will not be reimbursed by tenants, other than non-recurring capital expenditures. The following table summarizes capital expenditures incurred at the Centers, including the pro rata share of joint ventures, for the twelve months ending December 31,:

(Dollars in Millions)
		2003	2002	2001

Acquisitions of property and equipment		$340.0	$1,661.2	$20.7
Development, redevelopment and expansion of Centers		183.9	65.2	43.1
Renovations of Centers		24.5	6.9	14.6
Tenant allowances		12.0	16.0	16.4
Deferred leasing charges		18.5	16.5	13.9

	Total	$578.9	$1,765.8	$108.7

Management expects similar levels to be incurred in future years for tenant allowances and deferred leasing charges and to incur between $125 million to $180 million in 2004 for development, redevelopment, expansion and renovations, excluding the Queens Center expansion and the developments of La Encantada and Scottsdale 101 which will be separately financed as described below. Capital for major expenditures or major developments and redevelopments has been, and is expected to continue to be, obtained from equity or debt financings which include borrowings under the Company's line of credit and construction loans. However, 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.

On February 28, 2002, the Company issued 1,968,957 common shares with total net proceeds of $52.3 million. The proceeds from the sale of the common shares were used principally to finance a portion of the Queens Center expansion and redevelopment project and for general corporate purposes. The Queens Center expansion and redevelopment is anticipated to cost between $250 million and $275 million. The Company has a $225.0 million construction loan which converts to a permanent loan at completion and stabilization, which is collateralized by the Queens Center property, to finance the remaining project costs. Construction began in the second quarter of 2002 with completion estimated to be, in phases, through late 2004 and stabilization expected in 2005.

The Company has obtained construction loans for $51.0 million and $54.0 million for the developments of La Encantada and Scottsdale 101, respectively. These loans will be funded as construction costs are incurred.

The Company believes that it will have access to the capital necessary to expand its business in accordance with its strategies for growth and maximizing Funds from Operations. The Company presently intends to

The Macerich Company 51

obtain additional capital necessary for these purposes through a combination of debt or equity financings, joint ventures and the sale of non-core assets. The Company believes joint venture arrangements have in the past and may in the future provide an attractive alternative to other forms of financing, whether for acquisitions or other business opportunities.

The Company's total outstanding loan indebtedness at December 31, 2003 was $3.7 billion (including its pro rata share of joint venture debt). This equated to a debt to Total Market Capitalization (defined as total debt of the Company, including its pro rata share of joint venture debt, plus aggregate market value of outstanding shares of common stock, assuming full conversion of OP Units and preferred stock into common stock) ratio of approximately 52.5% at December 31, 2003. The majority of the Company's debt consists of fixed-rate conventional mortgages payable collateralized by individual properties.

The Company has filed a shelf registration statement, effective June 6, 2002, to sell securities. The shelf registration is for a total of $1.0 billion of common stock, common stock warrant or common stock rights. The Company sold a total of 15.2 million shares of common stock under this shelf registration on November 27, 2002. The aggregate offering price of this transaction was approximately $440.2 million, leaving approximately $559.8 million available under the shelf registration statement. In addition, the Company filed another shelf registration statement, effective October 27, 2003, to sell up to $300 million of preferred stock.

The Company had a credit facility of $200.0 million with a maturity of July 26, 2002 with a right to extend the facility subject to certain conditions. On July 26, 2002, concurrent with the closing of Westcor, the Company replaced this $200.0 million credit facility with a new $425.0 million revolving line of credit. This increased revolving line of credit has a three-year term plus a one-year extension. The interest rate fluctuates from LIBOR plus 1.75% to LIBOR plus 3.00% depending on the Company's overall leverage level. As of December 31, 2003 and 2002, $319.0 million and $344.0 million was outstanding at an average interest rate of 3.69% and 4.72%, respectively.

On May 13, 2003, the Company issued $250.0 million in unsecured notes maturing in May 2007 with a one-year extension option bearing interest at LIBOR plus 2.50%. The proceeds were used to pay down and create more availability under the Company's line of credit. At December 31, 2003, the entire $250.0 million of notes were outstanding at an interest rate of 4.45%. In October 2003, the Company entered into an interest rate swap agreement which effectively fixed the interest rate at 4.45% from November 2003 to October 13, 2005.

The Company had $125.1 million of convertible subordinated debentures (the "Debentures") which matured December 15, 2002. On December 13, 2002, the Debentures were repaid in full, using the Company's revolving credit facility.

At December 31, 2003, the Company had cash and cash equivalents available of $47.2 million.

Funds From Operations

52 The Macerich Company

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 and after adjustments for unconsolidated partnerships and joint ventures. Adjustments for unconsolidated partnerships and joint ventures are calculated to reflect FFO on the same basis. FFO and FFO on a fully 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. FFO on a fully diluted basis, is one of the measures investors find most useful in measuring the dilutive impact of outstanding convertible securities. FFO does not represent cash flow from operations as defined by GAAP, should not be considered as an alternative to net income as defined by GAAP and is not indicative of cash available to fund all cash flow needs. FFO, as presented, may not be comparable to similarly titled measures reported by other real estate investment trusts. The reconciliation of FFO and FFO-diluted to net income available to common stockholders is provided below.

In compliance with the Securities and Exchange Commission's Regulation G and Amended Item 10 of Regulation S-K relating to non-GAAP financial measures, the Company has revised its FFO definition as of January 1, 2003 and for all prior periods presented, to include gain or loss on sales of peripheral land, impairment of assets, losses on debt-related transactions and the effect of SFAS No. 141 to amortize the below market leases which are recorded in minimum rents. The Company's revised definition is in accordance with the definition provided by NAREIT.

The inclusion of gains (losses) on sales of peripheral land included in FFO for the years ended December 31, 2003, 2002, 2001, 2000 and 1999 were $1.4 million (including $0.4 million from joint ventures at pro rata), $2.5 million (including $2.4 million from joint ventures at pro rata), $0.3 million (including $0.1 million from joint ventures at pro rata), ($0.7) million (including ($0.7) million from joint ventures at pro rata), and $1.6 million (including $1.6 million from joint ventures at pro rata), respectively. The inclusion of gains (losses) on sales of peripheral land included in FFO for the years ended December 31, 1998, 1997, 1996, 1995 and 1994 were ($0.1) million, $0.1 million, $0.1 million, $0.2 million and $0.4 million, respectively. All of these amounts represented amounts from joint ventures at pro rata.

FFO and FFO-diluted, for the years ended December 31, 2002, 2001, 2000, 1999, 1998, 1997, 1996, 1995 and 1994 have been restated to reflect the Company's share of impairment of assets and losses on debt-related transactions, the latter of which was previously reported as extraordinary items under GAAP. The Company's write-off of impairment of assets for 2002 was $13.3 million (including $10.2 million from joint ventures at pro rata). There were no write-offs of impairment of assets for the years ended December 31, 2001, 2000, 1999, 1998, 1996, 1995 or 1994. In 1997, the write-down from the impairment of a joint venture asset for $10.5 million has been reflected in FFO for that period. The Company's losses on debt-related transactions for the years ended December 31, 2002, 2001, 2000, 1999, 1998, 1997, 1996 and 1995 were $3.6 million, $2.0 million, $0.5 million (including $0.2 million from joint ventures at pro rata) $1.5 million, $2.4 million, $0.6 million, $0.3 million and $1.3 million respectively. There were no losses from debt-related transactions in 1994.

The Macerich Company 53

The following reconciles net income available to common stockholders to FFO and FFO-diluted:

(amounts in thousands)
		2003		2002		2001		2000		1999		1998		1997		1996		1995		1994
		Shares	Amount	Shares	Amount	Shares	Amount	Shares	Amount	Shares	Amount	Shares	Amount	Shares	Amount	Shares	Amount	Shares	Amount	Shares	Amount

Net income-available to common stockholders			$113,218		$60,965		$58,035		$37,971		$110,873		$32,528		$22,046		$18,911		$11,303		$10,450
Adjustments to reconcile net income to FFO-basic:
	Minority interest		28,907		20,189		19,001		12,168		38,335		12,902		10,567		10,975		8,246		8,008
	(Gain) loss on sale or write-down of wholly-owned assets		(34,451)		(22,253)		(24,491)		2,773		(95,981)		(9)		(1,619)		—		—		—
	Add: Gain on land sales—consolidated assets		1,054		128		215		—		—		—		—		—		—		—
	Less: Impairment writedown of consolidated assets		—		(3,029)		—		—		—		—				—		—		—
	(Gain) loss on sale or write-down of assets from unconsolidated entities (pro rata)		(155)		8,021		(191)		(235)		193		143		10,400		(110)		(240)		(366)
	Add: Gain (loss) on land sales—pro rata unconsolidated entities		387		2,403		123		(659)		1,637		(164)		95		110		240		361
	Less: Impairment writedown of pro rata unconsolidated entities		—		(10,237)		—		—		—		—		(10,495)		—		—		—
	Depreciation and amortization on wholly-owned centers		109,028		78,837		65,983		61,647		61,383		53,141		41,535		32,591		25,749		23,195
	Depreciation and amortization on joint ventures and from the management companies (pro rata)		45,674		37,355		28,077		24,472		19,715		10,879		2,312		2,096		2,255		1,797
	Cumulative effect of change in accounting principle—wholly-owned centers		—		—		—		963		—		—		—		—		—		—
	Cumulative effect of change in accounting principle—pro rata unconsolidated entities		—		—		128		787		—		—		—		—		—		—
	Less: depreciation on personal property and amortization of loan costs and interest rate caps		(9,346)		(7,463)		(4,969)		(5,106)		(4,271)		(3,716)		(2,608)		(2,350)		(3,674)		(3,741)

FFO—basic(1)		67,332	254,316	49,611	164,916	44,963	141,911	45,050	134,781	46,130	131,884	43,016	105,704	37,982	72,233	32,934	62,223	26,930	43,879	25,645	39,704
Additional adjustments to arrive at FFO-diluted:
	Impact of convertible preferred stock	7,386	14,816	9,115	20,417	9,115	19,688	9,115	18,958	9,115	18,138	6,058	11,547	n/a	n/a	n/a	n/a	n/a	n/a	n/a	n/a
	Impact of stock options using the treasury method	480	—	456	—	(n/a antidilutive)		(n/a antidilutive)		462		612	—	421	—	386	—	—	—	—	—
	Impact of restricted stock using the treasury method	(n/a antidilutive)		(n/a antidilutive)		(n/a antidilutive)		(n/a antidilutive)		—	1,823	—	668		239	—	—	—	—	—	—
	Impact of convertible debentures	—	—	3,833	9,310	4,824	11,773	5,154	12,542	5,186	12,616	(n/a antidilutive)		n/a	n/a	n/a	n/a	n/a