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EX-31.1 - EXHIBIT 31.1 - MACERICH COmac-9302015xexhibit311.htm
EX-31.2 - EXHIBIT 31.2 - MACERICH COmac-9302015xexhibit312.htm
EX-32.1 - EXHIBIT 32.1 - MACERICH COmac-9302015xexhibit321.htm

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2015
Commission File No. 1-12504
THE MACERICH COMPANY
(Exact name of registrant as specified in its charter)
MARYLAND
 
95-4448705
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer Identification Number)
401 Wilshire Boulevard, Suite 700, Santa Monica, California 90401
 (Address of principal executive office, including zip code)
(310) 394-6000
 (Registrant's telephone number, including area code)
N/A
 (Former name, former address and former fiscal year, if changed since last report)
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 twelve (12) months (or for such shorter period that the Registrant was required to file such reports) and (2) has been subject to such filing requirements for the past ninety (90) days.
YES x       NO o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding twelve (12) months (or for such shorter period that the registrant was required to submit and post such files).
YES x        NO o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act.
Large accelerated filer x
 
Accelerated filer o
 
Non-accelerated filer o (Do not check if a smaller
reporting company)
 
Smaller reporting company  o 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
YES o       NO x
Number of shares outstanding as of November 4, 2015 of the registrant's common stock, par value $0.01 per share: 158,327,709 shares




THE MACERICH COMPANY
FORM 10-Q
INDEX
Part I
 
Financial Information
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Part II
 
Other Information
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

2



THE MACERICH COMPANY
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except par value)
(Unaudited)
 
September 30,
2015
 
December 31,
2014
ASSETS:
 
 
 
Property, net
$
11,031,476

 
$
11,067,890

Cash and cash equivalents
93,009

 
84,907

Restricted cash
11,564

 
13,530

Tenant and other receivables, net
123,067

 
132,026

Deferred charges and other assets, net
734,373

 
759,061

Due from affiliates
78,476

 
80,232

Investments in unconsolidated joint ventures
1,278,216

 
984,132

Total assets
$
13,350,181

 
$
13,121,778

LIABILITIES AND EQUITY:
 
 
 
Mortgage notes payable:
 
 
 
Related parties
$
282,413

 
$
289,039

Others
5,407,170

 
5,115,482

Total
5,689,583

 
5,404,521

Bank and other notes payable
1,136,575

 
887,879

Accounts payable and accrued expenses
92,207

 
115,406

Other accrued liabilities
524,055

 
568,716

Distributions in excess of investments in unconsolidated joint ventures
24,856

 
29,957

Co-venture obligation
68,689

 
75,450

Total liabilities
7,535,965

 
7,081,929

Commitments and contingencies

 

Equity:
 
 
 
Stockholders' equity:
 
 
 
Common stock, $0.01 par value, 250,000,000 shares authorized, 158,518,091 and 158,201,996 shares issued and outstanding at September 30, 2015 and December 31, 2014, respectively
1,585

 
1,582

Additional paid-in capital
5,087,698

 
5,041,797

Retained earnings
338,693

 
596,741

Total stockholders' equity
5,427,976

 
5,640,120

Noncontrolling interests
386,240

 
399,729

Total equity
5,814,216

 
6,039,849

Total liabilities and equity
$
13,350,181

 
$
13,121,778

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

3


THE MACERICH COMPANY
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share amounts)
(Unaudited)
 
For the Three Months Ended September 30,
 
For the Nine Months Ended September 30,
 
2015
 
2014
 
2015
 
2014
Revenues:
 
 
 
 
 
 
 
Minimum rents
$
194,183

 
$
150,395

 
$
578,075

 
$
451,248

Percentage rents
5,992

 
4,072

 
11,816

 
9,295

Tenant recoveries
106,339

 
90,059

 
317,629

 
264,909

Other
14,477

 
10,614

 
42,801

 
31,638

Management Companies
5,271

 
8,352

 
17,070

 
25,248

Total revenues
326,262

 
263,492

 
967,391

 
782,338

Expenses:
 
 
 
 
 
 
 
Shopping center and operating expenses
94,950

 
85,352

 
290,491

 
257,583

Management Companies' operating expenses
21,012

 
21,508

 
67,719

 
65,185

REIT general and administrative expenses
6,688

 
5,339

 
22,660

 
17,339

Costs related to unsolicited takeover offer
209

 

 
25,204

 

Depreciation and amortization
117,486

 
89,741

 
357,437

 
266,199

 
240,345

 
201,940

 
763,511

 
606,306

Interest expense:
 
 
 
 
 
 
 
Related parties
2,690

 
3,671

 
8,128

 
11,069

Other
52,266

 
44,132

 
155,010

 
128,872

 
54,956

 
47,803

 
163,138

 
139,941

Loss (gain) on extinguishment of debt, net
27

 
46

 
(609
)
 
405

Total expenses
295,328

 
249,789

 
926,040

 
746,652

Equity in income of unconsolidated joint ventures
10,817

 
16,935

 
28,185

 
44,607

Co-venture expense
(2,954
)
 
(2,144
)
 
(7,897
)
 
(6,175
)
Income tax benefit
859

 
689

 
2,077

 
3,759

(Loss) gain on sale or write down of assets, net
(3,342
)
 
9,561

 
(7,078
)
 
(1,504
)
Gain on remeasurement of assets

 

 
22,089

 

Net income
36,314

 
38,744

 
78,727

 
76,373

Less net income attributable to noncontrolling interests
2,717

 
2,830

 
6,124

 
6,552

Net income attributable to the Company
$
33,597

 
$
35,914

 
$
72,603

 
$
69,821

Earnings per common share—net income attributable to common stockholders:
 
 
 
 
 
 
 
Basic
$
0.21

 
$
0.25

 
$
0.46

 
$
0.49

Diluted
$
0.21

 
$
0.25

 
$
0.45

 
$
0.49

Weighted average number of common shares outstanding:
 
 
 
 
 
 
 
Basic
158,517,000

 
140,916,000

 
158,452,000

 
140,859,000

Diluted
158,634,000

 
141,060,000

 
158,603,000

 
140,975,000

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

4


THE MACERICH COMPANY
CONSOLIDATED STATEMENT OF EQUITY
(Dollars in thousands, except per share data)
(Unaudited)
 
Stockholders' Equity
 
 
 
 
 
Common Stock
 
 
 
 
 
 
 
 
 
 
 
Shares
 
Par
Value
 
Additional
Paid-in
Capital
 
Retained Earnings
 
Total
Stockholders'
Equity
 
Noncontrolling
Interests
 
Total Equity
Balance at January 1, 2015
158,201,996

 
$
1,582

 
$
5,041,797

 
$
596,741

 
$
5,640,120

 
$
399,729

 
$
6,039,849

Net income

 

 

 
72,603

 
72,603

 
6,124

 
78,727

Amortization of share and unit-based plans
225,190

 
2

 
29,086

 

 
29,088

 

 
29,088

Employee stock purchases
11,349

 

 
745

 

 
745

 

 
745

Distributions paid ($1.95) per share

 

 

 
(330,651
)
 
(330,651
)
 

 
(330,651
)
Distributions to noncontrolling interests

 

 

 

 

 
(1,751
)
 
(1,751
)
Contributions from noncontrolling interests

 

 

 

 

 
23

 
23

Other

 

 
(1,593
)
 

 
(1,593
)
 

 
(1,593
)
Conversion of noncontrolling interests to common shares
79,556

 
1

 
1,558

 

 
1,559

 
(1,559
)
 

Redemption of noncontrolling interests

 

 
(170
)
 

 
(170
)
 
(51
)
 
(221
)
Adjustment of noncontrolling interests in Operating Partnership

 

 
16,275

 

 
16,275

 
(16,275
)
 

Balance at September 30, 2015
158,518,091

 
$
1,585

 
$
5,087,698

 
$
338,693

 
$
5,427,976

 
$
386,240

 
$
5,814,216

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

5


THE MACERICH COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
 
For the Nine Months Ended September 30,
 
2015
 
2014
Cash flows from operating activities:
 
 
 
Net income
$
78,727

 
$
76,373

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
(Gain) loss on extinguishment of debt, net
(609
)
 
405

Loss on sale or write down of assets, net
7,078

 
1,504

Gain on remeasurement of assets
(22,089
)
 

Depreciation and amortization
362,681

 
273,765

Amortization of net premium on mortgage notes payable
(17,891
)
 
(4,056
)
Amortization of share and unit-based plans
23,629

 
25,217

Straight-line rent adjustment
(4,512
)
 
(4,440
)
Amortization of above and below-market leases
(13,905
)
 
(5,730
)
Provision for doubtful accounts
3,766

 
3,452

Income tax benefit
(2,077
)
 
(3,759
)
Equity in income of unconsolidated joint ventures
(28,185
)
 
(44,607
)
Distributions of income from unconsolidated joint ventures
2,700

 
886

Co-venture expense
7,897

 
6,175

Changes in assets and liabilities, net of acquisitions and dispositions:
 
 
 
Tenant and other receivables
7,379

 
(1,416
)
Other assets
5,232

 
(7,011
)
Due from affiliates
1,756

 
(1,290
)
Accounts payable and accrued expenses
2,770

 
780

Other accrued liabilities
(696
)
 
(19,342
)
Net cash provided by operating activities
413,651

 
296,906

Cash flows from investing activities:
 
 
 
Acquisitions of property
(26,250
)
 
(15,233
)
Development, redevelopment, expansion and renovation of properties
(208,485
)
 
(129,750
)
Property improvements
(34,541
)
 
(32,375
)
Proceeds from notes receivable
1,368

 
3,169

Deferred leasing costs
(24,797
)
 
(19,402
)
Distributions from unconsolidated joint ventures
66,643

 
55,688

Contributions to unconsolidated joint ventures
(336,806
)
 
(257,963
)
Loans to unconsolidated joint ventures, net

 
(605
)
Proceeds from sale of assets
11,655

 
51,350

Restricted cash
(546
)
 
2,722

Net cash used in investing activities
(551,759
)
 
(342,399
)
 
 
 
 

6


THE MACERICH COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(Dollars in thousands)
(Unaudited)
 
For the Nine Months Ended September 30,
 
2015
 
2014
Cash flows from financing activities:
 
 
 
Proceeds from mortgages, bank and other notes payable
1,800,671

 
580,967

Payments on mortgages, bank and other notes payable
(1,262,628
)
 
(229,099
)
Deferred financing costs
(5,160
)
 
(1,126
)
Payment of finance deposits
(38,567
)
 

Proceeds from share and unit-based plans
745

 
645

Redemption of noncontrolling interests
(221
)
 
(236
)
Contribution from noncontrolling interests
23

 

Purchase of noncontrolling interest
(1,593
)
 

Payment of contingent consideration

 
(18,667
)
Dividends and distributions
(332,402
)
 
(286,206
)
Distributions to co-venture partner
(14,658
)
 
(12,021
)
Net cash provided by financing activities
146,210

 
34,257

Net increase (decrease) in cash and cash equivalents
8,102

 
(11,236
)
Cash and cash equivalents, beginning of period
84,907

 
69,715

Cash and cash equivalents, end of period
$
93,009

 
$
58,479

Supplemental cash flow information:
 
 
 
Cash payments for interest, net of amounts capitalized
$
178,263

 
$
136,233

Non-cash investing and financing transactions:
 
 
 
Accrued development costs included in accounts payable and accrued expenses and other accrued liabilities
$
39,717

 
$
50,817

Assumption of mortgage note payable from unconsolidated joint venture
$
50,000

 
$

Mortgage note payable settled by deed-in-lieu of foreclosure
$
34,149

 
$

Acquisition of property in exchange for investment in unconsolidated joint venture
$
76,250

 
$
15,767

Notes receivable issued in connection with sale of property
$

 
$
9,603

Conversion of Operating Partnership Units to common stock
$
1,559

 
$
984

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

7


THE MACERICH COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)
(Unaudited)
1.
Organization:
The Macerich Company (the "Company") is involved in the acquisition, ownership, development, redevelopment, management and leasing of regional and community/power shopping centers (the "Centers") located throughout the United States.
The Company commenced operations effective with the completion of its initial public offering on March 16, 1994. As of September 30, 2015, the Company was the sole general partner of and held a 94% ownership interest in The Macerich Partnership, L.P. (the "Operating Partnership"). The Company was organized to qualify as a real estate investment trust ("REIT") under the Internal Revenue Code of 1986, as amended (the "Code").
The property management, leasing and redevelopment of the Company's portfolio is provided by the Company's management companies, Macerich Property Management Company, LLC, a single member Delaware limited liability company, Macerich Management Company, a California corporation, Macerich Arizona Partners LLC, a single member Arizona limited liability company, Macerich Arizona Management LLC, a single member Delaware limited liability company, Macerich Partners of Colorado, LLC, a single member Colorado limited liability company, MACW Mall Management, Inc., a New York corporation, and MACW Property Management, LLC, a single member New York limited liability company. All seven of the management companies are collectively referred to herein as the "Management Companies."
All references to the Company in this Quarterly Report on Form 10-Q include the Company, those entities owned or controlled by the Company and predecessors of the Company, unless the context indicates otherwise.
2.
Summary of Significant Accounting Policies:
Basis of Presentation:
The accompanying consolidated financial statements of the Company have been prepared in accordance with generally accepted accounting principles in the United States ("GAAP") for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. They do not include all of the information and footnotes required by GAAP for complete financial statements and have not been audited by an independent registered public accounting firm.
The accompanying consolidated financial statements include the accounts of the Company and the Operating Partnership. Investments in entities in which the Company has a controlling financial interest or entities that meet the definition of a variable interest entity in which the Company has, as a result of ownership, contractual or other financial interests, both the power to direct activities that most significantly impact the economic performance of the variable interest entity and the obligation to absorb losses or the right to receive benefits that could potentially be significant to the variable interest entity are consolidated; otherwise they are accounted for under the equity method of accounting and are reflected as investments in unconsolidated joint ventures.
All intercompany accounts and transactions have been eliminated in the consolidated financial statements.
The unaudited interim consolidated financial statements should be read in conjunction with the Company's audited consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2014. In the opinion of management, all adjustments (consisting of normal recurring adjustments) necessary for a fair presentation of the consolidated financial statements for the interim periods have been made. The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The accompanying consolidated balance sheet as of December 31, 2014 has been derived from the audited financial statements but does not include all disclosures required by GAAP.



8

THE MACERICH COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share amounts)
(Unaudited)
2. Summary of Significant Accounting Policies: (Continued)

Recent Accounting Pronouncements:
In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-09, “Revenue From Contracts With Customers,” which outlines a comprehensive model for entities to use in accounting for revenue arising from contracts with customers. ASU 2014-09 states that “an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.” While ASU 2014-09 specifically references contracts with customers, it may apply to certain other transactions such as the sale of real estate or equipment. In July 2015, the FASB voted to defer the effective date of ASU 2014-09 by one year. Accordingly, ASU 2014-09 is effective for the Company beginning January 1, 2018, with early adoption permitted beginning January 1, 2017. The Company does not expect the adoption of this standard to have a significant impact on the consolidated financial statements.
In February 2015, the FASB issued ASU 2015-02, “Consolidation (Topic 810): Amendments to the Consolidation Analysis,” which makes certain changes to both the variable interest model and the voting model, including changes to (1) the identification of variable interests (fees paid to a decision maker or service provider), (2) the variable interest entity characteristics for a limited partnership or similar entity and (3) the primary beneficiary determination. ASU 2015-02 is effective for the Company beginning January 1, 2016. Early adoption is permitted. The Company does not expect the adoption of this standard to have a significant impact on the consolidated financial statements.
 In April 2015, the FASB issued ASU 2015-03, “Simplifying the Presentation of Debt Issuance Costs,” which requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. The recognition and measurement guidance for debt issuance costs are not affected. ASU 2015-03 is effective for the Company beginning January 1, 2016. Early adoption is permitted. Upon adoption, the Company will apply the new standard on a retrospective basis and adjust the balance sheet of each individual period to reflect the period-specific effects of applying the new standard. The Company does not expect the adoption of this standard to have a significant impact on the consolidated financial statements.
In September 2015, the FASB issued ASU 2015-16, "Simplifying the Accounting for Measurement-Period Adjustments," which requires adjustments to provisional amounts used in business combinations during the measurement period to be recognized in the reporting period in which the adjustment amounts are determined. It also requires the disclosure of the impact on changes in estimates on earnings, depreciation, amortization and other income effects. ASU 2015-16 is effective for the Company beginning January 1, 2016. The Company does not expect the adoption of this standard to have a significant impact on the consolidated financial statements.




9

THE MACERICH COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share amounts)
(Unaudited)

3.
Earnings per Share ("EPS"):
The following table reconciles the numerator and denominator used in the computation of earnings per share for the three and nine months ended September 30, 2015 and 2014 (shares in thousands):
 
For the Three Months Ended September 30,
 
For the Nine Months Ended September 30,
 
2015
 
2014
 
2015
 
2014
Numerator
 
 
 
 
 
 
 
Net income
$
36,314

 
$
38,744

 
$
78,727

 
$
76,373

Net income attributable to noncontrolling interests
(2,717
)
 
(2,830
)
 
(6,124
)
 
(6,552
)
Net income attributable to the Company
33,597

 
35,914

 
72,603

 
69,821

Allocation of earnings to participating securities
(147
)
 
(122
)
 
(442
)
 
(373
)
Numerator for basic and diluted earnings per share—net income attributable to common stockholders
$
33,450

 
$
35,792

 
$
72,161

 
$
69,448

Denominator
 
 
 
 
 
 
 
Denominator for basic earnings per share—weighted average number of common shares outstanding
158,517

 
140,916

 
158,452

 
140,859

Effect of dilutive securities:(1)
 
 
 
 
 
 
 
Share and unit-based compensation plans
117

 
144

 
151

 
116

Denominator for diluted earnings per share—weighted average number of common shares outstanding
158,634

 
141,060

 
158,603

 
140,975

Earnings per common share—net income attributable to common stockholders:
 
 
 
 
 
 
 
Basic
$
0.21

 
$
0.25

 
$
0.46

 
$
0.49

Diluted
$
0.21

 
$
0.25

 
$
0.45

 
$
0.49

 
 
 
(1)
Diluted EPS excludes 138,759 and 184,304 convertible preferred units for the three months ended September 30, 2015 and 2014, respectively, and 139,330 and 184,304 convertible preferred units for the nine months ended September 30, 2015 and 2014, respectively, as their impact was antidilutive.
Diluted EPS excludes 10,576,632 and 10,110,716 Operating Partnership units ("OP Units") for the three months ended September 30, 2015 and 2014, respectively, and 10,557,254 and 10,072,321 OP Units for the nine months ended September 30, 2015 and 2014, respectively, as their impact was antidilutive.

10

THE MACERICH COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share amounts)
(Unaudited)

4.
Investments in Unconsolidated Joint Ventures:
The Company has made the following recent investments and dispositions in its unconsolidated joint ventures:
On June 4, 2014, the Company acquired the remaining 49% ownership interest in Cascade Mall, a 589,000 square foot regional shopping center in Burlington, Washington, that it did not previously own for a cash payment of $15,233. The Company purchased Cascade Mall from its joint venture partner in Pacific Premier Retail LLC. The cash payment was funded by borrowings under the Company's line of credit. Prior to the acquisition, the Company had accounted for its investment in Cascade Mall under the equity method of accounting. Since the date of acquisition, the Company has included Cascade Mall in its consolidated financial statements (See Note 13Acquisitions).
On July 30, 2014, the Company formed a joint venture to redevelop Fashion Outlets of Philadelphia at Market East, a 1,376,000 square foot regional shopping center in Philadelphia, Pennsylvania. The Company invested $106,800 for a 50% interest in the joint venture, which was funded by borrowings under its line of credit.
On August 28, 2014, the Company sold its 30% ownership interest in Wilshire Boulevard, a 40,000 square foot freestanding store in Santa Monica, California, for a total sales price of $17,100, resulting in a gain on the sale of assets of $9,033, which was included in loss on sale or write down of assets, net. The sales price was funded by a cash payment of $15,386 and the assumption of the Company's share of the mortgage note payable on the property of $1,714. The Company used the cash proceeds from the sale to pay down its line of credit and for general corporate purposes.
On November 13, 2014, the Company formed a joint venture to develop a 500,000 square foot outlet center at Candlestick Point in San Francisco, California. In connection with the formation of the joint venture, the Company issued a note receivable for $65,130 to its joint venture partner that bears interest at LIBOR plus 2.0% and matures upon the completion of certain milestones in connection with the development of Candlestick Point (See Note 16Related Party Transactions).
On November 14, 2014, the Company acquired the remaining 49% ownership interest that it did not previously own in two separate joint ventures, Pacific Premier Retail LLC and Queens JV LP, which together owned five Centers: Lakewood Center, a 2,075,000 square foot regional shopping center in Lakewood, California; Los Cerritos Center, a 1,294,000 square foot regional shopping center in Cerritos, California; Queens Center, a 963,000 square foot regional shopping center in Queens, New York; Stonewood Center, a 931,000 square foot regional shopping center in Downey, California; and Washington Square, a 1,441,000 square foot regional shopping center in Portland, Oregon (collectively referred to herein as the "PPRLP Queens Portfolio"). The total consideration of $1,838,886 was funded by the direct issuance of $1,166,777 of common stock of the Company (See Note 12Stockholders' Equity) and the assumption of the third party's pro rata share of the mortgage notes payable on the properties of $672,109. Prior to the acquisition, the Company had accounted for its investment in these joint ventures under the equity method of accounting. Since the date of acquisition, the Company has included the PPRLP Queens Portfolio in its consolidated financial statements (See Note 13Acquisitions).
On November 20, 2014, the Company purchased a 45% interest in 443 North Wabash Avenue, a 65,000 square foot undeveloped site adjacent to the Company's joint venture in The Shops at North Bridge in Chicago, Illinois, for a cash payment of $18,900. The cash payment was funded by borrowings under the Company's line of credit.
On February 17, 2015, the Company acquired the remaining 50% ownership interest in Inland Center, a 933,000 square foot regional shopping center in San Bernardino, California, that it did not previously own for $51,250. The purchase price was funded by a cash payment of $26,250 and the assumption of the third party's share of the mortgage note payable on the property of $25,000. Concurrent with the purchase of the joint venture interest, the Company paid off the $50,000 mortgage note payable on the property. The cash payment was funded by borrowings under the Company's line of credit. Prior to the acquisition, the Company had accounted for its investment in Inland Center under the equity method of accounting. Since the date of acquisition, the Company has included Inland Center in its consolidated financial statements (See Note 13Acquisitions).
On April 30, 2015, the Company entered into a 50/50 joint venture with Sears to own nine freestanding stores located at Arrowhead Towne Center, Chandler Fashion Center, Danbury Fair Mall, Deptford Mall, Freehold Raceway Mall, Los Cerritos Center, South Plains Mall, Vintage Faire Mall and Washington Square. The Company invested $150,000 for a 50% interest in the joint venture, which was funded by borrowings under the Company's line of credit.

11

THE MACERICH COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share amounts)
(Unaudited)
4. Investments in Unconsolidated Joint Ventures: (Continued)

On September 30, 2015, the Company reached an agreement with GIC to form a joint venture, whereby the Company would sell a 40% ownership interest in five centers for a total sales price of approximately $1,534,000, including cash payments and the assumption of a pro rata share of mortgage and other notes payable on the properties. On October 30, 2015, the Company completed the sale of a 40% ownership interest in Lakewood Center, a 2,075,000 square foot regional shopping center in Lakewood, California; Los Cerritos Center, a 1,294,000 square foot regional shopping center in Cerritos, California; South Plains Mall, a 1,127,000 square foot regional shopping center in Lubbock, Texas; and Washington Square, a 1,441,000 square foot regional shopping center in Portland, Oregon (See Note 19Subsequent Events). The Company expects the sale of a 40% ownership interest in Arrowhead Towne Center, a 1,196,000 square foot regional shopping center in Glendale, Arizona; which is subject to usual and customary closing conditions, will be completed in the first quarter of 2016. This joint venture is referred to herein as the "MAC GIC JV".
On September 30, 2015, the Company reached an agreement with Heitman LLC to form a joint venture, whereby the Company would sell a 49% ownership interest in Deptford Mall, a 1,040,000 square foot regional shopping center in Deptford, New Jersey; FlatIron Crossing, a 1,430,000 square foot regional shopping center in Broomfield, Colorado; and Twenty Ninth Street, an 847,000 square foot regional shopping center in Boulder, Colorado. The sales price of approximately $770,000 will include a cash payment and the assumption of a pro rata share of the mortgage notes payable on the properties. The joint venture is referred to herein as the "MAC Heitman JV". The completion of the MAC Heitman JV transaction, which is subject to usual and customary closing conditions, is expected to close in the first quarter of 2016.
Combined and condensed balance sheets and statements of operations are presented below for all unconsolidated joint ventures.
Combined and Condensed Balance Sheets of Unconsolidated Joint Ventures:
 
September 30,
2015
 
December 31,
2014
Assets(1):
 
 
 
Properties, net
$
3,288,060

 
$
2,967,878

Other assets
253,070

 
208,726

Total assets
$
3,541,130

 
$
3,176,604

Liabilities and partners' capital(1):
 
 
 
Mortgage notes payable(2)
$
1,818,390

 
$
2,038,379

Other liabilities
180,809

 
195,766

Company's capital
786,825

 
489,349

Outside partners' capital
755,106

 
453,110

Total liabilities and partners' capital
$
3,541,130

 
$
3,176,604

Investments in unconsolidated joint ventures:
 
 
 
Company's capital
$
786,825

 
$
489,349

Basis adjustment(3)
466,535

 
464,826

 
$
1,253,360

 
$
954,175

 
 
 
 
Assets—Investments in unconsolidated joint ventures
$
1,278,216

 
$
984,132

Liabilities—Distributions in excess of investments in unconsolidated joint ventures
(24,856
)
 
(29,957
)
 
$
1,253,360

 
$
954,175

 
 
 

12

THE MACERICH COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share amounts)
(Unaudited)
4. Investments in Unconsolidated Joint Ventures: (Continued)

(1)
These amounts include the assets of Tysons Corner LLC of $278,100 and $341,931 as of September 30, 2015 and December 31, 2014, respectively, and liabilities of Tysons Corner LLC of $836,659 and $871,933 as of September 30, 2015 and December 31, 2014, respectively.
(2)
Certain mortgage notes payable could become recourse debt to the Company should the joint venture be unable to discharge the obligations of the related debt. As of September 30, 2015 and December 31, 2014, a total of $5,000 and $33,540, respectively, could become recourse debt to the Company. As of September 30, 2015 and December 31, 2014, the Company had an indemnity agreement from a joint venture partner for $2,500 and $16,770, respectively, of the guaranteed amount.
Included in mortgage notes payable are amounts due to an affiliate of Northwestern Mutual Life ("NML") of $463,821 and $606,263 as of September 30, 2015 and December 31, 2014, respectively. NML is considered a related party because it is a joint venture partner with the Company in Macerich Northwestern Associates—Broadway Plaza. Interest expense on these borrowings was $6,385 and $9,645 for the three months ended September 30, 2015 and 2014, respectively, and $22,976 and $28,992 for the nine months ended September 30, 2015 and 2014, respectively.
(3)
The Company amortizes the difference between the cost of its investments in unconsolidated joint ventures and the book value of the underlying equity into income on a straight-line basis consistent with the lives of the underlying assets. The amortization of this difference was $3,348 and $948 for the three months ended September 30, 2015 and 2014, respectively, and $3,188 and $3,227 for the nine months ended September 30, 2015 and 2014, respectively.

13

THE MACERICH COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share amounts)
(Unaudited)
4. Investments in Unconsolidated Joint Ventures: (Continued)

Combined and Condensed Statements of Operations of Unconsolidated Joint Ventures:

 
Pacific
Premier
Retail LLC
 
Tysons
Corner
LLC
 
Other
Joint
Ventures
 
Total
Three Months Ended September 30, 2015
 
 
 
 
 
 
 
Revenues:
 
 
 
 
 
 
 
Minimum rents
$

 
$
17,667

 
$
58,186

 
$
75,853

Percentage rents

 
7

 
3,554

 
3,561

Tenant recoveries

 
12,305

 
19,955

 
32,260

Other

 
869

 
7,819

 
8,688

Total revenues

 
30,848

 
89,514

 
120,362

Expenses:
 
 
 
 
 
 
 
Shopping center and operating expenses

 
10,010

 
33,340

 
43,350

Interest expense

 
8,466

 
10,559

 
19,025

Depreciation and amortization

 
5,600

 
29,053

 
34,653

Total operating expenses

 
24,076

 
72,952

 
97,028

Gain on sale or write down of assets, net

 

 
3,573

 
3,573

Loss on early extinguishment of debt

 

 
(3
)
 
(3
)
Net income
$

 
$
6,772

 
$
20,132

 
$
26,904

Company's equity in net income
$

 
$
452

 
$
10,365

 
$
10,817

Three Months Ended September 30, 2014
 
 
 
 
 
 
 
Revenues:
 
 
 
 
 
 
 
Minimum rents
$
25,095

 
$
15,542

 
$
61,522

 
$
102,159

Percentage rents
653

 
115

 
3,683

 
4,451

Tenant recoveries
11,495

 
11,757

 
26,235

 
49,487

Other
962

 
678

 
9,523

 
11,163

Total revenues
38,205

 
28,092

 
100,963

 
167,260

Expenses:
 
 
 
 
 
 
 
Shopping center and operating expenses
9,959

 
9,694

 
37,384

 
57,037

Interest expense
9,643

 
8,107

 
17,651

 
35,401

Depreciation and amortization
8,199

 
5,162

 
24,006

 
37,367

Total operating expenses
27,801

 
22,963

 
79,041

 
129,805

Loss on sale or write down of assets, net
(732
)
 

 
(6
)
 
(738
)
Net income
$
9,672

 
$
5,129

 
$
21,916

 
$
36,717

Company's equity in net income
$
4,379

 
$
988

 
$
11,568

 
$
16,935




14

THE MACERICH COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share amounts)
(Unaudited)
4. Investments in Unconsolidated Joint Ventures: (Continued)

 
Pacific
Premier
Retail LLC
 
Tysons
Corner
LLC
 
Other
Joint
Ventures
 
Total
Nine Months Ended September 30, 2015
 
 
 
 
 
 
 
Revenues:
 
 
 
 
 
 
 
Minimum rents
$

 
$
51,824

 
$
162,854

 
$
214,678

Percentage rents

 
426

 
7,565

 
7,991

Tenant recoveries

 
36,776

 
59,187

 
95,963

Other

 
2,260

 
20,861

 
23,121

Total revenues

 
91,286

 
250,467

 
341,753

Expenses:
 
 
 
 
 
 
 
Shopping center and operating expenses

 
29,527

 
93,482

 
123,009

Interest expense

 
24,968

 
33,837

 
58,805

Depreciation and amortization

 
16,626

 
80,796

 
97,422

Total operating expenses

 
71,121

 
208,115

 
279,236

Gain on sale or write down of assets, net

 

 
3,996

 
3,996

Loss on early extinguishment of debt

 

 
(3
)
 
(3
)
Net income
$

 
$
20,165

 
$
46,345

 
$
66,510

Company's equity in net income
$

 
$
5,286

 
$
22,899

 
$
28,185

Nine Months Ended September 30, 2014
 
 
 
 
 
 
 
Revenues:
 
 
 
 
 
 
 
Minimum rents
$
76,829

 
$
47,516

 
$
173,710

 
$
298,055

Percentage rents
1,862

 
719

 
7,915

 
10,496

Tenant recoveries
34,614

 
35,140

 
75,606

 
145,360

Other
3,652

 
2,294

 
25,821

 
31,767

Total revenues
116,957

 
85,669

 
283,052

 
485,678

Expenses:
 
 
 
 
 
 
 
Shopping center and operating expenses
31,772

 
29,374

 
101,522

 
162,668

Interest expense
29,572

 
23,590

 
56,717

 
109,879

Depreciation and amortization
25,747

 
14,520

 
66,768

 
107,035

Total operating expenses
87,091

 
67,484

 
225,007

 
379,582

Loss on sale or write down of assets, net
(7,044
)
 

 
(66
)
 
(7,110
)
Net income
$
22,822

 
$
18,185

 
$
57,979

 
$
98,986

Company's equity in net income
$
9,865

 
$
4,357

 
$
30,385

 
$
44,607

Significant accounting policies used by the unconsolidated joint ventures are similar to those used by the Company.

15

THE MACERICH COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share amounts)
(Unaudited)

5.
Property, net:
Property, net consists of the following:
 
September 30,
2015
 
December 31,
2014
Land
$
2,238,048

 
$
2,242,291

Buildings and improvements
9,524,581

 
9,479,337

Tenant improvements
628,014

 
600,436

Equipment and furnishings
166,632

 
152,554

Construction in progress
409,631

 
303,264

 
12,966,906

 
12,777,882

Less accumulated depreciation
(1,935,430
)
 
(1,709,992
)
 
$
11,031,476

 
$
11,067,890

Depreciation expense was $90,540 and $68,663 for the three months ended September 30, 2015 and 2014, respectively, and $271,861 and $205,158 for the nine months ended September 30, 2015 and 2014, respectively.
The (loss) gain on sale or write down of assets, net includes an impairment loss of $4,318 and $238 for the three months ended September 30, 2015 and 2014, respectively, and $10,234 and $8,754 for the nine months ended September 30, 2015 and 2014, respectively. The impairment losses were due to the reduction of the estimated holding periods of Flagstaff Mall, a regional shopping center in Flagstaff, Arizona and a freestanding store in 2015 and three freestanding stores in 2014.
The (loss) gain on sale or write down of assets, net includes the gain on the sale of assets of $1,080 and $8,872 for the three months ended September 30, 2015 and 2014, respectively, and $2,402 and $7,187 for the nine months ended September 30, 2015 and 2014, respectively. The gain on sale of assets, net for the three and nine months ended September 30, 2014 includes the $9,033 gain on the sale of the Company's 30% ownership interest in Wilshire Boulevard (See Note 4Investments in Unconsolidated Joint Ventures). The gain on the sale of assets for the nine months ended September 30, 2014 also includes the loss from the sales of Rotterdam Square, Somersville Towne Center and Lake Square Mall in 2014 (See Note 14Dispositions).
The (loss) gain on sale or write down of assets, net includes the gain on the sale of land of $1,056 for the nine months ended September 30, 2015, and $927 and $1,165 for the three and nine months ended September 30, 2014, respectively.
The (loss) gain on sale or write down of assets, net also includes the write off of development costs of $104 for the three months ended September 30, 2015, and $302 and $1,102 for the nine months ended September 30, 2015 and 2014, respectively.
6.
Tenant and Other Receivables, net:
Included in tenant and other receivables, net, is an allowance for doubtful accounts of $3,273 and $3,234 at September 30, 2015 and December 31, 2014, respectively. Also included in tenant and other receivables, net, are accrued percentage rents of $3,480 and $13,436 at September 30, 2015 and December 31, 2014, respectively, and a deferred rent receivable due to straight-line rent adjustments of $60,516 and $57,278 at September 30, 2015 and December 31, 2014, respectively.
On March 17, 2014, in connection with the sale of Lake Square Mall (See Note 14Dispositions), the Company issued a note receivable for $6,500 that bears interest at an effective rate of 6.5% and matures on March 17, 2018 ("LSM Note A") and a note receivable for $3,103 that bore interest at 5.0% and was to mature on December 31, 2014 ("LSM Note B"). On September 2, 2014, the balance of LSM Note B was paid in full. LSM Note A is collateralized by a trust deed on Lake Square Mall. At September 30, 2015 and December 31, 2014, LSM Note A had a balance of $6,371 and $6,436, respectively.

16

THE MACERICH COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share amounts)
(Unaudited)

7.
Deferred Charges and Other Assets, net:
Deferred charges and other assets, net consist of the following:
 
September 30,
2015
 
December 31,
2014
Leasing
$
246,144

 
$
239,955

Financing
49,020

 
47,171

Intangible assets:
 
 
 
In-place lease values
274,407

 
298,825

Leasing commissions and legal costs
69,680

 
72,432

Above-market leases
257,869

 
250,810

Deferred tax assets
37,727

 
35,625

Deferred compensation plan assets
35,419

 
35,194

Other assets
93,405

 
66,246

 
1,063,671

 
1,046,258

Less accumulated amortization(1)
(329,298
)
 
(287,197
)
 
$
734,373

 
$
759,061

 
 
 
(1)
Accumulated amortization includes $120,754 and $103,361 relating to in-place lease values, leasing commissions and legal costs at September 30, 2015 and December 31, 2014, respectively. Amortization expense of in-place lease values, leasing commissions and legal costs was $16,864 and $11,850 for the three months ended September 30, 2015 and 2014, respectively, and $57,208 and $35,948 for the nine months ended September 30, 2015 and 2014, respectively.
The allocated values of above-market leases and below-market leases consist of the following:
 
September 30,
2015
 
December 31,
2014
Above-Market Leases
 
 
 
Original allocated value
$
257,869

 
$
250,810

Less accumulated amortization
(76,292
)
 
(59,696
)
 
$
181,577

 
$
191,114

Below-Market Leases(1)
 
 
 
Original allocated value
$
364,577

 
$
375,033

Less accumulated amortization
(111,374
)
 
(93,511
)
 
$
253,203

 
$
281,522

 
 
 
(1)
Below-market leases are included in other accrued liabilities.

17

THE MACERICH COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share amounts)
(Unaudited)

8.
Mortgage Notes Payable:
Mortgage notes payable at September 30, 2015 and December 31, 2014 consist of the following:
 
 
Carrying Amount of Mortgage Notes(1)
 
 
 
 
 
 
 
 
September 30, 2015
 
December 31, 2014
 
 
 
 
 
 
Property Pledged as Collateral
 
Related Party
 
Other
 
Related Party
 
Other
 
Effective Interest
Rate(2)
 
Monthly
Debt
Service(3)
 
Maturity
Date(4)
Arrowhead Towne Center
 
$

 
$
223,089

 
$

 
$
228,703

 
2.76
%
 
$
1,131

 
2018

Chandler Fashion Center(5)
 

 
200,000

 

 
200,000

 
3.77
%
 
625

 
2019

Danbury Fair Mall
 
112,018

 
112,018

 
114,265

 
114,264

 
5.53
%
 
1,538

 
2020

Deptford Mall
 

 
194,869

 

 
197,815

 
3.76
%
 
947

 
2023

Deptford Mall
 

 
14,074

 

 
14,285

 
6.46
%
 
101

 
2016

Eastland Mall
 

 
168,000

 

 
168,000

 
5.79
%
 
811

 
2016

Fashion Outlets of Chicago(6)
 

 
200,000

 

 
119,329

 
1.84
%
 
278

 
2020

Fashion Outlets of Niagara Falls USA
 

 
119,320

 

 
121,376

 
4.89
%
 
727

 
2020

Flagstaff Mall(7)
 

 
37,000

 

 
37,000

 
5.03
%
 
153

 
2015

FlatIron Crossing
 

 
256,448

 

 
261,494

 
3.90
%
 
1,393

 
2021

Freehold Raceway Mall(5)
 

 
226,147

 

 
229,244

 
4.20
%
 
1,132

 
2018

Great Northern Mall(8)
 

 

 

 
34,494

 

 

 

Green Acres Mall
 

 
308,623

 

 
313,514

 
3.61
%
 
1,447

 
2021

Kings Plaza Shopping Center
 

 
473,205

 

 
480,761

 
3.67
%
 
2,229

 
2019

Lakewood Center(9)
 

 
408,114

 

 
253,708

 
3.46
%
 
1,825

 
2026

Los Cerritos Center(10)
 
99,962

 
99,963

 
103,274

 
103,274

 
1.65
%
 
1,009

 
2018

Northgate Mall(11)
 

 
64,000

 

 
64,000

 
3.07
%
 
130

 
2017

Oaks, The
 

 
207,055

 

 
210,197

 
4.14
%
 
1,064

 
2022

Pacific View
 

 
131,154

 

 
133,200

 
4.08
%
 
668

 
2022

Queens Center
 

 
600,000

 

 
600,000

 
3.49
%
 
1,744

 
2025

Santa Monica Place
 

 
226,422

 

 
230,344

 
2.99
%
 
1,004

 
2018

SanTan Village Regional Center
 

 
131,636

 

 
133,807

 
3.14
%
 
589

 
2019

Stonewood Center
 

 
106,963

 

 
111,297

 
1.80
%
 
640

 
2017

Superstition Springs Center(12)
 

 
67,842

 

 
68,079

 
2.03
%
 
139

 
2016

Towne Mall
 

 
22,304

 

 
22,607

 
4.48
%
 
117

 
2022

Tucson La Encantada
 
70,433

 

 
71,500

 

 
4.23
%
 
368

 
2022

Valley Mall
 

 
40,745

 

 
41,368

 
5.85
%
 
280

 
2016

Valley River Center(13)
 

 

 

 
120,000

 

 

 

Victor Valley, Mall of
 

 
115,000

 

 
115,000

 
4.00
%
 
380

 
2024

Vintage Faire Mall(14)
 

 
277,441

 

 

 
3.55
%
 
1,256

 
2026

Washington Square(15)
 

 
228,095

 

 
238,696

 
1.65
%
 
1,499

 
2016

Westside Pavilion
 

 
147,643

 

 
149,626

 
4.49
%
 
783

 
2022

 
 
$
282,413

 
$
5,407,170

 
$
289,039

 
$
5,115,482

 
 

 
 

 
 


18

THE MACERICH COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share amounts)
(Unaudited)
8. Mortgage Notes Payable: (Continued)


(1)
The mortgage notes payable balances include the unamortized debt premiums (discounts). Debt premiums (discounts) represent the excess (deficiency) of the fair value of debt over (under) the principal value of debt assumed in various acquisitions and are amortized into interest expense over the remaining term of the related debt in a manner that approximates the effective interest method. Debt premiums (discounts) consist of the following:
Property Pledged as Collateral
September 30,
2015
 
December 31,
2014
Arrowhead Towne Center
$
9,263

 
$
11,568

Deptford Mall
(4
)
 
(8
)
Fashion Outlets of Niagara Falls USA
4,718

 
5,414

Lakewood Center

 
3,708

Los Cerritos Center
14,153

 
17,965

Stonewood Center
5,877

 
7,980

Superstition Springs Center
342

 
579

Valley Mall
(66
)
 
(132
)
Washington Square
2,502

 
9,847

 
$
36,785

 
$
56,921

(2)
The interest rate disclosed represents the effective interest rate, including the debt premiums (discounts) and deferred finance costs.
(3)
The monthly debt service represents the payment of principal and interest.
(4)
The maturity date assumes that all extension options are fully exercised and that the Company does not opt to refinance the debt prior to these dates. These extension options are at the Company's discretion, subject to certain conditions, which the Company believes will be met.
(5)
A 49.9% interest in the loan has been assumed by a third party in connection with a co-venture arrangement (See Note 10Co-Venture Arrangement).
(6)
On March 3, 2015, the Company amended the loan on the property. The amended $200,000 loan bears interest at LIBOR plus 1.50% and matures on March 31, 2020. At September 30, 2015 and December 31, 2014, the total interest rate was 1.84% and 2.97%, respectively.
(7)
The Company is negotiating with the loan servicer, which will likely result in a transition of the property to the loan servicer or a receiver.
(8)
On June 30, 2015, the Company conveyed the property to the mortgage lender by a deed-in-lieu of foreclosure, which resulted in a loss of $1,627 on the extinguishment of debt (See Note 14Dispositions).
(9)
On February 25, 2015, the Company paid off in full the loan on the property, which resulted in a gain of $2,245 on the early extinguishment of debt as a result of writing off the related debt premium. On May 12, 2015, the Company placed a new $410,000 loan on the property that bears interest at an effective rate of 3.46% and matures on June 1, 2026. On October 30, 2015, in connection with the MAC GIC JV transaction, a 40% interest in the loan was assumed by a third party (See Note 19Subsequent Events).
(10)
On October 30, 2015, the Company replaced the existing loan on the property with a new $525,000 loan that bears interest at 4.00% and matures on November 1, 2027. Concurrently, in connection with the MAC GIC JV transaction, a 40% interest in the loan was assumed by a third party (See Note 19Subsequent Events).
(11)
The loan bears interest at LIBOR plus 2.25% and matures on March 1, 2017. At September 30, 2015 and December 31, 2014, the total interest rate was 3.07% and 3.05%, respectively.
(12)
The loan bears interest at LIBOR plus 2.30% and matures on October 28, 2016. At September 30, 2015 and December 31, 2014, the total interest rate was 2.03% and 1.98%, respectively.
(13)
On July 31, 2015, the Company paid off in full the loan on the property, which resulted in a loss of $9 on the early extinguishment of debt.
(14)
On February 19, 2015, the Company placed a $280,000 loan on the property that bears interest at an effective rate of 3.55% and matures on March 6, 2026.
(15)
On October 5, 2015, the Company paid off in full the existing loan on the property. On October 29, 2015, the Company placed a new $550,000 loan on the property that bears interest at 3.65% and matures on November 1, 2022. On October 30, 2015, in connection with the MAC GIC JV transaction, a 40% interest in the loan was assumed by a third party (See Note 19Subsequent Events).
Most of the mortgage loan agreements contain a prepayment penalty provision for the early extinguishment of the debt.

19

THE MACERICH COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share amounts)
(Unaudited)
8. Mortgage Notes Payable: (Continued)

Most of the Company's mortgage notes payable are secured by the properties on which they are placed and are non-recourse to the Company. As of September 30, 2015 and December 31, 2014, a total of $13,500 and $73,165, respectively, of the mortgage notes payable could become recourse to the Company.
The Company expects that all loan maturities during the next twelve months, except for the loan on Flagstaff Mall, will be refinanced, restructured, extended and/or paid-off from the Company's line of credit or with cash on hand.
Total interest expense capitalized was $3,629 and $3,930 during the three months ended September 30, 2015 and 2014, respectively, and $10,095 and $9,513 during the nine months ended September 30, 2015 and 2014, respectively.
Related party mortgage notes payable are amounts due to an affiliate of NML. See Note 16Related Party Transactions for interest expense associated with loans from NML.
The estimated fair value (Level 2 measurement) of mortgage notes payable at September 30, 2015 and December 31, 2014 was $5,662,080 and $5,455,453, respectively, based on current interest rates for comparable loans. Fair value was determined using a present value model and an interest rate that included a credit value adjustment based on the estimated value of the property that serves as collateral for the underlying debt.
9.
Bank and Other Notes Payable:
Bank and other notes payable consist of the following:
Line of Credit:
The Company has a $1,500,000 revolving line of credit that bears interest at LIBOR plus a spread of 1.38% to 2.0%, depending on the Company's overall leverage level, and matures on August 6, 2018. Based on the Company's leverage level as of September 30, 2015, the borrowing rate on the facility was LIBOR plus 1.50%. In addition, the line of credit can be expanded, depending on certain conditions, up to a total facility of $2,000,000. As of September 30, 2015 and December 31, 2014, borrowings under the line of credit were $1,002,000 and $752,000, respectively, at an average interest rate of 1.88% and 1.89%, respectively. The estimated fair value (Level 2 measurement) of the line of credit at September 30, 2015 and December 31, 2014 was $996,765 and $713,989, respectively, based on a present value model using a credit interest rate spread offered to the Company for comparable debt.
Term Loan:
On December 8, 2011, the Company obtained a $125,000 unsecured term loan under the line of credit that bore interest at LIBOR plus a spread of 1.95% to 3.20%, depending on the Company's overall leverage level, and was to mature on December 8, 2018. Based on the Company's leverage level as of September 30, 2015, the borrowing rate was LIBOR plus 2.20%. As of September 30, 2015 and December 31, 2014, the total interest rate was 2.53% and 2.25%, respectively. The estimated fair value (Level 2 measurement) of the term loan at September 30, 2015 and December 31, 2014 was $125,438 and $119,780, respectively, based on a present value model using a credit interest rate spread offered to the Company for comparable debt. On October 23, 2015, the Company paid off the term loan in full.
Prasada Note:
On March 29, 2013, the Company issued a $13,330 note payable that bears interest at 5.25% and matures on March 29, 2016. The note payable is collateralized by a portion of a development reimbursement agreement with the City of Surprise, Arizona. At September 30, 2015 and December 31, 2014, the note had a balance of $9,575 and $10,879, respectively. The estimated fair value (Level 2 measurement) of the note at September 30, 2015 and December 31, 2014 was $9,680 and $11,178, respectively, based on current interest rates for comparable notes. Fair value was determined using a present value model and an interest rate that included a credit value adjustment based on the estimated value of the collateral for the underlying debt.
As of September 30, 2015 and December 31, 2014, the Company was in compliance with all applicable financial loan covenants.

20

THE MACERICH COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share amounts)
(Unaudited)

10.
Co-Venture Arrangement:
On September 30, 2009, the Company formed a joint venture, whereby a third party acquired a 49.9% interest in Freehold Raceway Mall, a 1,669,000 square foot regional shopping center in Freehold, New Jersey, and Chandler Fashion Center, a 1,320,000 square foot regional shopping center in Chandler, Arizona.
As a result of the Company having certain rights under the agreement to repurchase the assets after the seventh year of the venture formation, the transaction did not qualify for sale treatment. The Company, however, is not obligated to repurchase the assets. The transaction has been accounted for as a profit-sharing arrangement, and accordingly the assets, liabilities and operations of the properties remain on the books of the Company and a co-venture obligation was established for the amount of $168,154, representing the net cash proceeds received from the third party. The co-venture obligation is increased for the allocation of income to the co-venture partner and decreased for distributions to the co-venture partner. The co-venture obligation was $68,689 and $75,450 at September 30, 2015 and December 31, 2014, respectively.
11. Noncontrolling Interests:
The Company allocates net income of the Operating Partnership based on the weighted average ownership interest during the period. The net income of the Operating Partnership that is not attributable to the Company is reflected in the consolidated statements of operations as noncontrolling interests. The Company adjusts the noncontrolling interests in the Operating Partnership at the end of each period to reflect its ownership interest in the Company. The Company had a 94% ownership interest in the Operating Partnership as of September 30, 2015 and December 31, 2014. The remaining 6% limited partnership interest as of September 30, 2015 and December 31, 2014 was owned by certain of the Company's executive officers and directors, certain of their affiliates, and other third party investors in the form of OP Units. The OP Units may be redeemed for shares of stock or cash, at the Company's option. The redemption value for each OP Unit as of any balance sheet date is the amount equal to the average of the closing price per share of the Company's common stock, par value $0.01 per share, as reported on the New York Stock Exchange for the 10 trading days ending on the respective balance sheet date. Accordingly, as of September 30, 2015 and December 31, 2014, the aggregate redemption value of the then-outstanding OP Units not owned by the Company was $815,341 and $877,184, respectively.
The Company issued common and preferred units of MACWH, LP in April 2005 in connection with the acquisition of the Wilmorite portfolio. The common and preferred units of MACWH, LP are redeemable at the election of the holder. The Company may redeem them for cash or shares of the Company's stock at the Company's option and they are classified as permanent equity.
Included in permanent equity are outside ownership interests in various consolidated joint ventures. The joint ventures do not have rights that require the Company to redeem the ownership interests in either cash or stock.
12.
Stockholders' Equity:
Stock Buyback Program:
On September 30, 2015, the Company's Board of Directors authorized the repurchase of up to $1,200,000 of the Company's outstanding common shares over the period ending September 30, 2017, as market conditions warrant. Repurchases may be made through open market purchases, privately negotiated transactions, structured or derivative transactions, including accelerated stock repurchase transactions, or other methods of acquiring shares and pursuant to Rule 10b5-1 of the Securities Exchange Act of 1934, from time to time as permitted by securities laws and other legal requirements.





21

THE MACERICH COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share amounts)
(Unaudited)
12. Stockholders' Equity: (Continued)

At-The-Market Stock Offering Program ("ATM Program"):
On August 17, 2012, the Company entered into an equity distribution agreement ("2012 Distribution Agreement") with a number of sales agents (the "2012 ATM Program") to issue and sell, from time to time, shares of common stock, par value $0.01 per share, having an aggregate offering price of up to $500,000 (the “2012 ATM Shares”). Sales of the 2012 ATM Shares could have been made in privately negotiated transactions and/or any other method permitted by law, including sales deemed to be an “at the market” offering, which includes sales made directly on the New York Stock Exchange or sales made to or through a market maker other than on an exchange. The Company agreed to pay each sales agent a commission that was not to exceed, but could have been lower than, 2% of the gross proceeds of the 2012 ATM Shares sold through such sales agent under the 2012 Distribution Agreement.
On August 20, 2014, the Company terminated and replaced the 2012 ATM Program with a new ATM Program (the "2014 ATM Program") to sell, from time to time, shares of common stock, par value $0.01 per share, having an aggregate offering price of up to $500,000 (the "ATM Shares"). The terms of the 2014 ATM Program are substantially the same as the 2012 ATM Program. The unsold 2012 ATM Shares are no longer available for issuance.
The Company did not sell any shares under the 2014 ATM Program during the nine months ended September 30, 2015.
As of September 30, 2015, $500,000 of the ATM Shares were available to be sold under the 2014 ATM Program. Actual future sales of the ATM Shares under the 2014 ATM Program will depend upon a variety of factors including but not limited to market conditions, the trading price of the Company's common stock and the Company's capital needs. The Company has no obligation to sell the ATM Shares under the 2014 ATM Program.    
Stock Issued to Acquire Property:
On November 14, 2014, the Company issued 17,140,845 shares of common stock in connection with the acquisition of the PPRLP Queens Portfolio (See Note 13Acquisitions) for a value of $1,166,777, based on the closing price of the Company's common stock on the date of the transaction.
13.
Acquisitions:
Cascade Mall:
On June 4, 2014, the Company acquired the remaining 49% ownership interest in Cascade Mall that it did not previously own for $15,233. Prior to the acquisition, the Company had accounted for its investment under the equity method of accounting (See Note 4Investments in Unconsolidated Joint Ventures). As a result of this transaction, the Company obtained 100% ownership of Cascade Mall. The acquisition was completed in order to obtain 100% ownership and control over this asset.
The following is a summary of the allocation of the fair value of Cascade Mall:
Property
$
28,924

Deferred charges
6,660

Other assets
202

Total assets acquired
35,786

Other accrued liabilities
4,786

Total liabilities assumed
4,786

Fair value of acquired net assets (at 100% ownership)
$
31,000


The Company determined that the purchase price represented the fair value of the additional ownership interest in Cascade Mall that was acquired.

22

THE MACERICH COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share amounts)
(Unaudited)
13. Acquisitions: (Continued)

The following is the reconciliation of the purchase price to the fair value of the acquired net assets: