May 9, 2014
Mr. Kevin Woody
Accounting Branch Chief
Securities and Exchange Commission
100 F Street, N.E.
Washington D.C. 20549
Re: The Macerich Company
Form 10-K for the year ended December 31, 2013
Filed on February 21, 2014
File No. 001-12504
Dear Mr. Woody:
We are writing in response to your letter dated April 28, 2014, setting forth the comment of the staff (the “Staff”) of the Securities and Exchange Commission on the Annual Report on Form 10-K for the year ended December 31, 2013 (the “2013 10-K”) of The Macerich Company (the “Company”). For your convenience, your comment is restated in italics prior to the Company’s response to the comment below.
FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 2013
Note 4 – Investments in Unconsolidated Joint Ventures, pages 78 – 84
1. We note that in prior years you identified Pacific Premier Retail LP as being significant to warrant the inclusion of separate stand-alone financial statements pursuant to Rule 3-09 of Regulation S-X. Based on the equity in net income recognized by you from Pacific Premier Retail LP it appears that it remains significant for the year ended December 31, 2013. Please clarify how you have complied with Rule 3-09 of Regulation S-X.
The Company determined Pacific Premier Retail LP (“PPRLP”) was not significant as defined in Rule 3-09 of Regulation S-X during the three year period ended December 31, 2013. The stand-alone financial statements for PPRLP were included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2012 (the “2012 10-K”) as PPRLP was significant for the year ended December 31, 2010. While not required, the Company elected to include audited financial statements of PPRLP for 2012 and 2011 in lieu of unaudited financial statements in the 2012 10-K. During the year ended December 31, 2013, PPRLP sold Redmond Town Center-Office, Kitsap Mall and Redmond Town Center (See Note 4 – Investments in Unconsolidated Joint Ventures of the Company’s Consolidated Financial Statements in the 2013 10-K).
Mr. Kevin Woody
Securities and Exchange Commission
May 9, 2014
Accordingly, PPRLP classified the results of these dispositions as discontinued operations in its stand-alone financial statements as follows (dollars in thousands):
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For the years ended December 31, | |||||||
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Revenues: |
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2013 |
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2012 |
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2011 | |||
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Minimum rents |
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$ |
103,957 |
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$ |
100,848 |
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$ |
98,772 |
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Percentage rents |
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4,019 |
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4,202 |
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4,132 | |||
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Tenant recoveries |
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46,939 |
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45,881 |
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44,508 | |||
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Other |
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5,357 |
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4,605 |
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4,187 | |||
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Total revenues |
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160,272 |
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155,536 |
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151,599 | |||
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Expenses: |
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Shopping center and operating expenses |
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45,152 |
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44,876 |
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45,445 | |||
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Interest expense |
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43,445 |
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47,796 |
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45,737 | |||
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Depreciation and amortization |
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34,599 |
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32,691 |
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31,535 | |||
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Total expenses |
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123,196 |
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125,363 |
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122,717 | |||
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Income from continuing operations |
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37,076 |
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30,173 |
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28,882 | |||
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Discontinued operations: |
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Gain on sale of assets |
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182,754 |
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90 |
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- | |||
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Income from discontinued operations |
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7,926 |
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15,012 |
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19,424 | |||
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Total income from discontinued operations |
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190,680 |
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15,102 |
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19,424 | |||
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Net income |
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$ |
227,756 |
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$ |
45,275 |
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$ |
48,306 |
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Company’s equity from net income: |
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Continuing operations |
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$ |
15,954 |
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$ |
15,345 |
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$ |
14,689 |
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Discontinued operations |
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94,844 |
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7,681 |
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9,879 | |||
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Total Company’s equity in net income |
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$ |
110,798 |
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$ |
23,026 |
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$ |
24,568 |
The Company did not separately present income from continuing and discontinued operations in the Combined and Condensed Statements of Operations of Unconsolidated Joint Ventures in Note 4 of the 2013 10-K. In accordance with Rule 1-02(w) of Regulation S-X, the computation of the numerator in the calculation of significance is based on the registrant’s proportionate share of the pre-tax income from continuing operations reflected in the separate financial statements of the investee. Accordingly, the Company used its proportionate share of PPRLP’s income from continuing operations in the numerator. For purposes of calculating the denominator, in accordance with Rule 1-02(w) of Regulation S-X, the Company used its average income from continuing operations for the past five years since income from continuing operations for 2013 was more than 10% less than the five year average income.
Mr. Kevin Woody
Securities and Exchange Commission
May 9, 2014
The following table sets forth the Company’s significance test for PPRLP in accordance with Rule 3-09 of Regulation S-X for the year ended December 31, 2013:
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The Macerich Company (“Registrant”) Test of Significant Subsidiaries (Rule 3-09 of Regulation S-X) December 31, 2013 |
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(Dollars in thousands) |
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Registrant |
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Adjustments |
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Income from |
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for Discontinued |
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Adjusted |
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Continuing |
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Noncontrolling |
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Continuing |
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For the Years Ended December 31 |
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Operations |
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Interests |
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Operations |
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2013 |
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$ |
159,023 |
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$ |
(99,937 |
) |
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$ |
59,086 |
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2012 |
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$ |
303,166 |
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$ |
(35,173 |
) |
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$ |
267,993 |
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2011 |
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$ |
239,442 |
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$ |
(32,364 |
) |
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$ |
207,078 |
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2010 |
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$ |
29,191 |
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$ |
(19,573 |
) |
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$ |
9,618 |
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2009 |
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$ |
201,786 |
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$ |
(36,005 |
) |
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$ |
165,781 |
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5-Year Average |
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$ |
141,911 |
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Current Year compared to 5-Year Average |
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41.6% |
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Income used for Registrant (1) |
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$ |
141,911 |
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Subsidiary - PPRLP |
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Investment Test |
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Total Investment in Subsidiary |
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$ |
(59,632 |
) |
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Total Assets - Registrant |
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$ |
9,075,250 |
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-1% |
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Income Test |
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Pre-tax income - Subsidiary pro rata |
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$ |
15,954 |
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Pre-tax income - Registrant |
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$ |
141,911 |
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11% |
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(1) In accordance with Rule 1-02(w) of Regulation S-X, the denominator in the pretax income test may be replaced by the registrant’s average pretax income over the last five fiscal years when the registrant’s current year pretax income is at least 10% lower than that average.
Mr. Kevin Woody
Securities and Exchange Commission
May 9, 2014
As provided above, PPRLP’s income from continuing operations was below 20% of the Company’s income from continuing operations for the year ended December 31, 2013. Accordingly, separate stand-alone financial statements of PPRLP were not required to be filed in the 2013 10-K.
In making this response, the Company acknowledges that: the Company is responsible for the adequacy and accuracy of the disclosure in the filing; Staff comments or changes to disclosure in response to Staff comments do not foreclose the Commission from taking any action with respect to the filing; and the Company may not assert Staff comments as a defense in any proceeding initiated by the Commission or any person under the federal securities laws of the United States.
If you have any questions, please feel free to contact me at (310) 899-6331.
Sincerely,
The Macerich Company
/s/ Thomas E. O’Hern
Thomas E. O’Hern
Senior Executive Vice President, Chief Financial
Officer and Treasurer