The Macerich Company

1952–1964

The Macerich Company is a self-administered and self-managed real estate investment trust (REIT) involved in the acquisition, redevelopment, and management of regional and community shopping centers. Known as the "Mall Doctor," Macerich focuses on acquiring retail properties, making improvements on the properties, and gleaning a financial return for its efforts. The company operates on a national scale, controlling 56 regional shopping centers and 21 community shopping centers. Regional shopping centers generally contain more than 400,000 square feet of gross leasable area. Community shopping centers range between 100,000 square feet of gross leasable area and 400,000 square feet of gross leasable area. Nearly one-third of the company's 60 million square feet of gross leasable area is located in California.

Origins

Mace Siegel, one of the principal founders of what would become Macerich, began his real estate career working for others. In 1952, he entered the shopping center business, working for a real estate brokerage firm that aided clients in creating shopping centers, the novel, soon-to-skyrocket retail format of the post-World War II era. Siegel spent a dozen years helping others fulfill their entrepreneurial dreams before he began pursuing his own. Siegel's desire for independence sprang from a business idea of his own: to develop strip centers whose major tenants--referred to as "anchors" in the retail industry--were leading discount stores. As such, Siegel envisioned founding a company that constructed its properties from the ground up, a defining characteristic later shed by his venture, as Siegel's dream evolved into a redeveloper of impressive proportions.

For help in getting his new business started, Siegel turned to a friend. He convinced an experienced builder and real estate developer named Richard Cohen to join him in business. The two friends combined their first names and, in October 1964, formed the MaceRich Real Estate Company, founded in New York City. With Cohen providing much of the fledgling company's financial muscle, the business became an operational enterprise not long after its founding date. The first real estate property acquired by the company was an athletic field in Ames, Iowa. On the site, Siegel and Cohen built a strip mall anchored by a discount store, developing a property that served as a model for expansion. In the years ahead, the pair developed 18 strip centers, each of which counted a well-known discount store as its major tenant. To a large extent, the financial success of Macerich was tied to the financial success of its anchor tenants, which served as the magnets that attracted customers to the strip centers. In this interdependent relationship between developer and retailer, Macerich maintained a close relationship with one retailer in particular. Of the 18 strip centers developed by the company, 16 were anchored by Arlan's Department Store.

The strip centers provided firm financial footing for Macerich's more ambitious projects to come, although the same could not be said for its primary tenant. The Arlan's chain began to suffer by the end of the 1960s, prompting Cohen to purchase a controlling interest in the beleaguered retailer. With control over the chain, Cohen could affect the re-tenanting of Macerich's strip centers, but his influence was not enough to stave off the chain's demise. Cohen later divested his interest in Arlan's. The chain subsequently filed for bankruptcy protection and its stores were sold to Wal-Mart, Target, and several other discount department stores. Meanwhile, Macerich had turned its focus to bigger, more profitable ventures, beginning its second era of existence just shy of its eighth anniversary.

Revenues during this initial expansion spree increased from $86 million in 1994 to $155 million in 1996.

1966–1994

Macerich gained one of its chief lieutenants not long after the company began building its first wave of strip centers. Dana Anderson joined the company in 1966, beginning a Macerich career that would span more than 35 years. His first great contribution to the company's development occurred during the early 1970s, when he learned of an opportunity to buy a shopping mall, a decided leap up the retail hierarchy from strip centers. Anderson's discovery led to the September 1972 acquisition of the White Lakes Mall in Topeka, Kansas, a turning point in the company's history, as Macerich evolved from a builder of strip centers into an acquirer of shopping malls. The company lacked the financial resources to complete the purchase on its own, so it sought a partner and formed a joint venture with Provident Life Accident and Assurance Company. The partnership worked well for both parties, leading to a lasting relationship that eventually saw Macerich and Provident Life acquire seven regional shopping centers in the Midwest and Southeast.

Becoming a Redeveloper in 1975

Success with strip centers encouraged Macerich to branch out into acquiring shopping malls. Success with acquiring and managing shopping malls in the Midwest and Southeast encouraged the company to extend its geographic reach. Siegel, Cohen, and Anderson began focusing on southern California as the next area for Macerich's expansion. The partners evaluated numerous properties and set their sights on a large, poorly kept shopping mall, the Lakewood Center in Lakewood, California. Macerich teamed with Provident Life and purchased the property in 1975. Because of the outdated condition of the property, Siegel and his partners embraced a new facet of their operating strategy, turning themselves into renovators and redevelopers. The company began the lengthy and costly process of transforming the derelict, open-air shopping mall into a premier regional mall, an arduous task that required Macerich to relocate its headquarters to Santa Monica, California.

Macerich's involvement with the Lakewood Center proved to be a seminal success. Once the company succeeded in thoroughly revamping the Lakewood Center, it began lending its salubrious touch to other shopping malls. The company's executives developed expertise at devising and implementing redevelopment and expansion programs, skills that would later earn the company its industry nickname as the "Mall Doctor."

For the next 20 years, Macerich patterned its activities after the success of the Lakewood Center project, assembling a stable of modern regional shopping malls through the redevelopment of older properties. Over time, project by project, Macerich's executives became more adept at turning the old into the new, at renovating properties so that the rent charged per square foot increased significantly after the company's redevelopment and expansion programs were completed. During the 20-year period following the acquisition of the Lakewood Center, the company built a portfolio of more than a dozen regional shopping malls, enough to make its name known in the national industry but a pittance compared to the major competitors in the industry. Macerich did make a bid to join the loftier ranks of the industry, however, a charge that began in 1994, the year the company began its third era of development.

1994–2000

1994 IPO Fueling Aggressive Growth

Macerich achieved its greatest growth after it filed for an initial public offering (IPO) of stock, a public debut that cast the company as a real estate investment trust (REIT). The difference in the rate of growth before the IPO and after the IPO was enormous, an exponential difference in terms of the gross leased area owned by the company and in the number of properties it managed. To a great extent, the catalyst for the metamorphosis in stature was attributable to Macerich's status as a REIT. There were numerous requirements for a company to qualify as a REIT in the eyes of the Internal Revenue Service (IRS). Some of the stipulations were arcane, but essentially the conditions required a REIT to distribute nearly all of its taxable income to shareholders. In exchange for adhering to this condition--among a bevy of others--Macerich could look forward to far greater ease in raising capital, the fuel for the company's expansion. By raising capital through the sale of stock and debt as a REIT, Macerich no longer had to secure investment partners for individual projects, enabling it to acquire and to redevelop properties at a much quicker pace.

Macerich completed its IPO in March 1994, the company's 30th anniversary. At the time of the offering, the company owned 15 properties that contained roughly ten million square feet of space. Within the next few years, these two measures of its size would increase robustly, driven upward by individual acquisitions that generally ranged between $75 million and $100 million and by acquisitions of groups of properties whose aggregate value sometimes exceeded $1 billion. Concurrent with its IPO, Macerich obtained its 16th property, the Crossroads Mall in Oklahoma City, Oklahoma, followed by the July 1994 acquisition of the Chesterfield Towne Center in Richmond, Virginia. Macerich tripled its acquisition total in 1995, becoming the fifth fastest-growing acquisition company in the nation after purchasing properties in Salisbury, Maryland; Capitola, California; and New York City. In 1996, when Macerich ranked as the second fastest-growing acquisition company in the country, it added 6.1 million square feet to its portfolio through the purchase of seven properties. Revenues during this initial expansion spree increased from $86 million in 1994 to $155 million in 1996.

As Macerich entered the late 1990s, its pace of growth accelerated. The company acquired more retail projects than any other developer in 1997, adding 14.5 million square feet to its portfolio through the addition of 16 properties. In early 1998, Macerich completed the first of two massive acquisitions during the year. The company entered into a joint venture with Simon DeBartolo Group Inc. and acquired 12 regional malls from ERE Yarmouth, an institutional real estate advisor and manager that operated as a unit of Sydney, Australia-based Lend Lease Corp. The transaction, valued at a numbing $974.5 million, added 10.7 million square feet to Macerich's swelling portfolio, giving it properties located in eight states. The ERE Yarmouth acquisition bolstered Macerich's presence in the Midwest, the historical epicenter of its activities. The next big acquisition of the year extended the company's presence into uncharted territory. Late in the year the company announced it was forming a joint venture with Canada's largest pension fund, the Ontario Teachers' Pension Fund. Macerich's 51 percent interest in the joint venture gave it controlling interest over the entity's acquisition of four regional shopping malls in the Pacific Northwest, the company's first foray into the region. The deal, estimated to be worth $500 million, added 4.1 million square feet to Macerich's portfolio, making it the largest regional mall owner west of the Rocky Mountains.

By 2000, Macerich stood as a rising force in its industry, its reputation as the "Mall Doctor" known throughout the country. As it entered the 21st century, the company operated 47 regional shopping centers and five community shopping centers, controlling 42 million square feet of gross leasable area. In the six years since its IPO, Macerich had quadrupled in size, becoming a dominant owner and redeveloper of regional shopping malls. The company's achievements during the first decade of the new century suggested its committed drive toward growth was far from finished.

2002

During the early years of the decade, Macerich strode forward, sharpening its strategic focus on acquiring the country's largest shopping centers. In 2002, the company completed the $152.5 million acquisition of The Oaks, a regional mall in Thousand Oaks, California, with 1.1 million square feet of gross leasable area. The scale of the Oaks acquisition paled in comparison with the acquisition Macerich completed in July 2002, when the company acquired Westcor Realty, an Arizona-based owner and operator of retail properties, for $1.475 billion. Included within the deal were eight regional malls in Arizona and one in Colorado. Of the eight properties in Arizona, six were located in the Phoenix market. Other assets included in the acquisition were options to more than 1,000 acres of undeveloped land and interests in 18 retail assets--referred to as "urban villages"--that contained 5.6 million square feet of gross leasable area.

In the wake of the Westcor acquisition, there was justifiable optimism for Macerich's future. The transaction added 15.9 million square feet of gross leasable area to the company's portfolio, giving it a total of 57 million square feet, a sixfold increase in less than a decade. Further, the company reacted quickly to contend with the debt incurred from the purchase, raising $420 million in a ten million-share equity offering in November 2002. The company ended the year with $378.9 million in revenue. In the years ahead, Macerich promised to figure prominently in the commercial real estate business, its reputation as the "Mall Doctor" galvanized by nearly 40 years of operation.