• Sales Per Square Foot: $910 excluding Eddy assets; $834 overall, down $1 from last quarter.
• Occupancy Rate: 95.4% excluding Eddy properties; 93.7% overall, up 40 basis points from the second quarter.
• Same-Store NOI: Increased 2.8% excluding Eddy assets; 1.9% overall.
• Traffic Increase: Up 2.4% compared to the third quarter last year; year-to-date up 1.6% from 2023.
• FFO Per Share: $0.38 for the third quarter, down from $0.45 in the third quarter of 2023.
• Leasing Activity: 220 leases signed for 830,000 square feet in Q3; year-to-date 2.6 million square feet.
• New Store Openings: 1 million square feet year-to-date; 225,000 square feet in Q3.
• Debt Reduction Target: $2 billion, with $1.17 billion completed or in progress.
• Available Liquidity: Approximately $667 million.
• Leverage Ratio: Reduced to 8.22 times from 8.76 times at year-end 2023.

• Warning! GuruFocus has detected 9 Warning Signs with MAC.

Release Date: November 06, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Macerich Co (NYSE:MAC) reported continued improvement in operational results, with occupancy, leasing activity, and same-store NOI showing positive trends.
• The company is making significant progress on its Path Forward initiative, targeting a $2 billion reduction in long-term debt, with approximately 60% of this target already completed or in progress.
• Leasing volumes and metrics remain strong, with a 40% increase in deal flow compared to the same period last year, indicating robust retailer demand.
• Macerich Co (NYSE:MAC) successfully closed several acquisitions and dispositions, including the acquisition of a partner's interest in Pacific Premier Retail Trust, which is expected to be accretive to FFO per share.
• The company has a strong pipeline of new store openings, with 2.5 million square feet of new stores expected to open through early 2027, contributing $80 million of incremental rent.

Negative Points

• Sales per square foot decreased slightly, with comparative sales down about 1% from the third quarter of 2023, reflecting cautious consumer behavior.
• The macroeconomic environment remains challenging, with consumers focusing on essentials and showing caution in discretionary spending.
• Macerich Co (NYSE:MAC) will incur severance charges in the fourth quarter related to executive changes, resulting in a $0.02 reduction to fourth-quarter earnings.
• Interest expenses increased by $5 million due to rising rates, impacting quarterly FFO trends.
• The company faces challenges in re-leasing select vacant spaces, including former Forever 21 and Express locations, which are critical to achieving its NOI targets.

Q & A Highlights

Q: With the current market conditions, including pricing and higher interest rates, do you think this will impact your disposition plans or other strategies in the coming months? A: Jackson Hsieh, President and CEO, stated that while he would prefer rates to go down, the company is still ahead of its plan at the current rate levels. He expressed confidence in the progress of their $1.17 billion deals and mentioned that the remaining efforts will focus on Lakewood Center and a portfolio of net lease properties. He emphasized that the current rates are not a concern and that they are focused on achieving their incremental leasing objectives.

Q: Can you elaborate on what you're seeing from the consumer, particularly regarding strength at the high end and potential weakness at the low end? A: Douglas Healey, Senior EVP of Leasing, noted that sales have been flat for the last few quarters, but there is a pickup in discretionary spending on innovative products. Essentials remain the primary focus for consumers, but retailers offering newness are being rewarded. He expects holiday sales to increase by 3% to 3.5% compared to last year, with retailers being more promotional.

Q: Regarding the equity raised and the acquisition of Washington Square and Los Cerritos, how should we think about the impact on your growth going forward? A: Jackson Hsieh explained that acquiring full control of these assets allows Macerich to accelerate business plans and refinancing efforts, particularly for Washington Square, which has a 9% debt rate. He believes this will positively impact growth rates as they can now execute their strategies without partner constraints.

Q: How is CapEx trending relative to expectations in the strategic plan, given the strong leasing demand and positive spreads? A: Scott Kingsmore, CFO, stated that there are no substantive differences in CapEx trends compared to previous periods. He highlighted that most available anchor stores have been leased, and they are focused on opening new stores to boost traffic and sales. The company has a good handle on CapEx, with a narrowing amount of large space to manage.

Q: With leasing as strong as it has been, why hasn't occupancy increased more significantly, and do you expect it to accelerate? A: Jackson Hsieh acknowledged that occupancy will increase as they execute their leasing strategies. He emphasized the focus on permanent occupancy and the importance of targeting specific spaces to drive leasing and occupancy rates. The company is committed to improving occupancy through strategic leasing efforts.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.