Release Date: July 31, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Macerich Co (MAC, Financial) has made significant progress in reducing its debt, with a goal to reduce $2 billion in debt by the end of 2024.
- Operational performance is improving, with a focus on key assets on the East Coast contributing to NOI growth.
- Leasing momentum is strong, with 1.8 million square feet of leases signed year-to-date and a robust pipeline of new store openings.
- Occupancy rates are improving, with portfolio occupancy excluding Eddie properties at 94.9%.
- Redevelopment projects at Scottsdale Fashion Square, FlatIron Crossing, and Green Acres Mall are expected to add $36 million in incremental NOI.
Negative Points
- Sales per square foot were flat compared to the previous year, indicating potential challenges in consumer spending.
- Interest rates and inflation are impacting consumer behavior, particularly at moderate and lower-income levels.
- The company faces challenges in the commercial property market, making asset sales more difficult.
- There are ongoing negotiations with lenders for certain assets, such as Santa Monica Place, indicating potential financial stress.
- The company experienced a $2 million increase in bad debt expense, impacting same-center NOI growth.
Q & A Highlights
Q: Has the timeline changed at all on when you think you'll be able to achieve the goals you had laid out previously? Has that timeline shortened at all?
A: I think we're on track. The reduction in debt is happening probably faster than the plan. The leasing and the NOI piece are on track, albeit slower. Asset sales are going along as planned. We expect to describe a range of $1 billion to $1.4 billion in debt reduction by year-end, so we feel we're ahead of schedule on that front. - Jackson Hsieh, President, Chief Executive Officer, Director
Q: Can you talk a little bit more about the rationalization to sell your joint venture interest in Biltmore Fashion Park?
A: Biltmore Fashion Park is a very good asset in our Steady Eddie category. We felt it was a good way to raise liquidity and maintain our leasing position in the Greater Phoenix market, especially considering we gained complete control over Arrowhead. - Jackson Hsieh, President, Chief Executive Officer, Director
Q: How many other assets in your portfolio do you think could transact around a 6.5% cap rate?
A: I'd rather not get into cap rate assumptions. We will continue to give updates as we complete these sales. - Jackson Hsieh, President, Chief Executive Officer, Director
Q: Is there any color you can give around negotiations with lenders on Santa Monica or any timing updates?
A: We plan to be involved in that asset, at least from a management standpoint, through the better part of the second half of next year into 2025. We have uses that we continue to perform work on to bring tenants to the campus. - Scott Kingsmore, Chief Financial Officer, Senior Executive Vice President, Treasurer
Q: Can you comment on the transaction market today and how deep the buyer pool is for assets you have in the market?
A: The market is challenging for selling big commercial properties. We have a particular strategy in mind for monetizing different assets. We believe we will be able to execute and will continue to give reports on assets as we close them. - Jackson Hsieh, President, Chief Executive Officer, Director
Q: How are the conversations with tenants going, especially with the potential economic slowdown next year?
A: Regardless of sales being flat, the retailer environment is still very robust. We are ahead of where we were in terms of reviewing deals in our executive leasing committee, indicating strong market demand. - Douglas Healey, Senior Executive Vice President, Head - Leasing
Q: Is the underlying NOI growth expected to accelerate in the second half of this year and into 2024?
A: Yes, the pipeline is significant, and we expect a lot of openings. The pace of NOI growth should accelerate in the second half of this year and into 2024. - Scott Kingsmore, Chief Financial Officer, Senior Executive Vice President, Treasurer
Q: What are you hearing or expecting in terms of the refinancing of the $600 million Queens Center debt?
A: We believe it will be a CMBS execution and will be very well received by the market. We expect to reduce the leverage to around $500 million to $525 million. - Scott Kingsmore, Chief Financial Officer, Senior Executive Vice President, Treasurer
Q: Could you discuss your thought process of seeking refinancing on Victor Valley versus handing it back to the lenders?
A: Victor Valley is a solid asset with a lot of momentum. We believe it is relevant and reducing leverage is part of our overall goal. - Scott Kingsmore, Chief Financial Officer, Senior Executive Vice President, Treasurer
Q: How should we think about the commencement timing of the $71 million of new leases that are signed but not yet open?
A: In 2024, roughly $28 million to $29 million of revenue will come online from the pipeline. 2025 is tracking at about $35 million, and 2026 will see the balance. The pipeline continues to grow, indicating strong demand. - Scott Kingsmore, Chief Financial Officer, Senior Executive Vice President, Treasurer
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
