Macerich Company ((MAC)) has held its Q2 earnings call. Read on for the main highlights of the call.
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Macerich Company’s recent earnings call painted a largely positive picture, underscored by robust leasing activity and strategic acquisitions. Despite some challenges, such as a slight decline in occupancy and rising costs, the overall sentiment was optimistic, with the positive aspects significantly outweighing the negatives.
Strong Leasing Performance
Macerich has demonstrated impressive leasing performance, having signed 4.3 million square feet of leases year-to-date, surpassing their annual target ahead of schedule. The company’s SNO (signed-not-open) pipeline has grown to $87 million, with a goal to exceed $100 million by the end of the year, indicating a strong leasing momentum.
Strategic Acquisition of Crabtree Mall
In a strategic move, Macerich acquired Crabtree Mall for $290 million. This acquisition is expected to significantly enhance the company’s portfolio and shareholder value, with plans to increase the mall’s permanent occupancy from 74% to 90% by 2028.
Positive Leasing Spreads and New Store Openings
The company has maintained positive leasing spreads of 10.5% for 15 consecutive quarters. In the second quarter alone, Macerich signed 331 new and renewal leases covering 1.7 million square feet, showcasing their ability to attract and retain tenants.
Significant Disposition Progress
Macerich has made substantial progress in its disposition strategy, completing over $800 million in mall sales towards its $2 billion target. Several properties are currently under contract for additional sales, reflecting the company’s commitment to optimizing its asset portfolio.
Occupancy Decline Due to Store Closures
The company faced a slight decline in occupancy, down by 60 basis points to 92%, primarily due to the liquidation and closing of Forever 21 stores. This challenge highlights the ongoing retail sector volatility.
Rising Tenant Improvements and Landlord Work Expenses
Macerich reported increased costs related to tenant improvements and landlord work, particularly in reconfiguring anchor stores like Sears. These rising expenses are a concern as they impact overall profitability.
Forward-Looking Guidance
Macerich’s guidance for the future focuses on its Path Forward plan, aiming to simplify the business, improve operational performance, and reduce leverage. The company targets an average of 4 million square feet of leasing in 2025 and 2026 and aims to achieve significant new deal completions by mid-2026. Additionally, Macerich plans to reduce its net debt to EBITDA ratio to the low to mid-6x range over the next few years.
In summary, Macerich’s earnings call conveyed a positive outlook, driven by strong leasing activity and strategic acquisitions. While challenges such as occupancy declines and rising costs were acknowledged, the company’s forward-looking strategies and achievements in leasing and dispositions suggest a promising trajectory for the future.