In its Third Quarter 2023 earnings conference call, real estate company Macerich (NYSE:MAC) reported strong leasing volumes and a significant increase in occupancy. The company also indicated robust financial performance, maintained its guidance for 2023, and expressed optimism about its future business prospects.
Key takeaways from the call:
- Macerich reported a 130 basis point gain in occupancy from the same period last year, bringing the total to 93.4%.
- The company signed 206 leases for 766,000 square feet in Q3, surpassing the same period in 2022 by 10%.
- Average base rent increased by 2.8% to $65.40, and portfolio average sales per foot for tenants under 10,000 square feet was $849.
- Same-center Net Operating Income (NOI) grew by 4.8% in the quarter.
- The company expects consumer traffic and sales to grow significantly in the future.
- Macerich reported Funds from Operations (FFO) per share for the quarter at $0.44, in line with consensus.
- The company successfully renewed its corporate credit facility, increasing liquidity to $650 million.
- Leasing demand is at unprecedented levels, with over 2 million square feet in the leasing pipeline.
Macerich experienced strong leasing volumes in Q3, with 740,000 square feet of new stores opened and 206 leases signed for 766,000 square feet. The leasing pipeline includes 2 million square feet of new store openings for the remainder of 2023 and beyond.
Notable new leases include Foot Locker (NYSE:FL) superstores, Garage, Mizzen + Main, Pandora (OTC:PANDY) stores, DSW, Five Below (NASDAQ:FIVE), FWRD, Warby Parker, and Life Time Fitness. The company has commitments on 84% of the square footage expected to renew in 2023 and 30% committed for 2024.
During the earnings call, the company discussed ongoing negotiations for 700,000 square feet of space and the impact of the macroeconomic environment on these conversations. The company attributed the continued demand to its portfolio and retailers taking advantage of opportunities.
The company also mentioned a decline in percentage rent for next year and discussed lease termination guidance driven by a single transaction expected to be finalized in the fourth quarter. They stated that the watch-list remains healthy with fewer leases and square footage compared to pre-pandemic levels.
Macerich expressed cautious optimism about reaching 94% occupancy by the end of next year and discussed the impact of the macroeconomic climate on rent and occupancy. The company expects to have more leverage in negotiating rents for remaining space as capacity and availability increase.
Macerich reported strong operating fundamentals and leasing demand. The company expects to achieve a net debt to forward EBITDA leverage ratio in the low 8s by the end of next year. Specific details regarding future growth and guidance will be provided in a future call.
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