Macerich Beats Q2 FFO Estimates on Occupancy Gains

Zacks

Leaving behind the property-cost woes tied to the cold winters in the first quarter, California-based – The Macerich Company (MAC) – has presently come up with an earnings beat in the second quarter, aided by occupancy gains.

The company reported funds from operations (:FFO) per share of 86 cents for the second quarter, exceeding the Zacks Consensus Estimate by 2 cents. Revenues of $254.3 million also comfortably surpassed the Zacks Consensus Estimate of $246 million.

Quarter in Details

However, on a year over year basis, FFO per share were down by a cent, while revenues fell 3.3%. The company had been fine-tuning its portfolio for the past two years.

Nevertheless, as of Jun 30, 2014, mall portfolio occupancy climbed 160 basis points (bps) year over year to 95.4%. Mall tenant annual sales increased 4.0% year over year to $567 per square foot. In addition, re-leasing spreads rose 18.1% on a year-over-year basis. Also, same centers net operating income (:NOI) advanced 3.6% year over year to $188.6 million.

During the second quarter, Macerich continued with constructions at Tysons Corner Center and Fashion Outlets of Niagara Falls, and the redevelopment work including expansion plans at Broadway Plaza.

Liquidity

As of Jun 30, 2014, on a pro rata basis, Macerich’s share of cash and cash equivalents were $129.2 million, compared with $93.5 million as of Mar 31, 2014. Moreover, the company had a total debt of nearly $6.2 billion (on pro rata basis), up from $6.06 billion at the end of the prior quarter.

Outlook Reiterated

Macerich reaffirmed its full-year 2014 FFO per share guidance in the range of $3.50 – $3.60. The Zacks Consensus Estimate of $3.56 falls in this range.

Our Viewpoint

Going forward, we believe that Macerich’s premium operating portfolio promises better growth prospects. Increasing mall tenant annual sales per square foot and re-leasing spreads, would pave the way for a robust top-line. Further, the portfolio repositioning activity bodes well for the long term.
 
Currently, Macerich carries a Zacks Rank #2 (Buy). We now look forward to other retail REITs scheduled to report in the upcoming weeks. These include General Growth Properties, Inc. (GGP), Kimco Realty Corporation (KIM) and DDR Corp. (DDR).

Note: Funds from operations, a widely used metric to gauge the performance of REITs, is obtained after adding depreciation and amortization and other non-cash expenses to net income.
 

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