The Macerich Company (MAC), a real estate investment trust (:REIT), recently inked a 15-year lease with Intelsat, Ltd. for under-construction office building Tysons Tower in Fairfax County, Virginia. The deal is in support of Intelsat’s decision to relocate its U.S. headquarters from Washington, D.C. to the area.
Intelsat has been the leading satellite services provider over the last 45 years. The company has been providing media, network and satellite related services to many of the world's top internet service providers, multinational corporations and government agencies.
As per the deal, Macerich has agreed to lease 188,000 square feet, or 37% of the Tysons Tower building. The agreement includes an option to extend the space up to 50%. The first tenant of the office building, Intelsat, intends to move on to a new building by mid-2014 and will acquire 14th through 20th floors of the building.
Post completion, the 22-storey Tysons Tower will be the tallest building in Tysons Corner Center spanning 544,000 square feet. The tower is a part of 1.4 million square feet extension of Tysons Corner Center. Tysons Tower will be directly connected through a covered walkway to the Tysons Corner Metro station, which is slated to open in December 2013.
Since 1968, Tysons Corner Center has served as an U.S. commercial powerhouse, with a retail mix intended to generate high annual revenues. This largest shopping mall in Virginia spans 2.4 million square feet. Macerich acquired the owner of the mall, Wilmorite Properties, in 2005 and is transforming it into a community set-up in collaboration with Alaska Permanent Fund Corporation.
Along with Tysons Tower Office building, the center includes the recently announced addition of a Hyatt Hotels Corporation (H) property, a residential building and new retail space. All assets will be connected to a new entrance for the grand mall via an elevated outdoor plaza. The whole project is expected to complete in four stages in 10 to 15 years with the addition of around 3,500,000 square feet of space.
Macerich strategizes on leasing commercial and retail spaces to high-end tenants to help them reach their most productive customers in dynamic U.S. markets. In the third quarter of 2012, overall portfolio occupancy increased to 93% versus 91.9% in the prior-year quarter. In addition, the re-leasing spreads also jumped 18.5% year over year. Some of the major tenants of Macerich include J. C. Penney Company, Inc. (JCP), Michael Kors Holdings Ltd. (KORS) and Barnes & Noble, Inc. (BKS).
Macerich has a heavy concentration of A-quality malls in some of the most attractive markets in the U.S., including Arizona, California, Virginia and New Jersey. As of September 30, 2012, Macerich owned a managing interest in 59 regional shopping centers spanning approximately 62 million square feet of gross leasable area.
We currently have a long-term Neutral recommendation on Macerich. Also, it carries a short-term Zacks #3 Rank (Hold).
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