Macerich (MAC) Beats Q4 FFO on Improved Revenues - Analyst Blog
The Macerich Company (MAC) reported fourth-quarter 2014 adjusted funds from operations (“FFO”) per share of $1.05, which beat the Zacks Consensus Estimate by a penny. Further, the figure comfortably outpaced the prior-year quarter figure of 94 cents.
The results were attributable to improving mall tenant annual sales and same center net operating income (“NOI”). Notably, in recent times, the company has been fine tuning its portfolio.
Total revenue for the quarter came in at $322.9 million, which comfortably surpassed the Zacks Consensus Estimate of $294 million. Further, it beat the year-ago quarter figure by 11.6%.
For 2014, Macerich reported adjusted FFO per share of $3.60, which beat the Zacks Consensus Estimate by a penny as well as the prior-year figure of $3.51.
Total revenue for 2014 came in at $1.11 billion, beating the Zacks Consensus Estimate of $1.04 billion. Also, it surpassed the prior-year figure of $1.08 billion.
Quarter in Details
As of Dec 31, 2014, mall portfolio occupancy climbed 120 basis points (bps) year over year to 95.8%. Mall tenant annual sales increased 4.4% year over year to $587 per square foot. In addition, re-leasing spreads rose 22% on a year-over-year basis. Also, same centers NOI advanced 5.8% year over year to $210.6 million.
During the fourth quarter, Macerich acquired 49% ownership interest in Queens Center, Washington Square, Los Cerritos Center, Stonewood Center and Lakewood Center, for around $1.8 billion, from a subsidiary of the Ontario Teachers’ Pension Plan Board. Moreover, the company took over 40% ownership interest of AWE Talisman in Fashion Outlets of Chicago for $70 million. On the other hand, Macerich divested South Towne Center in Sandy, UT for $205 million, and 67.5% interest in a community center in Phoenix, AZ for $61.2 million.
Macerich continued with its construction work on the multifamily and hotel components at Tysons Corner Center. A redevelopment project was underway at Broadway Plaza, in Walnut Creek, CA. Moreover, an expansion project was underway in Los Cerritos Center and Scottsdale Fashion Square.
As of Dec 31, 2014, on a pro rata basis, Macerich’s share of cash and cash equivalents were $84.9 million, as compared to $100.5 million as of Sep 30, 2014. Moreover, the company had a total debt of nearly $7.01 billion (on pro rata basis), up from $6.33 billion at the end of the prior quarter.
2015 Guidance
Macerich provided full year 2015 FFO per share guidance in the range of $3.80–$3.90. The Zacks Consensus Estimate of $3.87 falls in the new range.
Our Viewpoint
Going forward, we believe that Macerich’s premium operating portfolio promises better growth prospects. Improving 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 holds a Zacks Rank #2 (Buy). Some retail REITs which are scheduled to report next week include Regency Centers Corporation (REG), DDR Corp. (DDR) and Taubman Centers, Inc. (TCO).
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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