Macerich Posts Robust 4Q

Zacks

Calif.-based retail real estate investment trust (:REIT), The Macerich Company (MAC) reported fourth quarter 2012 core FFO (funds from operations) per share of 90 cents, beating the Zacks Consensus Estimate by 3 cents. The earnings were also higher than the year-ago figure of 87 cents.

For full year 2012, core FFO per share escalated 10.4% year over year to $3.18 and also exceeded the Zacks Consensus Estimate of $3.04. The remarkable results were aided by strong fundamentals in the portfolio with solid tenant sales, leasing growth and occupancy gains.  

Macerich's reported FFO for the quarter stood at $132.6 million or 90 cents per share, compared with $118.8 million or 83 cents per share in the year-ago period. For 2012, reported FFO stood at $577.9 million or $3.99 per share, compared with $399.6 million or $2.79 per share in the last year.

Total revenue for the fourth quarter reached $251.2 million, up from $217.8 million reported in the year-ago quarter. Moreover, total revenue substantially beat the Zacks Consensus Estimate of $218 million.

For full year 2012, the company reported revenues of $891.9 million, substantially higher than $803.3 million generated in the previous year. Also, the revenues outpaced the Zacks Consensus Estimate of $784 million.

Inside the Headlines

As of Dec 31, 2012, overall portfolio occupancy increased 110 bps (basis points) to 93.8% from 92.7% reported at year-end 2011. For full year 2012, mall tenant sales climbed 5.7% to $517 per square foot from $489 in the year-ago period.

In addition, the re-leasing spreads for 2012 jumped 15.4% year over year. Same center net operating income advanced 2.9% year over year to $666.5 million.

Acquisitions and Developments

During the quarter, Macerich acquired Brooklyn-based enclosed super regional mall – Kings Plaza – for $756 million.  Kings Plaza is 96% occupied and generates revenues per square foot of $680 annually.

Subsequent to quarter-end, the company acquired Valley Stream-based indoor shopping mall – Green Acres Mall – from a subsidiary of Vornado Realty Trust (VNO) for $500 million. The mall is currently 94% anchored and generates revenues per square foot of over $535 annually.

During the fourth quarter, Macerich continued construction at a 526,000 square feet fashion outlet center – Fashion Outlets of Chicago – which is slated to be completed in Aug 2013.  The project is currently 87% leased and has awaiting deals for another 10%.

Also, Macerich has ongoing constructions at Tysons Corner Center for the development of a mixed use project, which includes an office building, a luxury residential tower and a Hyatt Hotels Corporation (H)-branded hotel. The company has also inked a 15-year lease with Intelsat, Ltd. for leasing the office space.  The office building is slated to open in middle of 2014.  

Liquidity

At the end of 2012, the company had cash and cash equivalents of $65.8 million and total debt of $6.6 billion.

During the quarter under review, Macerich completed over $1.2 billion of financings (at its pro rata share) of four properties – Kings Plaza, Deptford Mall, Queens Center and Santa Monica Place. The loans carried an average term of over 8 years and an average interest rate of 3.4%. These major financing activities considerably extended the maturity date and reduced the floating rate of the debt balance.

Outlook

For full year 2013, Macerich expects the FFO per share in the range of $3.32– $3.42. The underlying assumptions for the abovementioned guidance include expected assets sale in the range of $500 million–$1.0 billion during mid-2013 and use of proceeds to pay off debt; as well as projected same center EBITDA growth in the range of 2.75%–3.25%.

Our Viewpoint

We are impressed with Macerich’s strong fourth-quarter results. The company’s solid portfolio of A-quality malls across the most attractive U.S. markets has enabled it to hold rents fairly stable, despite a challenging macroeconomic environment, thereby generating a steady source of revenue. Moreover, the acquisition of upscale properties during the quarter has further strengthened its portfolio. We expect these activities to provide Macerich a considerable upside potential and boost its top-line growth going forward.

Another REIT – Simon Property Group Inc (SPG) – reported fourth quarter 2012 results earlier this week with FFO per share of $2.29, substantially beating the Zacks Consensus Estimate by 12 cents.  

Macerich currently holds a Zacks Rank #3 (Hold).

Note: Funds from operations, a widely accepted and reported measure of REITs performance, are derived by adding depreciation, amortization and other non-cash expenses to net income.

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