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Macerich (MAC) Q3 FFO Meets Estimates, Leasing Revenues Dip

Zacks Equity Research

Retail REIT The Macerich Company MAC reported third-quarter 2019 adjusted funds from operations (FFO) per share of 88 cents, in line with the Zacks Consensus Estimate. However, the figure compares unfavorably with the prior-year quarter’s 99 cents. Adjusted FFO per share for the quarter excludes financing expense in relation to Chandler Freehold.

The company witnessed strong tenant sales growth as well as increase in average rent and releasing spreads, while occupancy declined.

The company generated leasing revenues of $214.3 million in the quarter, missing the Zacks Consensus Estimate of $217.8 million. The figure also slipped 4.5% year over year.

Behind the Headlines

As of Sep 30, 2019, mall portfolio occupancy shrunk 130 basis points year over year to 93.8%. Mall tenant annual sales for the 12-month period ended Sep 30, 2019, increased 13.2% to $800 per square feet. Re-leasing spreads for the 12-month period ended September 2019, increased 8.3%. Average rent per square foot jumped 3.5% to $61.16 from $59.09 as of Sep 30, 2018. Also, same-center net operating income (excluding lease termination revenue) inched up 0.2% from the prior-year quarter.

Notably, year to date, Macerich accomplished or arranged around $2.1 billion of financings. This was done at an average interest rate of 3.9% and an average maturity of more than 9.2 years, netting $576 million of excess loan proceeds at the company's share.

Outlook

Macerich reaffirmed its guidance for FFO per share, excluding financing expense in connection with Chandler Freehold. The REIT expects FFO per share of $3.50-3.58 for the ongoing year. The Zacks Consensus Estimate for full-year 2019 FFO per share is currently pegged at $3.56.
 
Our Viewpoint

Although Macerich met expectations in terms of FFO per share in the third quarter, dip in leasing revenues is disappointing. The choppy retail real estate environment, with tenant bankruptcies and store closures, is expected to keep affecting the company’s leasing and occupancy level. Nevertheless, the company remains focused on redevelopment opportunities, which is likely to provide value accretion and enable diversified usage of its high-quality properties.

Macerich currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Macerich Company (The) Price, Consensus and EPS Surprise
 

Macerich Company (The) Price, Consensus and EPS Surprise

Macerich Company (The) price-consensus-eps-surprise-chart | Macerich Company (The) Quote

We, now, look forward to the earnings releases of other REITs like Realty Income Corporation O, Outfront Media Inc. OUT and Host Hotels & Resorts, Inc. HST, all of which are slated to report quarterly numbers next week.

Note: Anything related to earnings presented in this write-up represent funds from operations (FFO) — a widely used metric to gauge the performance of REITs.

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