MACERICH CO Q4 FY2024 earnings call

Management Statement and Operational Highlights:

• Jack Hsieh introduced Macerich's Path-Forward Plan with three key objectives: simplify the business, improve operational performance, and reduce leverage. Progress included consolidating joint venture interests, equity offering, refinancing, and process improvements in leasing, asset management, etc.
• Doug Healey discussed leasing volumes and metrics: sales per square foot at the end of the fourth quarter were $837, up $3 from the last quarter; traffic for the year was up almost 2%; occupancy in the fourth quarter was 94.1%; 530,000 square feet of new stores were opened in the fourth quarter, bringing total for 2024 to 1.5 million square feet.
• Dan Swanstrom reviewed fourth quarter financial results and balance sheet progress: closed on debt transactions, managed liquidity, reduced leverage, and made progress in executing the Path-Forward Plan including acquisitions, equity offering, and sales of assets.

Segment Performance:

• FFO excluding financing expense, gain on extinguishment of debt, etc., was approximately $117 million or $0.47 per share in the fourth quarter of 2024, compared to approximately $128 million or $0.57 per share in the fourth quarter of 2023. The primary drivers of the decrease included higher interest expense and severance expense.
• Same-center NOI excluding lease termination income decreased 0.4% in the fourth quarter of 2024 compared to the fourth quarter of 2023. For the full year ended 2024, same-center NOI excluding lease termination increased 0.2% compared to 2023. Adjusting for the negative impact of express bankruptcy, same-center NOI growth would be about 1% year-over-year, and excluding Eddy assets, this adjusted 1% growth would increase to 2.1% for the year.
• Debt to EBITDA at year-end 2024 was slightly below 8x, almost a full turn lower than one year ago.

Guidance:

• Expect the amortization of debt mark-to-market resulting from JV buyouts to have an incremental $0.09 per share reduction to 2025 FFO adjusted.
• Have less than $300 million net share of maturing loans in the balance of 2025 and have started to address 2026 debt maturities.
• Plan to further reduce leverage to the low to mid 6x range over the next several years.
• Expect to close $100 million to $150 million of sales in 2025, more weighted towards the second half of the year, and the balance of the $500 million in sales to close in 2026 into the first half of 2027.

Risks:

• Potential delay in the development pipeline, such as at Flatiron Crossing.
• Uncertainty in the sales of outparcel land and select open air retail sale opportunities around shopping centers.

Q: On leasing demand and tariffs?

A: Doug Healey said there's a healthy retailer environment, lease terms are similar, and tariffs aren't embedded in retailers' 2025 guidance. Jack Hsieh added retailers have strategies to deal with tariffs.

Q: On tenant watch list and bad debt reserves?

A: Doug Healey said the tenant watch list is significantly lower than before, and Dan Swanstrom said bad debt reserves are about 75 bps to 100 bps.