Macerich(US:MAC)2025-02-28 13:58Financial Strategy and Debt Management - The Company announced the Path Forward Plan in Q2 2024, aiming to reduce its Net Debt to Adjusted EBITDA leverage ratio over the next three to four years[47]. - The company aims to deleverage its capital structure over the next three to four years as part of its Path Forward Plan, though success is not guaranteed[134]. - As of December 31, 2024, the company's total outstanding loan indebtedness was $6.65 billion, which includes $4.99 billion of consolidated debt and $1.69 billion of pro rata share of mortgages on unconsolidated joint ventures[133]. - The company's total debt, including both consolidated and unconsolidated, was $5.1 billion as of December 31, 2024[346]. - The company's pro rata share of the Unconsolidated Joint Venture Centers' fixed rate debt was $1.6 billion as of December 31, 2024, with an average interest rate of 5.28%[348]. - The company's total fixed rate debt was $4.7 billion with an average interest rate of 4.40%, compared to $3.8 billion and 4.29% in 2023[347]. - The company's total floating rate debt as of December 31, 2024, was $0.4 billion with an average interest rate of 6.21%, down from $0.5 billion and 7.43% in 2023[347]. - A 1% increase in interest rates is estimated to decrease future earnings and cash flows by approximately $5.4 million per year based on $542.9 million of floating rate debt outstanding[351]. - The company has interest rate cap agreements in place to manage floating rate debt, which limits how high the prevailing floating loan rate can rise[350]. - The company's average interest rate on fixed rate debt decreased from 4.29% in 2023 to 4.40% in 2024, indicating a slight increase in borrowing costs[347]. Property and Portfolio Management - As of December 31, 2024, the Centers included 40 Regional Retail Centers totaling approximately 43 million square feet of GLA, with an average size of about 990,000 square feet[57]. - The Company acquired interests in several shopping centers, including Arrowhead Towne Center and South Plains Mall, as part of its strategy to enhance its portfolio[50]. - The Company focuses on acquiring well-located, quality Regional Retail Centers with strong revenue enhancement potential, and seeks to improve operating performance through leasing and redevelopment[49]. - The Company has developed a fully integrated real estate organization to optimize operations, tenant mix, and respond to competitive conditions in the market[51]. - The Company emphasizes a decentralized property management strategy, with on-site property managers responsible for operations and tenant relationships[52]. - The Company actively seeks replacement tenants for vacant sites and is considering redevelopment opportunities for these locations[1]. - The shopping center industry is seasonal, with earnings generally higher in the fourth quarter due to increased retail sales during the holiday season[88]. Tenant and Rental Information - For the year ended December 31, 2024, 73% of total rents were derived from Mall Stores and Freestanding Stores under 10,000 square feet, while 27% came from Big Box and Anchor tenants[60]. - Tenant occupancy costs for Mall Store and Freestanding Store tenants in consolidated centers were 11.8% of total sales for the year ended December 31, 2024, compared to 12.1% in 2023[64]. - Major tenants contributed significantly to total rents, with the top 10 tenants accounting for a combined 12.1% of total rents as of December 31, 2024[60]. - The average base rent per square foot for consolidated centers increased to $65.62 in 2024 from $61.66 in 2023, representing an increase of 4.9%[65]. - The average base rent per square foot for unconsolidated joint venture centers rose to $76.11 in 2024 from $70.42 in 2023, reflecting an increase of 9.6%[66]. - The average base rent per square foot on leases executed during 2024 for big boxes and anchors was $14.85, down from $16.65 in 2023, indicating a decrease of 9.6%[66]. - The average base rent per square foot on leases expiring during 2024 for big boxes and anchors was $21.14, a decrease from $29.67 in 2023, representing a decline of 28.8%[66]. - The company has a total of 145 anchor stores, with a combined GLA of 19,946,000 square feet, including 9,093,000 square feet owned and 10,853,000 square feet leased[75]. - Scheduled lease expirations for consolidated centers in 2025 include 522 leases, representing 24.99% of total leased GLA, with an ending base rent of $66.31 per square foot[69]. - For big boxes and anchors, 27 leases are set to expire in 2025, accounting for 15.42% of total leased GLA, with an ending base rent of $11.35 per square foot[70]. - Anchors contributed approximately 7.2% to the company's total rents for the year ended December 31, 2024[73]. - The company’s average base rent per square foot on leases executed during the year for mall stores and freestanding stores was $61.16 in 2024, up from $58.97 in 2023, an increase of 2.0%[65]. Employee and Diversity Initiatives - As of December 31, 2024, the Company had approximately 616 employees, with a turnover rate of 13.7%[81]. - The average tenure of the Company's employees was approximately 10.6 years, indicating a stable workforce[82]. - Approximately 58% of the Company's employees identified as female, and about 30% belong to an underrepresented group, reflecting its commitment to diversity[86]. - The Company has implemented operational protocols to ensure the health and safety of employees and customers at its Centers[87]. Regulatory and Compliance Risks - The company incurs costs to comply with various governmental regulations, impacting capital expenditures and competitive position[76]. - Compliance with the Americans with Disabilities Act and other regulations may require substantial expenditures, impacting cash flows and operational flexibility[119]. - The company faces significant risks from cyber threats, including increased costs for protection and recovery from incidents, despite carrying cyber liability insurance[120]. - The company must maintain an ownership limit of no more than 50% in value of its outstanding stock to qualify as a REIT[148]. - The company believes it currently qualifies as a REIT, but there are risks that could jeopardize this status, affecting distributions to stockholders[155]. - If the company fails to qualify as a REIT, it could face significant tax liabilities and reduced funds for distributions[157]. - Legislative changes to U.S. federal income tax laws could adversely affect the taxation of the company and its stockholders[165]. - The company may be subject to a 100% tax on income from prohibited transactions, impacting asset sales[161]. - The company must distribute 90% of its annual taxable income to stockholders, which may require borrowing or selling assets if cash flow is insufficient[162]. Environmental and Natural Disaster Risks - The Company carries specific earthquake insurance with a combined annual aggregate loss limit of $100 million for its Centers located in California and the Pacific Northwest[79]. - Environmental liabilities may arise from hazardous materials at properties, leading to significant costs for investigation and remediation[111]. - The company faces risks from climate change, which could impact property demand and increase operational costs related to compliance and repairs[114]. - Properties are subject to potential natural disasters, which could delay projects and increase insurance costs, negatively affecting financial performance[115]. Market and Economic Risks - Elevated interest rates may negatively impact consumer spending and tenant businesses, with increased borrowing costs affecting cash flow and debt service[128][129]. - International trade disputes and tariffs could increase costs for tenants, potentially impacting their ability to meet obligations and affecting the company's revenue[132]. - Future pandemics or outbreaks of infectious diseases could disrupt operations, leading to decreased consumer spending and potential tenant bankruptcies[124][125]. - Acts of violence, vandalism, and civil unrest could adversely affect property values and revenue generation from tenants[122][123]. - Inflationary pressures may increase operating costs, impacting cash flows and profits despite tenants covering some expenses[127]. - The company faces risks related to occupancy levels, customer traffic, and rental income, which may be adversely affected by store closures from significant tenants[104]. - Historical revenue growth has been tied to the acquisition and redevelopment of shopping centers, with future success dependent on factors like capital availability and competition from other REITs[105]. - The company may not achieve anticipated financial results from newly acquired assets due to risks associated with real estate development, including financing and construction delays[106]. - Excess space at properties may lead to downward pressure on rental rates and occupancy levels, with ongoing bankruptcies among tenants impacting overall performance[108]. - The company sold certain properties as part of the Path Forward Plan in 2024, but real estate investments remain relatively illiquid, limiting portfolio adjustments[109]. - Impairment charges on real estate assets could adversely affect operating results, with past charges indicating potential future risks[110].