Macerich(US:MAC)2025-02-27 21:50Financial Data and Key Metrics Changes - FFO excluding certain expenses was approximately $117 million or $0.47 per share in Q4 2024, down from approximately $128 million or $0.57 per share in Q4 2023, primarily due to higher interest and severance expenses [34][35] - Same-center NOI excluding lease termination income decreased by 0.4% in Q4 2024 compared to Q4 2023, but increased by 0.2% for the full year [36][37] - Debt to EBITDA at year-end 2024 was slightly below 8x, nearly a full turn lower than the previous year [40] Business Line Data and Key Metrics Changes - The company achieved 8.8% base rent releasing spreads for permanent tenants under 10,000 square feet in 2024, with new leases signed during this period being 17.6% higher than prior period permanent rent [13][14] - The current physical permanent occupancy rate is 84%, with a target of 89% by 2028 [14][15] - The leasing team is focused on increasing the percentage of new lease deals versus renewals, targeting an average of 4 million square feet of leasing in 2025 and 2026 [12][15] Market Data and Key Metrics Changes - Sales per square foot at the end of Q4 were $837, up $3 from the last quarter, while sales excluding Eddy properties were $915 [20] - Portfolio traffic was up almost 2% compared to 2023, returning to pre-COVID levels, with occupancy in Q4 at 94.1% [22][23] - The company opened 530,000 square feet of new stores in Q4, totaling 1.5 million square feet for the year [23] Company Strategy and Development Direction - The Path-Forward Plan aims to simplify the business, improve operational performance, and reduce leverage over a five-year horizon [7][8] - The company is focusing on leasing vacant and underperforming spaces to drive incremental revenue and improve NOI [11][15] - Significant progress has been made in consolidating joint ventures and simplifying the business structure [41][42] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the leasing environment, noting a healthy demand from retailers and a focus on permanent leasing [80][82] - The anticipated landlord work and tenant improvement costs were higher than expected, which could impact the execution of the Path-Forward Plan [120][121] - Management is optimistic about achieving incremental NOI goals by 2028, driven by a strategic focus on leasing and tenant remerchandising [15][17] Other Important Information - The company has identified a clear path to achieving its $2 billion disposition target, having completed nearly $800 million to date [46][47] - The company is currently under contract to sell Wilton Mall for $25 million, expected to close in the first half of 2025 [45] - The company has approximately $683 million of liquidity, including $540 million of capacity on its line of credit [40] Q&A Session Summary Question: Same-store NOI growth expectations for 2025 - Management indicated that same-store NOI growth in 2025 is expected to be flat initially, with improvements anticipated in 2027 and 2028 as leasing goals are achieved [52][54] Question: Impact of new leases on sales numbers - Management expects to see an increase in sales numbers as new leases typically involve higher rental revenue compared to existing leases [56][62] Question: Efficiency improvements from new processes - Management noted that the new leasing dashboard has significantly improved efficiency and visibility, allowing for better resource allocation and leasing outcomes [70][75] Question: Update on development pipeline and CapEx - Management acknowledged that higher anticipated landlord work and tenant improvement costs could lead to increased CapEx in 2025 and 2026 [126][127] Question: Quality and cap rates of planned dispositions - Management indicated that the planned dispositions are expected to have sub-8% cap rates, with a focus on outparcels and non-enclosed mall assets [134][135]