Macerich Cuts Q3 Loss to $16.7 Million as Occupancy Rises

Some malls are getting a second act, with a new cast of anchor stores. Macerich, owner of about 39 million square feet of retail, said on November 4 that its third-quarter loss shrank to $16.7 million from $87.4 million a year earlier ^[1].

FFO, as adjusted, rose to $109.1 million, or $0.37 per share, from $96.2 million, according to the company ^[1]. Commercial Observer described the Santa Monica REIT as about two years into a turnaround plan under CEO Jackson Hsieh ^[2].

Signs of the turnaround

• Leased occupancy reached 94.9% at September 30, up from 93.4% a year earlier and 94.0% in June ^[1].
• Tenant sales for shops under 10,000 square feet hit $943 per square foot over 12 months, up from $867 ^[1].
• NOI at its core Go Forward malls rose 4.7% ^[1].
• Leases signed in the quarter covered about 1.2 million square feet, with new store square footage up 16.9% ^[2].

But the improvement in the bottom line leaned on a one-time item: Macerich said the smaller loss came mainly from a gain on asset sales ^[1]. That includes the $69.7 million sale of Pacific View in Ventura, California, where the buyer took over the loan ^[1][2]. Debt is still heavy at 6.85 times pro forma adjusted EBITDA ^[1].

What it means for you

Macerich's quarterly dividend is $0.17 a share ^[1], or $0.68 a year by our math. Its FFO of $0.37 a share for the quarter covers that payout about twice, by our math, which leaves room to pay down debt. Income investors should weigh that cushion against the leverage before reaching for yield in a turnaround story.

Zoom out

Hsieh credits new anchors such as DICK'S House of Sport with lifting foot traffic at several centers ^[1]. The best malls are filling up and raising sales, while owners still carrying weaker centers keep selling them off.