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Macerich (MAC) Gains 16.3% in 3 Months: Will the Trend Continue?
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In the wake of the pandemic, there is renewed enthusiasm among customers for in-person shopping experiences. As a result, The Macerich Company’s (MAC - Free Report) portfolio of premium assets in the United States has been witnessing healthy leasing activity.
Also, this retail real estate investment trust’s (REIT) focus on mixed-use developments, omni-channel retailing and capital-recycling moves have enabled it to ride the growth curve so far.
Given this backdrop, shares of this Zacks Rank #3 (Hold) company have soared 16.3% in the past three months compared with the industry’s growth of 6.6%.
Image Source: Zacks Investment Research
With a rebound in retail demand, retailers are continuing to rent out more physical store spaces, benefiting retail REITs like Macerich. This healthy retailer demand has aided leasing activity in recent quarters and helped the company backfill its spaces, which is encouraging.
During the first quarter of 2023, Macerich signed 256 leases encompassing 949,000 square feet. On a comparable center basis, this reflected a 59% increase in the amount of square footage leased and a 20% rise in the number of deals signed year over year.
Also, the portfolio tenant sales per square foot for spaces less than 10,000 square feet in the trailing 12 months ended Mar 31, 2023, came in at $866 compared with $843 a year ago.
Amid this rebounding retail real estate market, we expect this leasing momentum to gather pace in the upcoming period, boding well for the company.
In recent years, omni-channel retailing has gained popularity and has become the focal point for many retailers. In line with this, MAC’s efforts to enhance its asset quality and grow its successful tie-ups with premium retailers by increasing its adoption of the omni-channel model are likely to pay off well.
Moreover, the company has been focusing on the re-use and mixed-use of its properties through the recapture and repositioning of anchor tenants. In May 2023, it acquired the remaining 50% interest in five former Sears boxes from its joint venture partner — Seritage Growth Properties — and took full ownership of these parcels.
This move provides MAC the flexibility to undertake redevelopment opportunities at these properties and enrich them with premium in-demand retailers, driving sales and traffic.
In the same month, Macerich and Wish You Were Here Group, a renowned, multi-concept hospitality company, announced that the south wing of Scottsdale Fashion Square will house the upscale, experiential restaurant concept — Élephante.
The move will mark Élephante’s first location outside Los Angeles. It will encompass 12,000 square feet of Macerich’s top-performing shopping center, aiming to provide a multidimensional experience to the Scottsdale community.
With mixed-used assets gaining traction in recent years, Macerich’s efforts to ring in premium brands at its properties to drive more footfall and boost sales augur well. Per the first-quarter 2023 Investor Presentation, for 2023-2024, management expects to spend an average of $160 million per year on development and redevelopment projects.
Further, Macerich’s aggressive capital-recycling program to enhance the overall quality of its portfolio highlights its prudent capital-management practices and releases the pressure off its balance sheet.
As of May 4, 2023, MAC had around $645 million of liquidity. This included $475 million of available capacity on its $525 million revolving line of credit. Its well-laddered debt maturity profile and ample financial flexibility have positioned it well to capitalize on long-term growth opportunities and are expected to continue to do so in the future.
Nonetheless, given the conveniences of online shopping, higher e-commerce adoption is still a concern for the company. Also, limited consumers’ willingness to spend amid macroeconomic uncertainty and a high interest rate environment add to its woes.
The Zacks Consensus Estimate for Kite Realty Group’s 2023 funds from operations (FFO) per share has moved marginally upward over the past month to $1.96.
The Zacks Consensus Estimate for Tanger Factory Outlet’s current-year FFO per share has been raised 1.6% over the past two months to $1.87.
The Zacks Consensus Estimate for Saul Centers ongoing-year FFO per share has moved 1.3% northward over the past month to $3.05.
Note: Anything related to earnings presented in this write-up represents FFO — a widely used metric to gauge the performance of REITs.
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Macerich (MAC) Gains 16.3% in 3 Months: Will the Trend Continue?
In the wake of the pandemic, there is renewed enthusiasm among customers for in-person shopping experiences. As a result, The Macerich Company’s (MAC - Free Report) portfolio of premium assets in the United States has been witnessing healthy leasing activity.
Also, this retail real estate investment trust’s (REIT) focus on mixed-use developments, omni-channel retailing and capital-recycling moves have enabled it to ride the growth curve so far.
Given this backdrop, shares of this Zacks Rank #3 (Hold) company have soared 16.3% in the past three months compared with the industry’s growth of 6.6%.
Image Source: Zacks Investment Research
With a rebound in retail demand, retailers are continuing to rent out more physical store spaces, benefiting retail REITs like Macerich. This healthy retailer demand has aided leasing activity in recent quarters and helped the company backfill its spaces, which is encouraging.
During the first quarter of 2023, Macerich signed 256 leases encompassing 949,000 square feet. On a comparable center basis, this reflected a 59% increase in the amount of square footage leased and a 20% rise in the number of deals signed year over year.
Also, the portfolio tenant sales per square foot for spaces less than 10,000 square feet in the trailing 12 months ended Mar 31, 2023, came in at $866 compared with $843 a year ago.
Amid this rebounding retail real estate market, we expect this leasing momentum to gather pace in the upcoming period, boding well for the company.
In recent years, omni-channel retailing has gained popularity and has become the focal point for many retailers. In line with this, MAC’s efforts to enhance its asset quality and grow its successful tie-ups with premium retailers by increasing its adoption of the omni-channel model are likely to pay off well.
Moreover, the company has been focusing on the re-use and mixed-use of its properties through the recapture and repositioning of anchor tenants. In May 2023, it acquired the remaining 50% interest in five former Sears boxes from its joint venture partner — Seritage Growth Properties — and took full ownership of these parcels.
This move provides MAC the flexibility to undertake redevelopment opportunities at these properties and enrich them with premium in-demand retailers, driving sales and traffic.
In the same month, Macerich and Wish You Were Here Group, a renowned, multi-concept hospitality company, announced that the south wing of Scottsdale Fashion Square will house the upscale, experiential restaurant concept — Élephante.
The move will mark Élephante’s first location outside Los Angeles. It will encompass 12,000 square feet of Macerich’s top-performing shopping center, aiming to provide a multidimensional experience to the Scottsdale community.
With mixed-used assets gaining traction in recent years, Macerich’s efforts to ring in premium brands at its properties to drive more footfall and boost sales augur well. Per the first-quarter 2023 Investor Presentation, for 2023-2024, management expects to spend an average of $160 million per year on development and redevelopment projects.
Further, Macerich’s aggressive capital-recycling program to enhance the overall quality of its portfolio highlights its prudent capital-management practices and releases the pressure off its balance sheet.
As of May 4, 2023, MAC had around $645 million of liquidity. This included $475 million of available capacity on its $525 million revolving line of credit. Its well-laddered debt maturity profile and ample financial flexibility have positioned it well to capitalize on long-term growth opportunities and are expected to continue to do so in the future.
Nonetheless, given the conveniences of online shopping, higher e-commerce adoption is still a concern for the company. Also, limited consumers’ willingness to spend amid macroeconomic uncertainty and a high interest rate environment add to its woes.
Stocks to Consider
Some better-ranked stocks from the REIT sector are Kite Realty Group Trust (KRG - Free Report) , Tanger Factory Outlet Centers (SKT - Free Report) and Saul Centers (BFS - Free Report) , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for Kite Realty Group’s 2023 funds from operations (FFO) per share has moved marginally upward over the past month to $1.96.
The Zacks Consensus Estimate for Tanger Factory Outlet’s current-year FFO per share has been raised 1.6% over the past two months to $1.87.
The Zacks Consensus Estimate for Saul Centers ongoing-year FFO per share has moved 1.3% northward over the past month to $3.05.
Note: Anything related to earnings presented in this write-up represents FFO — a widely used metric to gauge the performance of REITs.