Macerich Ahead of Estimates

Macerich Co. (MAC - Analyst Report) reported third quarter 2011 FFO (fund from operations) of $104.2 million or 73 cents per share compared with $93.3 million or 66 cents per share in the year-earlier quarter. Fund from operations, a widely used metric to gauge the performance of REITs, is obtained after adding depreciation and amortization and other non-cash expenses to net income.

Adjusted FFO in the reported quarter stood at 75 cents per share versus 66 cents in the year-ago quarter. FFO growth in the third quarter was driven by strong fundamentals in the portfolio with solid tenant sales growth and continued same-center net operating income growth. Adjusted quarterly FFO per share was ahead of the Zacks Consensus Estimate by a penny

Total revenue during the quarter was $202.6 million versus $190.7 million in the year-ago period. Total revenue comfortably beat the Zacks Consensus Estimate of $191 million.

Overall same-store occupancy at quarter end was 91.9% as opposed to 92.6% in the year-ago period. Mall tenant sales increased 9.6% during the reported quarter to $467 per square foot compared with $426 per square foot in the year-earlier period. Same-center net operating income climbed 2.82% during the quarter, thus marking the seventh consecutive quarter of growth.

During the quarter, the company entered into a joint venture with a subsidiary of AWE/Talisman for the development of the Fashion Outlets of Chicago in the Village of Rosemont, Illinois. The total project cost is estimated to be approximately $200 million.

Macerich will own a 60% stake in the joint venture while the remaining 40% will be held by AWE/Talisman. The center will be a fully enclosed two level, 528,000 square foot outlet center, expected to be completed by spring 2013.

During the reported quarter, Macerich closed on a $230 million, 4.25% seven-year fixed rate loan on Arrowhead Towne Center. The company also repaid a $40 million loan on Rimrock Mall. During the quarter, the company increased the annualized dividend by 10% to $2.20 per share.

For full-year 2011, Macerich reiterated its earlier FFO guidance range of $2.84 to $2.94 per share.

Macerich currently retains a Zacks #3 Rank, which translates into a short-term Hold rating. We are also maintaining our long-term Neutral recommendation on the stock. One of its competitors, Simon Property Group Inc. (SPG - Analyst Report) holds a Zacks #2 Rank, which translates into a short-term Buy rating.

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