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Macerich Beats Estimates

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The Macerich Company (MAC - Analyst Report)), a real estate investment trust (REIT), recently reported third quarter 2012 FFO (fund from operations) of $112.9 million or 78 cents per share compared with $104.2 million or 73 cents per share in the year-earlier quarter.

The year-over-year growth in FFO in the reported quarter was driven by strong fundamentals in the portfolio with solid tenant sales, releasing spreads and occupancy gains.  FFO in the reported quarter beat the Zacks Consensus Estimate by $0.03.

Total revenue during the quarter was $215.7 million versus $202.7 million in the year-ago period. Total revenue in the quarter beat the Zacks Consensus Estimate of $197 million.

Overall portfolio occupancy increased to 93.0% in third quarter 2012 versus 91.9% in the prior-year quarter. For the 12 months ended September 30, 2012, mall tenant sales increased 9.4% to $511 per square foot compared with $467 in the year-ago period. In addition, the re-leasing spreads also jumped 18.5% year over year. Same center net operating income stood at $162.9 million compared to $158.7 million in the prior year quarter.

During the quarter, the company was bought out of its equity interest in NorthPark Center in Dallas, Texas for $119 million in cash.  Macerich made an initial equity investment  of $75 million in NorthPark in 2004. Additionally, the company was also relieved of its pro rata share of debt of $163 million. Total asset sale transactions for the year was $468 million.

Subsequent to the end of the quarter, Macerich announced the acquisition of Kings Plaza and Green Acres Mall for $1.25 billion. Additionally the company acquired 75% stake in FlatIron Crossing in Broomfield, Colorado. The 1.5 million-square-foot regional mall was acquired for $196 million in cash, along with the assumption of a pro-rata share of a $127 million debt.

During the reported quarter, Macerich issued about 3 million shares under its at-the-market share offering program for net proceeds of $176.1 million. The company refinanced Westside Pavilion with a 4.49% 10-year fixed rate loan worth $155 million. Additionally, the company placed a new $110 million loan on the Chesterfield Towne Center (4.8%, 10 year fixed rate loan.)

 Furthermore, Macerich entered into a $600 million loan agreement secured by Queens Center (3.487%, 12 year fixed rate loan). The loan proceeds will be utilized to pay the existing loan of $317 million. Additionally, the company also committed to a $205 million loan on Deptford Mall (3.75%, 10 year fixed rate loan). The loan proceeds will be utilized to pay the existing $172 million loan. Both the loans are expected to close in December 2012.

For full-year 2012, Macerich reaffirmed the adjusted FFO guidance in the range of $3.06 to $3.14 per share. At the end of the third quarter 2012, the company had cash and cash equivalents of $76.5 million and total debt of $5.2 billion.

Macerich currently retains a Zacks #3 Rank, which translates into a short-term Hold rating. We maintain 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 implies a short term Buy rating

Note: Funds from operations, a widely accepted and reported measure of REITs performance, are derived by adding depreciation, amortization and other non-cash expenses to net income.

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