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Macerich (MAC) Boosts Liquidity, Revises '21 FFO View, Stock Down

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The Macerich Company (MAC - Free Report) is making every effort to boost its liquidity position, including the sale of 36 million shares of common stock under its "at the market" (“ATM”) equity program as well as opting for a 95% stake sale in Paradise Valley Mall in Phoenix, AZ.

However, the company had to revise its 2021 guidance for funds from operations (FFO) per share to reflect the common stock sold so far under its ATM equity program and the pending sale of Paradise Valley Mall. The company now guides for FFO per share of $1.77-$1.97. The company had earlier guided for a 2021 FFO per share of $2.05-$2.25.

Shares of Macerich depreciated 5.01% during Monday’s regular trading session, reflecting bearish sentiments.

Particularly, the selling of 36 million shares of common stock under its ATM equity program at a weighted average price of $13.54 per share through Mar 25, 2021, helped the company reap gross proceeds of $487.3 million. Roughly 1 million shares remain available to be issued under the program now.

Moreover, the company is in a contract to sell a 95% stake in a non-core asset in Phoenix for $100 million. This transaction, which is anticipated to close in the ongoing quarter, is likely to help the company generate net proceeds of around $95 million. It will, however, keep its 5% joint-venture (JV) interest in this multi-year re-development.

Apart from these moves to bolster its liquidity position, Macerich also obtained commitments for a new revolving line of credit and credit facility from its joint lead lenders. The line and the credit facility’s total capacity is estimated to range between $600-$800 million, and the facility is expected to close this April.

Macerich’s concerted efforts to bolster liquidity are likely to help the company withstand the current turbulence in the retail real estate market. Its cash and cash equivalents, including pro-rata share of joint ventures, amounted to roughly $950 million as of Mar 25, 2021. However, the total liquidity following the close of the new credit facility as well as the Paradise Valley stake sale is estimated to be $1.65-$1.85 billion before paying off the current line of credit.

As a matter of fact, businesses of physical stores widely depend on customer traffic but consumers have been avoiding crowded public spaces due to the pandemic and increasingly opting for online purchases. This, in turn, has been taking a huge toll on tenants’ liquidity, thereby making it difficult to meet their rental obligations. As a result, retail REITs, which have already been battling store closures and bankruptcy issues, have been feeling the heat. In fact, apart from Macerich, this turbulence is affecting other retail REITs, including Simon Property (SPG - Free Report) , Regency Centers (REG - Free Report) and Kimco (KIM - Free Report) among others.

Nonetheless, the relaxations in restrictions continue to improve the operating conditions. Moreover, widespread vaccinations and a likely uplift in consumer confidence in the second half of the current year are anticipated to buoy retailers’ businesses, in turn, helping cash flows of their landlords.

Particularly, the company's major markets of California and New York, which were severely capacity-restricted markets in 2020, are witnessing the loosening of the pandemic-related restrictions. Also, sales within the company's Arizona region during January and February 2021 were 99% of pre-COVID, January and February 2020 sales, excluding capacity-restricted food and beverage uses, the company said.

In addition, Tom O'Hern, the CEO of Macerich commented that “we also are experiencing resilient leasing demand, including from a wide variety and breadth of categories and uses, which supports our optimism for occupancy improvement and recovery."

Shares of this Zacks Rank #3 (Hold) company have gained 8.5% over the past three months compared with the industry’s rally of 11.8%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

 

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