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Macerich (MAC - Free Report) announced a $710-million refinancing of Tysons Corner Center by its joint venture (JV), which owns the high-quality property spanning 1.8 million square feet in Northern Virginia. The move is likely to enhance the company’s financial flexibility, poising it well to capitalize on long-term growth opportunities.
Shares of MAC gained 2.16% on the Dec 6 normal trading session on the NYSE following the announcement.
The new CMBS loan, which is interest only throughout the entire loan term, bears a fixed interest rate of 6.60% and matures on Dec 6, 2028. It replaces the existing $666 million loan that was set to mature on Jan 1, 2024.
Notably, the retail real estate investment trust has collectively, along with multiple other deals, completed loan transactions worth $2.7 billion ($1.9 billion at the company’s share). This was inclusive of the renewal of the company’s corporate credit facility in September 2023, whereby it amended and restated a new $650 million revolving credit facility, enhancing its liquidity position by $125 million.
With the pandemic’s impact waning, the demand for retail real estate has remained robust over the past few quarters. As a result, Macerich’s shopping centers, located in densely populated areas with an affluent customer base having significant disposable income, are witnessing healthy demand from retailers as they continue to rent out more physical store spaces. This has led to robust leasing activity and occupancy gains.
Tysons Corner Center is one such super-regional retail powerhouse that is experiencing healthy retail demand. The shopping center is among MAC’s top 10 regional town centers and gets around 16 million annual visits. The property, anchored by Nordstrom, Bloomingdale’s and Macy’s, generates around $1,200 sales per square foot. At the end of the third quarter of 2023, the center’s leased occupancy was 96%.
It is noteworthy that from the beginning of 2023 through Sep 30, MAC signed leases for 3.14 million square feet. This indicates a 10% increase in square footage signed from the year-ago period.
Additionally, Macerich’s redevelopment efforts augur well for long-term growth. The recent leasing changes and targeted renovations made at Kings Plaza in Brooklyn have not only revitalized the shopping center but also positioned Macerich as a dominant player in the New York City metro area.
The highlight of this transformation is the fully remerchandised former Sears space at Kings Plaza, Brooklyn's only enclosed mall. Macerich's strategic leasing decisions have attracted prominent brands and the stores now open in the former Sears box include a three-level Target, Primark, Zara and Burlington. These new stores are poised to deliver a combined annual sales figure nearly eight times higher than the previous Sears store.
Macerich is also redeveloping a three-level space (formerly occupied by Bloomingdale’s and Arclight Theatre) spanning around 150,000 square feet at its Santa Monica Place regional town center in California with an estimated total project cost of $35-$40 million.
The redeveloped area will include an entertainment destination use, high-end fitness and co-working space, and will open in phases beginning in 2024 through 2025. As of Sep 30, 2023, Macerich had incurred around $2.2 million of the cost.
Hence, with added financial flexibility and a well-laddered debt maturity profile, MAC seems well-positioned to carry out its development/redevelopment activities and bank on growth opportunities. As of Oct 31, 2023, the company had around $665 million of liquidity, including $515 million of available capacity on its newly expanded credit facility.
Shares of this Zacks Rank #3 (Hold) company have gained 25.0% over the past month compared with the industry’s 8.8% growth.
Image Source: Zacks Investment Research
Nonetheless, growing e-commerce adoption may weigh on Macerich’s prospects. Online retailing will likely remain a popular choice among customers, thus adversely impacting the market share for brick-and-mortar stores.
A slowdown in the economy amid persistent macroeconomic uncertainty and a high-interest rate environment could limit consumers’ willingness to spend, thus stalling the company’s growth tempo to some extent.
Also, with prevailing high-interest rates, Macerich may find it difficult to purchase or develop real estate with borrowed funds as the costs are likely to be on the higher side.
The Zacks Consensus Estimate for EastGroup Properties’ 2023 FFO per share has moved marginally upward in the past month to $7.70.
The consensus estimate for Stag Industrial’s ongoing year’s FFO per share has been raised 1.3% over the past two months to $2.28.
The consensus estimate for Park Hotels & Resorts’ current-year FFO per share has moved marginally northward over the past week to $1.99.
Note: Anything related to earnings presented in this write-up represents funds from operations (FFO) — a widely used metric to gauge the performance of REITs.
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Macerich's (MAC) JV Refinances Tysons Corner, Ups Flexibility
Macerich (MAC - Free Report) announced a $710-million refinancing of Tysons Corner Center by its joint venture (JV), which owns the high-quality property spanning 1.8 million square feet in Northern Virginia. The move is likely to enhance the company’s financial flexibility, poising it well to capitalize on long-term growth opportunities.
Shares of MAC gained 2.16% on the Dec 6 normal trading session on the NYSE following the announcement.
The new CMBS loan, which is interest only throughout the entire loan term, bears a fixed interest rate of 6.60% and matures on Dec 6, 2028. It replaces the existing $666 million loan that was set to mature on Jan 1, 2024.
Notably, the retail real estate investment trust has collectively, along with multiple other deals, completed loan transactions worth $2.7 billion ($1.9 billion at the company’s share). This was inclusive of the renewal of the company’s corporate credit facility in September 2023, whereby it amended and restated a new $650 million revolving credit facility, enhancing its liquidity position by $125 million.
With the pandemic’s impact waning, the demand for retail real estate has remained robust over the past few quarters. As a result, Macerich’s shopping centers, located in densely populated areas with an affluent customer base having significant disposable income, are witnessing healthy demand from retailers as they continue to rent out more physical store spaces. This has led to robust leasing activity and occupancy gains.
Tysons Corner Center is one such super-regional retail powerhouse that is experiencing healthy retail demand. The shopping center is among MAC’s top 10 regional town centers and gets around 16 million annual visits. The property, anchored by Nordstrom, Bloomingdale’s and Macy’s, generates around $1,200 sales per square foot. At the end of the third quarter of 2023, the center’s leased occupancy was 96%.
It is noteworthy that from the beginning of 2023 through Sep 30, MAC signed leases for 3.14 million square feet. This indicates a 10% increase in square footage signed from the year-ago period.
Additionally, Macerich’s redevelopment efforts augur well for long-term growth. The recent leasing changes and targeted renovations made at Kings Plaza in Brooklyn have not only revitalized the shopping center but also positioned Macerich as a dominant player in the New York City metro area.
The highlight of this transformation is the fully remerchandised former Sears space at Kings Plaza, Brooklyn's only enclosed mall. Macerich's strategic leasing decisions have attracted prominent brands and the stores now open in the former Sears box include a three-level Target, Primark, Zara and Burlington. These new stores are poised to deliver a combined annual sales figure nearly eight times higher than the previous Sears store.
Macerich is also redeveloping a three-level space (formerly occupied by Bloomingdale’s and Arclight Theatre) spanning around 150,000 square feet at its Santa Monica Place regional town center in California with an estimated total project cost of $35-$40 million.
The redeveloped area will include an entertainment destination use, high-end fitness and co-working space, and will open in phases beginning in 2024 through 2025. As of Sep 30, 2023, Macerich had incurred around $2.2 million of the cost.
Hence, with added financial flexibility and a well-laddered debt maturity profile, MAC seems well-positioned to carry out its development/redevelopment activities and bank on growth opportunities. As of Oct 31, 2023, the company had around $665 million of liquidity, including $515 million of available capacity on its newly expanded credit facility.
Shares of this Zacks Rank #3 (Hold) company have gained 25.0% over the past month compared with the industry’s 8.8% growth.
Image Source: Zacks Investment Research
Nonetheless, growing e-commerce adoption may weigh on Macerich’s prospects. Online retailing will likely remain a popular choice among customers, thus adversely impacting the market share for brick-and-mortar stores.
A slowdown in the economy amid persistent macroeconomic uncertainty and a high-interest rate environment could limit consumers’ willingness to spend, thus stalling the company’s growth tempo to some extent.
Also, with prevailing high-interest rates, Macerich may find it difficult to purchase or develop real estate with borrowed funds as the costs are likely to be on the higher side.
Stocks to Consider
Some better-ranked stocks from the REIT sector are EastGroup Properties (EGP - Free Report) , Stag Industrial (STAG - Free Report) and Park Hotels & Resorts (PK - Free Report) . PK sports a Zacks Rank #1 (Strong Buy), and EGP and STAG carry a Zacks Rank #2 (Buy) each. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for EastGroup Properties’ 2023 FFO per share has moved marginally upward in the past month to $7.70.
The consensus estimate for Stag Industrial’s ongoing year’s FFO per share has been raised 1.3% over the past two months to $2.28.
The consensus estimate for Park Hotels & Resorts’ current-year FFO per share has moved marginally northward over the past week to $1.99.
Note: Anything related to earnings presented in this write-up represents funds from operations (FFO) — a widely used metric to gauge the performance of REITs.