We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Is it Wise to Retain Macerich (MAC) Stock in Your Portfolio?
Read MoreHide Full Article
The Macerich Company (MAC - Free Report) enjoys a portfolio of premium shopping centers in the vibrant markets of the United States. Amid a healthy retail real estate market, its focus on supporting omni-channel retailing and developing mixed-use assets augurs well. However, growing e-commerce adoption and high interest rates raise concerns.
What’s Aiding it?
The increase in consumers’ preference for an in-person shopping experience following the pandemic downtime has been driving the recovery in the retail real estate industry. Amid this, Macerich’s shopping centers, located in densely populated areas having an affluent customer base with significant disposable income, are witnessing healthy demand from retailers as they continue to rent out more physical store spaces. Moreover, solid tenant demand has helped the company backfill its spaces, which is a positive.
From the beginning of 2023 through Sep 30, the company signed leases for 3.14 million square feet. This indicates a 10% increase in square footage signed from the prior-year period. With an encouraging leasing pipeline, the company is likely to experience significant rental income growth. For 2023, we expect year-over-year growth of 2.8% in the company’s total revenues.
MAC has been making efforts to enhance its assets quality, as well as customer relationships through increasing adoption of the omni-channel model, a popular choice among several store retailers post the pandemic. This is likely to pay off well. Also, focusing on the re-use and mixed-use of its properties by recapturing and repositioning anchor tenants remains a key emphasis, while bringing brands to new markets at its retail real estate will likely attract shoppers.
Macerich’s healthy balance sheet position with ample financial flexibility is likely to continue supporting its growth endeavors. In September 2023, it amended and restated a new $650 million revolving credit facility and enhanced its liquidity position by $125 million. 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.
Moreover, the company’s aggressive capital-recycling program and redeployment of the proceeds to fund acquisitions, and development and redevelopment activities highlight its prudent capital-management practices. This January, the company, along with Hudson Pacific Properties, completed the $700 million sale of One Westside and Westside Two in Los Angeles to the Regents of the University of California. The net proceeds from the sale will enable Macerich to further deleverage and improve its liquidity profile.
Over the past three months, shares of this Zacks Rank #3 (Hold) company have gained 40.9% compared with the industry's upside of 9.6%.
Image Source: Zacks Investment Research
What’s Hurting it?
Given the conveniences of online shopping, 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.
Amid persistent macroeconomic uncertainty and a high interest rate environment, a slowdown in the economy could limit consumers’ willingness to spend to some extent. For 2023, we project a year-over-year decline of 9% in FFO per share, excluding financing expenses in connection with Chandler Freehold and accrued default interest expense.
High interest rates are a key concern for Macerich. In the third quarter of 2023, a high interest rate led to a $12 million or 5 cents per share increase in interest expense, which negatively impacted FFO per share growth. Further, under the current economic scenario, the company 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 FRT’s 2023 funds from operations (FFO) per share is pegged at $6.56, suggesting year-over-year growth of 3.8%.
The Zacks Consensus Estimate for SKT’s 2023 FFO per share stands at $1.94, indicating an increase of 6% from the year-ago reported figure.
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.
Unique Zacks Analysis of Your Chosen Ticker
Pick one free report - opportunity may be withdrawn at any time
Image: Bigstock
Is it Wise to Retain Macerich (MAC) Stock in Your Portfolio?
The Macerich Company (MAC - Free Report) enjoys a portfolio of premium shopping centers in the vibrant markets of the United States. Amid a healthy retail real estate market, its focus on supporting omni-channel retailing and developing mixed-use assets augurs well. However, growing e-commerce adoption and high interest rates raise concerns.
What’s Aiding it?
The increase in consumers’ preference for an in-person shopping experience following the pandemic downtime has been driving the recovery in the retail real estate industry. Amid this, Macerich’s shopping centers, located in densely populated areas having an affluent customer base with significant disposable income, are witnessing healthy demand from retailers as they continue to rent out more physical store spaces. Moreover, solid tenant demand has helped the company backfill its spaces, which is a positive.
From the beginning of 2023 through Sep 30, the company signed leases for 3.14 million square feet. This indicates a 10% increase in square footage signed from the prior-year period. With an encouraging leasing pipeline, the company is likely to experience significant rental income growth. For 2023, we expect year-over-year growth of 2.8% in the company’s total revenues.
MAC has been making efforts to enhance its assets quality, as well as customer relationships through increasing adoption of the omni-channel model, a popular choice among several store retailers post the pandemic. This is likely to pay off well. Also, focusing on the re-use and mixed-use of its properties by recapturing and repositioning anchor tenants remains a key emphasis, while bringing brands to new markets at its retail real estate will likely attract shoppers.
Macerich’s healthy balance sheet position with ample financial flexibility is likely to continue supporting its growth endeavors. In September 2023, it amended and restated a new $650 million revolving credit facility and enhanced its liquidity position by $125 million. 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.
Moreover, the company’s aggressive capital-recycling program and redeployment of the proceeds to fund acquisitions, and development and redevelopment activities highlight its prudent capital-management practices. This January, the company, along with Hudson Pacific Properties, completed the $700 million sale of One Westside and Westside Two in Los Angeles to the Regents of the University of California. The net proceeds from the sale will enable Macerich to further deleverage and improve its liquidity profile.
Over the past three months, shares of this Zacks Rank #3 (Hold) company have gained 40.9% compared with the industry's upside of 9.6%.
Image Source: Zacks Investment Research
What’s Hurting it?
Given the conveniences of online shopping, 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.
Amid persistent macroeconomic uncertainty and a high interest rate environment, a slowdown in the economy could limit consumers’ willingness to spend to some extent. For 2023, we project a year-over-year decline of 9% in FFO per share, excluding financing expenses in connection with Chandler Freehold and accrued default interest expense.
High interest rates are a key concern for Macerich. In the third quarter of 2023, a high interest rate led to a $12 million or 5 cents per share increase in interest expense, which negatively impacted FFO per share growth. Further, under the current economic scenario, the company 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 retail REIT sector are Federal Realty Investment Trust (FRT - Free Report) and Tanger Inc. (SKT - Free Report) , each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for FRT’s 2023 funds from operations (FFO) per share is pegged at $6.56, suggesting year-over-year growth of 3.8%.
The Zacks Consensus Estimate for SKT’s 2023 FFO per share stands at $1.94, indicating an increase of 6% from the year-ago reported figure.
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.