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Key Reasons to Add Macerich (MAC) to Your Portfolio Now

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Given the rebound in the retail market, The Macerich Company (MAC - Free Report) is experiencing healthy demand for its premium shopping centers located in the vibrant markets of the United States. Retailers are continuing to rent out more physical store spaces, which is aiding leasing activity and helping the company backfill its spaces.

This Santa Monica, CA-based retail real estate investment trust (REIT) owns, acquires, leases, manages, develops and redevelops regional and community shopping centers in high barrier-to-entry markets.

Shares of this Zacks Rank #2 (Buy) company have gained 30.9% over the past six months compared with the industry’s growth of 9.4%. Given the strength in its fundamentals, there seems to be additional room for growth for this stock.

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Factors That Make Macerich a Solid Pick

Healthy Operating Performance: 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 are witnessing healthy demand from retailers as they continue to rent out more physical store spaces. Solid tenant demand has also helped the company backfill its spaces, which is encouraging.

In 2023, it signed leases for 4.2 million square feet. This indicates a 12% 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 2024, we expect year-over-year growth of 1.1% in the company’s total revenues.

Capital-Recycling Efforts: 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.

In 2023, Macerich sold various land parcels in separate transactions, resulting in a gain of $5.6 million.

For 2024, Macerich expects to incur around $160-$180 million for development, redevelopment, expansion and renovations. Apart from raising capital, the strategic dispositions reduced impending bankruptcy issues across the lower-quality disposed portfolio.

Omni-Channel Strategy, Diversification & Adaptation: MAC has been making efforts to enhance its assets quality, as well as customer relationships, through increasing adoption of the omni-channel model. It has become a popular choice among several store retailers post the pandemic, which 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.

Balance Sheet Strength: Macerich’s healthy balance sheet position with ample financial flexibility is likely to continue supporting its growth endeavors. In December 2023, the company announced a $710 million refinancing of Tysons Corner Center by its joint venture, which owns the high-quality property in Northern Virginia. The move boosts its financial flexibility.

As of Feb 7, 2024, the company had around $657 million of liquidity, including $490 million of available capacity on its $650 million revolving line of credit.

Other Stocks to Consider

Some other top-ranked stocks from the broader REIT sector are Tanger Inc. (SKT - Free Report) and SL Green Realty (SLG - Free Report) , each carrying a Zacks Rank #2 at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Zacks Consensus Estimate for SKT’s 2024 FFO per share stands at $2.03, indicating an increase of 3.6% from the year-ago reported figure.

The Zacks Consensus Estimate for SLG’s 2024 FFO per share is pegged at $5.88, suggesting year-over-year growth of 19%.

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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