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Macerich (MAC) Q2 FFO Beats Estimates, Revenues Fall Y/Y

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Retail REIT The Macerich Company (MAC - Free Report) delivered second-quarter 2018 funds from operations (FFO) per share (excluding costs related to shareholder activism) of 96 cents, in line with the Zacks Consensus Estimate. However, the figure came in lower than the prior-year tally of 98 cents.

Results were backed by robust growth in re-leasing spreads and tenant sales growth. Yet, the company recorded lower portfolio occupancy.

The company posted revenues of $234.5 million for the quarter, handily surpassing the Zacks Consensus Estimate of $214.2 million. However, the figure came in 5.2% lower than the prior-year figure.

Quarter in Detail

As of Jun 30, 2018, mall portfolio occupancy shrunk 10 basis points (bps) year over year to 94.3%. Mall tenant annual sales increased 7.1% year over year to $692 per square feet. Re-leasing spreads for the year ended Jun 30, 2018, increased 12.3%. Average rent per square foot ascended 4% to $58.84 from $56.60 as of Jun 30, 2017.

Also, same-center net operating income for the reported quarter inched up 1.4% from the prior-year period.

As of Jun 30, 2018, Macerich’s cash and cash equivalents summed $118.2 million, up from $91 million reported as of Dec 31, 2017.

Guidance

Macerich revised its guidance for 2018. The retail REIT expects FFO per share of $3.69-$3.79, up from the previous band of $3.92-$4.02. The company also expects FFO per share, excluding costs related to shareholder activism, in the range of $3.82 to $3.92 for 2018. Currently, the Zacks Consensus Estimate for full-year FFO per share is pegged at $3.96.     

This is backed by the same-center NOI growth rate projection of 1.5-2% and lease termination revenues of $15 million. Additionally, the company anticipates asset dispositions in 2018 to impact the bottom line by 5 cents per share.

Our Viewpoint

The company continues with its non-core asset dispositions and recycling the proceeds toward higher quality assets. In the June-end quarter, it sold two power centers located in the sub-urban Phoenix market for its share in net proceeds of $35 million. Such moves are expected to enhance Macerich’s portfolio quality.  In addition, we are impressed with its leasing deals with significant retailers.    

Nonetheless, large scale dispositions are expected to weigh on its earnings in the near term. Moreover, rising interest rate is a concern for Macerich as this restricts its ability to refinance existing debt, while increasing the interest cost on new debt. This, in turn, is feared to adversely impact the company’s financial results and dent its ability to hike dividend.

Macerich Company (The) Price, Consensus and EPS Surprise
 

Macerich Company (The) Price, Consensus and EPS Surprise | Macerich Company (The) Quote

Macerich currently carries a Zacks Rank #4 (Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Other REITs

Kimco Realty Corp.’s (KIM - Free Report) Q2 FFO came in at 37 cents per share, surpassing the Zacks Consensus Estimate of 36 cents. However, the reported tally came in lower than the year-ago figure of 38 cents.

Simon Property Group, Inc. (SPG - Free Report) reported second-quarter 2018 FFO of $2.98 per share, which surpassed the Zacks Consensus Estimate of $2.91. The FFO per share figure also came in 20.6% higher than the year-ago tally of $2.47.

DDR Corp.’s second-quarter operating FFO per share of 49 cents surpassed the Zacks Consensus Estimate of 47 cents. Moreover, the figure compares favorably with the prior-year quarter figure of 59 cents.

Note: Anything related to earnings presented in this write-up represent funds from operations (FFO) — a widely used metric to gauge the performance of REITs.

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