The Macerich Company (MAC - Free Report) recently refinanced Kings Plaza in Brooklyn, NY with a new long-term loan worth $540 million. The loan, carrying an interest rate of 3.62, is set to mature on Jan 1, 2030.
The former loan was valued at $427.4 million, with an effective interest rate of 3.67%. It matured on Dec 3, 2019, and was repaid at closing.
Remaining refinancing proceeds were used to repay a portion of the company's revolving line of credit. Notably, as of Sep 30, 2019, the company had $750 million of additional capacity on its line of credit.
In 2018, the property received a $110-million overhaul to redevelop the four-floor store, formerly occupied by Sears, with Primark, Zara, JCPenney (JCP - Free Report) and Burlington (BURL - Free Report) . The redevelopment also included a transformative revamp of the mall's exterior along Flatbush Avenue. This has likely enabled the company to improve property value and retain its relevance amid choppy retail environment. In fact, as of Sep 30, 2019, the shopping center generated $735 sales per square foot.
Notably, Macerich has a high concentration of premium malls in the U.S. market. These properties are located in densely-populated areas, where affluent consumers with significant disposable incomes live, work and play, offering the company solid scope to generate decent cash flows.
Moreover, the company is making moves to enhance portfolio quality through non-core asset sales, redevelopment and addition of flexible-office spaces into its retail centers. Focus to boost mall traffic and drive sales by replacing unproductive tenants bode well for long-term growth.
However, mall traffic continues to decline with online purchases taking precedence. This has forced retailers to reconsider their strategy, and shift investments from traditional retailing to online channels and optimize brick-and-mortar presence. These optimization efforts and the consequent decision of store closures by a number of retailers have raised concerns over mall landlords’ cash flow. Also, retailers unable to cope with competition have been filing bankruptcies. This is affecting the demand for retail real estate space and has emerged as a pressing concern for retail REITs like Macerich, SITE Centers and Kimco Realty Corporation (KIM - Free Report) .
In fact, the bankruptcy of Forever 21 will result in the fashion retailer’s store closure at Kings Plaza.
Shares of this Zacks Rank #3 (Hold) company have declined 19.3% over the past six months, wider than the industry’s decline of 3.7%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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