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Macerich's (MAC) Q4 FFO & Leasing Revenues Decline Y/Y

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The Macerich Company MAC reported fourth-quarter 2019 adjusted funds from operations (FFO) per share of 98 cents. The figure compares unfavorably with the prior-year quarter’s $1.09. Adjusted FFO per share for the quarter excludes financing expense in relation to Chandler Freehold.

This retail REIT witnessed strong tenant sales growth and an increase in average rent while occupancy declined.

The company generated leasing revenues of $222.6 million in the quarter. The figure slipped 0.8% year over year.

For the full year, adjusted FFO per share came in at $3.54, declining from the prior-year tally of $3.73. Moreover, leasing revenues were down 2.8% year over year to $858.9 billion.

Behind the Headlines

As of Dec 31, 2019, the mall portfolio occupancy shrank 140 basis points year over year to 94%. Mall tenant annual sales for the 12-month period ended Dec 31, 2019 increased 10.3% to $801 per square feet. Leasing volumes for 2019 was up nearly 20% from 2018 volumes. Average rent per square foot rose 3.3% to $61.06 from $59.09 as of Dec 31, 2018. Also, same-center net operating income (excluding lease termination revenues) declined marginally to $231.4 million from the prior-year number.

Notably, in 2019, Macerich completed more than $2 billion of financings. This was done at an average interest rate of 4% and an average maturity of 9.3 years, netting $560 million of excess loan proceeds at the company's share.

Outlook

Macerich provided its guidance for 2020 FFO per share. The REIT expects FFO per share of $3.40-3.50 for the ongoing year. The Zacks Consensus Estimate for full-year FFO per share is currently pegged at $3.60.
 
Our Viewpoint

Macerich has been making efforts to enhance its asset quality and customer relationships through redevelopments and the increasing adoption of the omni-channel model. Specifically, it is reducing exposure to struggling department stores while embracing more experiential retail that is thriving. These efforts enabled the company to enjoy higher mall tenant sales in the December quarter.

However, going forward, the choppy retail real estate environment with tenant bankruptcies and store closures is expected to persistently affect the company’s occupancy level.

Macerich Company (The) Price, Consensus and EPS Surprise
 

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

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

We now look forward to the earnings releases of other REITs like SITE Centers Corp. SITC, Regency Centers Corporation (REG - Free Report) and Healthpeak Properties, Inc. PEAK. While SITE Centers is slated to report quarterly numbers on Feb 13, Regency Centers and Healthpeak Properties will report fourth-quarter results on Feb 12 and Feb 11, respectively.

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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