Macerich Company, the beleaguered mall REIT whose stock briefly soared last week before falling back down, is preparing to issue up to $500 million of new equity.
One of the largest shopping center owners in the U.S., Macerich is now shopping for investors to help it meet its outstanding debt obligations, according to filings with the Securities and Exchange Commission. The Santa Monica, California-based company has a $1.5 billion line of credit that was fully drawn and comes due in July, along with $800 million in mortgages in forbearance plans.
The move comes a few days after individual investors bid up the share price of Macerich — along with now famously, GameStop, AMC and Bed Bath and Beyond — catching hedge funds that had bet against them off guard. It made for a wild week on Wall Street as Macerich shares surged 72 percent to a high of $22.38 on Jan. 27, before giving up the gains just as quickly. The stock closed Tuesday at $12.31.
Despite the massive swings, or perhaps because of them, some companies emerged better positioned to cope with the financial effects of the pandemic.
Movie theater chain AMC capitalized on its own volatility, raising $304 million by selling shares last week, and reducing its debt burden by $600 million as investor Silver Lake swapped debt for equity — clearing about $112 million in profit.
Macerich didn’t have such luck, and its largest single investor, Ontario Teachers’ Pension Plan, cashed out last week as it rode the wave, selling all its shares for $500 million.
Prior to the pandemic, which has pummeled the company, Macerich’s properties were already heavily leveraged. An infusion of $500 million through a new equity issuance would be a “good start,” said Alex Goldfarb, a Piper Sandler analyst who covers mall REITs.
But Goldfarb said Macerich will need to raise as much as $2 billion this year to meet its outstanding debt and mortgage obligations.
The company owns 28 shopping centers concentrated in California, Illinois and New York, totaling about 25 million square feet. It also has another 18 million square feet across 21 joint ventures in regional cities where it is at least a 50-percent owner.
Preliminary figures Macerich released Monday ahead of its fourth quarter earnings show a predictable decline, Goldfarb said. Net operating income fell 33 percent to $155 million in Q4 compared to the same time in 2019. Tenant occupancy also slipped, to 90 percent from 94 percent, according to Piper Sandler. Funds from operations for Q4 also dropped to 72 cents a share from $1.01 year-over-year.
Rent collection was strong in the fourth quarter, slightly above 2019 rates, indicating the company overcame collection difficulty experienced early in the pandemic. In the first quarter of 2020, Macerich collected just 26 percent of rent from tenants.
Now, to help Macerich refinance its outstanding debt, “explaining its plans to recapitalize the business will be crucial to winning investors,” Goldfarb said.