Macerich has taken about a 60 percent bite out of its $2 billion debt reduction target. More mall sales should help get it across the finish line.
In its third-quarter report, the Santa Monica-based real estate investment trust, which had a recent market cap of $4.2 billion, said it has lined up the $157 million sale of its Thousand Oaks mall The Oaks. Meanwhile, it has three other transactions underway involving Santa Monica Place in California, Shops at Atlas Park in New York and Southridge Mall in Iowa.
There are also talks with lenders or sale negotiations on another four properties. That includes the nearly 2 million-square-foot Lakewood Center in Southern California, which CFO Scott Kingsmore told analysts on Wednesday is likely to be sold in the “near term.”
That The Oaks’ buyer was able to secure financing given the property’s need for a “major” redevelopment offers a read on investor appetite, said CEO Jackson Hsieh regarding the deal during Wednesday’s conference call to discuss the third-quarter results.
“There hasn’t been a huge amount of A-plus centers sold, but the fact that lenders are coming into what I call B opportunities or maybe properties that could become As that need a lot of reconstruction, that to me is kind of encouraging,” Hsieh said. “That wasn’t really evident when I first started at the company in March of this year.”
Hsieh was tapped to helm the shopping center owner in March, succeeding Thomas O’Hern. He was tasked with turning around the business and in May released the Path Forward Plan that set out to trim about $2 billion in debt while identifying centers with the most future potential and opportunity.
Path Forward divides Macerich’s properties into three categories: top-producing Fortress centers; Steady Eddy malls with stable performance; and Eddies, the laggards the company looks to sell.
Fortress potential
Hsieh said Macerich intends to “aggressively pursue” redevelopment plans for Fortress property Los Cerritos Center, while refinancing debt at Washington Square in Portland, Ore. The latter is viewed as having potential to become a Fortress property.
Macerich paid $122 million to buy out its partner’s 40 percent stake in Pacific Premier Retail Trust, which owns the two malls in addition to Lakewood Center. Pacific Premier is a joint venture Macerich formed in 1999 with the Ontario Teachers’ Pension Plan Board.
“Now that we were able to buy them out, we’re just going to be able to accelerate our business plans, which we have on these two properties,” Hsieh said of Cerritos and Washington. “We’re going to get after it very quickly with the leasing and development teams.”
Those future plans in Washington could include more luxury tenants for the 1.3 million-square-foot center anchored by Macy’s, Nordstrom, Dick’s Sporting Goods and JCPenney, according to Hsieh. In Cerritos, which Hsieh called a “gem,” there are entitlements for multifamily development.
The over 1 million-square-foot Los Cerritos Center pulls visitors from both Orange County and Los Angeles County with Nordstrom, Forever 21, Macy’s, Dick’s Sporting Goods and Harkins Theatres as its anchors.
The mall updates came with Macerich’s results for the third quarter ended Sept. 30 in which it reported a net loss of $108.2 million, narrowed from a $262.5 million loss in the same period a year ago. Total quarterly revenue, which comes from leasing among other income streams, rose about 1 percent from a year earlier to $220.2 million.
Funds from operations, a cash flow measurement used by REITs, was $86 million in the recent quarter, compared to $100.6 million in the year-ago quarter.
The company also announced Daniel Swanstrom II is expected to join Macerich Nov. 16 as chief financial officer. Current CFO Kingsmore is expected to stay on as a senior advisor through the end of the year.
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