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“Revenge buying” powers mall owner Macerich to crush estimates

With shopper traffic near pre-pandemic levels and tenant sales up over 2019, the REIT calls it a comeback

Macerich CEO Thomas O'Hern (iStock)
Macerich CEO Thomas O'Hern (iStock)

Shopping centers, pummeled by the pandemic, are staging a comeback. That’s welcome news for one of the nation’s largest mall owners.

The Macerich Company was upbeat during its quarterly earnings call Wednesday, describing what it sees as a shopping renaissance due to federal income checks and pent-up demand.

“Brick and mortar retail is back with a vengeance,” said Tom O’Hern, CEO of the California-based REIT, “albeit powered with stimulus checks and revenge buying.”

O’Hern’s comments echoed those made by Simon Property Group CEO David Simon on that mall owner’s quarterly earnings call Monday, in which Simon reported a 53 percent year-over-year jump in funds from operations.

For Macerich, funds from operations stood at $127.6 million for the second quarter, or $0.59 per share, beating the consensus estimate of $0.44 by more than 30 percent. That’s compared to $60.5 million in FFO in the second quarter last year, or $0.39 per share.

Macerich’s portfolio is “bouncing back,” and its current rate of leasing puts it on pace for “the highest volumes since 2015,” according to a report from investment firm Piper Sandler Companies.

Sales by Macerich tenants across its 5.5 million square feet of real estate, primarily in Arizona, California and New York, were 15 percent higher in May and June than the pre-pandemic numbers seen during the same period in 2019, O’Hern said on the call.

He added that shopper traffic at Macerich-owned stores rose to 90 percent of their 2019 level in the second quarter, indicating shoppers are spending more at retail outlets than they were before the pandemic.

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The figures are a far cry from last year, when Macerich collected just 26 percent of tenant rent in April due to government bans on most in-person shopping.

Occupancy at Macerich-owned property was 89.4 percent at the end of June, according to vice president Doug Healey.

Net income, including that from lease terminations, grew 11.5 percent year-over-year, according to O’Hern.

Macerich officers told analysts on the call it had taken steps to reduce its debt burden, paying down $1.3 billion so far this year. As of June 30, the REIT’s total debt balance was $7.5 billion.

O’Hern said he expects to pay down $100 million more in the near future through the sale of “non-core assets.” When the company sold a Pheonix mall in April for $100 million, the proceeds were used to eliminate debt.

The closure of indoor shopping centers last year exposed the company as over-leveraged at a time when its income — 90 percent of which comes from its leases — suddenly dried up.

The price of shares in Macerich rocketed up, then back down, in January after individual investors coordinated stock purchases on Reddit in a gambit to run up the score on short sellers holding bets against retail.

The event prompted a reexamination of short-selling tactics. Shares of Macerich have since risen by 20 percent, though they closed down 5 percent to 15.58 on Wednesday, the day of the earnings call.

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