The Macerich Company (MAC) Q2 2025 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call summary reveals strong financial performance with record leasing progress and a growing SNO pipeline, despite some uncertainties. The Q&A section highlights confidence in re-leasing and strategic acquisitions, with no major risks identified. The company's strategic plan to reduce leverage and increase asset sales is on track, and the focus on permanent tenants and high-quality assets is promising. The market cap indicates moderate sensitivity to these developments, suggesting a positive stock price movement within 2% to 8% over the next two weeks.
Key Financial Performance
Portfolio sales per square foot $849 per square foot, up $12 compared to Q1 2025. For the go-forward portfolio, sales were $906 per square foot.
Traffic Up 1.6% for the total portfolio and 2.1% for the go-forward portfolio compared to the same period in 2024.
Occupancy 92% at the end of Q2 2025, down 60 basis points from the last quarter due to the liquidation and closing of Forever 21 stores. However, go-forward portfolio occupancy was 92.8%.
Trailing 12-month leasing spreads Positive at 10.5%, consistent with the previous quarter, marking 15 consecutive quarters of positive leasing spreads.
New and renewal leases signed 650 leases for 4.3 million square feet year-to-date through Q2 2025, representing 40% more leases and 75% more square footage than the same period in 2024. For new deals, it was double the number of leases and triple the square footage compared to 2024.
SNO (Signed Not Open) pipeline Increased from $75 million last quarter to $87 million in Q2 2025, with a target to exceed $100 million by year-end.
FFO (Funds From Operations) Approximately $87 million or $0.33 per share in Q2 2025, excluding certain expenses. This includes $9 million of interest expense related to debt mark-to-market amortization, compared to $3 million in Q2 2024.
Go-Forward Portfolio Centers NOI Increased 2.4% in Q2 2025 compared to Q2 2024. Year-to-date, it increased 2% compared to the same period in 2024.
Net debt to EBITDA 7.9x at the end of Q2 2025, almost a full turn lower than at the outset of the Path Forward plan.
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Operating Highlights
Leasing Activity: Achieved 4.3 million square feet of leasing year-to-date, surpassing the 2025 target. New deals completion reached 65%, ahead of the 70% year-end target.
New Retail Concepts: Signed leases for DICK'S House of Sport, an experiential retail concept, at multiple locations including Washington Square and Crabtree Mall.
Acquisition of Crabtree Mall: Acquired Crabtree Mall in Raleigh-Durham, North Carolina for $290 million. The mall is a market-dominant Class A retail center with plans to increase occupancy from 74% to 90% by 2028.
Market Expansion: Entry into the high-growth southeastern U.S. market with Crabtree Mall acquisition, enhancing the portfolio's strategic positioning.
Operational Efficiency: Implemented technology enhancements like the Macerich leasing speedometer to optimize leasing and capital allocation decisions.
Portfolio Refinement: Sold multiple assets, including Atlas Park and SouthPark, contributing to $800 million in mall sales to date. On track to achieve $2 billion disposition target.
Path Forward Plan: Focused on simplifying the business, improving operational performance, and reducing leverage. Progress includes achieving a net debt to EBITDA ratio of 7.9x, with a target of low to mid-6x in the next few years.
Deleveraging Strategy: Proactively addressing debt maturities and leveraging asset sales to strengthen the balance sheet.
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Risk or Challenges
Leverage and Debt Maturities: The company has a high net debt to EBITDA ratio of 7.9x, which, while reduced, remains a significant leverage risk. Additionally, there are upcoming debt maturities in 2025 and 2026, which require proactive management through asset sales, refinancings, or other measures.
Occupancy Challenges: Occupancy rates have declined to 92% due to the liquidation and closing of Forever 21 stores. While efforts are underway to remerchandise the space, this poses a short-term risk to revenue and operational performance.
Economic Uncertainty and Tariffs: The macroeconomic environment and pending tariffs create uncertainty, which could impact retailer sentiment and leasing activity.
Execution of Disposition Plan: The company has a $2 billion disposition target as part of its Path Forward plan. While progress has been made, achieving this target is critical to balance sheet improvement and remains a challenge.
Crabtree Mall Acquisition Risks: The acquisition of Crabtree Mall, while strategic, involves risks related to achieving the targeted occupancy increase from 74% to 90% by 2028 and realizing the embedded NOI growth potential.
Retailer Sentiment and Leasing Risks: Although leasing activity is strong, the company remains dependent on retailer sentiment and the ability to attract and retain tenants, especially in a competitive retail environment.
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Guidance & Outlook
Leasing Targets: The company is targeting an average of 4 million square feet of leasing in 2025 and 2026. They are ahead of schedule, having already signed 4.3 million square feet year-to-date. The goal is to achieve 70% new deal completion by year-end 2025 and 85% by mid-2026, which would contribute to a $130 million cumulative SNO potential.
SNO Pipeline: The signed-not-open (SNO) pipeline has grown to $87 million as of today, with a target to exceed $100 million by year-end 2025. This includes 179 leases for 1.5 million square feet of new stores expected to open by early 2028.
Crabtree Mall Acquisition: The company acquired Crabtree Mall for $290 million, aiming to increase permanent occupancy from 74% to 90% by 2028. This acquisition is expected to enhance the Path Forward plan's 2028 target FFO range and align with deleveraging targets.
Debt and Leverage Reduction: The company aims to reduce net debt to EBITDA to the low to mid-6x range over the next few years. They are addressing 2025 and 2026 debt maturities through asset sales, refinancings, and other measures.
Dispositions: The company has a $2 billion disposition target, with $1.2 billion already completed or under contract. They plan to complete the remaining dispositions, including land and outparcel sales, by the end of 2026.
New Retail Concepts: DICK'S House of Sport is expected to open at multiple locations, including Crabtree Mall in spring 2027 and Washington Square in fall 2027, aiming to transform these spaces into destination-oriented retail hubs.
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Shareholder Return Plan
The selected topic was not discussed during the call.
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Key Q&A
Q:Can you provide more background on the Crabtree acquisition, including its sales productivity, risks, and marketing?
A:Jackson Hsieh explained that Crabtree is a unique asset with a value-add component. The NOI is expected to grow from $32 million to $36 million pro forma, with potential to exceed $40 million. The Raleigh-Durham area has favorable GLA per capita metrics, and Crabtree benefits from being the only mall in the area with an Apple Store. The acquisition required significant equity investment and leasing efforts to reconfigure the merchandising mix and drive traffic.
Q:Does the inclusion of the Apple Store significantly impact sales per square foot productivity at Crabtree?
A:Jackson Hsieh stated that even excluding the Apple Store, the sales per square foot at Crabtree remain very productive. The center has strong leasing interest and plans for enhancements, including repainting and parking lot improvements.
Q:What benchmarks need to be hit before reinstating guidance?
A:Jackson Hsieh mentioned that asset sales are a key component, as they disrupt earnings timing. The company is balancing asset sales and leasing efforts and prefers not to be constrained by guidance numbers.
Q:How is the watch list trending, and what is the impact of Claire's bankruptcy?
A:Daniel Swanstrom noted that bad debt is down year-over-year, and the watch list is at an all-time low. Claire's represents about 50 basis points of rents, and the company is confident in re-leasing those spaces at existing rents or higher. Claire's bankruptcy is not indicative of the strong retailer environment.
Q:Has bad debt guidance changed?
A:No, bad debt guidance has not changed.
Q:What drove the increase in tenant improvements (TIs) this quarter?
A:Jackson Hsieh explained that the increase is due to a high number of anchor stores in play, which require varying levels of CapEx depending on the reconfiguration. Tenant allowance expenses for new leasing have remained consistent, but anchor store projects are driving up TIs.
Q:What is the strategy for external growth activities, and how does Crabtree fit into this?
A:Jackson Hsieh stated that Crabtree aligns well with the portfolio and has strong growth potential. The company evaluates acquisitions based on market rents, leasing momentum, and trade area dynamics. The focus remains on achieving leasing and disposition goals.
Q:Why was the decision made to acquire Crabtree instead of paying down debt?
A:Jackson Hsieh explained that Crabtree's NOI growth rate is higher than the core portfolio, making it accretive. The company has high confidence in achieving leasing goals and remains within deleveraging targets.
Q:How has the team improved its leasing systems and processes?
A:Jackson Hsieh highlighted that the company has streamlined decision-making and unburdened the leasing team, enabling them to achieve goals more efficiently. The integration of Crabtree has been seamless.
Q:What is the composition and growth potential of the signed-not-open (SNO) pipeline?
A:The SNO pipeline is $87 million, with an ultimate goal of $130 million. About 90% of the additional $43 million is expected to come from A, B, and C graded spaces. The SNO pipeline represents 12% of the go-forward portfolio NOI.
Q:What is the plan for temporary tenancy at Crabtree and the broader portfolio?
A:The goal is to replace temporary tenants with high-quality permanent tenants to drive traffic and sales. At Crabtree, there is significant opportunity to improve permanent occupancy, supported by capital investments and strong tenant demand.
Q:Why is South Plains Mall part of the go-forward portfolio?
A:Jackson Hsieh stated that discussions with the lender are ongoing to seek an extension. With the right terms, the company believes it can create NOI lift over the next three years. However, the status of South Plains Mall in the portfolio could change.
Q:How are the non-go-forward assets performing?
A:Non-go-forward assets are not growing at the same rate as the go-forward portfolio. The focus is on maintaining occupancy, and these assets are being managed differently, with limited capital investment.
Q:What factors are holding back NOI growth in the go-forward portfolio this year?
A:Factors include the impact of Forever 21 closures and the transition from temporary to permanent tenants. The company expects an inflection point in mid-2026, with a 5.2% CAGR over the next four years.
Q:What is the CapEx plan for Crabtree?
A:The $60 million CapEx plan includes re-leasing activities, common area improvements, parking deck enhancements, and addressing storm drain issues. The focus is on creating a modern and dynamic environment.
Q:How is the California portfolio performing?
A:The Bay Area assets are performing well, while Southern California is in transition. Los Cerritos is a standout performer with strong traffic and tenant demand. Inland Center faces more competition, and other assets are part of the Eddie package.
Q:What is the backfill strategy for Forever 21 spaces?
A:About 50% of the spaces are committed, and another 30% are in the LOI stage. Most spaces are straight backfills, with a few requiring demising. The company expects to double the rent previously paid by Forever 21.
Q:What is the potential impact of the DICK'S Sporting Goods and Foot Locker merger?
A:The company is not aware of any closure lists and views the merger as a positive. The combined credit of DICK'S and Foot Locker is expected to benefit the portfolio.
Q:Review of Unclear Management Responses
A:Management avoided providing specific guidance on the timeline for reinstating guidance, the exact impact of the DICK'S and Foot Locker merger, and detailed targets for reducing temporary tenancy by 2026. Additionally, they did not disclose specific NOI growth rates for non-go-forward assets or provide a detailed breakdown of the SNO pipeline by asset class.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
DICK House
Eddies
Forward plan
Freehold Raceway
House Sport
ICSC convention
Inc Research
LLC Research
Macerich
North Carolina
Path Forward
Raceway Mall
Raleigh
Research Division
Senior EVP
Senior Vice
amount footage
assumption plan
completion
concept
foot date
forward portfolio
improvement
lease store
leasing momentum
mid
plan acquisition
portfolio statistic
road map
shareholder value
MAC Transcript
The Macerich Company (MAC) Q1 2026 Earnings Call Transcript
Positive5-7
The earnings call presented strong financial performance with record high revenue per square foot, increased occupancy, and successful leasing activities. Despite high net debt to EBITDA, liquidity is robust. The Q&A section reinforced positive sentiment, with management confirming achievable growth targets and strategic asset management. While some uncertainty remains regarding specific financial metrics, the overall outlook is optimistic, supported by strategic leasing and sales strategies. Given the company's market cap and the positive indicators, a 'Positive' rating is justified, anticipating a stock price increase of 2% to 8% over the next two weeks.
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Neutral3-2
The Macerich Company (MAC) Q4 2025 Earnings Call Transcript
Positive2-18
The earnings call shows strong leasing momentum, a significant reduction in net debt, and a robust liquidity position, indicating good financial health. The Q&A section reveals strategic focus on value-add acquisitions and a cautious yet positive outlook on consumer demand. Despite some unclear management responses, the overall sentiment is positive, supported by strong operational performance and strategic initiatives. With a market cap of approximately $3.3 billion, the stock is likely to experience a moderate positive reaction, falling into the 2% to 8% range.
The Macerich Company (MAC) Q3 2025 Earnings Call Transcript
Positive11-5
The company's strategic initiatives, such as the successful leasing targets, Crabtree Mall acquisition, and debt reduction plans, indicate positive momentum. The Q&A section showed a constructive debt market and positive leasing demand, despite some management opacity. The company's strong leasing performance, optimistic holiday sales outlook, and positive impact from the Crabtree acquisition support a positive sentiment. The market cap suggests moderate sensitivity to these factors, leading to a prediction of a 2% to 8% stock price increase over the next two weeks.
MAC Report
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