Macerich Announces Quarterly Results Including Strong Leasing Volumes And Spreads Driving Occupancy Gains

SANTA MONICA, Calif., July 23, 2014 /PRNewswire/ -- The Macerich Company (NYSE Symbol: MAC) today announced results of operations for the quarter ended June 30, 2014 which included funds from operations ("FFO") diluted of $129.8 million or $.86 per share-diluted compared to $130.4 million or $.87 per share-diluted for the quarter ended June 30, 2013. Net income attributable to the Company was $16.1 million or $.11 per share-diluted for the quarter ended June 30, 2014 compared to net income attributable to the Company for the quarter ended June 30, 2013 of $219.0 million or $1.57 per share-diluted. A description and reconciliation of FFO per share-diluted to EPS-diluted is included in the financial tables accompanying this press release.

Recent Highlights

  • Mall tenant annual sales per square foot increased 4.0% for the year ended June 30, 2014 to $567 compared to $545 for the year ended June 30, 2013.
  • The releasing spreads for the year ended June 30, 2014 were up 18.1%.
  • Mall portfolio occupancy was 95.4% at June 30, 2014 compared to 93.8% at June 30, 2013.

Commenting on the quarter, Arthur Coppola chairman and chief executive officer of Macerich stated, "It was another strong quarter for us.  Our operating fundamentals remained solid, with continued occupancy gains and positive double digit releasing spreads.  We continue to benefit from the fine tuning of our portfolio done over the past two years. Furthermore, our highly value-creative redevelopment pipeline is continuing to move forward nicely, with additional pre-leasing progress made across the various in-process projects and work on two additional expansions commencing during the quarter."

Developments:

At Tysons Corner Center, the Company's 2.1 million square foot super regional mall, construction continues on a mixed-use densification project which will add 1.4 million square feet to one of the country's premier retail centers. The Tysons expansion includes a 500,000 square foot office tower including major tenants Intelsat and Deloitte; a 30-story, 430-unit luxury residential tower; and a 300-room Hyatt Regency hotel.  The office building is currently over 75% leased and tenants are scheduled for occupancy starting in August, 2014.  The hotel and the residential tower are expected to open in early 2015.

At Fashion Outlets of Niagara Falls, a 175,000 square foot expansion is in progress.  The expansion is currently 78% leased and the project is expected to open in late 2014. 

At Santa Monica Place, the Company has obtained final city approvals to proceed with the addition of a 48,000 square foot ArcLight Cinemas which is expected to be completed in fall 2015. 

At Broadway Plaza, in Walnut Creek, California, a major redevelopment, including a 235,000 square foot expansion is underway.  This 776,000 square foot mall (pre-expansion) is anchored by Macy's, Nordstrom and Neiman Marcus and for 2013 had over $725 per square foot in annual tenant sales.  The expansion will open in phases starting in fall 2015.

At both Los Cerritos Center and Scottsdale Fashion Square, expansions are underway to add a Dick's Sporting Goods store and a Harkins Theatre.  Both projects are slated for completion in the second half of 2015.

2014 Earnings Guidance:

Management is reaffirming its previously provided diluted EPS and FFO per share guidance for 2014.

A reconciliation of estimated EPS to FFO per share-diluted follows:



2014 range

Diluted EPS


$ .98  -  $1.08

Plus: real estate depreciation and amortization


2.62  -    2.62

Less: gain on sale of dispositions


( .10)  -   ( .10)

Diluted FFO per share


$3.50  -  $3.60

Macerich, an S&P 500 company, currently celebrating 20 years of trading on the NYSE, is a fully integrated self-managed and self-administered real estate investment trust, which focuses on the acquisition, leasing, management, development and redevelopment of regional malls throughout the United States.

Macerich currently owns 55 million square feet of real estate consisting primarily of interests in 52 regional shopping centers. Macerich specializes in successful retail properties in many of the country's most attractive, densely populated markets with significant presence in California, Arizona, Chicago and the Greater New York Metro area. Additional information about Macerich can be obtained from the Company's website at www.macerich.com.

Investor Conference Call

The Company will provide an online Web simulcast and rebroadcast of its quarterly earnings conference call.  The call will be available on The Macerich Company's website at www.macerich.com (Investing Section).  The call begins Thursday, July 24, 2014 at 12:30 PM Pacific Time. To listen to the call, please go to any of these websites at least 15 minutes prior to the call in order to register and download audio software if needed. An online replay at www.macerich.com (Investing Section) will be available for one year after the call. 

The Company will publish a supplemental financial information package which will be available at www.macerich.com in the Investing Section.  It will also be furnished to the SEC as part of a Current Report on Form 8-K.

Note:  This release contains statements that constitute forward-looking statements which can be identified by the use of words, such as  "expects," "anticipates," "assumes," "projects," "estimated" and "scheduled" and similar expressions that do not relate to historical matters. Stockholders are cautioned that any such forward-looking statements are not guarantees of future performance and involve risks, uncertainties and other factors that may cause actual results, performance or achievements of the Company to vary materially from those anticipated, expected or projected.  Such factors include, among others, general industry, as well as national, regional and local economic and business conditions, which will, among other things, affect demand for retail space or retail goods, availability and creditworthiness of current and prospective tenants, anchor or tenant bankruptcies, closures, mergers or consolidations, lease rates, terms and payments, interest rate fluctuations, availability, terms and cost of financing and operating expenses; adverse changes in the real estate markets including, among other things, competition from other companies, retail formats and technology, risks of real estate development and redevelopment, acquisitions and dispositions; the liquidity of real estate investments, governmental actions and initiatives (including legislative and regulatory changes); environmental and safety requirements; and terrorist activities or other acts of violence which could adversely affect all of the above factors.  The reader is directed to the Company's various filings with the Securities and Exchange Commission, including the Annual Report on Form 10-K for the year ended December 31, 2013, for a discussion of such risks and uncertainties, which discussion is incorporated herein by reference. The Company does not intend, and undertakes no obligation, to update any forward-looking information to reflect events or circumstances after the date of this release or to reflect the occurrence of unanticipated events unless required by law to do so.

(See attached tables)

THE MACERICH COMPANY

FINANCIAL HIGHLIGHTS

(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)















Results of Operations:








Results before 

Impact of 

Results after 


Discontinued Operations (a)

Discontinued Operations (a)

Discontinued Operations (a)


For the Three Months 

For the Three Months 

For the Three Months 


Ended June 30,

Ended June 30,

Ended June 30,


Unaudited

Unaudited

Unaudited


2014

2013

2014

2013

2014

2013

Minimum rents 

$149,220

$150,761

$0

($10,547)

$149,220

$140,214

Percentage rents   

2,372

2,798

-

(282)

2,372

2,516

Tenant recoveries

83,375

87,307

-

(5,633)

83,375

81,674

Management Companies' revenues

8,776

10,301

-

-

8,776

10,301

Other income

10,594

11,733

-

(560)

10,594

11,173

     Total revenues

254,337

262,900

0

(17,022)

254,337

245,878








Shopping center and operating  expenses 

81,865

84,743

-

(6,061)

81,865

78,682

Management Companies' operating  expenses 

20,896

22,816

-

-

20,896

22,816

REIT general and administrative expenses 

5,123

6,693

-

-

5,123

6,693

Depreciation and amortization 

87,801

93,984

-

(5,405)

87,801

88,579

Interest expense  

45,800

54,439

-

(4,064)

45,800

50,375

Gain on extinguishment of debt, net

-

(1,943)

-

-

-

(1,943)

     Total expenses

241,485

260,732

-

(15,530)

241,485

245,202

Equity in income of unconsolidated joint ventures 

13,903

92,201

-

-

13,903

92,201

Co-venture expense (b)

(2,212)

(2,138)

-

-

(2,212)

(2,138)

Income tax benefit 

2,898

1,477

-

-

2,898

1,477

(Loss) gain on remeasurement, sale or write down of assets, net

(9,455)

141,108

-

(141,906)

(9,455)

(798)

     Income from continuing operations

17,986

234,816

0

(143,398)

17,986

91,418








Discontinued operations:







     Gain on sale, disposition or write down of assets, net

-

-

-

141,906

-

141,906

     Income from discontinued operations

-

-

-

1,492

-

1,492

     Total income from discontinued operations

-

-

-

143,398

-

143,398








Net income 

17,986

234,816

-

-

17,986

234,816

Less net income attributable to noncontrolling interests

1,898

15,819

-

-

1,898

15,819

Net income attributable to the Company

$16,088

$218,997

$0

$0

$16,088

$218,997








Average number of shares outstanding - basic

140,894

139,372



140,894

139,372

Average shares outstanding, assuming full conversion of OP Units  (c)

151,007

149,311



151,007

149,311

Average shares outstanding - Funds From Operations ("FFO") - diluted (c) 

151,149

149,465



151,149

149,465








Per share income - diluted before discontinued operations





$0.11

$0.61

Net income per share-basic 

$0.11

$1.57



$0.11

$1.57

Net income per share - diluted  

$0.11

$1.57



$0.11

$1.57

Dividend declared per share 

$0.62

$0.58



$0.62

$0.58

FFO - basic  (c) (d)

$129,825

$130,405



$129,825

$130,405

FFO - diluted (c) (d)

$129,825

$130,405



$129,825

$130,405

FFO per share- basic   (c) (d)

$0.86

$0.87



$0.86

$0.87

FFO per share- diluted  (c) (d)

$0.86

$0.87



$0.86

$0.87

    

THE MACERICH COMPANY

FINANCIAL HIGHLIGHTS

(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)















Results of Operations:








Results before 

Impact of 

Results after 


Discontinued Operations (a)

Discontinued Operations (a)

Discontinued Operations (a)


For the Six Months 

For the Six Months 

For the Six Months 


Ended June 30,

Ended June 30,

Ended June 30,


Unaudited

Unaudited

Unaudited


2014

2013

2014

2013

2014

2013

Minimum rents 

$300,852

$299,917

$0

($22,676)

$300,852

$277,241

Percentage rents   

5,222

7,175

-

(677)

5,222

6,498

Tenant recoveries

174,850

172,631

-

(11,999)

174,850

160,632

Management Companies' revenues

16,897

20,451

-

-

16,897

20,451

Other income

21,024

25,510

-

(1,149)

21,024

24,361

     Total revenues

518,845

525,684

0

(36,501)

518,845

489,183








Shopping center and operating  expenses 

172,225

170,120

-

(12,830)

172,225

157,290

Management Companies' operating  expenses 

43,677

45,965

-

-

43,677

45,965

REIT general and administrative expenses 

12,006

12,717

-

-

12,006

12,717

Depreciation and amortization 

176,457

187,143

-

(11,547)

176,457

175,596

Interest expense  

92,138

108,137

-

(8,080)

92,138

100,057

Loss (gain) on extinguishment of debt, net

358

(1,943)

-

-

358

(1,943)

     Total expenses

496,861

522,139

-

(32,457)

496,861

489,682

Equity in income of unconsolidated joint ventures 

27,672

110,316

-

-

27,672

110,316

Co-venture expense (b)

(4,032)

(4,179)

-

-

(4,032)

(4,179)

Income tax benefit 

3,070

1,721

-

-

3,070

1,721

(Loss) gain on remeasurement, sale or write down of assets, net

(11,065)

145,942

-

(141,912)

(11,065)

4,030

     Income from continuing operations

37,629

257,345

0

(145,956)

37,629

111,389








Discontinued operations:







     Gain on sale, disposition or write down of assets, net

-

-

-

141,912

-

141,912

     Income from discontinued operations

-

-

-

4,044

-

4,044

     Total income from discontinued operations

-

-

-

145,956

-

145,956








Net income 

37,629

257,345

-

-

37,629

257,345

Less net income attributable to noncontrolling interests

3,722

20,256

-

-

3,722

20,256

Net income attributable to the Company

$33,907

$237,089

$0

$0

$33,907

$237,089








Average number of shares outstanding - basic

140,831

138,460



140,831

138,460

Average shares outstanding, assuming full conversion of OP Units  (c)

150,883

148,532



150,883

148,532

Average shares outstanding - Funds From Operations ("FFO") - diluted (c) 

150,981

148,653



150,981

148,653








Per share income - diluted before discontinued operations





$0.24

$0.73

Net income per share-basic 

$0.24

$1.71



$0.24

$1.71

Net income per share - diluted  

$0.24

$1.71



$0.24

$1.71

Dividend declared per share 

$1.24

$1.16



$1.24

$1.16

FFO - basic  (c) (d)

$251,384

$257,379



$251,384

$257,379

FFO - diluted (c) (d)

$251,384

$257,379



$251,384

$257,379

FFO per share- basic   (c) (d)

$1.67

$1.73



$1.67

$1.73

FFO per share- diluted  (c) (d)

$1.67

$1.73



$1.67

$1.73








     

 

THE MACERICH COMPANY

FINANCIAL HIGHLIGHTS

(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)





(a)

In April 2014, the Financial Accounting Standards Board issued guidance that amends the definition of discontinued operations by limiting discontinued operations reporting to disposals that represent strategic shifts that have, or will have, a major effect on an entity's operations and financial results. Previously, the Company had reported all disposed properties as discontinued operations. The Company early adopted this accounting pronouncement in the first quarter of 2014. As a result, the Company's results of operations for all 2014 property disposals are presented within income from continuing operations in the consolidated statements of operations.



(b)

This represents the outside partners' allocation of net income in the Chandler Fashion Center/Freehold Raceway Mall joint venture.



(c)

The Macerich Partnership, L.P. (the "Operating Partnership" or the "OP") has operating partnership units ("OP units"). OP units can be converted into shares of Company common stock. Conversion of the OP units not owned by the Company has been assumed for purposes of calculating FFO per share and the weighted average number of shares outstanding. The computation of average shares for FFO - diluted includes the effect of share and unit-based compensation plans, stock warrants and convertible senior notes using the treasury stock method. It also assumes conversion of MACWH, LP preferred and common units to the extent they are dilutive to the calculation.



(d)

The Company uses FFO in addition to net income to report its operating and financial results and considers FFO and FFO-diluted as supplemental measures for the real estate industry and a supplement to Generally Accepted Accounting Principles ("GAAP") measures. The National Association of Real Estate Investment Trusts ("NAREIT") defines FFO as net income (loss) (computed in accordance with GAAP), excluding gains (or losses) from extraordinary items and sales of depreciated operating properties, plus real estate related depreciation and amortization, impairment write-downs of real estate and write-downs of investments in an affiliate where the write-downs have been driven by a decrease in the value of real estate held by the affiliate and after adjustments for unconsolidated joint ventures. Adjustments for unconsolidated joint ventures are calculated to reflect FFO on the same basis.



FFO and FFO on a diluted basis are useful to investors in comparing operating and financial results between periods. This is especially true since FFO excludes real estate depreciation and amortization, as the Company believes real estate values fluctuate based on market conditions rather than depreciating in value ratably on a straight-line basis over time. The Company believes that such a presentation also provides investors with a more meaningful measure of its operating results in comparison to the operating results of other real estate investment trusts ("REITs"). The Company believes that FFO on a diluted basis is a measure investors find most useful in measuring the dilutive impact of outstanding convertible securities. The Company further believes that FFO does not represent cash flow from operations as defined by GAAP, should not be considered as an alternative to net income (loss) as defined by GAAP, and is not indicative of cash available to fund all cash flow needs. The Company also cautions that FFO as presented, may not be comparable to similarly titled measures reported by other REITs.

    

THE MACERICH COMPANY

FINANCIAL HIGHLIGHTS

(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)















Reconciliation of Net income attributable to the Company to FFO (d):









 For the Three Months  

 For the Six Months  




 Ended June 30, 

 Ended June 30, 




 Unaudited 

 Unaudited 




2014

2013

2014

2013


Net income attributable to the Company


$16,088

$218,997

$33,907

$237,089









Adjustments to reconcile net income attributable to the Company to FFO - basic and diluted:






   Noncontrolling interests in OP


1,154

15,902

2,419

17,244


   Loss (gain) on remeasurement, sale or write down of consolidated assets, net 


9,455

(141,108)

11,065

(145,942)


     plus gain (loss) on undepreciated asset sales - consolidated assets


122

(10)

122

2,238


     plus non-controlling interests share of (loss) gain on remeasurement, sale or write down of consolidated joint ventures, net


(39)

(9)

(39)

3,163


   Loss (gain) on remeasurement, sale or write down of assets from unconsolidated entities (pro rata), net


 

3,310

 

(73,035)

 

3,372

 

(73,016)



     plus gain on undepreciated asset sales - unconsolidated entities (pro rata)


2

486

-

484


   Depreciation and amortization on consolidated assets 


87,801

93,984

176,457

187,143


   Less depreciation and amortization allocable to noncontrolling interests on consolidated joint ventures








(5,387)

(4,603)

(10,846)

(9,137)


   Depreciation and amortization on joint ventures (pro rata) 


19,952

22,815

40,327

44,147


   Less: depreciation on personal property 


(2,633)

(3,014)

(5,400)

(6,034)


Total FFO - basic and diluted


$129,825

$130,405

$251,384

$257,379























Reconciliation of EPS to FFO per diluted share (d):









 For the Three Months  

 For the Six Months  




 Ended June 30, 

 Ended June 30, 




 Unaudited 

 Unaudited 




2014

2013

2014

2013


Earnings per share - diluted


$0.11

$1.57

$0.24

$1.71


   Per share impact of depreciation and amortization of real estate


0.67

0.73

1.34

1.45


   Per share impact of gain on remeasurement, sale or write down of assets


0.08

(1.43)

0.09

(1.43)


FFO per share - diluted


$0.86

$0.87

$1.67

$1.73









     

    


THE MACERICH COMPANY

FINANCIAL HIGHLIGHTS

(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

















 For the Three Months

 For the Six Months


Reconciliation of Net income attributable to the Company to EBITDA:


 Ended June 30, 

 Ended June 30, 




 Unaudited 

 Unaudited 




2014

2013

2014

2013









Net income attributable to the Company


$16,088

$218,997

$33,907

$237,089









   Interest expense - consolidated assets


45,800

54,439

92,138

108,137


   Interest expense - unconsolidated entities (pro rata)


16,540

16,977

33,654

35,849


   Depreciation and amortization - consolidated assets


87,801

93,984

176,457

187,143


   Depreciation and amortization - unconsolidated entities (pro rata)


19,952

22,815

40,327

44,147


   Noncontrolling interests in OP


1,154

15,902

2,419

17,244


   Less: Interest expense and depreciation and amortization allocable to noncontrolling interests on consolidated joint ventures








(8,150)

(7,447)

(16,341)

(14,741)


   (Gain) loss on extinguishment of debt - consolidated entities


-

(1,943)

358

(1,943)


   Loss (gain) on remeasurement, sale or write down of assets - consolidated assets, net

9,455

(141,108)

11,065

(145,942)


   Loss (gain) on remeasurement, sale or write down of assets - unconsolidated entities (pro rata), net

3,310

(73,035)

3,372

(73,016)


   Add: Non-controlling interests share of (loss) gain on sale of consolidated assets, net

(39)

(9)

(39)

3,163


   Income tax benefit


(2,898)

(1,477)

(3,070)

(1,721)


   Distributions on preferred units


183

183

367

367









EBITDA (e)


$189,196

$198,278

$374,614

$395,776























Reconciliation of EBITDA to Same Centers - Net Operating Income ("NOI"):
















 For the Three Months  

 For the Six Months  




 Ended June 30, 

 Ended June 30, 




 Unaudited 

 Unaudited 




2014

2013

2014

2013


EBITDA (e)


$189,196

$198,278

$374,614

$395,776









Add: REIT general and administrative expenses


5,123

6,693

12,006

12,717


        Management Companies' revenues


(8,776)

(10,301)

(16,897)

(20,451)


        Management Companies' operating  expenses 


20,896

22,816

43,677

45,965


        Straight-line and above/below market adjustments to minimum rents of comparable centers








(2,006)

(3,384)

(2,680)

(5,495)


        EBITDA of non-comparable centers


(15,848)

(32,071)

(42,826)

(73,179)









Same Centers - NOI (f)


$188,585

$182,031

$367,894

$355,333










(e)

EBITDA represents earnings before interest, income taxes, depreciation, amortization, noncontrolling interests, extraordinary items, gain (loss) on remeasurement, sale or write down of assets and preferred dividends and includes joint ventures at their pro rata share. Management considers EBITDA to be an appropriate supplemental measure to net income because it helps investors understand the ability of the Company to incur and service debt and make capital expenditures. The Company believes that EBITDA should not be construed as an alternative to operating income as an indicator of the Company's operating performance, or to cash flows from operating activities (as determined in accordance with GAAP) or as a measure of liquidity. The Company also cautions that EBITDA, as presented, may not be comparable to similarly titled measurements reported by other companies.



(f)

The Company presents same center NOI because the Company believes it is useful for investors to evaluate the operating performance of comparable centers. Same center NOI is calculated using total EBITDA and subtracting out EBITDA from non-comparable centers and eliminating the management companies and the Company's general and administrative expenses. Same center NOI excludes the impact of straight-line and above/below market adjustments to minimum rents.

 

SOURCE The Macerich Company



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