Calif.-based retail real estate investment trust (:REIT), The Macerich Company (MAC), reported second-quarter 2013 adjusted funds from operations (:AFFO) per share of 87 cents, beating the Zacks Consensus Estimate of 81 cents. Moreover, this was substantially higher than the year-ago figure of 74 cents. Strong escalations in revenues, overall portfolio occupancy and re-leasing spreads aided the results.
Including the impact of non-recurring items, FFO came in at 87 cents per share, compared with $1.57 in the year-ago period. Nevertheless, Macerich raised its FFO per share outlook for full-year 2013.
Total revenue surged 26.1% year over year to $262.9 million. Moreover, this significantly beat the Zacks Consensus Estimate of $247 million.
Beneath the Headlines
As of Jun 30, 2013, overall portfolio occupancy upped 110 basis points (bps) year over year to 93.8%. Moreover, mall tenant annual sales jumped 6.2% year over year to $545 per square foot.
In addition, re-leasing spreads for the second quarter rose 14.2% on a year-over-year basis. Same centers net operating income (:NOI) during the quarter advanced 4.6% year over year to $179.8 million.
Notable Portfolio Activities
In tune with its portfolio enhancement activity, Macerich sold 5 non-core assets, namely Green Tree Mall, Northridge Mall, Rimrock Mall, Kitsap Mall and Redmond Town Center office building. The divestitures generated proceeds of $468 million on a pro rata basis. Moreover, subsequent to quarter-end, on Aug 1, Macerich sold the retail section of Redmond Town Center and generated proceeds of about $63.6 million on a pro rata basis.
Furthermore, Macerich continued constructions at Tysons Corner Center for the development of a mixed use project, which includes an office building, a luxury residential tower and Hyatt Hotels Corp. (H)’s Hyatt Regency hotel. The office tower is currently over 60% leased to 2 tenants, Deloitte LLP and Intelsat, Ltd. The project is slated to open in 2014.
Subsequent to quarter-end, on Aug 1, Macerich opened its 526,000 square feet fashion outlet center – Fashion Outlets of Chicago – after completion of construction. The 93% occupied (on the opening day) property includes several well-known retailers such as Bloomingdale's The Outlet Store, Skechers USA Inc. (SKX), Gap Inc. (GPS) and Last Call by Neiman Marcus.
As of Jun 30, 2013, Macerich had cash and cash equivalents of $46.9 million compared to $68.8 million at the prior quarter-end. The company had a total debt of $6.5 million at the end of the quarter.
In the quarter, Macerich reaped net proceeds of $171.2 million by selling 2.5 million shares under its at-the-market program at the time when the company was included in the S&P 500 Index. The proceeds were utilized to pay off debts.
Moreover, Macerich committed to refinancing worth $850 million of Tysons Corner super regional mall. The company also planned the extension and rate reduction of its unsecured line of credit worth $1.5 billion.
For full-year 2013, Macerich raised its FFO per share guidance in the range of $3.38–3.48 (prior range of $3.35–3.45). Notably, the company increased its guidance for the second time this year.
In tandem with its winning streak, Macerich reported impressive quarterly result on the back of solid operating fundamentals. The company’s A-quality malls portfolio positioned across the most attractive U.S. markets drive occupancy and revenues growth. Moreover, significant developments and portfolio restructuring activities strengthens long-term growth prospects. The guidance increase also boosts investors’ confidence in the stock and is thus encouraging.
Currently, Macerich carries a Zacks Rank #2 (Buy).
Note: FFO, a widely accepted and reported measure of REITs performance, are derived by adding depreciation, amortization and other non-cash expenses to net income.Read the Full Research Report on H
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