The Macerich Company — FY2021 Form 10-K
Business context and reporting period
For the fiscal year ended December 31, 2021, Macerich operated as a REIT focused on owning, leasing, managing, developing and redeveloping U.S. shopping centers. Its portfolio comprised 44 regional town centers and five community/power centers, with approximately 48 million square feet of gross leasable area, including joint venture interests. The filing was signed February 25, 2022. Amounts below are in U.S. dollars.
Financial and operating results
| Metric | FY2021 | FY2020 |
|---|---|---|
| Total revenue | $847.4 million | $786.0 million |
| Net income (loss) attributable to the Company | $14.3 million | $(230.2) million |
| Basic and diluted earnings per share | $0.07 | $(1.58) |
| FFO, diluted, excluding specified financing and debt-extinguishment items | $423.2 million | $339.5 million |
| Cash provided by operating activities | $286.4 million | $124.8 million |
| Cash and cash equivalents at year-end | $112.5 million | $465.3 million |
- Revenue increased 7.8%; leasing revenue rose 6.4%, to $787.5 million. Management cited stronger percentage rents and parking income, lower bad-debt expense, and all centers operating throughout 2021.
- Shopping center and operating expenses increased 14.7%, to $295.0 million, partly reflecting centers being open for more of the year. The filing does not provide a single comparable operating-margin measure.
- Investing activities provided $235.0 million, versus $202.8 million used in 2020, largely reflecting asset-sale proceeds. Financing activities used $837.0 million, versus $446.5 million provided in 2020, including substantial debt repayment.
- At December 31, total loan debt was approximately $6.98 billion on management’s pro rata basis, including joint venture debt; consolidated mortgage and bank/other notes payable were approximately $4.53 billion. Management reported a roughly 20% reduction in debt at its share from year-end 2020.
- The Company had $405.7 million available under its revolving facility and reported compliance with applicable loan covenants. Restricted cash was $54.5 million. Cash dividends were $0.15 per share each quarter, or $0.60 for 2021.
Changes versus prior periods and unusual items
- Results recovered from 2020’s pandemic-related loss, but 2021 net income included significant asset-sale and other items. The Company reported a $75.7 million net gain on sale or write-down of assets, compared with a $68.1 million net loss in 2020. This included a $117.2 million gain on the Tucson La Encantada sale, a $5.6 million gain on Paradise Valley Mall, land-sale gains, and a $28.3 million loss on assigning its Shops at North Bridge joint venture interest.
- 2020 included a $163.3 million loss on remeasurement when Macerich consolidated Fashion District Philadelphia. The 2021 net-income improvement therefore reflects both operating recovery and nonrecurring comparisons.
- Adjusted diluted FFO increased 24.7% to $423.2 million. This non-GAAP measure is not cash flow from operations and should be considered alongside GAAP results.
- The Company issued 62.0 million shares through its at-the-market programs in 2021, receiving $830.2 million net. This materially increased the share count; approximately $151.7 million of gross offering capacity remained under the March 2021 program at year-end.
Outlook, risks and commitments
- Management expected COVID-19 and new variants to continue affecting 2022 results, citing occupancy below pre-pandemic levels and possible additional Anchor closures. It provided no specific revenue, earnings or FFO guidance.
- Operating indicators improved: year-end leased occupancy was 91.5%, versus 89.7% a year earlier; small-tenant comparable sales in Q4 were 12% above Q4 2019, and full-year sales were 10% above 2019. Traffic was in the mid-90% range relative to 2019. New and renewal lease releasing spreads were positive 5% for 2021.
- Management expected positive 2022 cash flow after recurring operating, leasing and other capital expenditures and dividends, to support deleveraging and development. It forecast approximately $150 million of 2022 development, redevelopment, expansion and renovation spending, including about $30 million of remaining One Westside costs expected to be funded by a non-recourse construction facility.
- Management said near-term maturities were expected to be refinanced, restructured, extended or paid from the credit line or cash. The maturity schedule and refinancing assumptions remain important: the filing lists 2022 debt maturities of $794.5 million for consolidated centers and $493.6 million at the Company’s pro rata share of unconsolidated joint ventures.
- One Westside, redeveloped with Hudson Pacific Properties, is expected to deliver 584,000 square feet of office space leased to Google in 2022. Sears-store redevelopment is expected to require $130–$160 million at the Company’s pro rata share over several years; $40.9 million had been funded by year-end.
- Key risks include tenant and Anchor bankruptcies or closures, lease-up and occupancy challenges, e-commerce competition, high leverage and refinancing access, floating-rate exposure, joint venture dependencies, property impairments, and natural-disaster, environmental and regulatory exposures. A 1% rise in rates was estimated to reduce annual earnings and cash flow by about $8.4 million based on $843.3 million of floating-rate debt.
- The Company reported no material legal proceedings. KPMG issued an unqualified opinion on the financial statements and concluded internal control over financial reporting was effective.
Important facts for investors to verify
- 2022 debt maturities, completed extensions or refinancings, available revolver capacity and covenant headroom.
- Whether occupancy, collections, tenant sales and leasing spreads continue improving, especially for the 2022 lease-expiration pipeline.
- The impact of the 2021 ATM issuance on per-share FFO, dividend coverage and future dilution; the dividend remains subject to quarterly Board review.
- Actual 2022 operating cash generation and capital spending versus management’s projections, including funding and delivery progress at One Westside and Sears redevelopments.
- Underlying recurring performance apart from asset-sale gains, impairments and other valuation-sensitive or nonrecurring items; review the Company’s FFO reconciliation alongside GAAP results.