The Macerich Company — Q1 2023 Form 10-Q
Business context and period. Unaudited results cover the three months ended March 31, 2023, compared with Q1 2022. Macerich owns, operates, leases and redevelops U.S. shopping centers. At quarter-end, its portfolio included 51 properties with approximately 47 million square feet of gross leasable area.
Financial performance and liquidity
| Metric | Q1 2023 | Q1 2022 | Change / context |
|---|---|---|---|
| Total revenue | $214.9 million | $216.1 million | Down $1.3 million |
| Net loss attributable to the Company | $58.7 million | $37.2 million | Loss widened; diluted loss per share was $0.27 versus $0.17 |
| Net cash from operations | $80.7 million | $65.4 million | Up $15.3 million |
| FFO, diluted, excluding Chandler Freehold financing expense | $88.7 million | $112.4 million | Down 21% |
| Cash and cash equivalents | $112.2 million | $100.3 million at Dec. 31, 2022 | Restricted cash was an additional $93.5 million |
| Consolidated mortgage and bank/other debt | $4.28 billion | $4.40 billion at Dec. 31, 2022 | Company-reported pro rata total debt, including its share of joint venture debt, was $6.84 billion |
Shopping-center and operating expenses were $70.5 million, down 3.3%; depreciation and amortization was $71.5 million. Net interest expense was $39.4 million versus $51.9 million, including a favorable $11.9 million fair-value adjustment to the Chandler Freehold financing obligation in 2023. Equity in losses of unconsolidated joint ventures rose to $61.8 million from $29.1 million, primarily reflecting asset write-downs following a shortened estimated holding period; the Company’s share of the related impairment was $50.2 million.
Operating cash flow was supplemented by $162.2 million of distributions from unconsolidated joint ventures, including proceeds related to the Scottsdale Fashion Square refinancing. Investing activities provided $118.2 million; financing activities used $174.3 million. The quarter-end revolving facility had $78.0 million drawn, $446.8 million of reported availability and an 8.35% borrowing rate. The Company reported compliance with applicable loan covenants.
Material changes and operating indicators
- Leasing revenue fell 2.1%, mainly due to lower lease termination and percentage rent income; fixed leasing revenue increased while variable leasing revenue declined.
- Leased occupancy increased to 92.2% from 91.3% a year earlier. Comparable tenant sales for spaces under 10,000 square feet increased 0.1%; trailing-twelve-month releasing spreads were up 6.6%.
- Macerich signed 256 leases covering approximately 949,000 square feet, versus 214 leases and 598,000 square feet in Q1 2022. It had executed renewals or commitments for 67% of 2023-expiring space not otherwise expected to close, with another 20% at letter-of-intent stage.
- Consolidated assets were $7.92 billion and total equity was $2.86 billion at March 31, 2023, down from $8.09 billion and $2.95 billion, respectively, at year-end 2022.
Outlook, risks and notable items
- Management expects positive 2023 cash flow after recurring operating and leasing capital expenditures and dividends, excluding potential proceeds from dispositions, refinancings or equity issuance. It expects surplus cash to support deleveraging and development/redevelopment.
- Management expects approximately $160 million of 2023 development, redevelopment, expansion and renovation spending. Santa Monica Place and Scottsdale Fashion Square projects are expected to open in 2024.
- The Company expects to address maturities over the next 12 months through refinancing, restructuring, extensions, its credit line or cash, with the stated exception of Towne Mall. The Towne Mall loan was not repaid at maturity; the property had transitioned to a receiver.
- Rising interest rates and inflation may increase borrowing and operating costs. Management cited potential economic slowdown, retailer financial stress or closures, leasing uncertainty, redevelopment cost/delay risks, and constrained capital-market access. A 1% increase in rates was estimated to reduce annual future earnings and cash flows by approximately $5.5 million on $548.3 million of floating-rate debt.
- On May 2, 2023, the Company sold The Marketplace at Flagstaff for $23.5 million, recording an approximately $10.2 million gain and using net proceeds to pay down debt. A $0.17-per-share cash dividend for Q2 2023 was announced. The filing reports no material change to previously disclosed risk factors and no material legal proceedings.
- Letters of credit totaled $40.9 million, of which $40.7 million was secured by restricted cash; management did not expect them to result in a liability. Construction obligations were $9.0 million.
Important facts for investors to verify
- Near-term debt maturities, refinancing progress, Towne Mall exposure and continued access to the revolving facility.
- Whether occupancy, tenant sales, leasing spreads and lease renewals remain resilient as 2023 expirations progress.
- The scale and timing of joint-venture impairments and the effect of further property valuation changes on reported earnings and equity.
- Actual cash generation after capital spending and dividends, including the sustainability of joint-venture distributions and planned development spending.
- Interest-rate exposure and borrowing costs as debt is refinanced or extended; the filing provides no specific earnings guidance.