California-based retail real estate investment trust (REIT), The Macerich Company (MAC), reported fourth-quarter 2013 adjusted funds from operations (AFFO) per share of 94 cents, surpassing the Zacks Consensus Estimate by a penny and the year ago figure by 4 cents.
Escalation in revenues, overall portfolio occupancy and re-leasing spreads aided the quarterly results. Total revenue moved up 15.2% year over year to $289.5 million and comfortably beat the Zacks Consensus Estimate of $266 million.
Macerich provided guidance for full-year 2014 FFO per share and expects it to be in the range of $3.50 – $3.60. However, the range is lower than the Zacks Consensus Estimate of $3.62. Share price of Macerich fell 1.27% in the after hours trading session on Jan 4.
For full-year 2013, Macerich reported AFFO per share of $3.53 on revenues of $1.08 billion. Results were substantially higher than the prior-year AFFO per share of $3.18 on revenues of $891.9 million.
Inside the Headlines
As of Dec 31, 2013, mall portfolio occupancy upped 80 basis points (bps) year over year to 94.6%. Also, same centers net operating income (NOI) advanced 4.1% year over year to $729.6 million.
For full-year 2013, mall tenant annual sales increased 8.7% year over year to $562 per square foot. In addition, re-leasing spreads rose 17.2% on a year-over-year basis.
Notable Portfolio Activities
In tune with its portfolio restructuring activity, Macerich sold 4 non-core properties for total gross proceeds of about $332 million on a pro rata basis. The divested assets were the Ridgmar Mall in Fort Worth, Texas; Salisbury Centre in Salisbury, Maryland; and Chesterfield Towne Center in Richmond, Virginia. This also includes the divestiture of Rotterdam Square in Schenectady, New York subsequent to the quarter end.
Notably, for non-core assets sold since the start of 2013, Macerich‘s pro rata share proceeds were $864 million. The activity diluted the 2013 FFO per share by 12 cents.
Liquidity
As of Dec 31, 2013, Macerich had cash and cash equivalents of $102.3 million compared to $102.6 million as of Sep 30, 2013. The company had a total debt of $6.0 billion, down from $6.3 billion at the end of the prior quarter.
Our Take
Macerich came up with decent results this quarter on the back of improved operating portfolio performance. Although the divestitures are expected to weigh upon the near-term earnings, it would aid in enhancing the company’s portfolio base and bodes well for long term. Going forward, we expect the company’s rising mall tenant annual sales per square foot and re-leasing spreads to pave way for strengthening of top-line.
Currently, Macerich carries a Zacks Rank #3 (Hold). Investors interested in REIT- Equity Trust – Retail industry may consider stocks like Federal Realty Investment Trust (FRT), American Assets Trust, Inc. (AAT) and Glimcher Realty Trust (GRT). All these stocks carry 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.
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