Macerich Reports In Line, Revs Up (MAC) (TCO)

Adjusted FFO stood at $106.2 million compared with $105.3 million in the year-ago quarter. The reported FFO was $226.2 million or $1.57 per share compared with $102.9 million or 72 cents per share in the year-earlier quarter.

Quarter Highlights

Total revenue during the quarter was $208.5 million, up 8.7% from $191.8 million in the year-ago period. The increase was mainly attributable to minimum rent increase of 8.0% to $120.2 million. Moreover, revenue substantially surpassed the Zacks Consensus Estimate of $188 million.

Overall portfolio occupancy rose to 92.7% from 92.3% in the prior-year quarter. For the 12 months ended June 30, 2012, mall tenant sales increased 12% to $513.0 per square foot from $458.0 for the 12 months ended June 30, 2011.

In addition, the re-leasing spreads also jumped 16.3% year over year. The same center net operating income increased 2.9% year over year to $161.4 million.

Acquisitions & Dispositions

Continuing with its portfolio repositioning program, Macerich sold several non-core properties — Chandler Gateway, The Borgata, Hilton Village, Carmel Plaza and a former Mervyn's site. The company generated $121 million in proceeds from these asset sales.

Financing Activity

During the second quarter, the company refinanced a mortgage loan to the tune of $200 million, (3.77%, 7-year fixed rate loan) collateralized by Chandler Fashion Center. The previous loan worth $153 million had an interest rate of 5.48%.

In addition, the company refinanced a mortgage loan worth $220 million (4.14%, 10-year fixed rate loan) collateralized by The Oaks.

Liquidity

At the end of the second quarter 2012, the company had cash and cash equivalents of $89.8 million and total debt amount of $5,679.9 million.

Dividend

On July 27, Macerich declared a quarterly dividend of 55 cents per share to be paid on September 7, 2012 to common shareholders of record as of August 20, 2012.

2012 Outlook

Santa Monica, California-based Macerich revised its 2012 FFO guidance and reaffirmed its adjusted FFO guidance. The FFO is now projected to be between $3.88 and $3.96 per share, up from the previous guidance range of $3.77 to $3.85 per share. The company maintained its adjusted FFO guidance of $3.06 to $3.14 per share.

Our Viewpoint

Based on Macerich’s solid tenancy sales growth, increasing portfolio occupancy and ongoing portfolio repositioning activity, we expect analysts to up their estimates in the coming days. Currently, the Zacks Consensus Estimate for 2012 and 2013 are pegged at $3.16 and $3.35, respectively.

One of the peers of Macerich – Taubman Centers Inc. (TCO) – recently reported second quarter 2012 FFO of 73 cents per share, beating the Zacks Consensus Estimate by 4 cents. Macerich currently carries a Zacks #3 Rank, implying a short-term Hold rating. We also reiterate our long-term Neutral recommendation on the stock.

Note: FFO, a widely accepted and reported measure of the performance of REITs, is derived by adding depreciation, amortization and other non-cash expenses to net income.