The Macerich Company

Sector: Real estate investment trusts (REITs) Country of operation: The US Key categories: Community/power centers and regional malls Annual Metrics [caption id="attachment_136359" align="aligncenter" width="700"] The fiscal year ends on December 31
*Trailing 12 months ended June 30, 2021[/caption]   Summary Founded in 1964 and headquartered in Santa Monica, California, The Macerich Company is the third-largest owner and operator of retail shopping centers in the US. The company is a fully integrated, self-managed and self-administered real estate investment trust (REIT). It works in the acquisition, development, leasing, management, ownership, and redevelopment of regional malls and community/power shopping centers across the US. As of its second quarter of 2021 (ended June 30, 2021), the company has approximately 50 million square feet of gross leasable area (GLA), consisting of 51 regional malls and five community/power centers. The company has a significant presence in major urban centers across Arizona, Chicago, New York, Washington and on the West Coast. The Macerich Company was ranked top of the Global Real Estate Sustainability Benchmark (GRESB) in the North American Retail Sector for six consecutive years, from 2015 through 2020. As of December 31, 2020, the company has 670 employees, 659 working full time and 11 part time. Company Analysis Coresight Research insight: As Covid-19 restrictions have eased, many markets have achieved a full economic re-opening, including The Macerich Company’s key markets, California and New York—which were also its markets with the heaviest capacity restrictions. Consequently, the company has reported that rent collections have consistently been improving over the year and now are in line with pre-Covid levels, as of its second quarter of 2021 (ended June 30, 2021) The Macerich Company has also reported that traffic levels continued to remain around 90% during its second quarter, in comparison to pre-pandemic 2019. In particular, the company’s properties in the Phoenix area are close to pre-crisis levels. Its revenues grew by 20.7% year over year and its fund from operations (FFO) was $127.6 million (not including the financial impact of the sale of a stake of its properties Chandler Beauty Center and Freehold Raceway Mall to REIT Heitman)—up from $60.5 million last year. The company also continued to strengthen its balance sheet by deleveraging about $1.3 billion during the quarter. As the leasing environment improves, reinforced by strong leasing demand along with a gradual rise in both occupancy rates and tenant sales, we expect the company to witness a rise in its revenues in its third quarter.

Tailwinds

Headwinds

Increase in sales and customer traffic and customer conversion rates as vaccination rise Market dominant standing and high-quality properties In the first half of 2021, signed more leases than during the same period in 2019 Economic recovery promises higher sales and rising occupancy leading to a rise in leasing activity All centers are now open and operating including its most capacity-restricted centers in New York and California

Store closures, tenant bankruptcies and an overall uncertain retail environment could make recovery a slow process Change in consumer behavior and rise in online shopping could increase competition within the company’s sector

  Strategy The Macerich Company aims to transform its malls into what the company refers to as “town centers where there’s something for everybody,” using a four-pronged core strategy. Although we believe that this core strategy remains unchanged, there are three further areas that the company has focused on in response to the pandemic, as per its fiscal 2020 annual report. Core Strategy: 1. Focus on high-quality acquisitions

• Focus on well-located, quality regional shopping centers across the US.
• Acquire retail properties which complement the overall portfolio, such as outlet centers.

2. Build a strong, localized network with specialized in-house departments

• Establish in-house specialized departments across various disciplines, including accounting, acquisition, development, finance, IT, leasing, legal, marketing, property management and redevelopment expertise.
• Establish decentralized property management led by on-site professionals responsible for the cost functions, leasing, maintenance, marketing and operation of their respective centers.
• Hire regionally located leasing managers to better understand the needs of their respective markets, communities and tenants.

3. Redevelop and optimize propertie

• Redevelop properties to optimize space through mixed-use densification, demolish underperforming department store boxes and develop available land at shopping centers.
• Establish a separate department of redevelopment professionals to identify opportunities, obtain necessary government approvals and oversee design and construction.

4. Develop properties selectively

• Pursue ground-up new development projects on a selective basis.

Focus Areas in Response to the Covid-19 Pandemic: 1. Focus on fewer and higher-quality centers

• Focus on fewer and higher-quality properties.
• Incorporate the value of stores as brand builders, media and efficient distribution platforms into its new leasing metrics.

2. Reinvigorate destinations

• Set the stage for new growth after the pandemic, aligning with its town center strategy.
• Densify and diversify essential properties to provide wider use for a larger number of people.

3. Transform properties as an avenue for growth

• Engage in pre-development work for mixed-use expansions in prime locations and fast-growing centers.
• Pursue mixed-use expansion and use joint ventures and ground leases as tools to redevelop and densify its assets.

Company Developments

Date	Development
May 20, 2021	The Macerich Company and Scheels announce that Arizona’s first Scheels store in Chandler Fashion Center, Phoenix, will open in fall 2023.
May 10, 2021	The Macerich Company announces that two Primark stores will be added to its retail lineup, one opening in Tysons Corner Center and one in Green Acres Mall.
April 14, 2021	The Macerich company closes on the renewal of its corporate credit facility worth $700 million.
April 1, 2021	The Macerich Company sells 95% of a non-core property in Phoenix, Paradise Valley Mall, for $95 million to a newly formed joint venture with an affiliate of RED Development.
December 22, 2020	The Macerich Company is ranked first in GRESB’s Performance Score in the North America retail sector and is included in the CDP Climate Change A-List for 2020.
December 4, 2020	The Macerich Company receives Bureau Veritas SafeGuard Certification for its 11 properties.
September 14, 2020	The Macerich Company and PREIT’s joint venture, Fashion District Philadelphia, adds Ardene, DSW, Francesca’s, Industrious, Kate Spade Outlet and Starbucks stores on completing its first successful year of operations.
December 9, 2019	The Macerich Company adds a Versace store to its elevated luxury wing at Scottsdale Fashion Square, Arizona.
October 1, 2019	The Macerich Company leases former Sears space at Wilton Mall, New York, to Saratoga Hospital.
August 8, 2019	The Macerich Company appoints Will Voegele to the new position of Executive Vice President, Chief Development.
September 17, 2019	The Macerich Company and PREIT launch a joint venture, Fashion District Philadelphia.
Nov 16, 2018	The Macerich Company launches BrandBox, a new retail concept designed for digitally native brands to open, operate and scale physical retail.
September 11, 2018	The Macerich Company and Simon Property Group enter a 50:50 joint venture to develop Los Angeles Premium Outlets.

  Management Team

• Thomas E. O’Hern—CEO and Director
• Edward C. Coppola—President and Director
• Douglas J. Healey—Senior EVP, Head of Leasing
• Scott W. Kingsmore—Senior EVP, CFO and Treasurer
• Ann C. Menard—Senior EVP, Chief Legal Officer, and Secretary
• William P. Voegele—EVP and Chief Development Officer
• Kenneth L. Volk—EVP, Business Development
• Jean Wood—VP of Investor Relations

---

Source: Company reports/S&P Capital IQ