CORRECTION - Macerich Announces Initial Progress in its Path Forward Strategic Plan

Rhea-AI Summary

Macerich announced its acquisition of the remaining 40% share of Arrowhead Towne Center and South Plains Mall for $36.5 million, plus debt, from a joint venture partner. This move gives Macerich full ownership of both properties. Additionally, Macerich has signed a contract to sell a major retail asset, expecting to generate $110 million in net proceeds with a 6.5% cap rate. The sale is anticipated to close this summer. Arrowhead Towne Center, a high NOI center in Metro Phoenix, benefits from the upcoming Taiwan Semiconductor Manufacturing Company site, projected to create thousands of jobs. South Plains Mall in Lubbock, Texas, is also a significant asset, with Dillard’s investing $40 million in a new store. Macerich aims to reduce leverage and simplify its business through these transactions. The company is set to participate in key investor events in May and June 2024.

Positive

• Macerich acquired the remaining 40% of Arrowhead Towne Center and South Plains Mall, enhancing its asset ownership and operational control.
• The transaction of selling a major retail asset is expected to generate $110 million in net proceeds.
• Arrowhead Towne Center benefits from significant local investments, including a $65 billion project by Taiwan Semiconductor Manufacturing Company.
• Arrowhead Towne Center has a strong leasing performance with 100% occupancy.
• South Plains Mall is supported by a $40 million investment from Dillard’s for a new flagship store.
• Lubbock’s population, where South Plains Mall is located, is growing at twice the national average.
• Macerich aims to reduce leverage and simplify its business by consolidating certain JV interests.
• Upcoming investor outreach events could increase visibility and attract potential investors.

Negative

• The acquisition cost of $36.5 million plus the debt may strain Macerich's financial resources.
• The expected $110 million from the retail asset sale is contingent on a successful transaction closure this summer.
• The 7.2% cap rate for Arrowhead Towne Center may indicate higher investment risk.
• South Plains Mall relies heavily on the success of the new Dillard’s store, which is still under development.

Insights

Financial Analyst

Macerich's recent moves to acquire full ownership of Arrowhead Towne Center and South Plains Mall are significant in terms of both immediate financial implications and long-term strategy. The first notable aspect is the $36.5 million acquisition cost for the remaining 40% shares, an amount that seems reasonable given the 7.2% cap rate for Arrowhead Towne Center. This cap rate indicates a good return on investment, which is higher than the typical market averages hovering around 5%-6% for similar high-quality retail assets.

Furthermore, the anticipated $110 million from selling another retail asset is likely to strengthen Macerich's balance sheet. This strategic asset rotation aligns with the company's aim to reduce leverage and simplify its business model. For investors, these steps could improve the company's financial stability and enhance shareholder value in the long term.

From a short-term perspective, the immediate injection of funds and acquisition of high-performing assets should be viewed positively. In the long term, the company's focus on high-growth markets like Metro Phoenix, which benefits from substantial investments such as TSMC's microchip manufacturing site, indicates potential for robust future growth.

Market Research Analyst

The Metro Phoenix area, which houses the Arrowhead Towne Center, has been highlighted as a high-growth region. The upcoming $65 billion investment by Taiwan Semiconductor Manufacturing Company (TSMC) is particularly noteworthy. Such significant investment is expected to create thousands of jobs and drive consumer spending, making retail properties in this area highly lucrative.

Additionally, the demographic and economic statistics provided for the Arrowhead Towne Center’s trade area suggest a substantial consumer base and strong growth potential. The presence of three top-ranked universities and a robust K-12 student population supports a stable and increasing demand for retail services.

Also, South Plains Mall in Lubbock, Texas, benefits from the economic impact of Texas Tech University and a rapidly growing population. These factors make it a valuable asset in Macerich’s portfolio. Investors should see this consolidation of ownership as a positive step towards capitalizing on high-growth markets, thus enhancing long-term profitability.

Macerich Purchases Remaining 40% Share of Arrowhead Towne Center (a Top 10 NOI Center for Macerich) and South Plains Mall from JV Partner, and Commits to the Sale of a Prominent Retail Asset

SANTA MONICA, Calif., May 16, 2024 (GLOBE NEWSWIRE) -- In a release issued under the same headline earlier today by Macerich (NYSE: MAC), please note in the third paragraph, the amount the transaction is expected to generate has been corrected to $110 million of net proceeds. The corrected release follows:

Macerich (NYSE: MAC), one of the nation’s leading owners, operators and developers of major retail properties in top markets, today announced its purchase of the remaining 40% share of both Arrowhead Towne Center (Metro Phoenix) and South Plains Mall (Lubbock, Texas) for $36.5 million plus the debt, which for Arrowhead is a 7.2% cap rate, from its joint venture partner, a global institutional investor.

This transaction, which closed on May 14, gives Macerich full ownership of both properties.

Additionally, Macerich has executed a contract for the sale of a retail asset in a major market. The transaction is expected to generate approximately $110 million of net proceeds based on an expected cap rate of 6.5% and is anticipated to close this summer.

“We are pleased to achieve full ownership of these retail assets via the purchase of the remaining 40% share from our JV partner,” said Jack Hsieh, President and Chief Executive Officer, Macerich. “Given the pending, massive microchip investment within the Arrowhead Towne Center market, we believe there are significant positive impacts to our trade area that we will soon be able to capitalize upon. With these transactions, Macerich is acting on its strategic plan that includes disposing of certain assets to reduce our leverage and simplifying our business through selectively consolidating certain JV interests over time.”

Located in a high-growth area of Metro Phoenix, the 1.1 million-square-foot, super-regional Arrowhead Towne Center is a market-dominant, top 10 NOI center for MAC and a top 10 sales PSF center at well over $1,100 PSF – second only to Scottsdale Fashion Square among Macerich’s Phoenix market assets. Currently 100% leased, Arrowhead Towne Center is anchored by Dillard’s, Macy’s, JCPenney, DICK’s Sporting Goods, AMC Theatres and a brand-new Round1 Spo-Cha.

The buoyant trade area consists of 1.6 million people and is home to the new Taiwan Semiconductor Manufacturing Company site consisting of three fabs, opening in phases beginning in 2025 and bringing TSMC’s total investment in Arizona to more than $65 billion. The three fabs are expected to create 6,000 direct high-tech, high-wage jobs, more than 20,000 accumulated unique construction jobs, and tens of thousands of indirect supplier and consumer jobs.

Arrowhead Towne Center’s trade area also boasts three top-ranked universities and 13,000 K-12 students. More than one-third of Phoenix Metro residents live in this area, and over 43% of the county's growth over the next 25 years will take place here.

South Plains Mall is a 1.1 million square foot super-regional shopping center in Lubbock, Texas, home to Texas Tech University and its $4.3 billion annual economic impact. The vast trade area covers more than 40,000 square miles and 35 counties. Lubbock’s population is growing at 6% annually, double the national average. Longtime anchor Dillard’s is currently investing more than $40 million in a new flagship store set to open in Q4 2024 on the site of the former Sears parcel to consolidate its two existing locations.

Upcoming Investor Outreach

Macerich is scheduled to participate in the following events:

• ICSC Las Vegas in Las Vegas, Nevada, May 19-20, 2024
• Nareit’s REITweek: 2024 Investor Conference will be held at the New York Hilton Midtown in New York City from June 4 to 5, 2024. The conference will include a company presentation on June 4, 2024, at 11:45 a.m. Eastern Time. Additional details about the presentation, including a live audio webcast, will be available to the public on the Investor Relations website, investing.macerich.com.

About Macerich

Macerich is a fully integrated, self-managed and self-administered real estate investment trust (REIT). As a leading owner, operator and developer of high-quality retail real estate in densely populated and attractive U.S. markets, Macerich’s portfolio is concentrated in California, the Pacific Northwest, Phoenix/Scottsdale, and the Metro New York to Washington, D.C. corridor. Developing and managing properties that serve as community cornerstones, Macerich currently owns 47 million square feet of real estate consisting primarily of interests in 43 retail centers. Macerich is firmly dedicated to advancing environmental goals, social good and sound corporate governance. A recognized leader in sustainability, Macerich has achieved a #1 Global Real Estate Sustainability Benchmark (GRESB) ranking for the North American retail sector for nine consecutive years (2015-2023). For more information, please visit www.Macerich.com.

Macerich uses, and intends to continue to use, its Investor Relations website, which can be found at investing.macerich.com, as a means of disclosing material nonpublic information and for complying with its disclosure obligations under Regulation FD. Additional information about Macerich can be found through social media platforms such as LinkedIn. Reconciliations of non-GAAP financial measures, including NOI and FFO, to the most directly comparable GAAP measures are included in the earnings release and supplemental filed on Form 8-K with the SEC, which are posted on the Investor Relations website at investing.macerich.com.

MAC-I
SOURCE: Macerich
MEDIA CONTACT:
Karen Maurer, Macerich, 602-708-6311, Website: https://www.macerich.com/

FAQ

What recent acquisition did Macerich complete?

Macerich acquired the remaining 40% share of Arrowhead Towne Center and South Plains Mall for $36.5 million plus debt.

What is the expected net proceeds from Macerich's sale of a retail asset?

The sale of a major retail asset is expected to generate approximately $110 million in net proceeds.

How does the acquisition of Arrowhead Towne Center benefit Macerich?

Arrowhead Towne Center is a top 10 NOI center for Macerich, with significant local investments, including a $65 billion project by Taiwan Semiconductor Manufacturing Company.

When will the transaction for Macerich's retail asset sale close?

The transaction is anticipated to close this summer.

What is the cap rate for the sale of Macerich's retail asset?

The sale is based on an expected cap rate of 6.5%.

What are the upcoming investor outreach events for Macerich?

Macerich will participate in ICSC Las Vegas in May 2024 and Nareit’s REITweek in June 2024.

What is the significance of South Plains Mall for Macerich?

South Plains Mall is a major asset with a $40 million investment from Dillard’s for a new flagship store and is located in a high-growth area.