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

Rhea-AI Summary

Macerich (NYSE: MAC) announced the purchase of the remaining 40% share of Arrowhead Towne Center in Phoenix and South Plains Mall in Lubbock for $36.5 million plus debt. This acquisition gives Macerich full ownership of both properties. Additionally, Macerich has signed a contract to sell a retail asset expected to generate $110 million in net proceeds by summer 2024. These moves are part of the company's strategic plan to reduce leverage and consolidate joint ventures. Arrowhead Towne Center, a top-performing asset with $1,100 PSF sales, benefits from a high-growth area and significant investments, including a $65 billion microchip project expected to create thousands of jobs. South Plains Mall is also in a growth region, with a $40 million anchor store investment by Dillard's. Macerich will discuss these developments at upcoming investor events in May and June 2024.

Positive

• Macerich gained full ownership of Arrowhead Towne Center and South Plains Mall for $36.5 million plus debt.
• Arrowhead Towne Center is a top 10 NOI center with sales over $1,100 PSF.
• Upcoming $65 billion microchip investment in Arrowhead's trade area is expected to create 6,000 direct jobs.
• South Plains Mall's trade area is growing at 6% annually, double the national average.
• Dillard's investing $40 million in a new flagship store at South Plains Mall.
• Sale of a retail asset expected to generate $110 million in net proceeds by summer 2024.

Negative

• The purchase involved taking on debt, which may increase financial risk.
• The sale of the retail asset suggests potential divestiture of valuable properties to meet financial goals.
• High reliance on future developments and investments, which carry inherent risks.

Insights

Financial Analyst

Acquiring Full Ownership

The strategic acquisition of the remaining 40% ownership of Arrowhead Towne Center and South Plains Mall is a significant move for Macerich. By purchasing these interests for $36.5 million plus associated debt, Macerich gains full control over high-performing assets. This transaction will likely enhance the company's Net Operating Income (NOI) and potentially increase cash flow due to improved operational efficiency. The 7.2% cap rate for Arrowhead Towne Center is competitive, indicating a favorable yield on the investment, especially in the robust Phoenix market.

Asset Sale

Simultaneously, the planned sale of a retail asset expected to generate $110 million net proceeds at a 6.5% cap rate highlights a strategic effort to de-leverage and streamline operations. These funds can be reinvested into higher-yielding opportunities or used to reduce existing debt, improving the company's balance sheet and reducing interest expenses.

Growth Drivers

With the influx of investment around Arrowhead Towne Center, particularly the $65 billion investment by Taiwan Semiconductor Manufacturing Company (TSMC), the area is poised for further economic growth. This could boost foot traffic and sales in the region, positively impacting Macerich's revenues.

Conclusion

For retail investors, these moves indicate proactive portfolio management, aiming for long-term stability and growth. The transactions align with Macerich's strategic goals of leveraging high-growth markets and divesting underperforming assets.

Real Estate Market Expert

Market Dynamics

The acquisition of the remaining shares in Arrowhead Towne Center and South Plains Mall places Macerich in a strong position within two expanding markets. Metro Phoenix and Lubbock, Texas, are both experiencing high population growth rates, which can drive more consumer spending and ultimately benefit retail properties. Arrowhead Towne Center, with its 1.6 million people strong trade area and South Plains Mall's vast area coverage, position these assets as vital retail hubs.

Leasing and Tenancy

Both centers boast high occupancy rates, with Arrowhead Towne Center at 100% leased. This high occupancy indicates strong demand from retailers, which can result in higher rental yields and stable income streams. The presence of major anchors like Dillard’s, Macy’s and JCPenney adds to the attractiveness and foot traffic of these properties.

Anchor Investments

Notably, Dillard’s is investing over $40 million in a new flagship store at South Plains Mall, set to open end of 2024. This investment signifies confidence from major retailers and can act as a draw for additional tenants and shoppers.

Overall Outlook

From a real estate market perspective, these acquisitions and asset sales are strategic moves likely to solidify Macerich's market position and enhance its financial performance through increased ownership in high-growth markets and efficient capital utilization.

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) -- 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 $110,000 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 (MAC) make in 2024?

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

How much is Macerich (MAC) expecting from the sale of a retail asset?

Macerich expects to generate approximately $110 million in net proceeds from the sale of a retail asset by summer 2024.

What significant investment is impacting Arrowhead Towne Center’s area?

A $65 billion investment in a microchip project is expected to create thousands of high-tech and construction jobs in Arrowhead Towne Center’s trade area.

What is the sales per square foot (PSF) for Arrowhead Towne Center?

Arrowhead Towne Center has sales well over $1,100 PSF.

What is the annual population growth rate in South Plains Mall’s trade area?

South Plains Mall’s trade area is experiencing an annual population growth rate of 6%, double the national average.

What new store investment is happening at South Plains Mall?

Dillard’s is investing $40 million in a new flagship store at South Plains Mall, set to open in Q4 2024.