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Here's Why Macerich's (MAC) Stock Jumped 15.3% in 6 Months

Shares of The Macerich Company MAC have soared 15.3% in the past six months compared with its industry’s growth of 4.2%.

Last month, this retail real estate investment trust (REIT), headquartered in Santa Monica, CA, reported fourth-quarter funds from operations (FFO) per share of 53 cents, excluding financing expenses in relation to Chandler Freehold, which surpassed the Zacks Consensus Estimate by a penny. The figure was in line with the prior-year quarter’s tally.

The results reflected healthy leasing demand during the fourth quarter, with tenant sales continuing to gain momentum. The portfolio occupancy and re-leasing spreads improved year over year.

Zacks Investment Research
Zacks Investment Research

Image Source: Zacks Investment Research

Let us decipher the factors behind the surge in the stock price.

The increase in consumers’ preference for in-person shopping experiences following the pandemic downtime has driven the recovery in the retail real estate industry. Retailers continue to rent out more physical store spaces to meet this growing demand.

As a result, Macerich’s portfolio of premium assets in the United States, with a notable presence in California, the Pacific Northwest, Arizona and the Metro New York to Washington, DC corridor, has been experiencing healthy leasing activity.

In 2022, Macerich signed 974 new and renewal leases encompassing around 3.8 million square feet. Its portfolio occupancy improved year over year from 91.5% to 92.6% on Dec 31, 2022.

Moreover, these densely populated areas have an affluent customer base with significant disposable income. This has helped the company capture the post-pandemic rebound in retail demand, aiding its cash flow generation.

In February 2023, Macerich announced the addition of the Irish retail brand Primark at its popular Queens Center in New York City. Primark will occupy 54,562 square feet of multi-level space. The move deepens the relationship between both entities, with the latest opening marking Primark’s seventh store at a Macerich property.

In March 2023, the company announced that its popular Queens Center in New York City will welcome the sought-after European fashion retailer — Zara. It is expected that Zara will open a multi-level location. The move is likely to draw more shoppers to this well-known retail destination, boding well for Macerich.

Further, in the same month, MAC announced the addition of Din Tai Fung to Santa Monica Place. This Chinese restaurant, specializing in Xiao Long Bao, or soup dumplings, will occupy a prime, 10,615-square-foot indoor/outdoor location with ocean views on the third level of the property. It is also across from the newly announced ARTE MUSEUM.

In recent years, omni-channel retailing has gained momentum and has become the focal point for many retailers. In line with this, MAC has been focusing on enhancing its asset quality and customer relationships by increasing its adoption of the omni-channel model. The company has also been shifting toward re-use and mixed-used properties by recapturing and repositioning anchor tenants.

Macerich’s aggressive capital-recycling program to enhance the overall quality of its portfolio highlights its prudent capital-management practices and releases the pressure off its balance sheet.

As of Dec 31, 2022, MAC had around $512 million of liquidity, including unrestricted cash in hand, aggregating almost $158 million. The balance represented the available capacity on its revolving line of credit. Its well-laddered debt maturity profile and ample financial flexibility have positioned it well to capitalize on long-term growth opportunities.

Solid dividend payouts remain the biggest attraction for REIT investors, and Macerich has remained committed to that. In October 2022, it increased the quarterly cash dividend payment from 15 cents per share to 17 cents, reflecting a hike of 13.3%. Such efforts boost investors’ confidence in the stock.

Nonetheless, given the conveniences of online shopping, rising e-commerce adoption is still a concern for this Zacks Rank #3 (Hold) company. Also, amid the inflationary environment and rising interest rates, a slowdown in the economy and the depletion of savings could limit consumers’ willingness to spend to some extent.

Stocks to Consider

Some better-ranked stocks from the retail REIT sector are Federal Realty Investment Trust FRT and Essential Properties Realty Trust EPRT, each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Zacks Consensus Estimate for Federal Realty’s current-year FFO per share is pegged at $6.45.

The Zacks Consensus Estimate for Essential Properties Realty Trust’s ongoing year’s FFO per share stands at $1.64.

Note: Anything related to earnings presented in this write-up represents FFO — a widely used metric to gauge the performance of REITs.


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