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10-Q
MACERICH CO filed this Form 10-Q on 05/07/2018
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The Company considers tenant annual sales per square foot (for tenants in place for a minimum of twelve months or longer and 10,000 square feet and under), occupancy rates (excluding large retail stores or "Anchors") and releasing spreads (i.e. a comparison of initial average base rent per square foot on leases executed during the trailing twelve months to average base rent per square foot at expiration for the leases expiring during the trailing twelve months based on the spaces 10,000 square feet and under) to be key performance indicators of the Company's internal growth.
Tenant sales per square foot increased from $639 for the twelve months ended March 31, 2017 to $686 for the twelve months ended March 31, 2018. Occupancy rate decreased from 94.3% at March 31, 2017 to 94.0% at March 31, 2018. Releasing spreads increased 14.7% for the twelve months ended March 31, 2018. These calculations exclude Centers under development or redevelopment and property dispositions (See "Acquisitions and Dispositions" and "Other Transactions and Events" in Management's Overview and Summary).
Releasing spreads remained positive as the Company was able to lease available space at higher average rents than the expiring rental rates, resulting in a releasing spread of $7.57 per square foot ($59.12 on new and renewal leases executed compared to $51.55 on leases expiring), representing a 14.7% increase for the trailing twelve months ended March 31, 2018. The Company expects that releasing spreads will continue to be positive for the remainder of 2018 as it renews or relets leases that are scheduled to expire. These leases that are scheduled to expire represent 1.0 million square feet of the Centers, accounting for 13.3% of the gross leasable area ("GLA") of mall stores and freestanding stores, for spaces 10,000 square feet and under, as of March 31, 2018.
During the trailing twelve months ended March 31, 2018, the Company signed 228 new leases and 370 renewal leases comprising approximately 1.0 million square feet of GLA, of which 700,000 square feet related to the consolidated Centers. The annual initial average base rent for new and renewal leases was $59.12 per square foot for the trailing twelve months ended March 31, 2018 with an average tenant allowance of $26.95 per square foot.
Comparison of Three Months Ended March 31, 2018 and 2017
Revenues:
Minimum and percentage rents (collectively referred to as "rental revenue") decreased by $3.2 million, or 2.2%, from 2017 to 2018. The decrease in rental revenue is attributed to a decrease of $3.6 million from the Redevelopment Properties and $0.7 million from the Disposition Properties offset in part by an increase of $1.1 million from the Same Centers. Rental revenue includes the amortization of above and below-market leases, the amortization of straight-line rents and lease termination income. The amortization of above and below-market leases was $0.2 million in 2017 and 2018. The amortization of straight-line rents increased from $1.9 million in 2017 to $2.7 million in 2018. Lease termination income decreased from $2.0 million in 2017 to $1.7 million in 2018.
Tenant recoveries decreased $4.3 million, or 6.0%, from 2017 to 2018. The decrease in tenant recoveries is attributed to a decrease of $3.1 million from the Same Centers, $0.9 million from the Redevelopment Properties and $0.3 million from the Disposition Properties.
Management Companies' revenue decreased from $11.9 million in 2017 to $10.5 million in 2018. The decrease in Management Companies' revenue is due to a decrease in development and leasing fees from unconsolidated joint ventures.
Shopping Center and Operating Expenses:
Shopping center and operating expenses decreased $1.4 million, or 1.8%, from 2017 to 2018. The decrease in shopping center and operating expenses is attributed to a decrease of $2.4 million from the Redevelopment Properties and $0.5 million from the Disposition Properties offset in part by an increase of $1.5 million from the Same Centers.
Management Companies' Operating Expenses:
Management Companies' operating expenses increased $9.8 million from 2017 to 2018. The increase is attributed to a one-time charge of $12.7 million in connection with the Company's reduction in work force in 2018 (See "Other Transactions and Events" in Management's Overview and Summary) offset in part by a reduction in payroll and share and unit-based compensation costs.
REIT General and Administrative Expenses:
REIT general and administrative expenses decreased by $0.4 million from 2017 to 2018.

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