Q3 2020 Macerich Earnings Conference Call
11/05/20 at 1:00 PM EST Thursday, November 05, 2020 1:00 pm EST
Making news.
Results and Highlights:
"While we are certainly pleased by the first quarter operating metrics and financial results, which exceeded our original first quarter expectations, our world is facing an unprecedented health crisis in the form of the novel coronavirus (COVID-19). It is a crisis that is impacting our way of life and touching almost every facet of the global economy. We are fortifying our Company and re-shaping our strategic plans to help withstand this unprecedented event. We are closely monitoring the situation and working with local and national authorities and our number one priority is the health and safety of our employees, our tenants, our service providers, and our community shoppers," said the Company's Chief Executive Officer,
During the trough of the COVID-19 pandemic, all but a few of the Company's malls had shuttered, except for the continued operation of essential retail and services, and approximately 74% of the gross leasable area, which was previously occupied prior to the COVID-19 closures, had closed. Many of those stores that remained open did so on a limited-hours basis. The Company is now actively planning for the re-opening of its real estate in all facets. Within the past two weeks, The Company has re-opened 13 assets located in
Community Outreach:
During this period, the Company engaged in numerous community initiatives, including to name just a few:
Liquidity Measures:
During this period of disrupted rent collections due to COVID-19, the Company has taken numerous measures to preserve its liquidity, including among others:
Guidance:
On
Macerich currently owns 51 million square feet of real estate consisting primarily of interests in 47 regional shopping centers. Macerich specializes in successful retail properties in many of the country's most attractive, densely populated markets with significant presence in the West Coast, Arizona, Chicago and the Metro New York to Washington, DC corridor. A recognized leader in sustainability, Macerich has achieved the #1 GRESB ranking in the North American Retail Sector for five straight years (2015 – 2019). Additional information about Macerich can be obtained from the Company's website at www.Macerich.com.
Investor Conference Call:
The Company will provide an online Web simulcast and rebroadcast of its quarterly earnings conference call. The call will be available on
The Company will publish a supplemental financial information package which will be available at www.macerich.com in the Investors Section. It will also be furnished to the
Note: This release contains statements that constitute forward-looking statements which can be identified by the use of words, such as "expects," "anticipates," "assumes," "projects," "estimated" and "scheduled" and similar expressions that do not relate to historical matters. Stockholders are cautioned that any such forward-looking statements are not guarantees of future performance and involve risks, uncertainties and other factors that may cause actual results, performance or achievements of the Company to vary materially from those anticipated, expected or projected. Such factors include, among others, general industry, as well as national, regional and local economic and business conditions, which will, among other things, affect demand for retail space or retail goods, availability and creditworthiness of current and prospective tenants, anchor or tenant bankruptcies, closures, mergers or consolidations, lease rates, terms and payments, interest rate fluctuations, availability, terms and cost of financing and operating expenses; adverse changes in the real estate markets including, among other things, competition from other companies, retail formats and technology, risks of real estate development and redevelopment, and acquisitions and dispositions; the adverse impact of the novel coronavirus (COVID-19) on the
(See attached tables)
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FINANCIAL HIGHLIGHTS |
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(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) |
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Results of Operations: |
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For the Three Months |
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Ended |
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Unaudited |
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2020 |
2019 |
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Revenues: |
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Leasing revenue |
|
|
Other income |
9,258 |
5,334 |
Management Companies' revenues |
6,973 |
10,180 |
Total revenues |
226,952 |
226,522 |
Expenses: |
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Shopping center and operating expenses |
70,725 |
69,604 |
Management Companies' operating expenses |
16,224 |
19,014 |
Leasing expenses |
7,425 |
7,505 |
REIT general and administrative expenses |
6,821 |
6,961 |
Depreciation and amortization |
82,213 |
81,468 |
Interest expense (a) |
8,074 |
38,357 |
Loss on extinguishment of debt |
- |
351 |
Total expenses |
191,482 |
223,260 |
Equity in income of unconsolidated joint ventures |
9,698 |
12,243 |
Income tax benefit (expense) |
266 |
(346) |
Loss on sale or write down of assets, net |
(36,703) |
(6,316) |
Net income |
8,731 |
8,843 |
Less net income attributable to noncontrolling interests |
1,209 |
1,019 |
Net income attributable to the Company |
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Weighted average number of shares outstanding - basic |
141,437 |
141,262 |
Weighted average shares outstanding, assuming full conversion of OP Units (b) |
151,915 |
151,677 |
Weighted average shares outstanding - Funds From Operations ("FFO") - diluted (b) |
151,915 |
151,677 |
Earnings per share ("EPS") - basic |
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EPS - diluted |
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Dividend declared per share |
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FFO - basic and diluted (b) (c) |
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FFO - basic and diluted, excluding financing expense in connection with Chandler Freehold (b) (c) |
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FFO - basic and diluted, excluding financing expense in connection with Chandler Freehold and loss on extinguishment of debt (b) (c) |
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FFO per share - basic and diluted (b) (c) |
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FFO per share - basic and diluted, excluding financing expense in connection with Chandler Freehold (b) (c) |
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FFO per share - basic and diluted, excluding financing expense in connection with Chandler Freehold and loss on extinguishment of debt (b) (c) |
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FINANCIAL HIGHLIGHTS |
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(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) |
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(a) |
The Company accounts for its investment in the Chandler Fashion Center and |
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(b) |
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(c) |
The Company uses FFO in addition to net income to report its operating and financial results and considers FFO and FFO-diluted as supplemental measures for the real estate industry and a supplement to Generally Accepted Accounting Principles ("GAAP") measures. |
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Beginning in the first quarter of 2018, the Company revised its definition of FFO so that FFO excluded the impact of the financing expense in connection with Chandler Freehold. Beginning in the third quarter of 2019, the Company presented a separate non-GAAP measure - FFO excluding financing expense in connection with Chandler Freehold. The Company has revised the FFO presentation for the three months ended |
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The Company also presents FFO excluding financing expense in connection with Chandler Freehold and loss on extinguishment of debt. |
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FFO and FFO on a diluted basis are useful to investors in comparing operating and financial results between periods. This is especially true since FFO excludes real estate depreciation and amortization, as the Company believes real estate values fluctuate based on market conditions rather than depreciating in value ratably on a straight-line basis over time. The Company believes that such a presentation also provides investors with a more meaningful measure of its operating results in comparison to the operating results of other real estate investment trusts ("REITs"). In addition, the Company believes that FFO excluding financing expense in connection with Chandler Freehold and non-routine costs associated with extinguishment of debt provide useful supplemental information regarding the Company's performance as they show a more meaningful and consistent comparison of the Company's operating performance and allows investors to more easily compare the Company's results. The Company believes that FFO on a diluted basis is a measure investors find most useful in measuring the dilutive impact of outstanding convertible securities. |
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The Company further believes that FFO does not represent cash flow from operations as defined by GAAP, should not be considered as an alternative to net income (loss) as defined by GAAP, and is not indicative of cash available to fund all cash flow needs. The Company also cautions that FFO as presented, may not be comparable to similarly titled measures reported by other REITs. |
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FINANCIAL HIGHLIGHTS |
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(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) |
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Reconciliation of net income attributable to the Company to FFO attributable to |
For the Three Months |
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common stockholders and unit holders - basic and diluted, excluding financing expense in |
Ended |
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connection with Chandler Freehold and loss on extinguishment of debt (c): |
Unaudited |
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2020 |
2019 |
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Net income attributable to the Company |
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|
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Adjustments to reconcile net income attributable to the Company to FFO attributable to common stockholders and unit holders - basic and diluted: |
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Noncontrolling interests in the OP |
557 |
577 |
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Loss on sale or write down of consolidated assets, net |
36,703 |
6,316 |
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Add: gain on undepreciated asset sales from consolidated assets |
- |
534 |
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Loss on sale or write down of assets from unconsolidated joint ventures (pro rata), net |
- |
71 |
|
Depreciation and amortization on consolidated assets |
82,213 |
81,468 |
|
Less depreciation and amortization allocable to noncontrolling interests in consolidated joint ventures |
(3,789) |
(3,645) |
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Depreciation and amortization on unconsolidated joint ventures (pro rata) |
49,509 |
44,998 |
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Less: depreciation on personal property |
(4,326) |
(3,865) |
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FFO attributable to common stockholders and unit holders - basic and diluted |
168,389 |
134,278 |
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Financing expense in connection with Chandler Freehold |
(45,707) |
(12,344) |
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FFO attributable to common stockholders and unit holders, excluding financing expense in connection with Chandler Freehold - basic and diluted |
122,682 |
121,934 |
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Loss on extinguishment of debt |
- |
351 |
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FFO attributable to common stockholders and unit holders, excluding financing expense in connection with Chandler Freehold and loss on extinguishment of debt - diluted |
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Reconciliation of EPS to FFO per share - diluted (c): |
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For the Three Months |
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Ended |
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Unaudited |
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2020 |
2019 |
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EPS - diluted |
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Per share impact of depreciation and amortization of real estate |
0.82 |
0.79 |
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Per share impact of loss on sale or write down of assets, net |
0.24 |
0.05 |
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FFO per share - basic and diluted |
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Per share impact of financing expense in connection with Chandler Freehold. |
(0.30) |
(0.09) |
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FFO per share - basic and diluted, excluding financing expense in connection with Chandler Freehold |
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Per share impact of loss on extinguishment of debt |
- |
0.01 |
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FFO per share - basic and diluted, excluding financing expense in connection with Chandler Freehold and loss on extinguishment of debt |
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FINANCIAL HIGHLIGHTS |
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(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) |
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Reconciliation of Net income attributable to the Company to Adjusted EBITDA: |
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For the Three Months |
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Ended |
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Unaudited |
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2020 |
2019 |
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Net income attributable to the Company |
|
|
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Interest expense - consolidated assets |
8,074 |
38,357 |
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Interest expense - unconsolidated joint ventures (pro rata) |
26,988 |
27,054 |
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Depreciation and amortization - consolidated assets |
82,213 |
81,468 |
|
Depreciation and amortization - unconsolidated joint ventures (pro rata) |
49,509 |
44,998 |
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Noncontrolling interests in the OP |
557 |
577 |
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Less: Interest expense and depreciation and amortization allocable to noncontrolling interests in consolidated joint ventures |
(8,963) |
(8,637) |
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Loss on extinguishment of debt |
- |
351 |
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Loss on sale or write down of assets, net - consolidated assets |
36,703 |
6,316 |
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Loss on sale or write down of assets, net - unconsolidated joint ventures (pro rata) |
- |
71 |
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Income tax (benefit) expense |
(266) |
346 |
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Distributions on preferred units |
100 |
100 |
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Adjusted EBITDA (d) |
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Reconciliation of Adjusted EBITDA to Net Operating Income ("NOI") and to NOI - Same Centers: |
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For the Three Months |
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Ended |
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Unaudited |
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2020 |
2019 |
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Adjusted EBITDA (d) |
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REIT general and administrative expenses |
6,821 |
6,961 |
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Management Companies' revenues |
(6,973) |
(10,180) |
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Management Companies' operating expenses |
16,224 |
19,014 |
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Leasing expenses, including joint ventures at pro rata |
8,215 |
8,471 |
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Straight-line and above/below market adjustments |
(13,039) |
(6,011) |
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NOI - All Centers |
213,685 |
217,080 |
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NOI of non-Same Centers |
(2,891) |
(9,001) |
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NOI - Same Centers (e) |
210,794 |
208,079 |
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Lease termination income of Same Centers |
(1,241) |
(658) |
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NOI - Same Centers, excluding lease termination income (e) |
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NOI - Same Centers percentage change, excluding lease termination income (e) |
1.03% |
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(d) |
Adjusted EBITDA represents earnings before interest, income taxes, depreciation, amortization, noncontrolling interests in the OP, extraordinary items, loss (gain) on remeasurement, sale or write down of assets, loss (gain) on extinguishment of debt and preferred dividends and includes joint ventures at their pro rata share. Management considers Adjusted EBITDA to be an appropriate supplemental measure to net income because it helps investors understand the ability of the Company to incur and service debt and make capital expenditures. The Company believes that Adjusted EBITDA should not be construed as an alternative to operating income as an indicator of the Company's operating performance, or to cash flows from operating activities (as determined in accordance with GAAP) or as a measure of liquidity. The Company also cautions that Adjusted EBITDA, as presented, may not be comparable to similarly titled measurements reported by other companies. |
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(e) |
The Company presents Same Center NOI because the Company believes it is useful for investors to evaluate the operating performance of comparable centers. Same Center NOI is calculated using total Adjusted EBITDA and eliminating the impact of the management companies' revenues and operating expenses, leasing expenses (including joint ventures at pro rata), the Company's REIT general and administrative expenses and the straight-line and above/below market adjustments to minimum rents and subtracting out NOI from non-Same Centers. |
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