This U.S. Mall Owner Had a Good 2023
By Greg Cornfield February 8, 2024 3:10 pm
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In defiance of the larger narrative around brick-and-mortar real estate, retail landlord and developer Macerich filled more of its portfolio in 2023 than it ever has in 30 years.
“While there’s still uncertainty in the macroeconomic environment, to date we continue to see a little pullback from the retailers,” Doug Healey, senior executive vice president for leasing, said during Macerich’s earnings call Wednesday.
The Santa Monica, Calif.-based real estate investment trust focused on shopping malls and retail centers reported record-high annual leasing volumes, improved occupancy, and a 4.5 percent bump in net operating income on the year.
Macerich said it signed 4.2 million square feet in leases in 2023, a 12 percent increase over 2022. That activity helped bring occupancy to 93.5 percent, a 0.9 percentage point increase compared to last year.
The REIT also reported a staggering spike in net income in the fourth quarter compared to the same period in 2022, marking $62.2 million in the final three months of the year compared to just $1.7 million during the previous fourth quarter. However, that didn’t erase a net loss of $274.1 million on the year.
Retail sales at Macerich properties declined 1.8 percent compared to last year, for which Healey blamed rising interest rates, inflation and the threat of a recession throughout the year following post-pandemic spikes in spending.
“We’ve definitely seen a change in spending habits with consumers now focusing on travel, dining out, entertainment, and other various services,” Healey said. “This doesn’t come as a surprise, and we expect 2024 to once again normalize and ultimately reflect more traditional consumer spending habits.”
Macerich also closed major asset deals on the year, including a joint venture sale in December with Hudson Pacific Properties to unload the Google-leased One Westside property on L.A.’s Westside for $700 million. The existing $325 million loan on the property was repaid, and $78 million of net proceeds were generated at Macerich’s 25 percent ownership.
Earlier that month, Macerich also closed a $710 million refinance of the existing $666 million loan in another joint venture at Tysons Corner Center in Virginia, and, in January this year, Macerich closed a $155 million refinance of the existing $117 million loan on Danbury Fair Mall in Connecticut.
Scott Kingsmore, Macerich’s chief financial officer, said the firm has seen improvement in debt capital markets since the latter portion of 2023 after the Federal Reserve ended its cycle of historic rate hikes.
“We’re now finding significant opportunities to finance our assets within the sustained strong performance of our Class A retail,” Kingsmore said. “We also believe that we are benefiting from a rotation of financing capital away from the office sector and into the Class A retail real estate sector.”
Macerich owns 46 million square feet of real estate consisting primarily of interests in 43 regional town centers, mostly along the West Coast, as well as in Arizona and along the Northeast corridor. Jackson Hsieh is set to become president and CEO of Macerich on March 1 following the retirement of Thomas O’Hern after 31 years atthe company.
Gregory Cornfield can be reached at gcornfield@commercialobserver.com.
