MACERICH Q1 FY26 earnings call MAC

Macerich's Path Forward plan, aimed at elevating and transforming its centers, is nearing completion. The company has achieved 83% of its target to create a $140 million cumulative signed-not-open (SNO) tenant pipeline, with $116 million contracted by Q1 FY26. This pipeline is expected to drive significant NOI growth through 2028. The leasing speedometer, tracking revenue completion, stands at 83%, with only 250 remaining leases out of 1,000 needed to complete the plan, and 125 of these are already in the LOI phase. Management anticipates substantially completing the leasing target by year-end 2026.

Management expressed strong confidence in the resurgence of Class A regional malls, citing their ability to consolidate trade areas and remain relevant. Despite historical challenges, the current environment shows tenants prioritizing quality over quantity, leading to demand for flagship stores in high-quality physical locations. The company highlights Gen Z shoppers as a long-term tailwind, as this demographic over-indexes in physical store visits and is projected to be the largest spending demographic by 2040. Macerich's portfolio, with 90% of NOI from Class A malls, is well-positioned to benefit from these trends.

A critical component of the transformation strategy is backfilling 30 vacant anchor spaces, all of which are now committed and expected to generate over $750 million in sales. These anchor replacements act as catalysts, unlocking productivity in entire mall wings and driving in-line leasing. Examples like Scheels at Chandler Mall and Dick's House of Sport at Freehold Raceway Mall demonstrate significant increases in trade area traffic and elevated tenancy, leading to improved valuations and attracting new, high-quality retailers.

Macerich acquired Annapolis Mall for $260 million, plus $12 million for a 13.1-acre vacant Sears parcel. This Class A regional mall, totaling 1.5 million square feet, is located in an affluent East Coast market. The prior owners had already initiated an 'Elevate and Transform' process, securing key tenants like Dick's House of Sport, Tesla, Uniqlo, and Lululemon. The acquisition is expected to be accretive to 2028 FFO targets by $0.04 per share and offers an initial yield of 10.5%, stabilizing to 11%+, with significant leasing opportunities in the remaining 107,000 square feet of available space.

The company continues to make strong progress on its balance sheet initiatives. Net debt to adjusted EBITDA has been reduced to 7.76x, a full turn lower than at the outset of the Path Forward plan, with a target to reach the low to mid-6x range. Macerich has completed $1.3 billion in dispositions, two-thirds of its initial target, and expects to sell an additional $300 million to $400 million by year-end 2026. Financing activities included a $200 million loan extension for South Plains, an amended $900 million revolving credit facility, and the repayment of Vintage Fair Mall debt.

Leasing activity remains robust, with 1.6 million square feet of new and renewal leases signed in Q1 FY26, including 700,000 square feet of new deals, more than double Q1 FY25. Tenant demand is strong across legacy, international, experiential, food and beverage, health and wellness, and emerging brands. The company has commitments on approximately 90% of 2026 expiring square footage and 30% of 2027 expirations, with an additional 55% in the LOI stage, significantly de-risking future renewals. The upcoming ICSC convention is expected to further strengthen the leasing pipeline.