Q4 2023 The Macerich Co Earnings Call

Operator: Ladies and gentlemen, thank you for standing by. Welcome to the Q4 2023 Macerich Earnings Conference Call. At this time, all participants are in the listen only mode.

Yeah.

Ladies and gentlemen, thank you for standing by welcome to the Q4 2023 May stretch your earnings conference call at this time all procured.

And so are in a listen only mode.

Operator: After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising that your hand is raised.

The speaker's presentation, there will be a question and answer session to ask a question. During this session you would need to press star one one on your telephone you want.

Didn't hear an automated message it biting your hand, just right.

Operator: To withdraw your question, please press star 11. Again, please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Samantha Greening, Director of Investor Relations. Please go ahead.

Your question. Please press star one one again.

Today's conference is being recorded.

I would now like to hand, the conference over to your Speaker today, Samantha Greening director of Investor Relations. Please go ahead.

Samantha Greening: Thank you for joining us on our fourth quarter 2023 earnings call. During the course of this call, we'll be making certain statements that may be forward-looking within the meaning of the safe harbor of the Private Securities Litigation Reform Act of 1995, including statements regarding projections, plans, or future expectations. Actual results may differ materially due to a variety of risks and uncertainties set forth in today's press release and our SEC filing. Reconciliations of non-GATT financial measures to the most directly comparable GATT measures are included in the earnings release and supplemental Form 8K with the SEC, which are posted in the Investors section of the company's website at macerich.com. Joining us today are Tom O'Hearn, Chief Executive Officer And with that, I turn the call over to Tom. Thank you, Samantha.

Samantha Greening: Thank you for joining us on our fourth quarter 2023 earnings call. During the course of this call, we're making certain statements that may be forward looking within the meaning of the safe Harbor of the private Securities Litigation Reform Act of 1995, including statements regarding projections plans or future expectations actual results may differ materially.

Samantha Greening: Due to a variety of risks and uncertainties set forth in today's press release, and our SEC filings.

Samantha Greening: Conciliations of non-GAAP financial measures to the most directly comparable GAAP measures are included in the earnings release and supplemental filed on form 8-K, with the SEC, which are posted in the investors section of the company's website at <unk> Dot com.

Samantha Greening: Joining us today are Tom O'hern, Chief Executive Officer, Scott Kingsley, <unk> Senior Executive Vice President and Chief Financial Officer, and Doug Healey Senior Executive Vice President of leasing and with that I'll turn the call over to Tom.

Tom O'hern: Thank you Samantha.

Tom O'Hearn: By now, it's old news, but on Monday, we announced my pending retirement after 31 years at Macerich. So today is my 118th Macerich earnings call and my last. I will miss all of you. I would like to say I'll miss all of you, but I'm not so sure about that.

Tom O'hern: By now it's old news, but on Monday, we announced my pending retirement after 31 years at base rich.

Tom O'hern: So today is my 118th May stretch earnings call and my last.

Tom O'hern: I will Miss all of you I would like to say I'll Miss all of you.

Tom O'hern: But I'm not so sure about that.

Tom O'Hearn: When I joined Mace Church 31 years ago, it was to help Mace Siegel and Art and Ed Coppola take the company public. We did that in March of 1994. Our total market cap was a modest $650 million.

Tom O'hern: When I joined base reached 31 years ago. It was to help may Segal and ordinary proposed to take the company public.

Tom O'hern: We did that in March of 94.

Tom O'hern: Total market cap was a modest $650 million.

Tom O'Hearn: Today, our market cap is $11 billion. We went from having a portfolio of malls in the mid markets doing about $350 a foot in sales to a portfolio in major coastal markets doing $836 a foot in tenant sales. There's been a dramatic improvement in the quality of the portfolio, I have to say. When I joined Macerich in 1993, no way in hell did I think I'd be here 31 years later. Nothing in my Iron Man background prepared me for a run of that duration.

Today, our market cap is $11 billion.

Tom O'hern: We went from having a portfolio of malls in the mid market's doing about $3 50, a foot in sales to our portfolio in major coastal markets doing $836 per foot and tenant sales.

Tom O'hern: There's been a dramatic improvement in the quality of the portfolio.

Speaker Change: When I joined May stretch in 1993, no way in Hell did I think I'd be here 31 years later.

Speaker Change: Nothing in mine Iron Man background prepared me for a run of that duration.

Tom O'Hearn: I will be forever thankful to my Macerich colleagues and friends for our collective accomplishments. Today, Macerich is extremely well positioned for the future as I pass the baton of leadership over to a man most of you know, Jackson Shea. He's the right person to take the company forward and to continue to execute on our strategy of densifying and diversifying our portfolio of top quality town centers. Regarding the upcoming leadership change, there is a detailed press release in 8K on the topic. So I will refer you there.

Speaker Change: I won't be forever thankful to my <unk> colleagues and friends for our collective accomplishments.

Speaker Change: Today, <unk> is extremely well positioned for the future as I pass the baton of leadership over to them and most of you know Jackson shape.

Speaker Change: He's the right person to take the company forward.

Speaker Change: And to continue to execute on our strategy of densify and diversifying our portfolio of top quality town centers.

Speaker Change: Regarding me up coming leadership change, there's a detailed press release and 8-K on the topic. So I would refer you there.

Tom O'Hearn: So the remainder of this call, we will be focused on the quarterly results and the guidance and outlook for 2020. So now to focus on the quarter, I'm very happy to be leaving on extremely positive news. We had a strong fourth quarter, which included.

Speaker Change: So the remainder of this call we will be focused on the quarterly results.

Speaker Change: On the guidance and outlook for 2024.

Speaker Change: Okay.

Speaker Change: So now to focus on the quarter I'm very happy to be leaving on extremely positive news.

Tom O'Hearn: Same center NOI of 3% for the quarter and 4.5% for the year. Occupancy is now up to 93.5%. That's a 90 basis point improvement over the end of 2020. We had a total shareholder return of 46% for 2023. That's a top 10 finish among all REITs. We posted positive release spreads of 17.2% for the year. We had a quarterly EBITDA margin improvement of over 100 basis points versus the fourth quarter of last year. Our partnership sold one Westside office building to UCLA for a pro rata share of $175 million to Macerich. We did over $890 million of financing that was closed or committed in the fourth quarter. More on that from Scott in a minute. We signed over 4 million square feet of leases in 2023. That's an all-time Macerich record.

Speaker Change: Had a strong fourth quarter, which included <unk>.

Same center NOI of 3% for the quarter and four 5% for the year.

Speaker Change: Occupancy is now up to 93, 5%.

Speaker Change: It's a 90 basis point improvement over the end of 2022.

Speaker Change: We had a total shareholder return of 46% for 2023.

Speaker Change: That's a top 10 finish among all Reits.

Speaker Change: We posted positive re leasing spreads of 17, 2% for the year.

Speaker Change: We had quarterly EBITDA margin improvement of over 100 basis points versus the fourth quarter of last year.

Speaker Change: Yeah.

Speaker Change: Our partnerships sold the one Westside office building to UCLA.

Speaker Change: For our pro rata share of a $175 million to make sure rich.

Speaker Change: Yeah.

Speaker Change: We did over $890 million of financings that was closed or committed in the fourth quarter.

Speaker Change: More on that from Scott in a minute.

Speaker Change: We signed over 4 million square feet of leases during 2023.

Speaker Change: That's an all time based rich record.

Tom O'Hearn: And that's on the heels of the prior record, which was set in 2022. Portfolio average sales per foot were 836, down slightly from last year, but nonetheless top quality sales productivity. Bankruptcies continue to be at a record low.

Speaker Change: And that's on the heels of the prior record which was set in 2022.

Speaker Change: Portfolio average sales per foot was 836.

Speaker Change: Down slightly from last year, but nonetheless, a top quality sales productivity.

Speaker Change: Bankruptcies continued to be at a record level.

Tom O'Hearn: We continue to expect gains in occupancy and net operating income as we progress through 2024 and into 2025. Also, keep in mind, as a result of the very strong leasing activity in 22 and 23, we have a very large and healthy leasing pipeline with nearly 2.2 million square feet of leases that have been signed but are not yet open. Once those tenets open, they are going to fuel our NOI growth in 2024 and 2025. Now, I'd like to turn it over to Scott to discuss in more detail the financial results, earnings guidance, and the significant financing activity we have had in the past few months. Thank you, Tom.

Speaker Change: We continue to expect gains in occupancy and net operating income as we progress through 2024 and into 2025.

Speaker Change: Also keep in mind as a result of the very strong leasing activity in 'twenty, two and 'twenty three.

Speaker Change: We have a very large and healthy leasing pipeline with nearly 2.2 million square feet of leases that have been signed but not opened yet.

Speaker Change: Once those 10 tenants open.

Speaker Change: It's going to fuel our NOI growth in 'twenty, four and 'twenty five.

Speaker Change: And now I'd like to turn it over to Scott to discuss in more detail the financial results earnings guidance and a significant financing activity we had in the past few months.

Scott W. Kingsmore: This morning, we're extremely pleased to report a strong finish to the year. As Tom noted, Same Center NOI increased 3% during the fourth quarter of 2023 relative to the fourth quarter of 22, when excluding lease termination income. For the year 2024, Same Center NOI growth, excluding lease termination income, was a positive 4.5%. SFO per share for the fourth quarter was 56 cents and was $1.80 per share for the year.

Scott W. Kingsmore: Tommy This morning, we're extremely pleased to report a strong finish to the year.

Scott W. Kingsmore: Tom noted same center NOI increased 3% during the fourth quarter of 2023 relative to the fourth quarter of 'twenty two.

Scott W. Kingsmore: When excluding lease termination income for the year 2020 for same center NOI growth excluding lease termination income was a positive four 5%.

Scott W. Kingsmore: <unk> per share for the fourth quarter was 56 cents and was $1 80 per share for 2023 for the year.

Scott W. Kingsmore: The quarterly result was 3 cents, or 5.7% more than FFO during the fourth quarter of 2022 at 53 cents a share, and was in line with consensus estimates for the quarter. FFO for the year was in line with our most recently issued guidance, which was a midpoint of $1.80 per share. Primary major factors contributing to the quarterly FFO per share increase are as follows. 1, an $11 million increase in rental revenues, which included a $13 million increase in top-line minimum rent. $2 million increase in recovery revenue, which was offset by a four million dollar decline in percentage rent. These trends are consistent with what's been reported over prior quarters.

Scott W. Kingsmore: Orderly result was three or five 7% more than <unk> during the FERC fourth quarter of 2022 at 53 cents a share and was in line with consensus estimates for the quarter.

Scott W. Kingsmore: So for the year was in line with our most recently issued guidance, which was a midpoint of $1 80 per share.

Scott W. Kingsmore: Primary major factors contributing to the quarterly <unk> per share increase are as follows one and $11 million increase in rental revenues, which included a $13 million increase in topline minimum rent to them.

Scott W. Kingsmore: The increase in recurring revenue.

Scott W. Kingsmore: Which were offset by a $4 million decline in percentage rent.

Scott W. Kingsmore: These trends are consistent with what's been reported over prior quarters, they're driven by improved occupancy growth in rental rates as well as our continued conversion from variable to fixed rent structures with cam and tax recovery charges.

Scott W. Kingsmore: They are driven by improved occupancy, growth in rental rates, as well as a continued conversion from variable to fixed rent structures with CAM and tax recovery charges. Secondly, we had a $9 million increase in termination income. This was primarily driven by a single lease termination deal, which was a very strategic transaction that we expect will facilitate a major future redevelopment opportunity. These positive factors were offset by the following, one, an $11 million unfavorable increase in interest expense due to rising rates. This figure excludes accrued default interest, which is consistent with our reporting over the prior quarter.

Speaker Change: Secondly, Ah.

Speaker Change: We had a $9 million increase in termination income. This was primarily driven by a single lease termination a deal which was a very strategic transaction that we expect will facilitate a major future redevelopment opportunity.

Speaker Change: These positive factors were offset by the following one and $11 million unfavorable increase in interest expense due to rising rates.

Speaker Change: This figure excludes accrued default interest, which is consistent with our reporting over the prior quarter.

Scott W. Kingsmore: And then secondly, a $4 million decline in non-cash straight-line rental revenue, primarily from the conversion of GAAP to cash rents for the lease with Google at One Westside, which Tom mentioned we've disposed of as of year-end. To recap, as we have emerged from the 2020 pandemic, same center NOI growth generated by our high quality Class A portfolio has been tremendous, with NOI growth averaging 7.4% in both 21 and 22, followed by 4.5% same center NOI growth in 2023. We are extremely pleased with our resilient core NOI growth during the past three years. This morning, we issued our initial guidance for 2024 funds from operations. 2024 FFO is estimated in the range of $1.76 to $1.86 per share, or $1.81 per share at the midpoint. Here are several details underlying this earnings guidance. The FFO range includes an estimated same-center NOI growth in the range of 2.25% to 3.25%.

Speaker Change: And then secondly, a $4 million decline in noncash straight line rental revenue primarily from the conversion of GAAP to cash rents for the lease with Google at one Westside, which Tom mentioned, we've disposed of as of yearend.

Speaker Change: To recap as we have emerged from the 2020 pandemic same center NOI growth generated by our high quality class a portfolio has been tremendous with NOI growth, averaging seven 4% and by 'twenty, one and 'twenty two.

Speaker Change: Followed by four 5% same center NOI growth in 2023.

Speaker Change: We are extremely pleased with our resilient core NOI growth during the past three years.

Speaker Change: This morning, we issued our initial guidance for 2024 funds from operations a.

Speaker Change: 2020 for FSFR was estimated in the range of $1 76 to $1 86 per share or $1 81 per share at the midpoint.

Here are several details underlying this earnings guidance.

Speaker Change: <unk> and <unk>.

Speaker Change: An estimated same center NOI growth in the range of two in a quarter to 3.25%.

Scott W. Kingsmore: In terms of quarterly cadence for our 2024 estimated FFO guidance, we expect approximately 21% in the first quarter, approximately 24% in both the second and third quarters, and the remaining approximately 31% within the fourth quarter of 2024. The primary major factors that result in a reconciliation between 2023 actual funds from operations and 2024 estimated FFO are as follows. Same Center NOI is estimated to contribute roughly 10 cents of FFO this year. We had roughly $0.03 of FFO estimated from a relative improvement in valuation adjustments pertaining to our investment and direct investment in retailers. And we had roughly a one and a half cent year over year increase from the acquisition of our partner's interest in Freehold Raceway Mall, a transaction which closed in the latter part of 2023. However, these positive factors will be substantively offset by the following.

Speaker Change: In terms of quarterly cadence for our 2024, our estimated <unk> guidance, we expect approximately 21% in the first quarter approximately 24% in both the second and third quarters and the remaining approximately 31% within the fourth quarter of 2024.

Speaker Change: Primary major factors.

Speaker Change: That resulted in our reconciliation between 2023 actual funds from operations in 2020 for estimated SSL are as follows.

Speaker Change: Same center NOI is estimated to contribute roughly 10 cents of <unk> this year.

Speaker Change: We had roughly <unk> estimated from a relative improvement in valuation of Joshua adjustments pertaining to our investment and direct investment and retailer.

Speaker Change: And retailers.

Speaker Change: And we had roughly a one 5% year over year increase from the acquisition of our partner's interest in Freehold Raceway mall transaction, which closed in the latter part of 2023.

Speaker Change: These positive factors will be substantively offset by the following.

Scott W. Kingsmore: 1, a 7 cent increase in interest expense when viewed on the same center basis, and 2, an anticipated $0.04 decline in land sale gains. We've spoken about this in the past, this decline is due to the robust disposition activity from our land sale program that we've undertaken since 2021, which has significantly depleted our undeveloped land inventory that remains. And then lastly, about a one and a half cent per share dilutive impact from increased share count, which is primarily driven from the company's various share-based compensation. To emphasize, consistent with 2023, our 2024 outlook More details regarding our guidance assumptions can be found on page 15 of the company's Form 8K supplemental that was filed early this morning, on the balance sheet. Over the past few months, we have made considerable progress addressing our debt maturity. In December, we closed a $710 million, five-year CMBS refinance of the $666 million loan on Tyson's Corner Center. The new loan bears interest at a fixed rate of 6.6% and is interest-only for the entire loan term.

1% to 7% increase in interest expense when viewed on a same center basis.

To and anticipated <unk> decline in land sale gains.

Speaker Change: We've spoken about this in the past this decline is due to the robust disposition activity from our land sale program that we've undertaken since 2021, which is a significantly depleted our undeveloped land inventory that remains.

Speaker Change: And then lastly, about one and a half cent per share dilutive impact from increased share count, which is primarily driven from the company's various share based compensation plans.

Speaker Change: To emphasize consistent with 2023.

Speaker Change: Our 2024 outlook continues to reflect healthy operating cash flow generation of approximately $300 million after recurring capital expenditures and leasing costs, but before payment of dividends.

Speaker Change: More details regarding our guidance assumptions can be found on page 15 of the company's form 8-K supplemental that was filed early this morning.

Speaker Change: Onto the balance sheet.

Speaker Change: Over the past few months, we have made considerable progress addressing our debt maturities.

Speaker Change: In December we closed a $710 million five year see MBS refinance of the $666 million loan on Tysons corner Center, the new loan bears interest at a fixed rate of six 6% and is interest only for the entire loan term.

Scott W. Kingsmore: Also in December, our joint venture sold One Westside, as Tom alluded to, to UCLA for $700 million. The existing $325 million loan on the property was repaid, and approximately $78 million in net proceeds were generated at our 25% ownership share. In January, we closed a $24 million five-year bank loan refinance of the existing $23 million loan on Chandler Boulevard Shop. The new loan bears variable interest at SOFR plus 2.5% and is interest only for the entire duration of the loan. In January also, we repaid the majority of the loan on Fashion District in Philadelphia. Roughly $8 million remains, and that matures in April and is anticipated to be repaid at that time, in January. A $155 million 10-year CMVS refinance of the existing $117 million loan on Danbury Fair. The new loan bears interest at a fixed rate of 6.39 percent, and as interest only during the majority of the 10-year loan term.

Speaker Change: Also in December our joint venture sold one Westside as Tom alluded to.

Speaker Change: UCLA for $700 million.

Speaker Change: The existing $325 million loan on the property was repaid and approximately $78 million of net proceeds were generated at our 25% ownership share.

In January we close to $24 million five year bank loan refinance of the existing $23 million loan on Chandler Boulevard shops.

Speaker Change: The new loan bears variable interest had so for plus two 5% and is interest only for the entire duration of the long term.

Speaker Change: In January also we repaid the majority of the loan on fashion district of Philadelphia.

Speaker Change: Roughly $8 million remains.

Speaker Change: And that matures in April and is anticipated to be repaid at that time.

Speaker Change: In January <unk>.

Speaker Change: Close to $155 million 10 year see MBS refinance of the existing $117 million loan on Danbury fair.

Speaker Change: The new loan bears interest at a fixed rate of $6 three 9%.

And is interest only during the majority of the 10 year loan term.

Scott W. Kingsmore: We're currently working with the loan servicer on a multi-year extension of the $86 million loan on Fashion Outlets of Niagara, and we do expect this transaction to close later this month. Once closed on that Niagara extension, we will have a very manageable $400 million in maturities remaining in 2024 across three separate loans. To recap the year,

Speaker Change: We are currently working with a loan servicer on a multi year extension of the $86 million loan on fashion outlets of Niagara and we do expect this transaction to close later this month.

Speaker Change: Once closed on that Niagara extension.

Speaker Change: We will have a very manageable $400 million of maturities remaining in 2024 across three separate loans.

Scott W. Kingsmore: We've been extremely active in the debt capital markets during 2023 and year-to-date. So far in 2024, across eight transactions, including Niagara, we will have refinanced or extended eight loans, totaling $2.9 billion, or $2.1 billion at our ownership share. This activity included a four and a half year renewal and upsizing of our $650 million revolving corporate credit facility during the third quarter of last year. And let's remind ourselves that this closing was amidst a regional banking crisis within the United States.

Speaker Change: To recap the year, we have been extremely active in the debt capital markets during 2023 and year to date, so far in 2024 across eight transactions, including Niagara, We will have refinanced or extended eight loans totaling $2 9 billion or $2 1 billion at our ownership share.

Speaker Change: This activity included a four and a half year of renewal and upsizing of our $650 million revolving corporate credit facility during the third quarter of last year.

Speaker Change: And let's remind ourselves that closing was amidst the regional banking crisis within the United States. So we're very pleased with our activity.

Scott W. Kingsmore: So we're very pleased with our activity throughout last year and to start this year. A year ago, we anticipated improvement in the debt capital markets during the latter portion of 2023, given that the Federal Reserve was expected to be then near the end of its historic rate hiking cycle. And, in fact, that expectation has proven true.

Speaker Change: Throughout last year and to start this year.

Speaker Change: A year ago, we anticipated improvement in the debt capital markets. During the latter portion of 2023 given that the federal reserve is expected to be then near the end of its historic rate hiking cycle and in fact that expectation has proven true.

Scott W. Kingsmore: We're now finding significant opportunities to finance our assets within the sustained strong performance of our Class A retail. We also believe that we are benefiting from a rotation of finance and capital away from the office sector and into the quasi-retail real estate sector. Our recent transactional activity supports that thesis. In mid-November, we acquired our partner's half share in Freehold Raceway Mall for $5.6 million and the assumption of our partner's share of debt. We now own 100% of Freehold Raceway Mall. We currently have approximately $657 million of available liquidity, which includes $490 million of capacity on our corporate credit facility.

Speaker Change: We're now finding significant opportunities to finance our assets within the sustained strong performance of our class a retail.

Speaker Change: 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.

Speaker Change: Our recent transactional activity supports that thesis.

Speaker Change: In mid November we acquired our partners have share in Freehold Raceway mall for $5 $6 million and the assumption of our partner share of that we now own 100% Freehold Raceway mall.

Speaker Change: We currently have approximately $657 million of available liquidity, which includes $490 million of capacity on our corporate credit facility.

Douglas J. Healey: With that, I'll turn it over to Doug to discuss the leasing and operating environment. Thanks, Scott. We closed out 2023 with very strong leasing metrics and leasing volumes. In fact, 2023 was a historic and record leasing year for Macerich, dating back 30 years as a public company. However, year-end 2023 sales were down 1.8% from year-end 2022.

Speaker Change: With that I'll turn it over to Doug to discuss the leasing and operating environment. Thanks.

Douglas J. Healey: Thanks, Scott, we closed out 2023, with very strong leasing metrics and leasing volumes. In fact, 2023 was a historic and record leasing year for matrix dating back 30 years as a public company.

Douglas J. Healey: Year end 2023 sales were down one 8% from year end 2022.

Douglas J. Healey: After a post-pandemic spike in spending across all retail categories, 2023 was clouded with increasing interest rates, inflation, and the constant threat of a recession. In addition, we've definitely seen a change in spending habits, with consumers now focusing on travel, dining out, entertainment, and other various services. This doesn't come as a surprise, and we expect 2024 to once again normalize and ultimately reflect more traditional consumer spending habits. Sales per square foot as of December 31st, 2023 were $836.

Douglas J. Healey: After a post pandemic spike in spending across all retail categories 2023 was clouded with increasing interest rates inflation and the constant threat of a recession.

Douglas J. Healey: In addition, we've definitely seen a change in spending habits consumers now focusing on travel dining out entertainment and other various services.

Douglas J. Healey: Doesn't come as a surprise and we expect 2024 to once again normalize and ultimately reflect reflect more traditional consumer spending habits.

Sales per square foot as of December 31, 2023 were $836.

Douglas J. Healey: That's down slightly from $847 at the end of the third quarter, and that's primarily due to a decline in the sales of electric vehicles. Trailing 12-month leasing spreads were a very healthy 17 percent as of December 31st, 2023. That's up 660 basis points from the third quarter and up over 13% when compared to December 31st, 2022. In the fourth quarter, we opened 391,000 square feet of new stores. For the full year 2023, we opened almost 1.6 million square feet of new stores, which is 80% more square footage than we opened during the same period in 2022. Notable openings in the fourth quarter include an expanded and newly reimagined American Eagle flagship at Tyson's Corner Center. Five Below at Valley Mall, Levi's at Los Cerritos, Pandora at Stonewood, and North Face at Broadway Plaza and Flatiron Crossroads.

Douglas J. Healey: Down slightly from $847 at the end of the third quarter and Thats, primarily due to a decline in the sales of electric vehicles.

Douglas J. Healey: Trailing 12 month leasing spreads were very healthy 17%.

As of December 31, 2023, that's up 660 basis points from the third quarter and up over 13% when compared to December 31 2022.

Douglas J. Healey: In the fourth quarter, we opened 391000 square feet of new stores.

Douglas J. Healey: For the full year 2023, we opened almost one 6 million square feet of new stores, which is 80% more square footage that we opened during the same period in 2022.

Douglas J. Healey: Notable openings in the fourth quarter include an expanded our newly re imagined American Eagle flagship at Tysons corner Center.

Douglas J. Healey: Five below at Valley Mall, Levi's at Lowe's to re dose Pandora at Starwood and North face at Broadway Plaza and Flatiron crossing.

Douglas J. Healey: In the Digitally Native and Emerging Brands category, we opened Beyond Yoga at Broadway Plaza, Purple at Los Cerritos, Warby Parker at Chandler, and Yeti at Washington Square. In the international category, we opened Aritzia and Inimissimi at Corte Madera, Lululemon at Freehold Raceway Mall, Uniglo at Green Acres, Zimmerman at Scottsdale Fashion Square, and Zara at Queen's Center.

Douglas J. Healey: And the digitally native and emerging brands category, we opened beyond yoga at Broadway Plaza Purple at loss to re dose for re Parker at Chandler and Yeti at Washington Square.

Douglas J. Healey: In the international category reopened auryxia in the midst of Mi at Corte Madera, Lulu Lemon at Freehold Raceway mall <unk> at Green acres.

Douglas J. Healey: Zimmerman at Scottsdale fashion square and Zara Queen Center.

Douglas J. Healey: Lastly, in the experiential category, we opened camp at Tyson's Corner and round one of Spoccia at Arrowhead Town Center. Now, let's take a look at the new and renewal leases we signed in the fourth quarter. In the fourth quarter, we signed 186 leases for 1.1 million square feet.

Douglas J. Healey: Lastly in the experiential category, we opened cap at Tysons corner and round one spoke.

Douglas J. Healey: At Arrowhead Towne Center.

Douglas J. Healey: Now, let's take a look at the new and renewal leases, we signed in the fourth quarter.

Douglas J. Healey: In the fourth quarter, we signed 186 leases for one 1 million square feet.

Douglas J. Healey: For the full year 2023, we signed leases for 4.2 million square feet, and that's up from 3.8 million square feet, or 12% when compared to the same period in 2022. And as I mentioned earlier, 2023 was a record leasing year for Macerich over the past three decades. Notable new lease signings in the fourth quarter include Buck Mason, Kate Spade, Mango, Mangianos, and Level 99 at Tyson's Corner, Round 1 at Chandler, Dave and Buster's at Freehold, Launch, and ShopRite at Greenacres. A second office lease with San Bernardino County at Inland Center, Arterix at Washington Square, True Food Kitchen at 29th Street, and Viore at Scottsdale Fashion Square.

Douglas J. Healey: For the full year 2023, we signed leases for $4 2 million square feet, and Thats up from $3 8 million square feet or 12% when compared to the same period in 2022 and.

Douglas J. Healey: And as I mentioned earlier 2023 was a record leasing year for mace rich over the past three decades.

Douglas J. Healey: Notable movie signings in the fourth quarter include bulk Mason, Kate Spade, Mango Marciano and level 99 at Tysons corner round, one at Chandler, Dave <unk> Buster's at freehold.

Douglas J. Healey: Launch in shop, right at Green acres.

Douglas J. Healey: <unk> office lease with San Bernardino County at Inland Center, our Terex at Washington Square true food kitchen at 29th Street, and Vre at Scottsdale fashion Square.

Douglas J. Healey: As always, our focus in the fourth quarter was, in large part, addressing our lease expirations, finalizing 2023 and getting a head start in 2024. In doing so, in the fourth quarter, we signed over 130 renewal leases with 84 different brands totaling 475,000 square feet. With that, we're basically done with 2023 and now have commitments on 44% of our 2024 expiring square footage with another 34% in the letter of intent state. 2023 was another year of newness for us. Once again, bringing new, unique, and emerging brands was a major initiative for our leasing team, and a way for us to really reimagine and differentiate our town centers from our competition. To that end, in 2023, we signed leases with over 80 new to Macerich brands, totaling just over 600,000 square feet. Examples include Beyond Yoga, Yeti, Club Studio, ShopRite, Level 99, Magianos, Elefante, and Catch, just to name a few.

Douglas J. Healey: As always our focus in the fourth quarter was in large part addressing our lease explorations finally, finalizing 2023 and getting a head start in 2024.

Douglas J. Healey: And doing so in the fourth quarter, we signed over 130 renewal leases with 84 different brands totaling 475000 square feet.

Douglas J. Healey: With that we're basically done with 2023 and now have commitments at 44% of our 2020 for expiring square footage with another 34% in the letter of intent stage.

Douglas J. Healey: 2023 was another year of newness for us once again, bringing new unique and emerging brands with a major initiative for our leasing team and a way for us to really re imagine and differentiate our town centers from our competition.

Douglas J. Healey: To that end in 2023, we signed leases with over 80, new domain based rich brands totaling just over 600000 square feet. Examples include beyond Yoga Yeti club studio shop, right level, 99, Marciano <unk> and catch just to name a few.

Douglas J. Healey: Turning to our leasing pipeline at the end of the fourth quarter. We had 126 signed leases for $2 2 million square feet of new stores, which we expect to open in 2020 for 2025 and 2026.

Douglas J. Healey: Turning to our leasing pipeline, at the end of the fourth quarter, we had 126 signed leases for 2.2 million square feet of new stores, which we expect to open in 2024, 2025, and 2026. In addition to these signed leases, we're currently negotiating another 80 leases for new stores totaling almost 600,000 square feet, which will also open in 2024, 2025, and 2026. So in total, that's over 2.8 million square feet of new store openings throughout the remainder of this year and into 2026. And I want to emphasize, these are new leases with retailers not yet open and not yet paying rent, and these numbers do not include renewals.

Douglas J. Healey: In addition to these signed leases were currently negotiated another 80 leases for new stores totaling almost 600000 square feet, which will also open in 2020 for 2025 and 2026.

Douglas J. Healey: So in total that's over $2 8 million square feet of new store openings throughout the remainder of this year and into 2026.

Douglas J. Healey: And I want to emphasize these are new leases with retailers and not yet open and not yet paying rent and these numbers do not include renewals.

Douglas J. Healey: And I can tell you that this leasing pipeline of new store openings now accounts for $64 million of incremental rent, which represents roughly 8% of our current net operating income.

Douglas J. Healey: And this incremental rent will continue to grow as we approve new deals and signed new leases.

Douglas J. Healey: And I can tell you that this leasing pipeline of new store openings now accounts for $64 million of incremental rent, which represents roughly 8% of our current net operating income. And this incremental rent will continue to grow as we approve new deals and sign new leases. So to conclude, our leasing and operating metrics were very solid in 2023. There was only one bankruptcy in our portfolio in the fourth quarter and only 10 for all of 2023. And bankruptcies overall in both 2022 and 2023 were at their lowest levels since 2013, which is consistent with our significantly reduced tenant watch list.

So to conclude our leasing and operating metrics were very solid in 2023.

Douglas J. Healey: There was only one bankruptcy in our portfolio in the fourth quarter and only 10 for all of 2023 and.

Douglas J. Healey: And bankruptcies overall in both 2022 and 2023 were at their lowest levels since 2013, which is consistent with our significantly reduced kind of watch list.

Douglas J. Healey: Leasing volumes were at record levels. The result of which is a very strong vibrant and exciting pipeline of tenant slated to open this year and into 2026.

Speaker Change: And as I've said in the past and that remains the case.

Speaker Change: There is still uncertainty in the macroeconomic environment to date, we can see we continue to see little pullback from the retailers.

Speaker Change: And I think this is a result of the very healthy retailer environment that exists today as well as a testament to our best in class portfolio of Superregional town centers.

Douglas J. Healey: Leasing volumes were at record levels, the result of which is a very strong, vibrant, and exciting pipeline of tenants slated to open this year and into 2026. And as I've said in the past, and it remains the case, while there's still uncertainty in the macroeconomic environment, to date, we continue to see little pullback from retailers. And I think this is a result of the very healthy retail environment that exists today, as well as a testament to our best-in-class portfolio of super regional town centers.

Speaker Change: So given this and everything Tom and Scott discussed we remain optimistic as we look to 2024 and beyond.

Speaker Change: And now I'll turn the call over to the operator to open it up for Q&A.

Speaker Change: Thank you.

Speaker Change: Reminder, to ask a question. Please press star one on your telephone and wait for your name to be announced.

Speaker Change: I would draw your question. Please press star one again.

Speaker Change: Please limit to one question and one follow up please standby, while we compile the Q&A roster.

Operator: So given this and everything Tom and Scott discussed... we remain optimistic as we look to 2024 and beyond. And now I'll turn the call over to the operator to open it up for Q&A. Thank you. As a reminder, to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please limit yourself to one question and one follow-up.

Speaker Change: The first question comes from Jeffrey Spector with Bank of America Securities. Your line is open.

Jeffrey J. Donnelly: Great. Thank you and first congratulations to Tom and Ed I wish you the best in retirement.

Jeffrey J. Donnelly: Yes.

Jeffrey J. Donnelly: Probably appropriate first question would be for Jackson on.

Jeffrey J. Donnelly: Please stay on live while we compile the Q&A roster. The first question comes from Jeffrey Spector with Bank of America Securities. Your line is open.

Jeffrey J. Donnelly:

Jeffrey J. Donnelly: The fact that Tom said, you know you're the right person to take things forward talked about Densification efforts tremendous leasing is Jackson. What are you I know you just started but could you provide some of your initial thoughts like should we expect any strategy changes at this.

Tom O'Hearn: Great, thank you. And first, congratulations to Tom and Ed. Wish you the best in retirement. I guess, you know, a probably appropriate first question would be for Jackson on, you know, the fact that Tom said, you know, you're the right person to take things forward and talked about densification efforts tremendously. So, I guess my first question is, Jackson, what are you? I know you just started, but, you know, could you provide some of your initial thoughts? Like, should we expect any strategy changes at this? What do you have in mind? Hey, Jeff, it's Tom. Jackson is actually not with us here.

Jeffrey J. Donnelly: Do you have in mind.

Hey, Jeff its Tom.

Speaker Change: Jackson has actually not with us here okay.

Tom O'hern: So much deserved time off he starts March 1st So I'll just ask you to hang on to that question until then Jeff.

Speaker Change: Okay, sorry about that if I know no problem no problem.

Speaker Change: If I could then ask Doug.

Speaker Change: And.

Speaker Change: Congratulations Doug on a great 'twenty three in terms of leasing I. Appreciate all the stats you provided including you know where you stand today on 24.

Douglas J. Healey: Okay, he's enjoyed so much deserved time off. He starts March 1. So I'll just ask you to hang on to that question till then, Jeff. Okay, sorry about that if I missed that. No, no problem. If I could then ask Doug, and you know, congratulations, Doug, on a great 23 in terms of leasing, appreciate all the stats you provided, including, you know, where you stand today on 24, I think you said, you know, 80% commitments, square footage, 44% in the LOI stage. I guess, would you be able to compare that to where you stood a year ago as you entered 23, which turned out The year?

Speaker Change: You said.

Douglas J. Healey: 80% commitments square footage, 44% in LOI stage, I guess would you be able to compare that to where you stood a year ago as you enter 'twenty, three which turned out to be a record year like how do you feel today versus one year ago.

Speaker Change: Well, there's two parts to that question Jeff.

Speaker Change: I think the first part.

Speaker Change: Referring to our lease explorations.

Speaker Change: We're basically done with all of our expiring square footage in 2023.

Speaker Change: We have commitments on 44% of our 2020 for expiring square footage and another 34% in the letter of intent stage. So we're about 77% there with 2020 for expiring square footage I think the other part of the question really referenced more of our leasing pipeline and which we said we had.

Speaker Change: 126 leases signed for $2 2 million square feet.

Speaker Change: That's just about Jeff where we were at this time last year give or take just a little bit.

Douglas J. Healey: Like, how do you feel today versus one year ago? There are two parts to that question, Jeff. I think the first part you were referring to our lease expirations. We're basically done with all of our expiring square footage in 2023, and we have commitments on 44% of our 2024 expiring square footage and another 34% in the letter of intent stage. So we're about 77% there with 2024 expiring square footage. I think the other part of the question really referenced more of our leasing pipeline, in which we said we had 126 leases signed for 2.2 million square feet. That's just about, Jeff, where we were at this time last year, give or take just a little bit. Okay, great. Thank you. Thanks for clarifying the stats. And then, if I can then ask a second question. What are you assuming in terms of bad debt and lease termination income in 24? You know, and how does that compare, let's say, to 23 or maybe verse historical?

Speaker Change: Okay, great. Thank you and thanks for clarifying that the stat.

Speaker Change: And then if I can then ask a second question.

Speaker Change: What are you assuming in terms of.

Speaker Change: Bad debt lease termination income in 'twenty four.

Speaker Change: And how does that compare let's say to 23 or maybe versus historical thank you.

Speaker Change: Hey, Jeff I'll take that this is Scott bad debts were assuming those to start to normalize a little bit more relative to 2023.

Scott W. Kingsmore: I would say that's about a two penny headwind in 2024.

Scott W. Kingsmore: Against our same center.

Scott W. Kingsmore: I don't expect those to be significant in the fullness of time, but I do expect them to be a little bit larger than they were in.

Scott W. Kingsmore: 2023, which frankly was a net reversal and that was just a continuation of recovering some of those late in <unk>.

Scott W. Kingsmore: <unk> reserved receivables in 'twenty, three I expect most of that to be.

Scott W. Kingsmore: Out of the pipeline now and it'll be trending a little bit more normal lastly, termination income we did provide line item guidance for that.

Scott W. Kingsmore: Is $10 million that was down about $3 million or so give or take versus where we finished in 2020.

Scott W. Kingsmore: Thank you. Hey Jeff, I'll take that. This is Scott.

Scott W. Kingsmore: 2023.

Alright, Thanks, Scott Scherr.

Scott W. Kingsmore: Bad debts, we're assuming those to start to normalize a little bit more relative to 2023. I would say that's about a two penny headwind in 2024 against our same center. I don't expect those to be significant in the fullness of time, but I do expect them to be a little bit larger than they were in 2023, which was a net reversal, and that was just a continuation of recovering some of those late, fully reserved receivables in 2023. I expect most of that to be out of the pipeline now, and it'll be trending a little bit more normally. Lastly, termination income. We did provide line-item guidance for that, which is $10 million, and that was down about $3 million or so, give or take, versus where we finished in 2023.

Speaker Change: One moment for the next question.

Speaker Change: Yeah.

Speaker Change: Okay.

Speaker Change: The next question comes from Greg Mcginniss with Scotiabank. Your line is open.

Greg Mcginniss: Hello. This is.

Greg Mcginniss: The effect of here on Greg Mcginniss.

Greg Mcginniss: I wanted to follow up on the lease termination income in Q4, I know probably that you cannot provide some specific details, but overall what type of tenant wants to that and you mentioned that it opened some strategic.

Greg Mcginniss: Opportunity for you to read about that center Sylvain it feel like you're kind of provide some more details on that.

Greg Mcginniss: Yeah.

Sylvain: The yes, you are right I can't speak to the specific tenant or the asset frankly other than to say like as I mentioned at the outset that the lion's share of that termination fee pretty much all but roughly a million a million and a half of that was from that single transaction.

Scott W. Kingsmore: Thanks, Scott. Sure. One moment for the next question. The next question comes from Greg McGinniss with Scotiabank. Your line is open. Hello, this is Viktor Fedyev here with Greg McGinniss.

That transaction was an anchor location in terms of the type of space, but we do expect that to open up a really significant redevelopment opportunity. We are working on pre development and pre planning of that right now as well as entitlement.

Viktor Fedyev: I wanted to follow up on this lease termination income in Q4. I know that you probably cannot provide some specific details. But overall, what type of tenant was that? And you mentioned that it opens some strategic opportunities for you to redevelop the center. So when that happens, can you provide some more details on that?

Sylvain: Once we narrow down the scope and the exact customer returns, which we expect to be.

Sylvain: The returns to be in the low double digit realm.

Scott W. Kingsmore: Yeah, you're right; I can't speak to the specific, specific tenant or the asset, frankly, other than to say, like I mentioned at the outset, that, you know, the lion's share of that termination fee, pretty much all but, you know, roughly a million and a half of that was from that single transaction. That transaction was an anchor location in terms of the type of space, but we do expect that to open up a really significant redevelopment opportunity. We are working on pre-development and pre-planning for that right now, as well as entitlement. Once we narrow down the scope and the exact costs and returns, which we expect to be, you know, returns to be in the low double-digit realm, we will disclose that in our pipeline, but it is a good opportunity. We're very glad to get that transaction completed. I got it.

Sylvain: We'll disclose that in our pipeline, but it is a good opportunity and we're very glad to get that transaction completed.

Speaker Change: Got it and then the second question probably on.

Speaker Change: Leasing demand Bart so given that department stores, the sales are weaker versus broad retail sales in 2023.

Speaker Change: Do you expect more optimization to occur within that space and have you had any conversations to me is that your tenants about that already.

Speaker Change: So.

Speaker Change: I'm not quite sure I caught all of that that question I would say this though and this is this is probably a good thing.

Speaker Change: As we look into 2024.

Speaker Change: I would not expect us to put up with the same type of volume that we did in 2023 because in all candor, we're running out of large format inventory running out of boxes big anchor locations.

Douglas J. Healey: And then the second question, probably on the leasing demand part. So given that department store sales were weaker versus broad retail sales in 2023, do you expect more optimization to occur within that space? And have you had any conversations with your tenants about that already?

Speaker Change: Last few years since 2021, we released about two nine square feet and over 20 anchor locations. So it's been very productive.

Speaker Change: Yes, I think youre going to continue to see the shift away from department.

Speaker Change: Department stores and into other.

Speaker Change: Other Big box uses you saw us open.

Douglas J. Healey: I'm not quite sure I caught all of that question. I would say this, though, and this is probably a good thing, as we look into 2024, I would not expect us to put up the same type of volume that we did in 2023 because, in all candor, we're running out of large-format inventory. We're running out of boxes and big anchor locations. In the last few years, since 2021, we've leased about 2 million square feet and over 20 anchor locations, so it's been very productive. Yeah, I think you're going to continue to see the shift away from department stores and into other big box uses. You saw us open Shields Sporting Goods, for example, in a former department store space. You'll see us open Arte Museum in the former Arclight Theater space.

Speaker Change: She'll sporting goods for example, in our former Department store space, you'll see US open <unk> Museum in the former.

Speaker Change: Arclight theater space, we're going to continue to see.

Speaker Change: Different types of uses diversified uses taking the department store space and converting that into other uses that frankly drive more sales and traffic that's a trend we've seen.

Speaker Change: Celebrating over the last five years and that is going to continue as we go forward.

Speaker Change: Alright, it makes sense. Thank you.

Speaker Change: Thank you.

Speaker Change: Okay.

Speaker Change: Okay.

Speaker Change: Michelle.

Speaker Change: Okay.

Speaker Change: Our next question comes from Samir Khanal with Evercore. Your line is now open.

Samir Khanal: Hi, everybody, it's Tom Congratulations on your retirement, we will Miss you.

Samir Khanal: So Scott just on same store NOI guidance here.

Douglas J. Healey: We're going to continue to see different types of uses, diversified uses, taking the department store space and converting that into other uses that, frankly, drive more sales and traffic. That's a trend we've seen accelerating over the last five years, and that is going to continue as we go forward. All right, that makes sense.

Samir Khanal: Certainly leasing is very strong pipeline looks great in the 'twenty four but I just wanted to kind of dive into the same store NOI growth.

Samir Khanal: That is moderating in 'twenty four maybe help us think through the drivers of that lower growth in 24 at this time.

Scott W. Kingsmore: Sure Samir I'll I'll walk through it obviously on <unk>.

Douglas J. Healey: Thank you. Thank you, Michelle.

Great growth over the last three years as I highlighted in my opening remarks, so for starters, we are dealing with some more challenging comps.

Operator: Our next question comes from Samir Khanal with Evercore. Your line is now open. Hi, everybody.

Samir Khanal: Tom, congratulations on your retirement. We will miss you. So Scott, on same store NOI guidance here, you know, certainly leasing is very strong, and pipeline looks great in the 24.

Scott W. Kingsmore: In addition, I would say operating expenses do remain relatively elevated when you think of things like insurance costs.

Scott W. Kingsmore: Security Labor I mentioned bad debt those are all contributing to some headwind in same center that I would quantify it roughly 100 basis 150 basis points herself headwind in same center.

Scott W. Kingsmore: But I just want to kind of dive into the same store NOI growth. You know that that is moderating in 24. Maybe help us think through the drivers of that lower growth in 24 at this time. Sure, Samir. I'll walk you through it. Obviously, there has been great growth over the last three years, as I highlighted in my opening remarks. So, you know, for starters, we are dealing with some more challenging comps. In addition, I would say operating expenses do remain relatively elevated. When you think of things like insurance costs, security, labor, and I mentioned bad debts, those are all contributing to some headwind in the same center that I will quantify at roughly 150 basis points or so. Headwind in the same center

We are.

Scott W. Kingsmore: Given the robust leasing environment and re merchandising our space, we are taking space offline. So there is an element of downtime.

Scott W. Kingsmore: Within that same center.

Scott W. Kingsmore: Guidance and I would estimate that kind of bracket roughly 1% headwind in the same center. That's all positive now because we're taking.

Scott W. Kingsmore: Underperforming merchants.

Scott W. Kingsmore: Offline, we're putting in much more attractive merchants much more diversified uses that will draw traffic and better sales volumes at better rent levels. So.

Scott W. Kingsmore: That is what you typically see in a robust leasing environment.

Scott W. Kingsmore: So those are really some of the major moving pieces and then of course.

Scott W. Kingsmore: We are, you know, given the robust leasing environment and re-merchandising our space; we are taking space offline. So there is an element of downtime within that same center guidance. And I would estimate that kind of bracket at roughly 1% headwind in the same center.

Scott W. Kingsmore: As we do with each and every year, we do embed some some reserves for the unanticipated and are in our guidance.

Scott W. Kingsmore: Okay.

Got it and just from a modeling perspective.

Scott W. Kingsmore: Help us think through G&A for the year and also percentage rents.

Scott W. Kingsmore: That's all positive, though, because we're taking, you know, underperforming merchants offline and putting in much more attractive merchants, much more diversified uses that will draw traffic and better sales volumes at better rent levels. So that is what you typically see in a robust leasing environment. So those are really some of the major moving pieces. And then, of course, you know, as we do with each and every year, we do embed some reserves for the unanticipated in our guidance. Got it.

Speaker Change: Sure G&A I think if I were to point you to a run rate.

Speaker Change: Look at 2023.

Speaker Change: And I would expect maybe a marginal decline versus 2023 and 2024.

Speaker Change: Cross management company expenses net of revenues <unk> expenses and one other thing to keep in mind on the G&A line Sameer.

Speaker Change: If you take a look at our proxy last proxy page 50, you'll see the combined.

Speaker Change: <unk> for Ed to Poland, Tom O'hern, and from the 8-K youll be able to ascertain the compensation for Jackson, So there'll be a fairly significant reduction in G&A just as a result of the CEO and president change.

Scott W. Kingsmore: And just from a modeling perspective, help us think through GNA for the year and also the percentage rent. Thanks. Sure. GNA, you know, I think if I were to point you to a run rate, look at 2023, and I would expect maybe a marginal decline versus 2023 and 2024, across management company expenses, net of revenues, and rate expenses. And one other thing to keep in mind on the G&A line, Samir. If you take a look at our proxy, last proxy page 50, you'll see the combined compensation for Ed Coppola and Tom O'Hearn. And from the AK, you'll be able to ascertain the compensation for Jackson.

Speaker Change: And then Samir you also asked about percentage rents.

Speaker Change: If my Memory's right about 12 months ago, I said, we do expect.

Speaker Change: Roughly a 15% to 20% decline in percentage rents into 2023 from 2022 and in fact that played out.

Speaker Change: If you look at our percentage rents on a pro rata basis, they were down about 16% and 23 versus <unk> 22.

Speaker Change: And again, largely a that was a function of conversion of variable rent a fixed rent type structures. I think we've worked through the vast majority of those at this point that yes.

Scott W. Kingsmore: So there'll be a fairly significant reduction in G&A just as a result of the CEO and president change. And then, Samir, you also asked about percentage rents. If my memory is right, about 12 months ago, I said, you know, we do expect roughly a 15 to 20 percent decline in percentage rents into 2023 from 2022, and, in fact, that played out. If you look at our percentage rents on a pro rata basis, they were down about 16 percent in 23 versus 22, and again, largely, that was a function of the conversion of variable rent to fixed rent type structures. I think we've worked through the vast majority of those at this point, Doug. I don't expect a lot more of that.

Speaker Change: I don't expect a lot more of that as we look into 2024, and we're looking at percentage rent trends versus 'twenty three I expect those to continue to tick down but not nearly as significantly as they did in 2023.

Speaker Change: We're estimating roughly about a mid single digit decline in percentage rents and some of that is just as you get escalations in base rents you get an increase in breakpoint, So theres a natural transition.

Speaker Change: We're able to rent the fixed rent on that basis, but I don't expect the type of leasing activity converting variable to fixed rent that we had in 2023 at all.

Speaker Change: Thank you.

Scott W. Kingsmore: As we look into 2024 and we're looking at, you know, percentage rent trends versus 23, I expect those to continue to tick down, but not nearly as significantly as they did in 2023. You know, we're estimating roughly about a mid single-digit decline in percentage rents, and, you know, some of that is just as you get escalations in base rents, you get an increase in break points, so there's a natural transition of variable rent to fixed rent on that basis, but I don't expect the type of leasing activity converting variable to fixed rent that we had in 2023 at all. Thank you, sir. Please stand by for the next question. The next question comes from Floris Van Dijkum of Compass Point.

Speaker Change: Please standby for the next question Ken.

Speaker Change: The next question comes from Floris Van <unk> with Compass point. Your line is now open.

Speaker Change: Great.

Floris van Dijkum: Thanks, guys can you hear me, we can hear you floris loud and clear.

Floris van Dijkum: Okay great.

Floris van Dijkum: Tom Congrats on the retirement.

Floris van Dijkum: Good luck in your in your next venture whatever you wind up doing.

Tom O'hern: Thank you Floris I remember you when you were 25 and fresh out of Uba, and we're going to visit malls in northern California.

Tom O'hern: I do remember that.

Tom O'hern: And by the way one of my low lights actually.

Tom O'hern: Some of you might have heard I don't know if once you that on this call, but but yes, I do remember that that would play out.

Floris van Dijkum: Your line is open. Great. Thanks, guys. Can you hear me?

Tom O'hern: A memorable time.

Tom O'Hearn: We can hear you, Floris. Loud and clear. It's great. Tom, congrats on the retirement. Good luck in your next venture, whatever you wind up doing. Thank you.

Tom O'hern: I I had.

Tom O'hern: I guess.

Tom O'hern: Two questions for you.

Tom O'hern: <unk>.

Tom O'hern:

Tom O'hern: If you can one of the issues I guess with with.

Tom O'Hearn: I remember you when you were 25 and fresh out of UVA, and we were going to visit malls in Northern California. I remember that. That was, by the way, one of my lowlights, actually, as some of you might have heard. I don't know if I want to share that on this call. But, but yes, I do remember that. That was a memorable time.

Tom O'hern: With the mall sector and you're not unique I think some of your peers have had.

Tom O'hern: To grapple with this as well but.

Tom O'hern: The people.

Tom O'hern: People don't think theres going to be much growth in the sector.

Tom O'hern: Can you maybe touch on obviously the underlying growth was very strong.

Tom O'hern: Last year you are.

Tom O'Hearn: I had, I guess, you know, two questions for you. Number one: One of the issues with the mall sector, and you're not unique; I think some of your peers have had to grapple with this as well, but people don't think there's going to be much growth in the sector. Can you maybe touch on, obviously, underlying growth was very strong last year. You're expecting a little bit of a slowdown this year, probably with some conservatism baked in, I would imagine. But maybe talk a little bit about some of the key drivers for growth. Obviously, you touched on the ethanol pipeline. Can you give a little bit more color on that?

Tom O'hern: We're expecting a little bit of a slowdown this year probably.

Tom O'hern: With some conservatism baked in I would I would imagine, but maybe talk a little bit about <unk>.

Tom O'hern: Some of the key drivers.

Tom O'hern: For growth, obviously, you've touched upon the.

Tom O'hern: Pipeline, maybe can you give a little bit more color on.

Tom O'hern: What percentage of that pipeline for example.

Tom O'hern: Luxury tenants I know Theres, a big win coming online at Scottsdale, how much of a driver of growth is that potentially for you going forward.

Speaker Change: Well I'll, let Doug talk about luxury in a second.

Speaker Change: Floris, but but as for people, saying they don't see the growth in the mall sector than they are clearly ignoring the facts are.

Douglas J. Healey: You know, what percentage of that S&O pipeline, for example, is for luxury tenants? I know there's a big wing coming online at Scottsdale. How much of a driver of growth is that potentially for you going forward? Well, I'll let Doug talk about luxury for a second, Floris.

Speaker Change: You have to do is look at record leasing volumes in 'twenty, two and 'twenty three and then drill down a little deeper look at the types of tenants that are coming in replacing traditional retail.

Speaker Change: This isn't apparel retail this isn't footwear. These are new users, new and creative food and beverage like pinstripes life.

Tom O'Hearn: But, as for people saying they don't see the growth in the mall sector, then they're clearly ignoring the facts. All you have to do is look at record leasing volumes in 22 and 23. And then drill down a little deeper and look at the types of tenants that are coming in replacing traditional retail. This isn't apparel retail; this isn't footwear.

Speaker Change: Lifetime fitness for example, very actively coming in and they can generate an additional 5000 trips to the center week, just that one tenant alone, adding our 10 U Z and they expect to have 1 million visitors per year coming to the top level of Santa Monica place. So there are a lot of exciting new uses that frankly, we didn't have 10.

Tom O'Hearn: These are new uses, new and creative food and beverage, like pinstripes, and lifetime fitness, for example, very actively coming in. And they can generate an additional 5,000 trips to the center a week, just that one tenant alone. Adding RK Museum, they expect to have a million visitors per year come to the top level of Santa Monica Place.

Speaker Change: Theres ago. So I think whoever said they didn't see the growth driving to the mall business the a quality mall business.

Speaker Change: Sadly mistaken because all these new users are driving traffic driving sales are driving productivity driving rents and they are going to drive NOI.

Tom O'Hearn: So there are a lot of exciting new uses that, frankly, we didn't have 10 years ago. I think whoever said they didn't see the growth driving the mall business, the quality mall business, was sadly mistaken because all these new uses are driving traffic, they're driving sales, they're driving productivity. They're driving rent, and they're gonna drive NOI. Hey, Floris, it's Doug.

Douglas J. Healey: Hey, Floris, it's Doug.

Douglas J. Healey: With regard to your specific questions about luxury as you know few years back we finished the luxury wing at Scottsdale fashion square.

Douglas J. Healey: The Neiman Marcus wing and.

Douglas J. Healey: Late last year early this year.

Douglas J. Healey: With regard to your specific questions about luxury, as you know, a few years ago, we finished the luxury wing at Scottsdale Fashion Square in the Neiman Marcus wing. And late last year, early this year, we're now focusing on bringing luxury, global luxury, to the Nordstrom wing. I think a few calls ago, we announced Hermes, which is the bellwether tenant for that property, and we'll be announcing more over the next several months. But to Tom's point, you know, I talk about the leasing pipeline all the time, and you know, it's 2.2 million square feet, and it's going to open over the next two and a half years. Those are phenomenal numbers, but the thing that really excites me is the uses we're going to be bringing. So, just all new uses, new exciting uses. You think about Din Tai Fung, and you think about Elephante, True Food Kitchen, Viore, H&M, Primark, Dave & Buster's, Kiln, Lifetime Fitness, Tom mentioned Pinstripe, Target, Level 99.

Douglas J. Healey: We're now focusing on bringing luxury global luxury to the Nordstrom way.

Douglas J. Healey: I think a few calls ago, we announced air Mezz, which is the bellwether tenants for that property and we will be announcing more over the next several months, but to Toms point I talked about the leasing pipeline all the time and you know it's $2 2 million square feet is going to open over the next two and a half years those are phenomenal.

Douglas J. Healey: Numbers, but the thing that really excites me is the uses were going to be bringing so that just all new uses new exciting use as you think about hentai Fang and you think about our farm to a true food kitchen view.

Douglas J. Healey: <unk> H and M. Prior Mark, Dave and Busters kill them lifetime fitness, Tom mentioned pinstripes target level 99, I mean, that's really the beauty of this pipeline not just the metrics, but the depth and breadth of uses that we're bringing to our town centers over the next two two and a half years.

Speaker Change: Great. Thanks.

Speaker Change: Maybe a follow up with that.

Speaker Change: Scott.

Speaker Change: I know you mentioned that Niagara is going to get refinanced and that that might surprise. Some people myself included who thought that might transition back.

Scott W. Kingsmore: I mean, that's really the beauty of this pipeline, not just the metrics, but the depth and breadth of uses that we're bringing to our town centers over the next two, two and a half years. Thanks. Maybe I will follow up with Scott. I know you mentioned that Niagara is going to get refinanced, and that might surprise some people, myself included, who thought that might transition back. I know you probably can't say a whole lot, but does this mean that you will be investing leasing capital in this asset on a going forward basis? And what do you think that could do to the operations?

Speaker Change: I know you probably can't say a whole lot but.

Scott W. Kingsmore: Does this mean that you will be investing we think capital in this asset on a going forward basis. What do you think that can do to the operations for this property going forward as well.

Scott W. Kingsmore: Sure.

Speaker Change: Floris, you're right I can't speak in too much detail because the transaction still.

Speaker Change: In process, we do expect to secure a multiyear extension of that.

Floris van Dijkum: For this property going forward as well. Sure. Floris, you're right.

Scott W. Kingsmore: I can't speak in too much detail because the transaction is still, you know, in process. We do expect to secure a multi-year extension of that. You know, the asset still generates some FFO.

Speaker Change: The assets still does generate some FFL certainly has its challenges given its market positioning with north of the border in Canada and in the.

Speaker Change: The local market.

Scott W. Kingsmore: It certainly has its challenges, given its market positioning north of the border in Canada and in the local market. You know, there still are some opportunities for that asset, and we'll continue to capitalize on those opportunities. But, you know, the bottom line is, you know, it's a negotiation that's still in process. Its earnings are created to retain that asset, and we'll report back once we close. Thanks, Scott. Chair.

Speaker Change: There still is some opportunities for that asset and we will continue to.

Speaker Change: Continue to capitalize on those opportunities, but the bottom line is.

Speaker Change: It was a negotiation that is still in process, it's earnings accretive to retain that asset and we'll report back once we close.

Speaker Change: Yes.

Speaker Change: Thanks Scott.

Sure.

Speaker Change: One moment for our next question.

Speaker Change: Okay.

Speaker Change: Okay.

Speaker Change: The next question comes from Todd Thomas with Keybanc.

Todd M. Thomas: One moment for our next question. The next question comes from Todd Thomas with KeyBank Capital Markets. Your line is open. Hi, thanks. First, Tom, and Ed, congrats on your run.

Todd M. Thomas: Keybanc capital markets. Your line is now open.

Todd M. Thomas: Hi, Thanks first Tom Ed Congrats on your Ron Best of luck in retirement.

Todd M. Thomas: Best of luck in retirement. Let me first ask you a question. I realize Jackson has not started yet, but Tom, or Scott, I'm just curious if you could talk a little bit about where you think there might be opportunity for Jackson to have an impact as you think about the organization today and look ahead. Well, Todd, I'm not going to speak for Jackson.

Todd M. Thomas: Let me first.

Todd M. Thomas: First I just wanted to take a stab at it asking a prior question I realized Jackson has not started yet, but Tom maybe Scott I'm. Just curious if you can talk a little bit about where you think there might be opportunity for Jackson to have an impact as you think about the organization today and and look ahead.

Tom: Well, Todd I am not going to speak for Jackson, who will be shortly starting soon and you can ask him directly but I know he does like our strategy of densify and diversify our high quality town centers and he found that very interesting and appealing.

Tom O'Hearn: He'll be starting soon, and you can ask him directly. But I know he does like our strategy of densifying and diversifying our high-quality town centers, and he finds that very interesting and appealing.

Tom O'Hearn: Other things he may be considering, I will leave to him and let him articulate directly to you and others on this call. Okay, and Tom, you're staying on for a few months as an advisor. What kind of timeline would you expect for Jackson to get, you know, sort of fully situated on the platform, you know, touring asset markets, you know, meeting with key retailers? What's the process like for, for, you know, for him really stepping into the, Well, many of you on this call know him. I mean, he's going to hit the ground running. I can guarantee you that.

Speaker Change: Other things you may be considering I will leave to him and let him articulate directly to you and others on this call.

Speaker Change: Oh, Okay, and Tom Youre staying on for a few months as an adviser.

Speaker Change: What kind of timeline would you expect for for Jackson to get you know sort of fully situated with the platform you know touring assets markets.

Speaker Change: Meeting with key retailers, what's the process like for for him really stepping into the CEO role.

Tom: Many of you on this call know him I mean, he is going to hit the ground running I can guarantee you that.

Tom O'Hearn: So I think there'll be, you know, a lot of travel visiting our offices, visiting our people, and getting going. Ed and I are still on the board through our current term, which runs through May, so he will have access to both of us.

Tom: So I think there'll be a lot of travel visiting our offices visiting our people and getting going Ed and I are still on the board through our current term which runs through may. So we will have access to both of us and.

Tom O'Hearn: And I imagine he's going to be a very quick study and hit the ground running. So I think that'll all happen very, very quickly. And, you know, he's already fairly familiar with the company, did his due diligence, and I can almost guarantee you he will get a fast start. Okay, that's helpful.

Tom: I imagine he is going to be a very quick study and hit the ground running so I think that will all happen very very quickly.

Tom: And he's already fairly familiar with the company did his due diligence.

Tom: <unk> economic <unk> guarantee you he will get a fast start.

Douglas J. Healey: And if I could just get one in for Doug, you know, appreciate the detail around the S&O pipeline and the lease signings and LOIs that you've executed around the 24 expirations. You know, can you talk about your expectation for tenant retention during the year and maybe discuss any, you know, known move-outs or, you know, post-holiday season seasonality that you're expecting this year, you know, relative to, you know, the last few years where there's been, you know, a lot less seasonality than there traditionally is, Todd? It's Doug. Thank you.

Speaker Change: Okay. That's helpful and if I could just get one in for Doug.

Speaker Change: I appreciate the detail around the <unk> pipeline and the lease signings and otherwise that you've executed around the 24 exploration.

Douglas J. Healey: Can you talk about.

Douglas J. Healey: Your expectation for tenant retention during the year and maybe discuss any.

Douglas J. Healey: Known move outs or.

Douglas J. Healey: Post holiday season six.

Douglas J. Healey: Seasonality that you're expecting this year.

Douglas J. Healey: Relative to the last few years, where there's been a lot less seasonality than than there traditionally is.

Douglas J. Healey:

Douglas J. Healey: I think, and Scott will jump in here, but I think in 2024, our expectation is between 90% and 95% tenant retention, meaning our expirations, our 2024 expirations between 90% and 95%, we believe will retain And your second part of your question was regarding, you know, any anticipated or just, you know, fallout following the holiday. And I won't say there's anything out of the ordinary, you know, if we looked at, say, the 2016 through 2019 period, we had some precursors certainly in the fall of tenants that were likely to close, and they were closing in in fairly significant droves. We have not had that for the last few years at all. And I can't think of any retailer that said, Look, we're going to shut down five or six stores following the holiday season, Doug.

Douglas J. Healey: Hey, Todd it's Doug Thank you.

Douglas J. Healey: I think Scott jump in here, but I think in 2024, our expectation is between 90 and 95%.

Douglas J. Healey: Tenant.

Douglas J. Healey: Tenant retention, meaning our explorations are too.

Douglas J. Healey: 'twenty 'twenty four explorations between 90 and 95% we believe we'll retain.

Douglas J. Healey: And I think the second part of your question was regarding <unk>.

Douglas J. Healey: Unanticipated or just fallout following the holiday.

Douglas J. Healey: And.

Speaker Change: I wont say Theres I don't think theres anything out of the ordinary.

He looked at say that 2016 through 2019 period.

Speaker Change: We had some precursor certainly in the fall of tenants that were likely to close and they were closing in.

Speaker Change: Fairly significant drought.

Speaker Change: Have not had that for the last few years at all.

Speaker Change: And I can't think of any retailer that said look we're going to shut down five or six stores. Following the holiday season, Doug Yeah, Todd we've talked about this a lot I mean, many of the retailers that were that were suffering pre pandemic.

Douglas J. Healey: Yeah, Todd, we've talked about this a lot. I mean, many of the retailers that were suffering pre-pandemic just didn't make it through the pandemic. And those that came through came through in a very healthy way. And as I mentioned in my prepared remarks, there's a very, very healthy retailer environment out there with very strong balance sheets. I think the retailers, I know the retailers in 2023 and into 2024 are already speaking about managing inventory levels, which is hugely important for their profitability and for their margins, which actually makes them stronger. So, you know, we're not really seeing any pullback, and our watch list is as low as it's ever been in 20 years.

Speaker Change: Didn't make it through pandemic and those that came through came through in a very healthy way and as I mentioned in my prepared remarks.

Speaker Change: Very very healthy retailer environment out there with very strong balance sheets.

Speaker Change: I think the retailers I know the retailers in 2023 and into 2024 already are speaking about managing the inventory levels, which is hugely important for their profitability and for their margins, which actually makes them stronger so.

Speaker Change: We're not seeing really any pullback add our watch list is as low as it's ever been in 20 years.

Douglas J. Healey: So I don't anticipate anything unusual in 2024, if you will. Okay, great. Thank you. One moment for our next question. The next question comes from Michael Mueller with JPMorgan. Your line is open. Hey, Tom.

Speaker Change: I don't anticipate anything.

Speaker Change: Anything unusual in 2024, if you will.

Speaker Change: Okay, great. Thank you thanks Todd.

Speaker Change: One moment for our next question.

Speaker Change: Okay.

Speaker Change: The next question comes from Michael Mueller with Jpmorgan. Your line is open.

Michael W. Mueller: Congratulations. It's been great working with you over the years. Thank you. Likewise. Yeah. And I just have one quick one for Scott.

Michael W. Mueller: Hey, Tom Congratulations it's been great working with you over the years.

Michael W. Mueller: Likewise.

Michael W. Mueller: And just have one quick one for Scott just curious what's embedded in the 2024 guidance for NOI margin improvement relative to what you had in 2023.

Tom O'Hearn: Just curious, what's embedded in the 2024 guidance for NOI margin improvement relative to what you had in 2023? Yeah, Mike, I think we'll see continued margin improvement. You know, we've got improvement in rental rates, we've got growth in occupancy, obviously, excuse me, the pipeline will start to add more and more as we get towards the latter half of the year. It's still a pretty thick pipeline.

Scott W. Kingsmore: Yes, Mike I think we will see continued margin improvement.

Scott W. Kingsmore: We've got improvement in rental rate, we've got growth in occupancy obviously.

Speaker Change: Excuse me the pipeline will start to add more and more as we get towards the latter half of the year, it's still a pretty thick pipeline.

Scott W. Kingsmore: In fact, I think that pipeline yields roughly $64-$65 million of incremental rent over existing uses. So, you know, that will be heavy in the second half. Conversely, like I said, operating expenses continue to be somewhat of a drag, not a huge drag, but somewhat of a drag. So, but I do think by the time we get to the end of the year, you'll see continued margin improvement year over year. OK, thank you. One moment for our next question. The next question comes from Keevin Kim with Truist. Your line is open. Thank you. And congrats, Tom. And going back to some of the executions that you've done in 2023 and what you have left to do in 2024, are there some trade-offs that don't show up in the interest rates themselves? Things like CapEx reserve requirements or other clauses that might be a little bit more restrictive?

Speaker Change: In fact, I think that pipeline yields roughly 64 $65 million of incremental rent over existing users. So.

Speaker Change: That will be heavy in the second half.

Speaker Change: Conversely, like I said, we've got.

Speaker Change: Our operating expenses.

Speaker Change: Continue to be somewhat of a drag not a huge drag but somewhat of a drag so but I do think by the time, we get to the end of the year Youll see continued margin improvement year over year.

Speaker Change: Okay. Thank you.

One moment for our next question.

Speaker Change: The next question comes from Keybanc, Kim with <unk>. Your line is open.

Kim: Thank you and congrats Tom.

Thank you Keith.

Kim: And going back to some of the debt execution that you've done in 2023, and what you have left to do in 'twenty 'twenty four or there are some trade offs that don't show up in the interest rate is up things like <unk>.

Kim: Capex reserve requirements or other.

Ki Bin Kim: Yeah, I'd say, you know, we're always leaning into our underwriting to make sure that we're getting full credit for the pipeline. And, you know, given the depth of the pipeline, any one of these deals we're approaching, whether it's Tyson's or Danbury, to the extent we have a tenant that's not yet come online, we do have to set aside that capital. It's effectively, I guess, when you think about it, it's pre-funding that capital, and then we drop back down over the next six to 12 months. And so, you know, for instance, for Tyson's, I think there was an incremental $40 million, give or take, of liquidity. But a lot of that liquidity was soaked up in CapEx reserves for a lot of restaurant uses.

Kim: Clauses that might be little bit more restrictive.

Kim: Yeah.

Kim: I'd say, we're always leaning into our underwriting to make sure that were getting full credit for the pipeline and given the depth of the pipeline any one of these deals were approaching whether it's tysons are danbury to the extent, we have a tenant that's not yet come online we do have to set aside that capital it's effectively.

Kim: When you think about it it's pre funding that capital and then we dropped back down over the next six to 12 months and so for instance for Tysons I think there was an incremental $40 million give or take of liquidity.

Kim: A lot of that liquidity was soaked up in Capex reserves for a lot of restaurant uses we've recently discussed level 99, which is new entertainment use on the east side of the center. So we did have to satisfy the anticipated leasing capital to bring that use to to opening and paying rent, but other than that no.

Scott W. Kingsmore: We've recently discussed level 99, which is a new entertainment use on the east side of the center. So we did have to set aside the anticipated leasing capital to bring that use to opening and paying rent. But other than that, I'd say that the environment's pretty normalized.

Kim: Say that the environment is pretty normalized.

Scott W. Kingsmore: You know, and we're getting deals done, we're getting back on, liquidity is back open. I'm happy to say that we probably accounted for roughly 25% of the volume that occurred in CNBS, which was about a little over $7 billion in transactions in 2023. So, you know, the markets are open and functional.

Kim: And we're getting deals done again liquidity is back open.

Kim: I'm happy to say that we probably accounted for roughly 25% of the volume.

Kim: That occurred in <unk>, which was about little over $7 billion of transactions. In 2023. So you know the markets are open and functional and as you can see from the rates somewhere in the mid sixes, where we are we've been transacting.

Scott W. Kingsmore: And, you know, as you can see from the rates, somewhere in the mid sixes is where we've been. And what is like a broad refinance rate that we should assume for 2024 refinancing? I'd say, you know, we've been transacting in the mid sixes, and that's probably representative of where we'll be this year. We'll have to see what the Fed has in store for us for the next 12 months, but based on where we see the forward curve, that's probably a reasonable expectation.

Kim: And.

Kim: What is that a broad refinance rate that we should assume for 2020 for refinancing.

Kim: I'd say, we've been transacting in the mid sixes and that's probably representative of where we'll be this year.

Speaker Change: Well again, we'll have to see what that what the fed has.

Speaker Change: In store for us for the next 12 months, but.

Speaker Change: Based on where we see the forward curve thats, probably a reasonable expectation.

Ki Bin Kim: Okay, thank you. One moment for the next question. The next question comes from Haendel St. Juste with Mizzou Ho. Your line is open. Hi guys, this is Ravi Vaidya on the line for Haendel.

Speaker Change: Okay. Thank you.

Speaker Change: One moment for the next question.

Speaker Change: The next question comes from Handel St Juste with Mizuho. Your line is open.

Speaker Change: Hi, guys. This is Ravi the idea on the line for <unk>.

Haendel Emmanuel St. Juste: I hope you guys are doing well. Just had one or two questions here. Regarding leverage, can you please provide a full year end target for year 24? And would you consider issuing equity at current prices? I believe on investor day, you referenced that you weren't looking to issue equity until the previous target was around 18 bucks a share. And we're getting close to that at this point.

Ravi: Hope you guys are doing well just had a one or two questions here regarding leverage can you. Please provide of full year end of the year at 24 target and would you consider issuing equity at current prices I believe at the Investor day.

Ravi: Your friends that you, where you werent looking to issue equity until the previous target was about 18 Bucks a share and.

Scott W. Kingsmore: So just wanted to follow up on that. Thanks. Robby, I'll take the second half of that question. We always reserve the right to issue equity.

Ravi: We're getting close to that at this point. So just wanted to follow up on that thanks.

Speaker Change: Ravi I'll take the second half of that question.

Speaker Change: We always reserve the right to issue equity so I'm not going to give you a hard and fast rule in terms of a dollar amount.

Scott W. Kingsmore: So I'm not going to give you a hard and fast rule in terms of a dollar amount. You've seen us judiciously use our ATM in the past. And we have an ATM in place today. And that's another tool in the capital toolkit that we would keep available to us. So it's certainly a positive possibility. And Look, we're very focused on de-levering over time. That can happen a few ways, one of which is to drive the same center NOI up, which we fully plan to do.

Speaker Change: You've seen us in the past judiciously use our ATM.

Ravi: And we have an ATM in place today and.

Speaker Change: That's another tool in the capital toolkit that we would keep available to us. So it is certainly positive as possible and.

Speaker Change: Look we're very focused on delevering overtime that can happen in a few ways one of which is to drive same center NOI up which we fully plan to do in the other way to effectively reduce debt to EBITDA is via <unk>.

Scott W. Kingsmore: And the other way to effectively reduce debt to EBITDA is via equity raises, so we wouldn't preclude ourselves from doing that. But we do not have any of that in the guidance.

Speaker Change: Equity raises so.

Speaker Change: We wouldnt preclude ourselves from doing that.

Speaker Change: We do not have any of that in the guidance.

Scott W. Kingsmore: But that's consistent with past practices. Scott, you want to comment on leverage? Yeah, sure, Robbie. To the first part of your question, I think we could see 40 to 50 basis points of improvement and leverage. By the time we get to the end of the year, roughly 8.2 times is kind of where we're triangulating based on the business plan today.

Speaker Change: But thats consistent with past practices will Scott.

Speaker Change: Scott you want to comment on leverage.

Scott W. Kingsmore: Sure Ravi to your first part of your question I think we could see 40 to 50 basis points of improvement in leverage by the time, we get to the end of the year roughly eight two times is kind of where we're triangulating based on the business plan today.

Ravi Vaidya: Thank you. Thank you. Sure. One moment for the next question. The next question comes from Caitlin Burrows with Goldman Sachs. Your line is open.

Ravi: Got it thank you.

Ravi: Sure.

Speaker Change: One moment for the next question.

Speaker Change: Okay.

Speaker Change: The next question comes from Caitlin Burrows with Goldman Sachs. Your line is open.

Caitlin Burrows: Hi, good morning there, and congrats, Tom, on your retirement. Thank you. Maybe starting with Santa Monica Place and Scottsdale Fashion Square, I feel like the expected openings are getting closer on those, and I think combined they're supposed to have an incremental NOI of around $50 million at your share, so I'm just wondering if you can give some further detail on the timing of recognizing that NOI, like could it start in the first half of this year or any other details you can give? Yeah, Caitlin, both of those projects are going to start to open in late 24, early 25. So I would say you'll see a full, you know, for the most part, you'll see a full impact in 2025, maybe a little bit of bleed into 26, but looking at those individually, Scottsdale, we'll start to open up a lot of those uses in fall, the renovation for that project, I think most of the scaffolding will be down and the physical work will be done by the time we get to the end of the quarter, but in terms of new tenants coming online, they'll start to come online in the fourth quarter, and we'll see kind of the full year effect in 25.

Caitlin Burrows: Hi, good morning, there and congrats Tom on your retirement.

Caitlin Burrows:

Maybe starting with Santa Monica place and Scottsdale fashion square I feel like the expected openings are getting closer on those and I think combine this thursday.

Caitlin Burrows: Have an incremental NOI of around $50 million at your share.

Caitlin Burrows: So I'm just wondering if you can give some further detail on the timing of recognizing that NOI like could it start in the first half of this year or any other details you can give.

Speaker Change: Yes, Caitlin both of those projects are going to start to open in.

Speaker Change: Late 'twenty for early 'twenty five.

Speaker Change: So I would say youll see a full.

Speaker Change: For the most part you'll see a full impact in 2025, maybe a little bit of bleed into 2006, but looking at those individually Scottsdale, we will start to open up a lot of those users in fall.

Speaker Change: The renovation for that project I think most of the scaffolding there'll be down in the physical work will be done by the time, we get to the end of the quarter.

Speaker Change: But in terms of new tenants coming online that will start to come online in the fourth quarter, we will see kind of the full year effect in 'twenty five Santa Monica.

Caitlin Burrows: Santa Monica, you know, we've got some exciting uses coming. First level, Club Studio, which is high-end fitness; third level, Arte, both of those are going to be coming on in the first half of 2025, so you'll see some bleed into 2026 there. Dentide Fund will also be a use that we hope to get online either the end of this year or the beginning of next year, so all those are very creative leases that we expect to be on board, you know, certainly by the second quarter of 2025. Okay, I got it.

Speaker Change: We've got some exciting uses coming first level club studio, which is high end fitness third level, our Te both of those are going to be coming on in the first half of 2025, and so youll see some bleed into 2026, they're dense high fund will also be of use that we hope to get online either at the end of this year.

We're beginning of next year. So all of those are very accretive leases that we expect to.

Speaker Change: To be onboard, but certainly by second quarter of 2025.

Scott W. Kingsmore: And maybe you guys talked earlier in the call about how percent rents were down in 23 because more was being shifted to base rents, which makes sense. I was wondering if you could go through any details on how much that kind of phenomenon impacted leasing spreads, like that the expiring ABR might have been somewhat lower and related to the level of leasing spreads that you reported in 4Q of almost 20%. Do you think that it's sustainable?

Speaker Change: Okay got it and maybe.

Speaker Change: You guys talked earlier in the call about how percent rents were down in 'twenty, three because more with being shifted to base trends, which makes sense. I was wondering if you could go through any details on how much that kind of phenomenon impacted leasing spreads.

Speaker Change: The expiring Abi might've been somewhat lower.

Speaker Change: And related kind of at the level of leasing spreads that you reported in <unk> of almost 20% do you think thats sustainable Thanks sure Great question.

Scott W. Kingsmore: Thanks. Sure. Great question. Um, certainly, if you look at our expiring rents in 2023, they were a lot lower than what we expect in 2024. And that was really driven, again, by, you know, all those shorter-term deals that we did during COVID, which had more variable rent.

Speaker Change: Yes, certainly if you look at our expiring rents in 2023, there were a lot lower than what we expect in 2024 and that was really driven again by you know all of those that are shorter term deals that we did during COVID-19, which had more variable rent.

Speaker Change: And were accessing those throughout 2023 and renewing those on a longer term.

Scott W. Kingsmore: And we were accessing those throughout 2023 and renewing those on a longer term, more typical fixed rent structure. So, as you know, we reported trailing 12 17% spreads at the end of the year. And I would expect those base rent spreads to be roughly 50% of that level. And in 2024, really, again, just a function of a relatively artificially low base rent expiring in 23, and a more normalized level of base rent expiring in 2024. I got it.

Speaker Change: Our typical fixed rent structure. So as we reported trailing 12, 17% spreads at the end of the year and I would expect those base rent spreads to be roughly 50% of that level.

Speaker Change: <unk>.

Speaker Change: In 2024, it really again, just a function of.

Speaker Change: A relatively artificially low base.

Speaker Change: Base rent expiring in 2003 in a more normalized level of base rent expiring in 2024.

Speaker Change: Got it thanks.

Speaker Change: Sure.

Nick Yulico: Thanks. One moment for the next question. The next question comes from Nick Joseph with Citi. Your line is open.

Speaker Change: One moment for the next question.

Speaker Change: Okay.

Speaker Change: The next question comes from Nick Joseph with Citi. Your line is open.

Nick Yulico: Thank you. I'm just hoping you could walk through the capital needs and the funding plan for leasing-related CapEx and the incremental redevelopment in 2024. Sure. I think I mentioned in my opening remarks, Nick, good morning, by the way, good afternoon, that we do expect, after recurring CapEx and leasing costs, to still have generated roughly $300 million of operating cash flow before payment of the dividend. As I look at 24, 25, 26 development pipelines, I think they will range between $150 to $200 million over those three years. And we're probably somewhere around that midpoint of that for 2024.

Nick Yulico: Thank you just hoping you could walk through the capital needs and the funding plan for leasing related capex any incremental redevelopment in 2024.

Nick Yulico: Sure.

Nick Yulico: I think I mentioned in my opening remarks, Nick good morning by the way good afternoon.

Nick Yulico: That we do expect after recurring Capex and leasing cost.

Nick Yulico: Still have generated roughly $300 million of operating cash flow before payment of dividend.

Nick Yulico: As I look at 'twenty four 'twenty five 'twenty six.

Nick Yulico: Development pipeline, I think will range between $150 million to $200 million over those three years.

Nick Yulico: Somewhere around that midpoint of that for 2024.

Scott W. Kingsmore: You know, we have probably 8 to 9, 10 anchor boxes that we continue to work on that will largely be re-tented and completed by the end of the year but will also be set on the table for some larger-scale redevelopments, potentially green acres, potentially flat iron for 2025 and 2026. So that'll give you an idea of some of the character of what we're spending on. Thank you very much.

Speaker Change: We are.

Speaker Change: We've got probably eight to 910 anchor boxes that we continue to work on that will largely be re tenant and completed by the end of the year.

Speaker Change: But we will also be setting the table for some larger scale redevelopments potentially.

Speaker Change: Potentially green acres potentially flat iron for 2025, and 2026, so that'll that'll give you an idea of some of the character of what were spending on.

Alexander Goldfarb: One moment for the next question. The next question comes from Alexander Goldfarb with Piper Sandler. Your line is open. I guess it's still a good morning out there.

Speaker Change: Thank you very much.

Speaker Change: One moment for the next question.

Speaker Change: The next question comes from Alexander Goldfarb with Piper Sandler Your line is open.

Alexander Goldfarb: Tom and Eddie, certainly, for two decades of working with you guys in REITland, it's been awesome, and we'll miss our NAREIT interactions. So, wish you guys the best in your next endeavors.

Alexander Goldfarb: I guess its still good morning out there Tom.

Alexander Goldfarb: Tom and Eddy certainly for two decades.

Alexander Goldfarb: Working with you guys in REIT land, it's been it's been awesome, and we will Miss our NAREIT interactions. So wish you guys the best.

Alexander Goldfarb: Your next endeavor.

Alexander Goldfarb: So I have two questions here.

Scott W. Kingsmore: The first question is, Scott, on the Danbury Mall loan, and you know how much I like that mall; can you just help us walk through and interpret the $155 million new loan relative to, you know, the value of that mall? Just given, you know, the sales that it does and the dominance in that northern region, would you think that the loan is under-leveraged relative to the value of the asset? Obviously, you know, the market today is a tough market to do debt in. So maybe just some perspective around how we should interpret the loan balance relative to where the market value of that asset would be in normal times, obviously, not, you know, right now, when people are skittish. Sure. Yeah, it's a great asset. It's virtually 100% occupied. I think there are one or two available storefronts. So, very happy to get a, you know, 10 year deal on it, stagger out that maturity, etc, etc, especially at a very attractive rate. The loan to value, if I recall correctly, was in the low 40s based on appraisal.

Speaker Change: The first question is Scott on the Danbury mall loan and how much I like that mall can you just help us walk through and interpret the $155 million new loan relative to the value of that of that mall, just given the sales that it does and the dominance in that northern <unk>.

Speaker Change: <unk>.

Scott W. Kingsmore: Would think that the loan is under levered relative to the value of the asset obviously the market today is a tough market to do that so maybe just some perspective around how we should interpret the loan balance relative to where the market value of that asset would be sort of a normal times, obviously not right now with people are skittish.

Scott Kingsley: Sure.

Speaker Change: Yes, it's a great asset.

Speaker Change: It's virtually 100% occupied I think there's one or two available storefront. So very happy to get a 10 year deal on it stagger out that maturity et cetera, et cetera, especially at a debt at a very attractive rate.

Speaker Change: The.

Speaker Change: The loan to value if I recall correctly. It was in the low 40 <unk> based on appraisal.

Scott W. Kingsmore: You know, we typically, as you know from following us for many years, we typically finance in the 55% realm. So, yeah, there's a little bit of liquidity on the table. But, you know, that's the state of the market today. And, you know, I think it was a great execution hitting a window.

Speaker Change: Typically as you know from following US many years, we typically finance in the 55% round. So yes, there is a little bit of liquidity on the table, but.

Speaker Change: It's the state of the market today and.

Speaker Change: I think it was a great execution hitting a window.

Tom O'Hearn: And, you know, recall, we've been trying to finance that thing through a difficult capital market environment for almost two years. So it was really nice to be able to hit a window and execute well at a good rate. Okay, and then the second question is, on the JV, the freehold and Chandler JV, you brought out that you bought out the freehold, but Chandler still seems to be a JV. Maybe you could just talk a little bit about what drove the JV to sort of cleave off the one asset. I think you guys said 5.6 million that you used to acquire that. What was unique about that asset versus Chandler, which is still in JV?

Speaker Change: And recall, we have been trying to finance that thing through a difficult capital market environment for almost two years. So it was really nice to be able to hit a window and execute well at a good rate.

Speaker Change: Okay and then the second question is on the JV.

Speaker Change: Freehold and Chandler JV, you brought out you bought out freehold, but.

Speaker Change: Sandler still seems to be a JV. So maybe you could just talk a little bit about what drove the JV to sort of cleave off the one asset I think you guys said $5 6 million that you used to acquire that what was unique about that asset versus Chandler that still isn't JV or should we expect something to happen in the near future on Chandler as well.

Tom O'Hearn: Or should we expect something to happen in the near future for Chandler as well? Alex, really, we can't comment on what motivated or didn't motivate our partner in that case; it was really their decision. But when given the opportunity, we like the economics, we like the asset. We had a chance to do that on Chandler, but that was really driven by them and their preferences. Okay, thank you, Tom. One moment for the next question. The next question comes from Ronald Camden with Morgan Stanley. Your line is open. Hey, congrats, Tom and Ed. Just two quick ones for me.

Speaker Change: Alex really we can't comment on what motivated or didn't motivate our partner in that case. It was really their decision, but when given the opportunity we like the economics, we like the asset we had a chance to do that on Chandler, but that was really driven by them and their preference.

Alex: Okay. Thank you Tom.

Speaker Change: Thanks alignment for the next question.

Speaker Change: The next question comes from Ronald Camden with Morgan Stanley. Your line is open.

Ronald Camden: Hey, Congrats Tom and add just two quick ones for me just aren't going back to the management transition, obviously can't comment for Jackson, but just about the process question really is is there any sort of specific skill set or experience.

Ronald Camden: Just on going back to the management transition, you know, obviously can't comment on Jackson's behalf, but just about the process. The question really is, is there any sort of specific skill set or experience that you guys were looking for, and can you just comment on why now is the right time for this transition, just trying to get a little bit more color around sort of the process that you guys were looking for? Yeah, Ron. I'll refer you to the press release in the 8K. We did an exhaustive search. We used Ferguson Partners, a very well-known firm that specializes in executive recruitment.

Ronald Camden: You guys were looking for and can you just comment on why why are we sort of now the right time for this transition just trying to get a little bit more color around sort of the process, but you guys were looking for.

Speaker Change: Yes, Ron I'll refer you to the.

Ron: Our press release and the 8-K, we did an exhaustive search we used fergusson partners very well known.

Firm.

Ron: <unk> specializes in executive recruitment and we considered a lot of candidates and those of you that know Jackson, though.

Tom O'Hearn: And we considered a lot of candidates. Those of you that know Jackson know he's very qualified and very capable. And I think we've got an outstanding replacement. In terms of the timing, every CEO should really go out when their company is in a good spot and when they are in good health.

Speaker Change: Very qualified and very capable and I think we've got an outstanding.

Replacement in terms of the timing.

Speaker Change: Every CEO should really go out when the company is in a good spot and when they have their health.

Tom O'Hearn: So, that's why it's good timing. Macerich is in great shape, and I have my health, so this is the perfect time for me to move on to all those things that I have put on the back burner for the last 30 years. And then one more, so I saw the Green Acres Mall redevelopment announcement. I didn't see it in the Supplement, is that going to be a large project, like how should we think about the economics and returns on that, or should we just wait for that to be added? Yeah, it's a lot of weight.

Speaker Change: So that's why it's good timing.

Speaker Change: She is in great shape and I've got my health.

Speaker Change: So this is the perfect time for me too.

Speaker Change: Move onto all of those things that I put on the backburner for the last 30 years.

Speaker Change: Understood.

Speaker Change: And then one on so I saw the green acres mall redevelopment announcement.

I think earlier this I guess the last week or earlier this in January but I didn't see it in the supplemental is there is that going to be a large project like how should we think about the economics and returns on that or should we just wait for that to be at it.

Scott W. Kingsmore: I think you'll see it hitting the pipeline. We are in pre-development and entitlement mode right now. You know, it's going to be a very attractive project. Frankly, that's a gem from the two assets that we acquired back in the 2012-2013 timeframe. Greenacres has performed extremely well.

Speaker Change: Yes, it's a wait.

Speaker Change: I think youll see it hitting the pipeline.

Speaker Change: We are in pre development and entitlement mode right now.

Speaker Change: It's going to be a very attractive project frankly, that's that's a gym.

Speaker Change: The two assets that we acquired back in the 2012 2013 timeframe Green acres has performed extremely well we added a power center, we've been able to re tenant the mall.

Scott W. Kingsmore: We added a power center. We've been able to re-tenant the mall. In total, the entire property, the entire campus generates over a billion dollars in sales.

Speaker Change: In total the entire property the entire campus generates over $1 billion of sales and we're really really excited to bring this next phase, but we're studying it and it will it will hit the pipeline over the next few quarters.

Scott W. Kingsmore: And we're really, really excited to bring this next phase to life. But we're studying it, and it will hit the pipeline over the next few quarters. That's it for me, thanks, share. I have no further questions at this time. I would now like to turn the call back to Tom for closing remarks. Thank you, Michelle. Thank all of you for joining us today. All kidding aside, I would like to say that it's been my pleasure to work with you, and I will miss all of you. As I approach retirement, I'm highly confident in the future of the company under the leadership of Jackson, our board of directors, and the balance of our incredibly talented leadership team here at Macerich.

Speaker Change: That's it for me thank you.

Speaker Change: Sure.

Speaker Change: I show no further questions at this time I would now like to turn the call back to Tom for closing remark.

Tom: Thank you Michelle.

Tom: Thank all of you for joining us today.

Tom: All kidding aside I would like to say that it's been my pleasure to work with you and I will Miss all of you.

Tom: As I approach retirement, I'm highly confident in the future of the company.

Tom: Under the leadership of Jackson.

Our board of directors and the balance of our incredibly talented leadership team here at <unk> I wish you all the best.

Tom O'Hearn: I wish you all the best. This concludes today's conference call. Thank you for your participation. You may now disconnect. Have a great day.

Speaker Change: This concludes today's conference call. Thank you for your participation you may now disconnect have a great day.

Speaker Change: Yeah.

Speaker Change: [music].

Speaker Change: Okay.

Speaker Change: Okay.

Speaker Change: [music].