Q2 2025 Macerich Co Earnings Call

Speaker #2: Ladies and gentlemen, thank you for standing by. Welcome to the second quarter 2025 Macerich earnings conference call. At this time, all participants are in a listen-only mode.

Speaker #2: 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 your hand is raised.

Speaker #2: To withdraw your estion, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to turn the conference over to Samantha Greening, Assistant Vice President, Director of Investor Relations.

Speaker #2: Please go ahead.

Speaker #3: Thank you for joining us on our second quarter 2025 earnings call. During this call, we'll making certain statements that may be deemed forward-looking within the meeting of the Safe Harbor of the Private Securities Litigation Reform Act of 1995, including statements regarding projections, plans, and future expectations.

Speaker #3: Actual results may differ materially due to a variety of risks and uncertainties set forth in today's earnings results, supplemental, and our SEC filings. Reconciliations of non-GAAP financial measures to the most directly comparable GAAP measures are included in the supplemental filed on Form 8-K with the SEC, which is posted in the Investor section on the company's website at macerich.com.

Speaker #3: Joining us today are Jack Shea, President and Chief Executive Officer; Dan Swanstrom, Senior Executive Vice President and Chief Financial Officer; and Doug Healey, Senior Executive Vice President of Leasing.

Speaker #3: And with us in the room is Brad Miller, Senior Vice President and Managing Portfolio Management. And with that, I'd like to turn the call over to Jack.

Speaker #4: Thank you, Samantha. And good afternoon. I want to begin with where everything starts for us at Macerich. Our people and their commitment to our mission and values.

Speaker #4: We are collectively a better-informed, aligned, and operationally focused company. Our second quarter results, the progress on our path forward plan, and the acquisition of Crabtree Mall demonstrate how well we have put this mission and values to work together.

Speaker #4: Thank you all. For your contributions that have brought us to this point. Now, let us turn to our recent path forward plan. I want to let that update guide our discussion this afternoon.

Speaker #4: Recall that our path forward strategy is built on simplifying the business, operational performance improvement, and leverage reduction. We are solving for strengthening the balance sheet, fortifying our core portfolio, driving operational excellence, and positioning us for growth.

Speaker #4: We provided an update to our Path Forward Plan in May, which included a comprehensive NOI bridge from year-end 2024 to 2028 for pro forma go-forward portfolio NOI.

Speaker #4: It also provided a roadmap for 2028 target FFO ranges and a path to our 2028 target leverage ranges. We also provided an update on the composition of our go forward portfolio and identified which properties have been ranked as fortress, fortress potential, steady eddies, and eddies.

Speaker #4: As Dan will discuss later, you will now see some of our supplemental KPIs broken down under the go-forward portfolio. A significant component of the plan is driving operational performance improvement.

Speaker #4: This all begins and ends with leasing. Leasing is the piece of the plan that best tracks the progress on hitting our 2028 targets. Recall that we are targeting an average of 4 million square feet of leasing in 2025 and 2026.

Speaker #4: Year-to-date, we've already signed $4.3 million square feet. I'm pleased to say that we are ahead of schedule on leasing volume and on target for our market rent assumptions used in our five-year plan.

Speaker #4: I want to focus on our leasing speedometer and snow pipeline. These metrics best track our progress on driving a higher percentage of new lease deals versus renewals which, in turn, drive higher spreads and incremental revenue to achieve our NOI targets.

Speaker #4: We provided a helpful visual for you in the plan update for the leasing dashboard that we refer to internally as the Macerich Leasing Speedometer.

Speaker #4: Which tracks revenue completion percentage for all new leasing activity in the five-year plan. This tool and other technology enhancements we've implemented drive every leasing and capital allocation decision at our properties.

Speaker #4: Our initial goal on new deals was 50% progress by mid-2025 and 70% by year-end 2025. Hitting 70% goal by year-end would put us on track for the 85% completion target by mid-2026.

Speaker #4: Reaching that goal also puts us on track for our ultimate opportunity to achieve the $130 million in cumulative snow potential. Reaching that mid-2026 leasing goal would effectively complete the new leasing goal outlined in our plan.

Speaker #4: We remain ahead of this plan on both the new deal completion and the snow pipeline. For new deal completion, we were at 54% at the end of last quarter and 60% in May.

Speaker #4: Today, we're at 65% and have a large pipeline of LOIs which puts us on pace to exceed our 70% year-end target. The snow pipeline has grown from 75 million on a cumulative basis at the end of last quarter and 80 million in May to 87 million as of today.

Speaker #4: That also has us on track to exceed our snow pipeline target of $100 million by year-end. None these figures include the addition of Crabtree.

Speaker #4: I noted on our last call that we were confident we'd de-risked the key elements the path forward plan with our leasing disposition, capital markets, and leverage reduction progress.

Speaker #4: That progress on the plan positioned us to opportunistically pursue external growth via an attractive transaction. At the end of June, Macerich acquired Crabtree Mall, a market-dominant Class A retail center totaling approximately $1.3 million square feet in the Raleigh-Durham North Carolina MSA, for approximately $290 million.

Speaker #4: The strategic rationale for this transaction is compelling. It's a creative path forward to the planned 2028 target FFO range. A powerful entry point to one of the top Southeastern U.S. markets.

Speaker #4: It holds a market-dominant position and high growth market with a REIT with top retailers in the country identifying it as the number one or number two must-have location in region.

Speaker #4: We have a perfect opportunity deploy our operating leasing and marketing platform to reinvigorate leasing momentum and drive permanent occupancy from 74% as of June 30th to closer to 90% by 2028 and capture the embedded NOI growth upside potential.

Speaker #4: And it's ected to keep us within our stated deleveraging targets under the path forward plan. We're excited to close this acquisition as Crabtree enhances our go forward portfolio and creates a compelling opportunity to drive shareholder value.

Speaker #4: Doug will comment on the strong leasing momentum we've already seen at Crabtree and the tremendous response and feedback we have received from many retailers.

Speaker #4: Who are elated that we now own and manage Crabtree. In closing, I feel very good about where we are on the path forward plan and with the addition of Crabtree to our go forward portfolio.

Speaker #4: As I noted earlier, we're ahead of plan on leasing. We're also ahead of plan on asset sales and dispositions. We have a clear roadmap for hitting our deleveraging targets.

Speaker #4: Our team is working well together, executing nicely on the key components of the path forward plan, and properly incentivized and aligned on shareholder value creation.

Speaker #4: With that, I will turn the call over to Doug.

Speaker #5: Thanks, Jack. In my remarks this afternoon, I'll refer to total portfolio statistics and where applicable, I'll provide the go forward portfolio statistics as well.

Speaker #5: Portfolio sales at the end of the second quarter were $849 per square foot, which is up $12 when compared to the first quarter of 2025.

Speaker #5: However, when you look at our go forward portfolio, sales were actually $960 per square foot. Traffic through the second quarter for the portfolio was up 1.6% when compared to the same period in 2024.

Speaker #5: For the go forward portfolio alone, traffic was up 2.1%. Occupancy at the end the second quarter was 92%. Down 60 basis points from the last quarter.

Speaker #5: As we signaled on our last call, this decline is primarily due to the liquidation and closing of our Forever 21 stores, all of which occurred in the second quarter.

Speaker #5: As I mentioned last quarter, Forever 21 had a lot of square footage, but did not pay a lot of rent. Recapturing these stores now allows us the opportunity to remerchandise the space with higher and better uses that will pay significantly more rent.

Speaker #5: To date, we have commitments on just over 50% of the closed square footage with another 30% in the letter of intent stage. We still expect to more than double the rent Forever 21 was paying us once we complete backfilling all of this space.

Speaker #5: The go forward portfolio occupancy at the end of the second quarter was 92.8%. Trailing 12-month leasing spreads as of June 30th, 2025 remain positive at 10.5%.

Speaker #5: Which is relatively consistent with last quarter. This now represents 15 consecutive quarters of positive leasing spreads. In the second quarter, we opened $332,000 square feet of new stores for a total of $599,000 square feet year-to-date through June 30th.

Speaker #5: Also in the second quarter, we signed $331,000 new and renewal leases for $1.7 million square feet. Year-to-date through the second quarter, we signed $650,000 new and renewal leases for $4.3 million square feet.

Speaker #5: In terms of lease signings, this represents 40% more leases and 75% more square footage than we signed during the same period in 2024. And just looking at new deals, it's double the number of leases and triple the amount of square footage that we signed during the same period last year.

Speaker #5: All of which are in line with the rentals assumptions we used in our five-year plan. We're very excited to announce the signing of $142,000 square foot fixed houses for at Washington Square in what was a vacant Sears box.

Speaker #5: For those not familiar, Dick's House is for is an experiential retail concept that is built on the foundation of a traditional Dick's Sporting Goods store by adding interactive elements such as climbing walls, batting cages, and golf simulators.

Speaker #5: Dick's House is the epitome of destination-oriented, and will create a more engaging and immersive experience for customers. We expect this will totally transform the Sears wing, both in terms of better merchandising and increased traffic.

Speaker #5: Dick's House is for is expected to open fall of 2027, and we look forward to doing much more business with this concept. Including a freehold raceway mall, which is under construction and opening later this year, and a Crabtree Mall, which is signed and will open spring 2027.

Speaker #5: So stay tuned for more news on Dick's House of Sport throughout our portfolio. Other notable lease signs in the second quarter include three stores with urban planning, totaling 60,000 square feet to replace Forever 21, a Freehold Raceway Mall, Kings Plaza, and South Plains.

Speaker #5: We also signed Sephora at Fashionola to Chicago in Green Acres Mall, Cheesecake Factory also at Green Acres Mall, Kids Empire at freehold raceway mall and Tyson's Corner, and Round One at Victor Valley just to name a few.

Speaker #5: Now let's look at our Executive Leasing Committee, which reviews and approves deals on a biweekly basis. As I've mentioned before, this is a much more forward-looking and better representation of the current environment and retailer sentiment.

Speaker #5: Through the second quarter, we've reviewed over 70% more new and renewal deals and 140% more square footage than we did during the same period last year.

Speaker #5: And if you look at new deals only, we've reviewed double the number of new deals and quadrupled the amount of square footage than we did during the same period last year.

Speaker #5: Turning to our lease expirations, as of June 30th, we have commitments on just about 90% of our expiring 2025 square footage. That is expected to renew and not close.

Speaker #5: With another 9% in the letter of intent stage. In terms of 2026 expiring square footage, we have commitments on almost 30% of our expiring square footage, with another 45% in the letter of intent stage.

Speaker #5: So as you can see, we're basically done with 2025, and in very good shape with our 2026 business. For both 2025 and 2026 lease expirations, we're ahead of pace when compared to this time last year when looking at our 2024 and 2025 expirations.

Speaker #5: The retailer environment remains very strong even with the noise of uncertainty in the macroeconomic environment and the pending tariffs. As I mentioned last quarter, and still stands, the best brands remain very active, and continue to take vantage of great space and great centers.

Speaker #5: To that end, in May, we attended the annual ICSD convention in Las Vegas. It was very well attended by both landlords and retailers. The mood was positive, with many national retailers having significant open-to-buys and/or talking about new brand extensions.

Speaker #5: It was also good to see many new and emerging brands such as LO Yoga, Pop Mart, Rowan, Gloriana, Missouri, and Fabletics continue to expand their footprints in shopping centers.

Speaker #5: We look forward to the next ICSD convention in December in New York City. Turning our attention to the signed, not-opener snow pipeline for our go-forward portfolio.

Speaker #5: At the end of the second quarter, we had 179 leases for 1.5 million square feet of new stores, which we expect to open between now and early 2028.

Speaker #5: In addition to these signed leases, we currently have leases out with new stores totaling 1.6 million square feet. These two will open between now and early 2028.

Speaker #5: So, in total, that's over 3 million square feet of new store openings throughout the remainder of this year and beyond. This leasing activity has increased our snow pipeline from $75 million as of last quarter to almost $87 million today, with our goal to exceed $100 million by the end of this year.

Speaker #5: Lastly, as Jack mentioned, we're thrilled to now own Crabtree Valley Mall in Raleigh, North Carolina. Already a great mall and a at market, there is still a ton of potential to garner from this asset.

Speaker #5: We are reimagining this mall through a more dynamic tenant mix, enhanced customer experiences, and refreshed, modern, and inviting environments. In just the short 45 days since we've owned Crabtree, the interest from and conversations with existing retailers and those that want to be in Crabtree have been extraordinary.

Speaker #5: We look forward to many major leasing updates in the very near future. And with that, I'll turn the call over to Dan to go through our second quarter financial results.

Speaker #6: Thanks, Doug, and good afternoon. I'll start with a review of our second quarter financial results. FFO excluding financing expense in connection with Chandler Freehold accrued default interest expense and loss on non-real estate investments was approximately $87 million, or 33 cents per share, during the second quarter of 2025.

Speaker #6: I would like to highlight the following items included in our FFO adjusted for the quarter. Number one, $9 million of interest expense relates to the amortization of debt marked to market resulting from our various JV interest acquisitions, which compares to $3 million in the second quarter of 2024.

Speaker #6: As a reminder, this non-cash expense is included in interest expense. Number two, $2 million of total combined expenses relating to legal claims expense at one of our properties and severance and staff transition expenses.

Speaker #6: Following the release of our path forward plan version 2.0, which included an update on the composition of our go forward portfolio, we have now begun to include certain supplemental financial and operating information on the go forward portfolio in our supplement.

Speaker #6: We will continue to evaluate additional enhancements or disclosures to our supplement in the coming quarters. Go forward portfolio centers NOI excluding lease termination income increased 2.4% in second quarter of 2025 compared to second quarter of 2024.

Speaker #6: Year to date, the go-forward portfolio's NOI has increased 2% compared to the same period in 2024. Turning to the balance sheet, we recently closed on a previously disclosed approximately $160 million two-year term loan with two one-year extension options on Crabtree Mall at an interest rate of SOFR plus 250 basis points.

Speaker #6: We used a portion of the net proceeds to fully repay borrowings on the revolving line of credit associated with the purchase of Crabtree. The term loan also allows for future additional borrowings up to approximately $50 million to fund capital investments and leasing costs at Crabtree Mall.

Speaker #6: We continue to make strong progress on the balance sheet initiatives contained in our path forward plan. For the balance of 2025, we have only one remaining maturing loan in November for approximately $200 million.

Speaker #6: And we're continuing to proactively address our remaining 2026 debt maturities through a combination of potential asset sales, refinancings, loan modifications, or property give-backs. We currently have approximately $915 million of liquidity including $650 million of capacity on our revolving line of redit.

Speaker #6: From a leverage perspective, net debt to EBITDA at the end of the second quarter was 7.9 times, which is almost a full time lower than at the outset of the Path Forward plan.

Speaker #6: And importantly, we've outlined our strategy to further reduce leverage to the low to mid-six times range over the next couple of years. We're also making substantial progress in executing on planned dispositions as part of the Path Forward plan.

Speaker #6: In April, we closed on the sale of South Park for $11 million. This asset was unencumbered. In July, we closed on the sale of Atlas Park for $72 million.

Speaker #6: We used our 50% portion of the net proceeds from this sale to repay our 50% portion of the $65 million loan on the property, which had an effective interest rate of over 9% and a 2026 maturity date.

Speaker #6: As previously disclosed, we are currently under contract to sell Lakewood, which is expected to close in the second half of 2025 subject to customary closing conditions.

Speaker #6: We expect net proceeds to Macerich of approximately $5 million above the debt balance outstanding. We are also now under contract to sell Valley Mall for $22 million, which is expected to close in the second half of 2025 also subject to customary closing conditions.

Speaker #6: This asset is unencumbered. These sales transactions are consistent with our stated disposition plan to improve the balance sheet and refine our portfolio. We have made substantial progress on the sales and give-back component of the plan and have identified a clear path to achieving our $2 billion disposition target.

Speaker #6: To date, we have completed over $800 million in mall sales. As you will see in the disclosure we provided in our supplement, this includes Country Club Plaza, Biltmore, Southbridge, The Oaks, Wilton Mall, South Park, and Atlas Park, which are closed.

Speaker #6: This total also includes Santa Monica Place in which the loan encumbering this property is in default. The sale of Lakewood and Valley Mall, which again are both now under contract, would increase our sales completed total to approximately $1.2 billion.

Speaker #6: And then we have identified internally several additional eddy assets for sale or give-back over the next one to two years which would increase total dispositions to the $1.4 to $1.5 billion range.

Speaker #6: The remaining dispositions in our plan represent the sale of El Parcels freestanding retail non-enclosed mall assets and land. As you will recall, our 2025 goal for this bucket of dispositions is $100 million to $150 million in total sales for the year.

Speaker #6: I'm pleased to report that we currently have approximately $100 million sold or under contract against this target. Year to date, we have now closed on land sales for $55 million at our share.

Speaker #6: And various El Parcel assets for $9 million at our share. And we currently have approximately $14 million of additional land sales and approximately $22 million of additional El Parcel sales under contract for sale.

Speaker #6: We continue to expect to be substantially complete on this last bucket of the disposition program by the of 2026. We'll ide further updates on these sales as we progress through the year.

Speaker #6: In conclusion, we are making great progress on our path forward plan objectives. To reduce leverage, refine the portfolio, and strengthen the balance sheet. With that, we'll turn the call back over to the operator.

Speaker #2: 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.

Speaker #2: We ask you limit to one question and one follow-up. And our first question will come from Keenan Kim with Truest. Your line is now open.

Speaker #7: Thank you. Good afternoon. Jack, can we first talk Crabtree? It almost sounds too good to be true. You know, a mall generating sales of $950 a square foot, trading at 11 cap.

Speaker #7: So maybe you can just give a little more background into it, you ow, how well marketed was, and how you thought about some of risks with Belk, you know, Macy's, there as tenants.

Speaker #7: Thank you.

Speaker #8: Yeah. Thanks, Keenan. Good to hear from you. Well, first of all, you ow, on the trade area, you know, from there. You know, we ok at that trade area and, you know, within that Raleigh-Durham MSA, there's approximately 10 centers that account for about $6.8 million square feet of GLA.

Speaker #8: So that's about $3.1 per square foot per capita. One of those mall triangles is about $1.3 million, and we think that's kind of on the road to being repurposed.

Speaker #8: So overall, like the GLA per capita in the Raleigh-Durham area we expected to be around $2.4 million, $2.4 square feet per capita. So that's obviously, you know, our opinion, like a good ratio.

Speaker #8: But specific to Crabtree, I think it was a unique situation for us. It had a value-add component, right? The NOI is going from 32 million to 36 pro forma with the snow.

Speaker #8: North of $40 million. It did require some real leasing effort and capital to kind of reimagine some of the merchandising mix and drive more incremental traffic.

Speaker #8: The other thing that was unique to Crabtree was just the size. Because that NOI was ramping, you know, I suspect it would be difficult to get a more permanent highly leveraged loan on that asset with the NOI ramping like that.

Speaker #8: So, more than likely, that required probably competitors to put in a fairly significant equity check north of $100 million, and we suspect that most of the people we were competing with were looking at opportunistic IRRs. So, I think there was a unique asset.

Speaker #8: I an, I'm not sure we're going to be le to replicate that kind of cap rate in the future, but we hope so. But we're we're elated that on this asset and as Doug talked about, the the leasing interest and momentum that we have and the opportunity to kind of reconfigure, you know, without getting specific, some of the merchandising in that center is going to really be able to drive a lot of traffic, especially as I mentioned that that we think one of the major malls in that area are probably going to potentially get repurposed.

Speaker #7: Okay. And I believe that store, that mall, has the only Apple Store in Raleigh located in it. Does that inclusion of that, you know, very highly productive retailer, move the sales per square foot productivity to a significant degree?

Speaker #7: I know always does.

Speaker #8: Oh, re.

Speaker #7: Just curious, just a unique situation.

Speaker #8: Yeah. I mean, we look at, you know, you know, when ou look at sales, you look at them with Apple, without, because Apple is really highly productive from a sales per square foot basis.

Speaker #8: Even if you exclude the Apple Store, as I think we put in the materials, you know, the sales per square foot is still very productive.

Speaker #8: And like I said, if ou look at the permanent occupancy in that center, that's the thing that excited us so much, the ility to drive more market rent, more permanent occupancy, there is a we've already done a merchandising mix analysis there's a lot of brands that that need to be represented there that are not.

Speaker #8: And I think that those brands know that we're committed long-term to this trade area and to this location. So I think that gives them a lot of confidence that that that they can be there and and perform.

Speaker #8: If you get a chance to go down there, they're already repainting the interior of the center. And we've got capital plans for the parking lot and railings that will start to push through later this year.

Speaker #8: As real enhancements to the center.

Speaker #7: Thank you, Jack.

Speaker #8: Sure.

Speaker #2: Thank you. And the next question will come from Linda Sy with Jeffries. Your line is open.

Speaker #9: Hi. Good afternoon. The overall pace of your leasing is quite impressive with over $3 million opening between now and next year and over $100 million in no by year-end.

Speaker #9: You're itting your goals and then some what other benchmarks do you need to hit before you'd reinstate guidance?

Speaker #8: Thank you, Linda. The asset sales are an important component as well because you ow they that has a lot of disruption to to to earnings, especially the timing.

Speaker #8: So, you know, we unfortunately have two petals that we've got to push at the same time. You know, we're balancing asset sales and leasing, and all are going well.

Speaker #8: But to try to predict your timing on asset sales, some of these can delay or move sooner than later. So we'd rather not try to put guidance be constrained by guidance numbers versus just keep the pedal to the metal for asset sales and leasing.

Speaker #9: Thanks. My second question is it looks like you're bad debt was down year over year. how's the watch list trending? We saw that Claire's filed.

Speaker #10: Yeah. Hey, Linda. This is Dan. That's right. Bad debt through the first half of the year is about $2.8 million relative to about $5.6 million for 2024.

Speaker #10: so our watch list does continue to be at an all-time low. with respect to Claire's, you know we have about 33 locations in our go forward portfolio.

Speaker #10: These represent about 50 basis points of rents. These spaces are roughly 1,300 to 1,400 square feet but are in good locations. We're confident we can release those probably at least at the existing rents but with healthier tenants that will improve the merchandising at our centers.

Speaker #10: and in fact, as part of the go forward plan, we had ready anticipated getting a number of those spaces back in our plan. so given the size and location of the spaces, and the relatively small total rent they were paying, we don't see any impact to the five-year plan.

Speaker #10: and as Doug alluded to and is is remarks, I think importantly, and to your point about the bad debt lower than last year, we don't think Claire's is indicative of the strong retailer environment that 're seeing today.

Speaker #9: Has your bad debt guidance changed?

Speaker #10: Oh, no.

Speaker #9: Thank ou.

Speaker #2: And the next question will come from Michael Griffin with Avercor. Your line is open.

Speaker #11: Great. Thanks. I'm curious if you could give some color on the TIs in the quarter. I noticed the jumped pretty notably compared to last quarter.

Speaker #11: Seems like it did some more new leasing. So that probably drove a portion of it, but just give us a sense of maybe what the concessionary environment looks like currently.

Speaker #10: Maybe I'll start with remember that we've got a very high number of anchor stores that are in play right . Anchor stores, depending on how you decide to resolve them, whether it's you know, you get a Dick's House of Sport or you chop it up or you decide to put another use in there.

Speaker #10: All require different levels of CapEx or tenant allowance. There's also landlord work involved in a lot of this. When you're reconfiguring an existing department store, I would say that when we talk about our new leasing, you know that momentum, a lot of it is inline.

Speaker #10: And generally, I would say our TA expense has not really changed to date year to date or much at all. Still in that 1 to 1 and a half times annual rent.

Speaker #10: Anchor stores are a very different kind of question, and there's not one size that fits all. You know a deal at Tysons will look very different than a deal at Washington Square.

Speaker #10: Or a deal in a steady eddy asset. So I expect you'll see TAs and landlord work go up and continue to move up as we've stated.

Speaker #10: We get after a lot of these vacant, unproductive anchor stores because our goal is to drive traffic in those wings, as Doug talked about, the Sears wing.

Speaker #10: At Washington Square, that's been kind defunct for a long time. It's going to be extremely exciting when Dick's is finally open down there. And we're able to really remerchandise that wing.

Speaker #10: And so we're just going to replicate that almost 30 times across our portfolio. There's about 28 opportunities in play right . If you went out to see Shields, same effect.

Speaker #10: You know, you put a dominant, great driver of traffic at the end of that wing, and you can really do a lot of things inline, leading up to that location.

Speaker #10: So our priority in terms of a strategy shift of starting a year and a f ago was to really get after these vacant anchors.

Speaker #10: And that really meant foregoing maybe some of the densification opportunities that, you know, prior leadership was looking at. And really, more what's going to drive traffic; traffic drives sales, sales drives our ability to raise rent, and have tenants, you know, cover their cost of occupancy.

Speaker #11: Thanks. I appreciate the context there. And then maybe just switching over to sort of external growth activities. You clearly demonstrated finding attractive deals with the Crabtree acquisition.

Speaker #11: You know, as you kind of play out that proof of concept on the go-forward path, whether it's being ahead of your leasing expectations, that snow pipeline, what have you, does that give you maybe more confidence to turn that acquisition engine on?

Speaker #11: Are these deals more opportunistic? You know, just trying to wrap my head around how you're thinking about external growth activities in the context of the go-forward plan.

Speaker #8: I mean, I'd say like I'd start with, you know, Crabtree made sense from a portfolio contribution configuration, you know, for Macerich. We candidly, we're looking at some other centers.

Speaker #8: I would say that you know not all centers are the same. Not all are going-in cap rates are the same. You know, we really look at that relationship of market rents—the ability to reignite leasing momentum.

Speaker #8: You know what the trade area and competition dynamic looks like. You know, Crabtree really set up perfectly for that. I can say there are other things out there that are also pretty interesting.

Speaker #8: Whether or not we decide to move forward, whether or not it meets our, you know, I call it low to mid-teen IRR thresholds. And as a creative to our portfolio, I mean, time will tell, but you know one of the things that gave the board a lot of confidence and us as senior leaders, you know, the momentum that we're seeing in our business from a leasing and disposition standpoint are very significant.

Speaker #8: I mean, I know Doug talked about all the leasing and doing comparisons, you know, to last year. I mean, the way I think about it is we have three in our go-forward portfolio. We've got 3.1 million square feet of signed leases.

Speaker #8: We've got 2 million square feet of leases out. That typically has a very high 95% historical completion rate. And we've got 2.3 million square feet of LOIs where we're kind of trading paper with a tenant.

Speaker #8: Now that the historical ratio might be 50%, you know, 60. But what that tells me is I see 8 million square feet of opportunity that's either signed leases out or LOI.

Speaker #8: And like I said, we're only, you know, 70% through the year, and we've still got another year plus to finish our plan. So I think we're way ahead of plan, and we're just going to keep driving it.

Speaker #8: You know, we’re at market rents too, which, and at the same TA assumptions—tenant allowance assumptions—that we had pro forma in our five-year plan.

Speaker #11: Great. That's it for me. Thanks for the time.

Speaker #8: Thanks.

Speaker #2: And the next question comes from Jeff Spector with Bank of America. Your line is open.

Speaker #11: Great. Thank you. Just coming back to Crabtree, again, I I understand the strategy. Thanks for laying all that out. The market positioning, leasing opportunity, I guess, can you just weigh the decision, again, buying Crabtree, the CapEx required, versus let's say using that cash on hand to just pay down debt?

Speaker #11: And obviously, with Crabtree, you're asking the team now. Focusing on a new market, I guess, can you just talk through that decision? Thank you.

Speaker #8: Thanks, Jeff. Yeah, I mean, we had a lot of cash on hand. It was very ideal and opportunistic for us. I suppose when we thought about the idea of paying down debt versus pursuing an acquisition like Crabtree, we think that just the implied growth rate of Crabtree's NOI—what that does is it actually shows that the growth rate's higher than our core growth rate.

Speaker #8: So on the one hand, we think it's going to be accretive from just a pure you ow standing start NOI growth rate versus our core portfolio.

Speaker #8: So that was a big plus. The second was you know that that that point about where we are in the leasing evolution of what we need to accomplish.

Speaker #8: We just have a high degree of confidence that we're going to get this done ahead of schedule, on market rent, and within the TA ranges that we've lined.

Speaker #8: You know, one of the staff members that I just shared with you is part of that remaining "go forward" bucket of LOIs and prospects that we talked about in the last question.

Speaker #8: You know, 90% of that space, of that new remaining space, or A, B, and C graded space in our folio. Another way to look at it is 66% of that new incremental rent that we're okaying for our LOIs and our prospecting bucket are at our fortress and fortress potential assets.

Speaker #8: So if you just step away, you'd see they've got remaining space at some of their best centers in their best quadrant of spaces that are remaining.

Speaker #8: So, if I were at a much lower percentage where I didn't have that visibility, we might not pursue a Crabtree. We might pay down debt.

Speaker #8: But we feel like we've really flexed over that point of where, like, I think we're really in a different position than where we were at the beginning of the year.

Speaker #11: The only thing I would add to Jack's comments is that we are still expected to keep the company within our previously stated deleveraging targets under the Path Forward Plan.

Speaker #11: So, even with this acquisition, we remain in our target leverage range as part of the plan. Thank you. Maybe, Jack, this ties to your initial comments about the team being better aligned.

Speaker #11: I know we've talked to you in the past about your leasing systems. I guess how does that all come together? Maybe just tie it to your comment.

Speaker #11: I think you said you may look at other, you know, potential acquisitions.

Speaker #8: Yeah, it was interesting. I'll tell you, Jeff, we did a kind of case study internally, like you know, lessons learned in the Crabtree process.

Speaker #8: I think it really worked quite amazingly well, given how we do our business today. The technology, the systems, and the processes that we put in place.

Speaker #8: It's, I mean, hard to describe how well the company is actually working right now. Like, we didn't just magically go lease all this space.

Speaker #8: I mean, we had a plan. It was built on a five-year plan. There was a lot of realignment with the operating teams. There are very specific criteria that are met for spaces in our portfolio with market rents and TA assumptions.

Speaker #8: That flows into that five-year model. So we're able to make decisions very rapidly. It frees up the team to move forward. We've unburdened a lot of our sales team and leasing team with things that, you know, so they can do their jobs.

Speaker #8: More efficiently. So just across the board, it's helped us achieve the leasing goals that we need. And when we evaluated Crabtree and actually integrated it, it's been—I can't really compare them because I wasn't here that long ago, but from what people tell me that have been around for a while, it's been a pretty seamless process so far.

Speaker #8: So we hope to get maybe another opportunity or two to try out to put into the business.

Speaker #11: Great. Thank you.

Speaker #8: Thank you.

Speaker #2: The next question comes from Flores van Ditchcom with Ladenburg. Your line is open.

Speaker #11: Hey, good evening, guys. Thanks for taking my question. I just maybe you know talking about the S&O pipeline. I you ow I you know it's it's a it's a large number.

Speaker #11: 85 million. Obviously, you had some new leases that commenced during the quarter. I'm curious to know what commenced during the quarter or how much was added?

Speaker #11: And as a percentage of your going forward NOI, what is it? I mean, this is, you know, approximately 10% of your EBITDA as you say it is today, but as a percentage of your going forward, it's got to be bigger.

Speaker #11: Maybe if you can give us a little bit more detail on that. And also maybe talk about the composition of that S&O pipeline.

Speaker #11: Because, presumably, if your average ABR is $73 a square foot right now and you're going forward with your portfolio, how much of that S&O pipeline is in the A bucket and B bucket versus the C bucket?

Speaker #11: And what is the rent difference between those?

Speaker #10: Hey, Flores. I'll start and then Brad and Jackson will chime in. If you think about your first point on the snow as a percentage of NOI, in the Path Forward presentation that we put out, we stated that the go-forward pro forma portfolio NOI was about $720 million.

Speaker #10: So you kind of look at the 87 of snow as a percentage of that. It's 12%. And obviously, the ultimate opportunity of $130 million of snow is significantly higher over that $720 million.

Speaker #10: In terms of snow, I think the second part of your question was about snow contribution to date. Again, in the Path Forward plan, we had outlined—and this is on the $80 million as of May—that we expected about $25 million contribution in 2025.

Speaker #10: So about $10 million of that has been realized to date. In terms of the last piece, the composition, yeah, so if we're... Hey, it's Brad.

Speaker #10: We're at $87 million today on the snow, and you know our ultimate goal is to get it to $130 million. So, of that additional $43 million, 90% of it is anticipated to come from our A, B, and C rated spaces.

Speaker #10: So we feel really good about that.

Speaker #11: And, and, and as you think about those A-rated spaces or B-rated spaces, what kind of premium rents do you see relative to the rest of the portfolio?

Speaker #8: Yeah, certainly, we got a higher rent on our A and B spaces. You know, I think one of the keys here is that we have, in our five-year plan, there's a specific market rent assigned to every single space.

Speaker #8: So, whether it's A, B, or C, we know what the target rent is that we need to hit for each space.

Speaker #11: And then maybe my second question. Sorry. And I know I sort of teased it on my first question because it was multi-part.

Speaker #11: But could you talk a little about the the temp tenancy opportunity? I think you mentioned obviously at Crabtree Valley 74% is is permanent and and or it's you know there's a uge temp opportunity there.

Speaker #11: Presumably, that also is incremental S&O potential in the portfolio. But maybe talk about what the temp tenancy percentage is today in your core portfolio and where do you think that'll be at the end of '26.

Speaker #8: Flores, you know we kind of gave wide end ranges for 2028. Like, I don't know what I'm trying to give incrementally because, you know, to answer, we're not putting out quarterly guidance. And I know if I give you a number, you'll probably try to do it.

Speaker #8: And so I think what I would tell you is that you know our goal is to is to really drive unproductive or temp tenants you know out of out of center because there's demand for really high-quality tenants at this point.

Speaker #8: And we're showing that through our leasing momentum. And, you know, I would rather not constrain ourselves to give you a target for '26.

Speaker #8: We might exceed it; we might not exceed it. I mean, I don't want to be constrained that way. So you can rest assured we're going as quickly as we possibly can.

Speaker #8: To make the right decision, to put the right tenant, where we think it's going to A, drive the most rent, but B, actually drive the most traffic.

Speaker #8: You know as as part of the merchandising plan in each of these centers. So and then you know at Crabtree, we we think there's an amazing opportunity to really tighten up permanent occupancy in that center.

Speaker #8: I would say that the prior owner, you know, did not probably commit the kind of capital that was necessary over the last few years coming out of COVID.

Speaker #8: There's clearly demand. We're seeing it, and we're going to get after it. It does cost money, and it does take time. I also think that a lot of those same tenants really want to see capital going into the center, which we've committed to do.

Speaker #8: And so they've seen it. They know what we're doing. In kind, you'll see updates from us, you know, maybe at the end of the year where we show progress before and after.

Speaker #8: And it'll quite significant.

Speaker #11: Jack, the only thing I would add to that—and you've done a great job sort of explaining Crabtree and everything that we're doing—but from a retailer standpoint, we're communicating to them all the time.

Speaker #11: They are elated that Macerich bought this property. They know exactly what a Macerich property looks like, feels like, and how it's leased. So already, I think I said this in my opening remarks, in the short time that we've had this, I can't tell you how many retailers proactively reached out to us and said, "Hey, we want to expand our store."

Speaker #11: We want to right-size our store. We want to invest capital. We haven't because we didn't know who was going to own this thing. So those are the ones that are currently in the mall.

But with the right loan structure, we think that it could be an interesting opportunity.

No, it makes sense. And I figured, um, your negotiations with the lender there. Um,

And then could you just give him the, you know, the portfolio list? It could be fluid. Are you able to share any insight into the performance for, you know, the remaining non-? Go-forward assets? In terms of, you know, how much NOI?

You know, growing or declining for those assets. I mean I might be able to do some back of the envelope math to get to first quarter results but I'm not sure if there's any noise there so I was hoping you can just you know share kind of ballpark where how noi is trended year to date for the you know, current non-. Go. Forward property, same store.

Yeah, I would say, like, high level. That's like, we're not putting capital into those properties. You know, the leasing that's happening there.

It, you know, it's being handled differently. The asset management teams that are operating those assets are treating them differently. Um, so I would just say they're not growing at the same rate as our forward portfolio. Not, not even close, actually.

Um, we're really just trying to maintain occupancy as a priority in those centers. Um, and

You know, in some, you know as we as we kind of move through the portfolio and look, other people have different ideas or other. We're clearly selling other properties with their other buyers. That may have a different angle or different Focus that that that can create value for that asset. I mean for us it's really just a prioritization uh concept like where we only have certain amount of capital, certain amount of bandwidth certain amount of leasing effort. Um so we're really trying to concentrate that effort into that. Go forward portfolio.

That that makes sense. Is it is it fair to assume to any those molds are effectively on the market? Given, you know, the release in May.

yeah, I mean

I think that's for sure. I mean, I would say they're on the market, or they— you know, the thing that's interesting about those properties.

you know, they they generate

Cash flow in some cases is FFO; some of them run levered. So, they're additive to what we're trying to do right now, which is, you know, the capital is good for the company and we can use that capital to reinvest.

But in the end, you know, we are operating and leasing and managing those properties differently now.

No, that makes sense. Thank you, yeah.

Sure.

The next question.

Will come from Ronald Camden.

With Morgan Stanley, your line is open. Hey, a couple quick ones, uh, or just 1 um, on the go forward portfolio. That that sort of noi growth maybe can you talk about, what are some of the factors that you're holding that back? Uh, sort of this year, whether it's Forever 21, whether it's transitioning from temp to permanent and you know, just some updated thoughts on, you know, once you get that inflection point, you talked about next year or how does that, what sort of a normalized growth rate we should be thinking about for the go forward? Thanks.

Hey, Ronald, this is Dan. I think you've hit a few of the points with, um, Forever 21 this year. Um, also all the leasing efforts and repositioning effort as it relates to 2025 specifically. I think if you look at our step back and look at our path forward presentation, you know, we put out for the go-forward portfolio. Um, you know, over the next four years of midpoint CAGR, go-forward portfolio of 5.2%. I think we've been pretty clear that, you know, um, that really ramps up to a jack point in kind of a mid-26 inflection point. So we've said for, uh, 2026, we can see that being 3 to 4%, but it significantly ramps from there. But the important point is, um, you know, over the next four years, it's north of a 5% NOI growth rate for the go-forward portfolio.

How full and then if I could speak a quick follow-up on just crap, tree the capex, uh, budget that you have for the asset maybe just just high level. What is that going towards? I mean, there was some articles about sort of the parking lots and and and flooding and and and different things. Is that just maybe details on what the capex plan is going towards. Thanks.

Yeah. So, you know, it's it's it's over a couple of different items. It's obviously, um, some of the releasing activity that's going to be there. But big picture, you know, as Doug alluded to, we're going to reimagine the center through a more Dynamic tenant mix. Um, modern environments refreshed experiences. We're doing 200,000 square feet of common area. That'll be reimagined, painting lighting redesign handrails. Um, a new furniture package, we're doing some interior signage, and wayfinding, um, some Greenery. Uh, we're doing a food court, that's going to be revitalized, New Vertical Transportation, the parking deck as you alluded to. So I think that gives you a mix of, you know, the the the what we're what we're looking to do at the asset, um, we've outlined about 60 million dollars in total over the next couple of years.

And, and also, the prior seller, they had already initiated a storm drain. Uh, we assessment, we, you know, we redesigned that that will alleviate some of that, flooding that that's historically, happened at that Center. So that that work is already in place. Um, the the parking stuff that we're working on is just

Make it more visually enhancing, you know, some of the sealant needs to be redone. So um, you know, I would say a lot of it's going to be more cosmetic oriented uh, and and sort of client facing which I think will be good. Because that that's going to really have a seen Capital go in in that way for quite some time.

Thanks so much.

And our next question will come from Omuo with...

Okasa with Dorchi Bank, your line is open.

Oh yeah, good afternoon. Um,

California.

Um, yeah, I would say, like, you know, our California exposures— you need to know, obviously, we have the Bay Area. You know, we've got a corner, Madera, Broadway Plaza; those are ...

Doing quite well given, you know, some of the I I call it more headline news in downtown, San Francisco. Although, I believe the mayor is doing an excellent job up there. Um, in terms of trying to address some of the perception issues in that City, you know, you go to Central, California Modesta and Fresno those. Those centers are doing well that within sort of the fine trade areas.

Um, you know, Southern California for us, you know, the portfolio is, is kind of, in the, in, in a kind of a reshape, right? You know, we've decided we sold the Oaks.

You know, Santa Monica place is in transition uh with the lender. Um Lakewood is under contract. So if you look at what we have left in the go forward, lost Doritos that is a that's that's small is doing Gang Busters right now. Um lots of traffic, lots of sales, lots of kind of demand the area that we're most focused on right now, which is an opportunity is the SE, the former Sears location. We uh, we are looking at, uh, an anchor option there that, we believe, you know, can't really talk about it right now, but that will bring a lot of traffic, a lot of demand into that wing of the center. Um, we've got a very very unique

Tenant that's we're in negotiation on in the former Forever 21 location which is in that same Sears Wing. So we're super excited about the potential for Los retos, you know, Victor Valley is a, is a very solid Setter. You know, it's in a very captive trade area, I wouldn't call it, La, it's in, it's in that Southern California, Beltway, but it's a very, it's the only Mall in town up in Victor Valley. Um, you know, we have Inland Center inland's got more competition, right with the Victoria Gardens.

And, uh, Ontario Mills that's surrounded and some of the power centers.

Um, but if you look at this in terms of our LA exposure, I would say Southern Cal we feel really good about.

You know, Los Cerritos, which is our most important asset down there at this point, and Victor Valley. So, and then the others are part of the EDI package.

Thank you.

We are over our allotted time today. We have time for one more question, and that question will come from Robbie Beda with Meizuo. Your line is open.

Hi there. Uh, good evening. I hope you guys are doing well. Uh, I wanted to ask about the opportunity with Forever 21. Uh, you mentioned that a good number of the backfills have been signed and a bunch of under LOIs as well. How many of these are straight-up single backfills and how many require a split of the box, which would require more CapEx? Thank you.

I think yeah. Robbie I it's Doug. Um I would say and uh Brad back check the I would say the majority of the Forever. 21 boxes are straight back fills with um the exception being a few that we may need to demise 1 or 2 or 3 ways.

um,

and I,

As I said in my remarks, we're about 50% committed.

Um, there's another 30% in the LOI stage. So, you know, not only are we going to basically double the rent that Forever 21 was paying, but you're going to see some uses come in that far exceed what Forever 21 was doing in the shopping center. So we're super excited to get those spaces back, to be very honest with you.

Got it, that's helpful. Maybe you could discuss the impact of the Dick's Sporting Goods and Foot Locker merger. What’s the potential store closure impact there? And um, what’s the backflow opportunity? Thanks.

Yeah, I mean, Adam, we're not, you know, we're not aware of any kind of closure list or anything like that.

The.

Having a Dick's credit become our number one.

Tenant, you know, if you look at it with the combined Foot Locker fixed contribution, I mean, I think that's going to be a real positive for us. And I think that, um,

You know, the Foot Locker stores that we have in our portfolio are quite productive, and so, you know, we'll patiently wait to see, you know, how that develops.

Uh, you know, potential transaction moves forward and then reacts from there.

I would now like to turn the conference back over to Jack Shea for closing remarks.

Um, well, I want to thank everyone here, especially all the colleagues that work here at Mitch. I mean, they've been doing great work on the platform, and we couldn't do this without them. And, um, we look forward to more updates and continued momentum on achieving our Path Forward Plan. Thank you.

This concludes today's conference call. Thank you for participating. You may now disconnect.