Macerich's Q3 2025 Earnings Call: Contradictions Emerge in Leasing Momentum, Asset Sales, and Vacancy Impacts

Guidance:

• Path Forward Plan targets: $2B dispositions by end-2026 (≈$1.2B closed) and deleveraging to low- to mid-6x net debt/EBITDA.
• SNO pipeline target $100M by year-end 2025; $140M expected including Crabtree; $20M of SNO in 2025, remainder 2026+.
• Crabtree expected to be accretive (~$0.08 to 2028 FFO); financed with SOFR+250 term loan (mid-6% range) with flexible terms.
• Expect ~85% tenant retention in 2026; renewals and new deals generally at or above five-year plan market rents.
• Liquidity roughly $1B (including $650M revolver); will use dispositions, refinancings, loan mods or give-backs to address maturities.

Business Commentary:

• Leasing Momentum and Targets:
• Macerich signed 1.5 million sq ft of new and renewal leases in Q3 2025, a 87% increase from Q3 2024, and has reached 5.4 million sq ft in total portfolio leases for the year, a 86% increase from the previous year.
• The company is ahead of schedule in leasing volume and is on track to meet its 2028 targets.

• This momentum is attributed to strategic leasing efforts and the success of the Path Forward Plan.

• Occupancy Rates and Portfolio Sales:

• Occupancy rates rose to 93.4%, up 140 basis points from the previous quarter, with the go-forward portfolio occupancy at 94.3%, a 150 basis points increase.
• Portfolio sales increased to $867 per sq ft, up almost 4% from the same period in 2024.

• The increase in occupancy is due to lease commitments following the Forever 21 liquidation, and sales are driven by the improved performance of the go-forward portfolio.

• Balance Sheet Management and Debt Reduction:

• The company has reduced net debt to EBITDA ratio to 7.76 times, a full turn lower than at the outset of the Path Forward Plan.
• Macerich has repaid almost $1 billion of debt with maturities in 2026 and completed approximately $1.2 billion in mall dispositions.

• These improvements are a result of strategic asset sales and refinancing efforts aimed at deleveraging and strengthening the balance sheet.

• Retailer Demand and Anchor Leasing:

• There are 30 anchors targeted to open between 2025 and 2028, with 25 committed to various retail uses.
• Macerich is making progress in anchor leasing initiatives to improve merchandising mix and drive customer traffic.
• The strong retailer demand is driven by legacy retailers reinventing themselves and emerging brands rapidly expanding their brick-and-mortar presence.
  

  Sentiment Analysis:

  Overall Tone: Positive

  • Management: "We had another great quarter," "well-positioned to deliver on our 2028 targets," leasing signed 1.5M sq ft in Q3 (up 87% YOY) and YTD 5.4M sq ft (up 86% YOY), SNO pipeline up to $99M and on pace for $100M by year-end, net debt/EBITDA down to 7.76x (one turn lower).

Q&A:

• Question from Vince Tabone (Green Street): What drove the decision to do $50 million of ATM issuance and should we expect further ATM issuance over time? Also, was $6M of the SNO pipeline related to Crabtree incremental since August or in-place when acquired?
  Response: The $50M ATM was executed primarily to make the Crabtree acquisition closer to leverage neutral; future ATM use will be evaluated case-by-case for accretive growth, and the Crabtree SNO reflects both in-place NOI at acquisition plus incremental leasing since takeover (details to be provided in follow-up).

• Question from Samir Canal (Bank of America): For 2026 expirations you have 55% committed and 30% in LOIs — what economics/spreads are you seeing versus 2025? And given SNO momentum, are you likely to exceed the $140M target (with Crabtree)?
  Response: We’re essentially trading paper on ~88% of 2026 expirations and are signing renewals/new deals at or mostly at/above the five-year-plan market rents; with continued leasing momentum and built-in plan reserves, exceeding the $140M SNO target is possible.

• Question from Michael Griffin (Evercore): Timing/cadence for the 30 anchors expected to open 2025–2028 and what capital costs/tenant allowance expectations should we model? Also, what is lender appetite/interest-rate expectation for refinancing non-fortress assets?
  Response: Most anchor openings expected back half 2027 into early 2028; inline tenant allowances typically ~1–1.5x annual rent while anchors (e.g., Dick’s House of Sport) are higher and deal-specific; financing markets are constructive and case-by-case — Crabtree financed at SOFR+250 (~mid-6%).

• Question from Linda Sette (Janney): If you hit $100M SNO by year-end, when will that come online, and of the 30 targeted anchors how many are still to be leased?
  Response: $20M of the $100M will come online in 2025 and the remainder in 2026 and thereafter; of 30 targeted anchors, 25 are committed, 3 have papers/LOIs and 2 are in prospecting.

• Question from Floris van Dijkum (Ladenburg Thalmann): What acquisition opportunities are you seeing like Crabtree and what is financing appetite/cost for those assets?
  Response: We see selective, accretive opportunities (Crabtree is unique) and are evaluating others though none are imminent this quarter; financing has improved — Crabtree closed with a flexible term loan at SOFR+250 (mid-6%), well inside 10%.

• Question from Ronald Kamdem (Morgan Stanley): How much did Forever 21 and proactive downtime drag same-store NOI, and what is peak occupancy for the go-forward portfolio (94.3% now)?
  Response: Q3 go-forward Centers NOI rose 1.7%; adjusted for Forever 21 headwinds the quarter would be closer to +3%+, and while 94.3% go-forward occupancy improved materially, management emphasized the long‑term upside from higher‑quality backfills rather than stating a specific peak occupancy.

• Question from Oluwatayo Oko-Sanya (Deutsche Bank): Given media speculation about Saks, how are you thinking through tenant risk and exposure?
  Response: Company declined to comment on specifics of any individual tenant, noting they will not discuss tenant-level issues publicly.

• Question from Handel St. Just (Mizuho): Portfolio sales/productivity and traffic trends through Q3 and back-to-school, plus read-through from recent A-mall trades?
  Response: Go-forward portfolio comp sales +3.5% Q3, Fortress properties +4.8%; traffic roughly flat; strongest categories were apparel/accessories, quick-service/food, home and jewelry; transaction comps vary by deal structure (Crabtree is a useful auction comp, while some recent trades were JV buyouts and not pure arm’s-length auctions).

• Question from Greg McGinniss (Scotiabank): Of the $99M incremental rent in the SNO pipeline, how much is from anchors? And any update/plans for Fashion District Philadelphia?
  Response: Anchors are a component of the $99M but specific split will be provided in follow-up; Fashion District leasing focus has been redirected, early momentum is cautiously encouraging, and there is no debt on the property while the team evaluates leasing and ROI-driven redevelopment options.

• Question from Todd Thomas (KeyBanc Capital Markets): Leasing spreads dropped to 5.9% TTM — what should we infer going forward and what tenant retention do you expect for 2026?
  Response: Quarterly leasing-spread variance is mix-driven and management focuses on net-effective rents versus five-year-plan targets (we are ahead on NERs); tenant retention for 2026 is expected to be about ~85%.

• Question from Alexander Goldfarb (Piper Sandler): Are fewer Canadian/mexican tourists and snowbirds materially impacting Scottsdale or other markets and how do you reconcile headline consumer stress with robust leasing?
  Response: While Canadian visitation is reduced in some markets, Scottsdale posted strong Q3 results and overall we have not seen material sales impact; leasing demand is strong because retailers are opportunistically expanding into high‑quality Macerich locations and emerging brands are seeking brick‑and‑mortar to support online.

• Question from Craig Mallman (Citi): Pace and appetite for remaining asset sales and specifics on Forever 21 backfills — TI and CapEx trends?
  Response: Disposition pace is on track to substantially complete the $2B plan by end‑2026 with several remaining $200M+ assets tied to debt timing; Forever 21 backfills are a mix of single large replacements and subdivided boxes — some require higher TI/CapEx but yield significantly higher rents and better merchandising/traffic outcomes.

• Question from Michael Mueller (JPMorgan): Why have rent spreads been higher for the overall portfolio than for the stronger go-forward portfolio this year and when might you tighten the 2028 FFO range?
  Response: Spread differences are driven by the mix of leases signed each period; management will evaluate tightening the 2028 FFO range as progress is confirmed later in the year and as disposition/refinancing milestones are met.

• Question from Caitlin Burrows (Goldman Sachs): The Path Forward Plan midpoint was $1.81 and Crabtree is ~$0.08 accretive — should we treat the new midpoint as $1.89?
  Response: Yes — the original plan midpoint was $1.81 pre‑Crabtree and Crabtree is expected to be roughly $0.08 accretive, subject to adjustments (e.g., ATM proceeds) as the plan is executed.

Contradiction Point 1

Leasing Momentum and Renewal Rents

It involves the company's leasing momentum and the renewal rents achieved, which are critical for understanding the company's financial health and growth strategy.

Can you detail the 2026 leasing commitments and their economics? - [Samir Canal](Bank of America)

2025Q3: Commitments on 2026 expiring square footage are at 55%, with another 30% in the LOI stage, significantly ahead of last year's commitments. Renewal deals are at or above target market rents. - [Dan Swanstrom](CFO)

Can you provide details on the Crabtree acquisition, including trade area, marketing, and risks from tenants like Belk and Macy's? - [Ki Bin Kim](Truist Securities)

2025Q2: We are significantly ahead of last year's renewals and early renewals on occupancy setting us up to achieve our 2026 leasing objectives. - [Jackson Hsieh](CEO)

Contradiction Point 2

Asset Sales and Disposition Strategy

It involves the company's asset sales strategy and the timeline for meeting its disposition targets, which are crucial for understanding the company's financial and strategic direction.

What is the forward-looking pace of asset sales and interest in non-Fortress dispositions? - [Craig Mallman](Citi)

2025Q3: Dispositions are on track to meet the $2 billion target by 2026, with continued progress on Eddy Mall sales and L parcels. The appetite for these assets remains strong. - [Brad Miller](SVP of Portfolio Management)

Why was South Plains Mall included in the go-forward portfolio despite the mortgage situation? - [Vince James Tibone](Green Street Advisors, LLC)

2025Q2: We have 27 assets, representing $3 billion, in play. We believe we will hit $1 billion this year and get to $2 billion within the next two years. - [Jackson Hsieh](CEO)

Contradiction Point 3

Forever 21 Vacancies and Impact on NOI

It involves differing statements about the impact of Forever 21 vacancies on NOI, which is crucial for understanding the company's financial performance.

For Forever 21 vacancies, how are TIs and concessions trending, and how is box splitting impacting CapEx? - [Craig Mallman](Citi)

2025Q3: The Forever 21 vacancies are being backfilled with larger tenants, requiring some box splitting to accommodate demand. - [Doug Healey](SEVP & CFO)

Could you share same-store NOI growth and occupancy targets for 2027 and 2028? - [Ronald Kamdem](Morgan Stanley)

2025Q1: The transitional year has been affected by Forever 21, but the impact is temporary. - [Dan Swanstrom](SEVP & CFO)

Contradiction Point 4

SNO Impact on NOI and FFO Growth

It involves differing expectations regarding the impact of Same-Store NOI (SNO) on NOI and FFO growth, which are critical financial performance indicators.

What prompted the $50 million ATM issuance, and are there plans for additional ATM issuances? - [Vince Tabone](Green Street)

2025Q3: We reiterate our expectation to deliver FFO per share growth of 3% to 7% in 2025. We now expect $140 million of SNO to be realized in 2025. Our SNO pipeline is expected to exceed $1 billion in the aggregate over the next five years. - [Dan Swanstrom](CFO)

With the SNO impact in 2025, will same-store NOI grow by 3%? - [Floris Gerbrand van Dijkum](Compass Point)

2024Q4: We expect that same-store NOI and FFO in the next couple of years won't reflect progress, but rather be flat. The focus is on achieving 39% of leasing goals affecting rent. - [Jackson Hsieh](CEO)

Contradiction Point 5

Leasing Momentum and Retailer Demand

It involves differing statements about leasing momentum and retailer demand, which are key indicators of the company's operational performance and future growth prospects.

Can you discuss the 2026 leasing commitments and their economic terms? - [Samir Canal](Bank of America)

2025Q3: We have built tremendous leasing momentum across our portfolio, with 2026 expiring square footage at 55% committed, 30% in LOI and another 15% in discussions. We continue to drive strong leasing spreads, with net effective rents on new leases up 16% year-to-date. - [Brad Miller](SVP, Portfolio Management)

Has consumer spending shifted from goods to services, and what’s the 2025 outlook for discretionary retail? - [Unknown Analyst](Bank of America Securities)

2024Q4: We are very excited about the progress we are making on the leasing front, especially on the anchor and junior anchor renewals, where we are seeing strong activity. - [Doug Healey](SVP, Leasing)