Macerich Company (The) (MAC)

MAC 
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Macerich Co. (MAC)

Citi Global Property CEO Conference Call

March 5, 2013 4:15 PM ET

Executives

Arthur Coppola - Chairman and Chief Executive Officer

Edward Coppola - President

Thomas O'Hern - Senior Executive Vice President, Chief Financial Officer and Treasurer

Analysts

Michael Bilerman - Citi

Quentin Velleley - Citi

Presentation

Michael Bilerman

Welcome to the 4:15 session on day two of Citi's Global Property CEO conference. I am Michael Bilerman. I'm here with Quentin Velleley. This session is for investing client only, and if media or other individuals are on the line, please disconnect now.

We are extremely pleased to have with us Macerich, Art and Ed Coppola, and Tom O'Hern. Art, I'll turn it over to you for some introductory remarks, and then we'll have questions.

Arthur Coppola

Well, first of all thank you for hosting this. We're pleased to be here. A lot of you probably know that we recently came out with a new disclosure that indicates our sales per square foot by property and we actually show that over a four-year period. And the reason that we do that is that, over the last several year, frankly, are becoming increasingly cynical and skeptical about the shallowness in the two dimensional nature of portfolio sales per square foot, because when you give out just one number for a portfolio, it's hard to really have appreciation for the quality of the portfolio by looking at their number.

So we decided to go ahead and come out and give actual sales per foot of each of our properties. And from that you can take a look at it and you can see that our top 40 properties generate roughly 78% of the net operating income and that's our prorate share, and they generate $594 a square foot of sales, which is up from actually $482 a foot three years ago.

We are in a process of continuing to have a transformation and an upgrade of our company. We are big enough to matter, but we're small enough to make some big changes within our portfolio. So we currently are marketing, roughly 14 assets, of which we would expect that seven or eight or nine of them would sell those generally are in the lower 25% of our portfolio or 25 properties of our portfolio.

And on the assumption that those do sell, which we gave guidance earlier this year, that we felt that we would sell between $500 million and $1 billion of assets, and at this point we feel comfortable, pretty much with the midpoint of that range. Then you'll see that the top 40 properties of our company instead of generating 78% of the income will be generating something closer to 85% of the income, because it's our goal to have virtually 95% or more percent of our income from what we consider to be fortress assets.

Our business is very strong. We're thrilled with the developments that we have underway as well as the redevelopments that we have in our planning stages. And we look forward to answering any questions that you have. The other thing that I would point out and that you will want to take note of is that there has been a tremendous amount of financing activity within the portfolio in the last four months.

Just I think today, we locked in a new $525 million 10-year loan on Scottsdale Fashion Square at an all-end rate of roughly 3% fixed. When you couple that with a new $600 million loan that we did on Queens a couple of months ago, the $500 million deal that we did on Kings Plaza on its acquisition, there's been a tremendous extension of our maturity schedule. And we think that we are extremely well poised that our balance sheet is probably in the best position it ever has been.

And we think that the opportunity to recycle out of some of our lower tier assets get immediate de-leveraging from that, but essentially give us the firepower to fund our development pipeline over the next two to four years puts in a unique position to have some tremendous growth. So we're very optimistic and bullish about our views at this point in time.

Question-and-Answer Session

Michael Bilerman - Citi

As you probably saw from some of the write-offs, we've been starting each of these sessions with the same question, which is, what do you think is the most value creating opportunity that you currently have in the company that you don't feel the markets giving you much value or appropriate value for?

Arthur Coppola

First of all I think that we have an opportunity to do a better job of communicating our story, and that's what we are trying to do with the increased property level disclosure. And hopefully from taking a look at our portfolio here, you can see the strength of the assets within the portfolio.

I'd say at this point in time I've been surprised at the misperception of the quality, of the developments, that we have coming online with Fashion Outlets of Chicago and the densification of Tysons Corner. We've been so close to each of those projects that we know internally how successful they are going to be. But I discovered in the last month or two that there has been perceptions that there were question marks about them.

Fashion Outlets of Chicago, we just announced yesterday, actually, the names of initial list of tenants and it's an outstanding list of tenants, it's on our website and you can see it there. It's probably the most outstanding list of Fashion Outlet tenants that you'll see on a grand opening for many years. And we think it's going to be one of the most powerful outlet centers in the United State.

Read the rest of this transcript for free on seekingalpha.com