Macerich Company (The) (MAC)

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Macerich Company (MAC)

Q1 2013 Earnings Call

May 2, 2013 1:30 PM ET


Jean Wood – VP, IR

Tom O’Hern – SVP, CFO and Treasurer

Art Coppola – Chairman and CEO

Bob Perlmutter – EVP, Leasing


Craig Schmidt – Bank of America

Richard Moore – RBC Capital Markets

Michael Mueller – JP Morgan

Paul Morgan – Morgan Stanley

Quentin Velleley – Citi

Christy McElroy – UBS

Joshua Patinkin – BMO Capital Markets

Alex Goldfarb – Sandler O’Neill

Tayo Okusanya – Jefferies

Cedrik Lachance – Green Street Advisors

Ben Yang – Evercore Partners



Good day, ladies and gentlemen. Thank you for standing by. Welcome to the Macerich Company First Quarter 2013 Earnings Conference Call. Today’s call is being recorded. At this time, all participants are in a listen-only mode.

Following the presentation, we will conduct a question-and-answer session. Instructions will be provided at that time for you to queue for questions. I would like to remind everyone that this conference is being recorded.

And I would now like to turn the conference over to Jean Wood, Vice President of Investor Relations. Please go ahead.

Jean Wood

Hi. Thank you everyone for joining us today on our first quarter 2013 earnings call. We look forward to see many of you Tuesday afternoon June 4th, in Chicago for our Construction Tour of fashion outlets of Chicago, as well the tour of The Shops at North Bridge on Michigan Avenue. Please contact me for the details.

During the course of this call management will be looking – will be making forward-looking statements, which are subject to uncertainties and risk associated with our business and industry. For a more detailed description of these risks, please refer to the company’s press release and SEC filings.

This call will be webcast for some time to come, we believe it is important to note that the passage of time can render information stale, and you should not rely on the continued accuracy of this material.

During this call, we will discuss certain non-GAAP financial measures as defined by the SEC’s Regulation G. The reconciliation of each non-GAAP financial measure to the most directly comparable GAAP financial measure is included in the press release and the supplemental 8-K filings for the quarter, which are posted in the Investors section of the company’s website at

Joining us today are Art Coppola, CEO and Chairman of the Board of Director; Tom O’Hern, Senior Executive Vice President and Chief Financial Officer, and Robert Perlmutter, Executive Vice President, Leasing.

With that, I would like to turn the call over to Tom.

Tom O’Hern

Thank you for joining us today. First, I’d like to introduce John Perry, our Senior Vice President of Investor Relations. We’re very pleased to welcome John to our management team in this newly created position to withstand investor relations efforts. We’ve known John for many years at Deutsche Bank and we know he is going to be a great addition to our team.

As most of you noticed, we added a new disclosure in the supplement today. The development pipeline on page 30 of the supplement. Mark will elaborate on this pipeline later in the call. Today, we are going to keep our introductory comments brief. We will have plenty of time for Q&A. That being said we will be limiting this call to one hour. If we run out of time and you still have questions, please do not hesitate to call me or John Perry or Jean Wood.

On the operating metrics, we continued to see strong fundamentals in our business, leasing volumes and spreads were both good. We signed leases for 325,000 square feet during the quarter with an average releasing spread on a trailing 12-month basis of about 15% – 14.9%. Occupancy rose nicely from a year ago at 93.4% that compared to 92.1% at March 31, 2012.

Adjusted FFO was up 13% in the quarter to $0.86 compared to $0.76 a year ago. Same center NOI increased by 3.4% compared to the first quarter of last year. And it’s important to note on that statistic that it does not include straight-lining or lease termination revenue.

This increase in same-store NOI growth was driven by increased occupancy, positive re-leasing spreads in 2012 that are now rolling through our 2013 numbers and the CPI increases on our leases. This is above our guidance range of 275 between a quarter, but this is just one quarter. So we’re not ready to modify that guidance yet but we’ll readdress that guidance after the second quarter.

We had gain on land sales during the quarter of $2.2 million. Those were sales that we had anticipated and they were included in our previously issued earnings guidance. There was significant savings on interest expense during the quarter as our average interest rate went down to 4.1%, compared to 4.7% in the first quarter of 2012.

Over the past 12 months, we have made significant progress on our balance sheet. Our debt to market cap at quarter end was down to 42.6%. Our floating rate debt had been reduced to 23%, compared to 36% a year ago. Our average debt maturity duration has increased to almost 5.5 years compared to 3.4 years a year ago.

We continued to take advantage of this great financing market. During the past 12 months, we have completed over 2.6 billion of financings, that’s our pro rata share. The average term of those financings has been 8.3 years and the average interest rate 3.4%. These low interest rates that we have been locking in have had a significant positive impact on our cash flow.

Our interest coverage ratio, for example, has improved to 2.9 times, compared to 2.5 times a year ago. There is only about $480 million remaining in maturities for 2013 and there we have two big loans coming up, one FlatIron Crossing with an interest rate of 5.32 and the other is Tysons Corner Mall with an interest of 5.22. Both are very underleveraged with interest rates and placed significantly above where we could finance today. Going forward, we will continue to put long-term non-recourse financing in place and continue to stretch out our maturity schedule.

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