Yahoo Finance Should Investors Hold on to Macerich (MAC) Stock for Now?
The increase in consumers’ preference for in-person shopping experiences following the pandemic downtime has driven the recovery in the retail real estate industry. Retailers continue to rent out more physical store spaces to meet this growing demand.
Given this backdrop, The Macerich Company’s MAC portfolio of premium shopping centers in the United States, with a notable presence in California, the Pacific Northwest, Arizona and the Metro New York to Washington, DC corridor, has been experiencing solid leasing activity. The healthy demand has also helped the company backfill its spaces, which is encouraging.
Moreover, these markets are densely populated and have an affluent customer base with significant disposable income, which enables the company to generate decent cash flows. This positions it well for growth.
In 2022, Macerich signed 974 new and renewal leases encompassing around 3.8 million square feet. Its portfolio occupancy improved year over year from 91.5% to 92.6% on Dec 31, 2022.
Additionally, the company recently welcomed Chinese restaurant Din Tai Fung to Santa Monica Place, fashion retailer — Zara — and Irish retail brand — Primark — to Queens Center in New York City.
Macerich has been focusing on enhancing its asset quality and customer relationships by increasing its adoption of the omni-channel model. It has also shifted toward re-use and mixed-used properties by recapturing and repositioning anchor tenants.
This April, MAC announced that it would showcase ticketed attractions, The Dr. Seuss Experience and World of Barbie, at Tysons Corner Center and Santa Monica Place, respectively. Both these attractions are being introduced to Macerich by Kilburn Live, a global market leader in branded live entertainment, collectively with Fever, the leading entertainment discovery platform. This is expected to pull in more traffic at MAC’s top-performing properties.
Furthermore, Macerich’s aggressive capital-recycling program to enhance the overall quality of its portfolio highlights its prudent capital-management practices and releases the pressure off its balance sheet.
On the balance sheet front, Macerich had around $512 million of liquidity as of Dec 31, 2022. Its net debt to forward EBITDA, excluding leasing costs, was 8.8X as of the same date. With a well-laddered debt maturity profile and enough financial flexibility, MAC is well-positioned to capitalize on long-term growth opportunities.
Nonetheless, given the conveniences of online shopping, rising e-commerce adoption is concerning for Macerich. Also, limited consumers’ willingness to spend due to macroeconomic uncertainty could impair the company’s top-line growth. For 2023, we project funds from operations (FFO), excluding financing expenses in connection with Chandler Freehold, to fall 8.8% year over year.
Rising interest rates might increase the company's borrowing costs, affecting its ability to purchase or develop real estate.
Shares of the Zacks #3 (Hold) firm have gained 5.8% in the past six months compared with its industry’s growth of 14.3%.
Image Source: Zacks Investment Research
Stocks to Consider
Some better-ranked stocks from the retail REIT sector are Regency Centers REG, Essential Properties Realty Trust EPRT and Urstadt Biddle Properties UBA, each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for Regency Centers’ ongoing year’s FFO per share is pegged at $4.08.
The Zacks Consensus Estimate for Essential Properties Realty Trust’s 2023 FFO per share is pegged at $1.64.
The Zacks Consensus Estimate for Urstadt Biddle Properties’ current-year FFO per share is pegged at $1.60.
Note: Anything related to earnings presented in this write-up represent funds from operations (FFO) — a widely used metric to gauge the performance of REITs.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Macerich Company (The) (MAC) : Free Stock Analysis Report
Regency Centers Corporation (REG) : Free Stock Analysis Report
Urstadt Biddle Properties Inc. (UBA) : Free Stock Analysis Report
Essential Properties Realty Trust, Inc. (EPRT) : Free Stock Analysis Report
