Entering text into the input field will update the search result below

Macerich: Increased Customer Traffic Offers Growth Potential

Apr. 01, 2022 2:22 PM ETThe Macerich Company (MAC)BRX, WHLR, FRT, KIM, KRG, REG, RPT, SKT, SPG, STAG54 Comments
Pearl Investing profile picture
Pearl Investing


  • I am initiating coverage of Macerich with a BUY rating. High foot traffic and sales productivity in Macerich's Class A malls have improved and are near the 2019 levels.
  • Macerich has provided strong Q4 2021 earnings and offered solid FY 2022 guidance. Macerich has also reduced its debts and improved debt coverage ratios in Q4 2021.
  • Macerich’s stock is undervalued and is currently trading at a 23.2% discount to NAV of $20.68.

single word reit (real estate investment trust) on yellow color background

May Lim/iStock via Getty Images

Overview/Investment Rationale

The retail sector has started to improve from the pandemic disruptions. The 2021 holiday season helped increase customer traffics and tenant sales across malls in the US. The Macerich Company (MAC

This article was written by

Pearl Investing profile picture
I am an experienced Financial Analyst with more than 15 years of experience and proven working history in the financial services industry. I have expertise in selecting stocks for Buy/Sell-side investment firms. I have experience building financial/economic models in sectors such as REIT, Banking, Oil, Healthcare, Technology, and Timber. I have written numerous initiation reports and investment short thesis. Worked in Commercial Banks and have strong knowledge of core banking and sales processes.

Analyst’s Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

Recommended For You

Comments (54)

i would like to see an offer for the company that would put present management and board out of shareholders misery. a couple of years ago in the midst of covid most of us figured this would be a $40 stock and here it is just languishing when real estate prices in most of the country are soaring. just doesn't make sense. I suspect that if someone came along and offered $28 shareholders would jump on it , management and bod would fight it tooth and nail saying it undervalued the company.
@harry505 I wouldn't be surprised if private equity, Brookfield or Simon eventually buys it.
@only-temporary Seems like now would be a time to try for a steal. I'd be disappointed, but i wonder how many would vote down a $20 offer, especially if it was a tax free merger with SPG
Today it has a price/FFO of around 6. It owns top level real estate. In my area Tysons Corner is the most valuable land in Northern Virginia. It's got Apple, Starbucks, Barnes Noble, lot's of restaurants. The only way I can see this fail is if management maliciously doesn't like the shareholders and actively works to sabotage the company.
KRG reported today. $.46 FFO. Stock is at $22.62. 1.6% short. 219 million shares. all similar to MAC except MAC may even be recovering a little better. If you figure KRG will continue to improve and maybe attain $2.00 ffo for the year, their share price is 11 times forward FFO. MAC is expected to do $2.00 or better FFO so its share price is 6.5 FFO. That is a sin. MAC also has 13% short at this bottom of the barrel SP. Almost all of the fundamental defects that would justify a lower multiple of FFO to SP have reversed.
Large unsecured debt- gone
Shrinking occupancy- growing fastest in 7 years
New rental sales- highest in 7 years.
The market with the help of slimmy short sellers can incorrectly value a stock for a significant period of time.
That seems to be the case with MAC. There is a group of short sellers that are spending millions to discourage longs to give up and sell.
This is the time for diamond hands.
The market will wise up, maybe a significant dividend increase will do it. Could be this earnings or August,maybe October but the increase in rentals, FFO and dividend will attract buyers and scare off the short sellers and we will be looking at a $25-$30 share price.
I've been dollar cost averaging down with my last buy at $12.80
Naples Investor profile picture
@peppydave Thank you for the informative argument why I should add to this position. I think I am down 16% - 18% at this price. Not that big of a position. I can go bigger.
Naples Investor profile picture
@peppydave Best way to beat back shorts with improved financials is to buy back shares. Increasing the dividend is advertising to others to buy your shares. But buying them back yourself accomplishes the same thing. And if you need to cut back it's not as obvious and disappointing as a dividend cut.
bengalesq profile picture
"Macerich's debt coverage ratios have started to improve. Net debt-to-adjusted EBITDA declined from 15.43xin Q4 2020 to 9.72x in Q4 2021. Further, the interest coverage ratio also improved from 2.65x in Q4 2020 to 4.12x in Q4 2021."

The ratio mostly improved because of the fill/pay rate in units. Debt is still out of hand - not even close. To say the books look good is ridiculous. Interest coverage will reduce in the upcoming (higher rate) environment. It may do ok and feels out of the woods but it should not trade in line with peers.
@bengalesq how the ratio fills up doesnt matter though, so I do not think your comment is on point. There are always 2 ways to reduce debt to EBITDA: reduce debt or increase EBITDA. I can not understand why you would call that a bad thing. MAC has been doing both at the same time hence the strong decrease in ratio.

Also, they paid down 1.5 BILLION until last ER and have a positive cashflow of 220+ million a year. Saying it improved due to a better performance of their retail assets is just false. Its. just. False. I repeat, FALSE.

With a pipeline of leases coming online, a pipeline of selling non-core assets, positive lease spreads (you read that right!) and a higher lease % of 92+% and possibly the ATM longer term, their debt-to-EBITDA will improve and so should the share price.

At 6 times FFO MAC is a steal and seriously under values, just like it was 12-15 months ago. Mister Market has no f* clue but thanks for the opportunity to add more share to my account. If we have an increase dividend in 2023 this will move higher.
bengalesq profile picture
@bladeli the fill rent rate I was referring to is your 92%
Its curious. MAC has been trending down the last several months, while every one of its peers have been trending up.
@JXF12 exactly. I don't know what happen. I am going to sell all my $mac shares I bought early last year for a small profit. I should have sold last month but didn't pay attention to it until now.
@JXF12 none of its peers are up though .. name 1?
@JXF12 I agree MAC is doing worse than it’s pears SP wise but a few months ago SPG was $170and it closed today at $118. The entire sector is getting massacred.
I bought some at $13.53 but a lot of mine is under water.
Xav Welsh profile picture
Over 13% of the float is being shorted. Tough for the stock price…we’ll see if a squeeze eventually materializes
ButscherDoug profile picture
@Xav Welsh With 9 days to cover, I doubt a squeeze will happen.
@Xav Welsh Does look like something materializing on the front
Xav Welsh profile picture
@parsat Yes indeed. The coiled spring is up 6.5% today.
tonor profile picture
Hi, thanks for the report.

I have a few questions about the NAV calculation. The 8.0% capitalization rate seems like a fair guess. How did you come up with that cap rate?

How did you estimate the Development/Redevelopment Identified - NPV and the Land/CIP amounts?

I'm skeptical of mall company reports about traffic. They rarely want to talk about how they've measured it over the years. Analysts should question mall owners' assertions about traffic.

Placer.ai, a retail-focused location analytics provider used by other REITs, reported in February 2022 that weekly visits to indoor malls across the US declined during all 9 weeks of the November-December 2021 holiday shopping season, compared to the same 9 weeks in 2019.
@tonor An investment in MAC has more than one theory. One is the economy continues to improve from the pandemic and all malls are doing better. Your information from Placer.ai tends to refute that theory.
The theory I am basing my investment on is that there is a surplus of B and C malls and they will drag down all the industrywide statistics. There is not a surplus of A and A+ malls. They will continue to improve and their value is not reflected in their share price yet. MAC is predominately an operator of A and A+ malls.
@tonor me being in the commercial real estate biz and specifically skilled at valuation, the 8 cap is far too high for class a trophy retail. Pre Covid I’d say a 5 cap but with retail concerns still out there, 6 cap is more likely. Also not sure but their cap may be applied to the GAAP straightline NOI rather than year 1 pro forma. Either way I’d say the NAV here is at least 20% low.
tonor profile picture

Unibail-Rodamco-Westfield's "radical reduction of financial exposure to the US" should lead to price discovery for US malls.

When was the last time a class A mall traded hands? The lack of US malls transactions is a red flag for values.
Naples Investor profile picture
I'm at about breakeven at this price and I agree with the author that this should see about $20 within the next year. Unless we go into a crushing recession.

They need to keep paying down debt and nudging up the dividend.
@Jeff Durbin I agree but I'm always confused why when the malls sell off, MAC seems to drop a higher percentage than SKT and SPG. I understood when the had a large line of credit balance. Now it is effectively 0.
I don't see the liquidity threat.
Naples Investor profile picture
@peppydave I think it's about winning back trust.

I'm in GoPro and it's a similar situation. How long do I sit there waiting for the market to realize they have turned a corner and growing again?
@peppydave its because of it's beta. Also, most of MAC volumes comes from ETFs selling at this moment, not really from shareholder dumping. People dumping their ETFS means MAC is getting sold although it's fundamentals are getting stronger.

Means it will go down hard but also bounce hard when those ETFS are getting bought back.
Thank u to the author for the article.

I don’t understand the allure of this stock unless one is “trading” it over the past 30 years . A sad 5.7% CAGR over 28 years “assuming” you had the guts to hold thru the 75% and 90% drawdowns this stock has experienced.
I think it’s been a destroyer of wealth if God forbid you bought it at the wrong time in the past.
It’s got some serious debt and malls are in a slow death spiral.
Based on the low stock price today one might get a trade out if it but I wouldn’t consider this any sort of real solid, long term investment.
@Archman Investor It’s not a destroyer of wealth if you entered the stock in early 2020…..or actually anytime in 2020. I’ve been very pleased and I’m looking forward to increased dividends in the years ahead.
@Bryan514 early 2020? You could have bought any of the stocks in the sector-or of the Mkt as a whole-and done well. The author does appear correct that MAC is undervalued compared to its peers, based on the data he presents. But at a much higher Div, I’ll stick with Dave Simon.

"it’s been a destroyer of wealth if God forbid you bought it at the wrong time in the past" = This is exactly what "I" stated which is 100% true.

What you stated is 100% true as well.

I want to own stocks that over full market cycles and many years:

1. Provide a CAGR that is at least 10-12%.
2. I also want to own stocks that don't have drawdowns of 75-90% (more than once with MAC) over those full market cycles.
Actionable Conclusion profile picture
Uh oh... frozen escalators.

Back some 6 years ago I was seeing frozen escalators in the local Macerich Westside property. An old 65% leased, near empty shell way past its prime. Since been repurposed.

Now seeing frozen escalators in the Macerich Santa Monica property. It too is around 65% leased. And the foot traffic is not shopping much outside of food and bev, and Apple and Tesla.

$80 five years ago and now $16? One would expect the dividend to be huge... but MAC had to cut the divy... and cut it severely. Once a favorite of the "high yield" crowd... even some of them have come to their senses and moved on to more fertile ground.

The current mkt does not favor dividend investing. A couple months ago yes, there were some good plays to be had, but now the prices have shot up and the yields are either piss poor, or fat but unwise stocks for investing.

Just one mans take.

Good luck out there.
@Actionable Conclusion That’s why it was smart to buy two years ago…..and not so much today.
At the current enterprise value one square feet of leasable space valued below $200.
Got in here in the low $10’s, as it was deeply undervalued due to pandemic impact, but sooner or later will recover. Targeting mid 20’s this year and then will depend on where the economy goes.
Emerald profile picture
I se MAC at +$18 by the end of 2022, for all the reasons stated in the article. Long a small number of MAC and SPG shares.
ckarabin profile picture
It certain is cheap, but they do still have the high debt ratio. Much depends on whether we have a recession later this year as looks likely.
Thanks for the analysis. Along with SPG And Several others I bought MAC at a great price in 2020. I made the poor choice to hold MAC when it hit $20 last year. As I anticipated the long term value to be $27+ as debt was paid down. Debt should drop down close to $5 billion by end of year. Now The waiting game continues.
Thanks for posting. The NAV data is helpful. What I think many investors are not recognizing is that the current payout is 30% of FFO. 70%-80% would be a more normal range. While the firm will be using Free Cash Flow to pay down debt for awhile, a return to even a 60% payout rate would be a yield of ~7.6% on the current share price (that assumes FFO does not continue to grow) which it should increase meaningfully as all of the new lease activity converts into cash flow.
It was encouraging to see the CEO and the President step up with some personal capital this week and buy shares. Hopefully management will develop a laser focus on increasing share holder value.
If not, SPG needs to come back after them. Step in, lower the overall funding cost and ramp up the value.
Pearl Investing profile picture
@therealsully23 Thank you for your comments.
@therealsully23 90 percent to keep reit status. Do they lose reit status soon?
@Badgers360 The requirement to retain REIT status is to distribute to investors >90% of TAXABLE income. As a long time REIT, they monitor that closely every quarter and will not be losing REIT status any time soon.
Thank you for your analysis.
I’m long for many of the reasons you describe. I hope you are correct
I’m very optimistic
"As a result, many retail companies may think of reducing their store count in the long run. "

You might want to revisit that statement. Retail is actually expanding their footprint/store count as physical locations actually increased online sales :)
Pearl Investing profile picture
@bladeli Thank you for your comments. I understand that physical stores are the fundamental channel for retailers, and eCommerce still accounts for a small percentage of total retail sales.

However, "E-commerce could kill 30K stores and half a million jobs by 2025" -
@Pearl Investing I'm sorry but that's an outdated 2020 article. Here are the newest statistics :




Combine more store with less a-mall space and you understand why MAC/SPG already have or will return to positive lease spreads positively impacting FFO. Debt ratio will naturally trend lower when FFO grows so we could look at an early 2023 dividend increase if they are able to lower debt a little more.
Disagree with this article? Submit your own. To report a factual error in this article, . Your feedback matters to us!

About MAC

SymbolLast Price% Chg
Div Rate (TTM)
Yield (TTM)
Short Interest
Market Cap
Compare to Peers

More on MAC

Related Stocks

SymbolLast Price% Chg
To ensure this doesn’t happen in the future, please enable Javascript and cookies in your browser.
Is this happening to you frequently? Please report it on our feedback forum.
If you have an ad-blocker enabled you may be blocked from proceeding. Please disable your ad-blocker and refresh.