Mall owner Macerich cut dead weight and debt by ridding itself of slow-performing properties as it looks to become what its CEO called the “new Macerich.”
The strategy appears to be paying off, according to its executives.
“Over the past six to nine months, we have de-risked the [turnaround] plan by consolidating joint ventures, issuing equity, completing refinancings and executing on dispositions,” CEO Jack Hsieh said during the company’s quarterly earnings call on Monday.
Revenue for the quarter ended March 31 increased from $208.8 million in the year-ago period to $249.2 million. Meanwhile, the company narrowed its net loss from $131.4 million a year ago to $51.2 million in the recently ended quarter.
Senior Vice President of Leasing Doug Healey attempted to assuage any concerns around the impacts of tariffs on Macerich’s business.
Healey said national tenants, of which Macerich works with 40, all indicated they weren’t pulling back on inventory buys or leases. Among other tenants, Healey reported “only a handful that were pulling back.”
“Retailer sentiment is strong,” he said. “You can see it in the leasing metrics, what we signed, what we approved in [estimated landed cost] and then, most importantly, what’s currently in our pipeline.”
Macerich also continues to rid its portfolio of shopping centers that don’t fit with its strategy.
That includes selling the Wilton Mall in New York for $25 million in March. The following month, Macerich received $11 million for the sale of SouthPark Mall in Illinois.
Macerich is in contract to sell Lakewood in a deal expected to be completed in the second half of this year.
In the case of Santa Monica Place, which was backed by a $300 million loan that Macerich defaulted on, the center is now in receivership.
Merchandising Strategy
Leasing is Hsieh’s number one priority because, he said, it’s “the most accurate predictor of Macerich’s future success.”
The company restructured its leasing teams across permanent, specialty and department stores under a single leader with a dashboard used to make all leasing and spending decisions.
Hsieh noted the business is ahead of plan on leasing, with 2.6 million in deals signed in the first quarter. Most of that, 2.3 million square feet, were renewals. The goal is to average 4 million square feet of leasing activity this year and in 2026.
Among these deals is Alo Yoga and Aritzia at Los Cerritos Center in Cerritos, which has been flagged by Macerich as one of the malls it sees the greatest growth potential in moving forward.
The company is mindful of what tenants it’s bringing into its malls and isn’t interested in broadening its definition of what works best.
What Hsieh called “key legacy retailers” will always be a part of the leasing formula, but Macerich’s interest has expanded beyond that to look at digital-first and emerging brands, international names, food, medical, entertainment, electric vehicle makers, fitness, home and grocery, Hsieh described.
Forever 21: “Didn’t Pay a Lot of Rent”
Meanwhile, Healey waived off the Forever 21 bankruptcy as having any significant implications for Macerich.
“While Forever 21 had a lot of square footage, they didn’t pay a lot of rent,” Healey said. “We’ve anticipated this liquidation of stores for some time and recapturing these stores will provide an excellent opportunity to re-merchandise the space with higher and better uses, paying us significantly more rent.”
So far, the company has leased more than 50 percent of Forever 21’s former space. Letters of intent have been signed for another 10 percent. Factoring in those deals alone will generate more than what Macerich was making in rent from Forever 21, according to Healey.
Some of the larger anchor spaces may be broken up, but most of the former Forever 21 stores are being leased in their current state.
“When we finalize this entire backfill endeavor, we anticipate we should more than double the rent Forever 21 was paying in aggregate,” Healey said.
The leasing executive was unable to offer specifics on what companies have signed leases but described them as “some of the real, real hot tenants that are out there right now.”
He guided analysts to think about concepts such as Dick’s House of Sport, Primark, Zara, Uniqlo and Urban Planet as examples.
“There’s just so much upside not only in the rent, but in terms of merchandising as well,” he said.
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