The Macerich Company has recently released its 10-K report, providing a detailed look at its financial performance and operations. As a fully integrated real estate investment trust (REIT), Macerich focuses on owning, operating, and developing high-quality retail real estate in densely populated U.S. markets. The company's portfolio primarily consists of interests in 44 regional town centers, totaling 47 million square feet of real estate. Macerich is also recognized for its commitment to sustainability, having achieved a #1 Global Real Estate Sustainability Benchmark (GRESB) ranking for the North American retail sector for nine consecutive years.
The 10-K report delves into the company's liquidity and capital resources, highlighting the impact of inflation on its operations. Macerich's leases typically have rent adjustments periodically throughout the lease term, either in fixed increments or based on the Consumer Price Index. The routine expiration of leases for smaller spaces allows the company to replace existing leases with new ones at higher base rents if the existing rents are below the market rate. Additionally, most leases require tenants to pay their pro rata share of property taxes and utilities.
The report also discusses the company's critical accounting policies and estimates, particularly in relation to acquisitions, asset impairment, and the fair value of financial instruments. Macerich evaluates whether acquisitions are business combinations or asset acquisitions, allocating the purchase price of properties to acquired tangible and intangible assets and liabilities. The company also assesses the fair value of its properties through discounted cash flow analyses, with significant unobservable inputs including discount rates and market rents.
In terms of results of operations, Macerich highlights key performance indicators such as tenant annual sales, occupancy rates, and releasing spreads. Comparable tenant sales for smaller spaces across the portfolio decreased by 1.8% in the trailing twelve months ended December 31, 2023, while the leased occupancy rate increased to 93.5% during the same period. The company also executed leases at an average rent of $61.00 for new and renewal leases, resulting in a releasing spread increase of $8.96 per square foot, or 17%, for the same period.
Looking ahead, the report emphasizes the importance of 2024 lease expirations for the company. As of December 31, 2023, Macerich had executed renewal leases or commitments on 41% of its square footage expiring in 2024, with an additional 33% in the letter of intent stage. The company continues to focus on renewing or replacing leases expiring in 2024 and beyond, representing approximately 1.3 million square feet of its centers.
The market has reacted to these announcements by moving the company's shares -1.3% to a price of $16.52. For more information, read the company's full 10-K submission here.
