Macerich, a prominent real estate investment trust (REIT), has recently released its 10-K report. As a leading owner, operator, and developer of high-quality retail real estate in densely populated U.S. markets, Macerich's portfolio is concentrated in California, the Pacific Northwest, Phoenix/Scottsdale, and the Metro New York to Washington, D.C. corridor. The company currently owns 45 million square feet of real estate consisting primarily of interests in 41 retail centers. Macerich has achieved a #1 Global Real Estate Sustainability Benchmark (GRESB) ranking for the North American retail sector for ten consecutive years (2015-2024).
In the 10-K report, under "Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources,” Macerich discusses its anticipated liquidity needs and the measures taken to meet those needs. The report highlights that most of the leases at the company's centers have rent adjustments periodically throughout the lease term, either in fixed increments or based on increases in the Consumer Price Index. The routine expiration of leases for spaces 10,000 square feet and under each year enables the company to replace existing leases with new leases at higher base rents if the rents of the existing leases are below the then existing market rate. Inflation had a negative impact on the company's costs in 2024 and is expected to continue to have a negative impact in 2025.
Moreover, the report delves into the critical accounting policies and estimates. The company's significant accounting policies and estimates include judgments on revenue recognition, estimates for common area maintenance and real estate tax accruals, provisions for uncollectible accounts, impairment of long-lived assets, the allocation of purchase price between tangible and intangible assets, capitalization of costs, and fair value measurements. The report emphasizes that the preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities.
Furthermore, the report discusses the results of operations, focusing on key performance indicators such as tenant annual sales, occupancy rates, and releasing spreads. The report indicates that during the trailing twelve months ended December 31, 2024, comparable tenant sales for spaces less than 10,000 square feet across the portfolio decreased by 0.4% relative to the twelve months ended December 31, 2023. The leased occupancy rate of 94.1% at December 31, 2024, represented a 0.6% increase from 93.5% at December 31, 2023. Releasing spreads increased as the company executed leases at an average rent of $67.74 for new and renewal leases executed compared to $62.27 on leases expiring, resulting in a releasing spread increase of $5.47 per square foot, or 8.8%, for the trailing twelve months ended December 31, 2024. The market has reacted to these announcements by moving the company's shares -1.3% to a price of $18.08. Check out the company's full 10-K submission here.
