Analyst Note
| Kevin Brown, CFA |Third-quarter results for Macerich were slightly below our expectations, though we don’t anticipate making any material changes to our $27.50 fair value estimate for the no-moat company. Occupancy improved 30 basis points sequentially to 92.1%, better than our estimate of remaining at 91.8%, and is up 180 basis points year over year. Re-leasing spreads of 6.6%, the strongest quarter Macerich has reported since the third quarter of 2019, were significantly better than the 6.3% decline we had anticipated. Despite improving occupancy and rent, same-store net operating income fell 3.5% year over year. However, this decline is due to lease termination income falling to just $1.5 million in the third quarter compared with $12.1 million in the third quarter of 2021, which we view as a positive for the health of Macerich’s tenants. Excluding the impact of lease termination income, same-store net operating income, or NOI, grew 2.1% in the quarter, which was relatively in line with our estimate of 2.7% growth. Funds from operation, or FFO, of $0.46 per share similarly missed our estimate of $0.49 due to lower lease termination income reported in the quarter.