Macerich Company (The)

Good day and welcome to the Mace Rich Company first quarter 2020 earnings conference call. Today's conference is being recorded and will be kept to one hour. At this time, I would like to turn the conference over to Jean Wood, Vice President of Investor Relations. Please go ahead.

Good morning. Thank you for joining us on our first quarter 2020 earnings call. During the course of this call, we will be making certain statements that may be deemed forward-looking within the meaning of the safe harbor of the Private Securities Litigation Reform Act of 1995, including statements regarding projections, plans, or future expectations. Actual results may differ materially due to a variety of risks and uncertainties set forth in today's press release and our SEC filings, including the adverse impact of the Novell and the financial condition and results of operations of the company and its tenants. Reconciliations of non-GAAP financial measures to the most directly comparable GAAP measures are included in the earnings release and supplemental filed on Form 8K with the FDC, which are posted in the investor section of the company's website at newsrich.com. Joining us today are Tom O'Hearn, Chief Executive Officer, Scott Kingsmore, Senior Executive Vice President and Chief Financial Officer, and Doug Healey, Senior Executive Vice President Leasing. With that, I would like to turn the call over to Tom.

Thank you, Jean. I thank all of you for joining us today, and I really hope you and your families are safe and staying healthy. As you read in our earnings release, the first quarter was a good quarter that exceeded expectations with generally good operating metrics. But today as we battle this horrific COVID-19 pandemic, the first quarter results, frankly, seem not that relevant. It is a crisis that's impacting our way of life and touching almost every facet of the global economy. We've been fortifying our company and reshaping our strategic plans to withstand this unprecedented event. We're closely monitoring the situation, establishing our reopening strategies and protocols, and working with local and national authorities to ensure our number one priority is the health and safety of our employees, tenants, service providers, and shoppers. Our employees have done a tremendous job of managing through this crisis with a situation that is changing not only day by day, but even hour by hour. Going back to mid-March, we instituted some liquidity measures, which Scott will elaborate on later. And that allowed us to accumulate $735 million of cash on our balance sheet at quarter end. Some of the operational things we have done or are doing include hosting a webinar with PWC and U.S. Bank for our retailers to explain the stimulus package and help them access some of those funds. We've donated food and supplies to support first responders. We've donated our real estate for essential functions including blood drives, drive-through testing facilities, first responder parking, and drive-through farmers markets. We've made available our billboards and other media for campaigns about staying home, healthy hygiene protocols, and blood drives. We've designed and implemented a website to provide retailers with a library of information on the stimulus package. State and local governments Closed a total of 43 of our 47 centers except for essential businesses. We started reopening centers last week with more in process this week and throughout May. Our reopening plans include finalizing guidelines and criteria for reopening our centers in alignment with government requirements. We will implement modified hours, new operational rules, and communication protocols. There will be increased and highly visible cleaning and sanitizing protocols. CDC guidelines will be followed closely. We are addressing path of travel, vertical transportation, and delivery issues. We will accommodate curbside pickup for retailers. We are assessing PPE equipment requirements, queuing solutions, restroom configuration, common area food court seating solutions, and restart of tenant construction. There will be touchless hand sanitizing stations at entrances and exits and throughout the centers. Meanwhile, our retailers are making changes to allow for safe reopening of their stores, including removing or resetting store fixtures, installing hand sanitizers, placing social distancing markers for fitting rooms, installing plexiglass shields at checkout counters, and reducing occupancy generally to 50% of the maximum allowable. We currently have 13 centers reopened in Arizona, Texas, Colorado, Missouri, and Indiana. Most counties have their own approach to how and what will open initially. We expect this to evolve daily and be a phased approach. California has very gradually started its phased reopening of the state late last week, including nonessential retail, including apparel and sporting goods for curbside pickup only. We expect almost all of our centers and most of our tenants to be open by the middle of June. One of our liquidity measures was to defer most of our redevelopment where possible. We'll finish up Fashion District of Philadelphia and Scottsdale Fashion Square, the luxury wing. But most other redevelopments have been deferred beyond 2020. We anticipate spending about $60 million in the last three quarters of this year which represents a $90 million reduction from our previous redevelopment pipeline. This reduction excludes the joint venture with HPP which owns the Project One Westside, Google's new Class A creative office campus. Work continues on that project during the pandemic which is fully funded by a non-recourse construction loan. This crisis has shown the importance of brick and mortar locations as key channels of distribution. Although it has accelerated sales of many digitally native brands, the increased sales cannot make up for the lost profits from physical stores. E-commerce is an expensive business model due to high delivery costs and customer acquisition costs. Omni-channel business models have become critical to almost all retailers, including most of the digital brands. Even with growing and accelerating e-commerce sales, cannot make up for lost sales and profits from physical store closures. This crisis has emphasized the importance of brick and mortar locations as key sales and profit drivers for most retailers. During the closure, many of our retailers have been fulfilling orders out of their mall-based stores. Upon reopening, we expect buy online, pick up in store to be even stronger than it was pre-COVID. Some examples that are currently underway at Tyson's Corner, 24 tenants are fulfilling orders averaging over 8,000 packages per day. At fashion outlets in Chicago, Coach is the number one curbside delivery store in their entire fleet. At Scottsdale Fashion Square, one of the department stores continues to be one of the top locations for online fulfillment within their chain. And one of the newly opened restaurants at Scottsdale Fashion Square was the number two location for curbside dinner pickup in the nation. At Washington Square, retailers are fulfilling an estimated 28,000 online orders per day out of their stores. Good retail is not going away, especially in A-quality centers. In China, as a post-COVID-19 example, by March 22nd, nine weeks after the country shut down, 90% of the malls had reopened and traffic has since recovered to an average of 85% of the prior year's traffic. Many of their retailers are also big in the U.S., including H&M, Apple, Lululemon, Adidas, Uniqlo, among others. And they have experience in opening after COVID-related closures. Our town centers are a vital part of their communities. Our portfolio generates $1.1 billion in sales tax revenues benefiting local and state governments and their communities. Our centers employ approximately 110,000 workers. Many of whom were furloughed or laid off. In the United States, pre-COVID, one out of every five workers had a retail job. We need to get those people back on the job. The states and communities where we operate benefit from 225 million in property taxes we pay every year. Our retailers are eager and ready to get open for business and to bring their employees back in a safe and well-thought-out manner. That is what will be happening throughout our portfolio over the course of the next four or five weeks. and now I'd like to turn it over to Scott.