Macerich Company (The)

Good morning. Thank you for joining us on our second quarter 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

and the financial condition and results of operations of the company and its tenants. The conciliations 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 SEC, which are posted in the investor section of the company's website at niecerich.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 Lindsey. With that, I would like to turn the call over to Tom.

Thank you, Jean. Thank you all for joining us today. And I really hope all of you and your families are safe and staying healthy. As you read in our earnings release this morning, the second quarter was a very unique and challenging quarter as we continue to battle this horrific COVID-19. By early April, all of our town centers were closed by government mandate. Our results were obviously adversely impacted in the quarter due to most of the centers being closed for two-thirds of the quarter. Our number one priority during the quarter was to safely reopen our centers and to get our tenants open and get their employees rehired and safely back to work and to welcome back our shoppers. I am very appreciative of the entire Maysearch team that did a tremendous job of getting our centers reopened safely. By July 10th, all but two of our assets, both in New York City, had reopened. Business was gradually returning, and for our centers open for at least eight weeks, sales were returning to near pre-COVID levels. Shoppers were back, and most of our tenants had reopened. On July 13th, due to a spike in COVID infections in California, The governor mandated a second partial closure of the state, specifically closing churches, fitness centers, indoor dining, bars, and enclosed malls. We have 13 malls in California, nine of which are enclosed. Tenants in those malls, however, if they have a direct entrance from the outside, can remain open, which includes 38 of the 45 anchor stores in those centers. At this time, there's not a specific timetable for reopening the California centers. We do expect our two New York City centers to open within a month. Some of the significant measures we've undertaken to improve the safety of all of our town centers, including those in California, are we significantly upgraded our air filtration systems in our enclosed walls to a level considered to be hospital quality. We've engaged the Clinical Head of Infectious Disease at UCLA Medical Center to review and advise us on our protocols and policies as it relates to opening and maintaining our centers in a safe manner. We hired a nationally renowned engineering firm to advise us on advanced HVAC infection control in our enclosed malls. We've implemented modified hours, new operational rules, regulations, and protocols. We are accommodating curbside pickup for our retailers. Given that most of our centers were closed in April and May, rent collections were a challenge. About 40% of our tenants paid rent for April and May. June cash collections came in at 58%, and July is currently at 66% and increasing every day. Through just the first week of August, collections are at 51%, which puts us on pace to be much better than July. For most of those tenants not paying April and May rent, We have generally come to terms with them on deferring those months with repayment in 2021, in many cases in exchange for landlord favorable amendments to leases. There were some large reserves for uncollectible rents in the quarter, which Scott will comment in a few minutes. The cash flow is improving by the month as we move into the third quarter, and I expect that to continue. As of today, we have significant liquidity and currently have approximately $600 million of cash on the balance sheet, and that will increase as rent collections grow in the third and fourth quarter, as well as when we get $45 million or so in loan proceeds when we close the financing of the apartment tower at Tysons. The tenant reaction has been good to the reopening. Our tenants, almost without exception, were eager to get reopened. By mid-July, Thank you. Thank you. as a key channel of distribution. Although it has accelerated sales of many digitally native brands, increased sales cannot make up for the lost profits from the physical stores. E-commerce is an expensive business model due to high delivery costs, greater product returns, and high consumer acquisition costs. Omni-channel business models have become critical to almost all retailers, including most of the digital brands. He went growing and accelerating e-commerce sales that did not make up for the lost sales and profits from the physical stores. The 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 were fulfilling orders out of their mall-based stores. Upon reopening, buy online, pick up in store has been even stronger than it was pre-COVID-19. Certainly, COVID-19 has accelerated bankruptcies that, frankly, were going to happen anyway. Those tenants that have filed for bankruptcy this year were all on our watch list for a number of years, and their bankruptcies were not a surprise. Good retail is not going away, especially in A-quality centers. China is a pretty good post-COVID example. By late March, nine weeks after the country shut down, 90% of the malls reopened and traffic had recovered to about 85% of the pre-COVID levels. That is very similar to the numbers we're seeing in the U.S. Our town centers are a vital part of their communities. Annually, 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. It's great to see so many of those people back to work. The states and communities we operate in benefit from 225 million in property taxes annually. Now as we look at the balance of 2020, the second quarter was obviously extremely unique, the likes of which we've never seen before. The adverse impact of having all of our centers closed for most of the quarter was significant. We had some pretty significant bad debt reserves, which you'll hear about in a moment. And although there's still many uncertainties, we can, I think, clearly say that the third and fourth quarter will be much better than the second quarter of 2020. And with that, I'd like to turn it over to Scott.