Macerich Company (The)

We stand by. We're about to begin. Good day and welcome to the Maysearch Company third quarter 2021 earnings conference call. Today's call is being recorded. And now at this time, I'd like to turn the conference over to Samantha Greening, Director of Investor Relations. Please go ahead, ma'am.

Thank you for joining us on our third quarter 2021 earnings call. During the course of the 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 novel coronavirus, COVID-19, on the U.S., regional and global economies, 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 SEC, which are posted on the Investors section of the company's website at macerich.com. Joining us today are Tom O'Hearn, Chief Executive Officer, Scott Kingsmore, Senior Executive Vice President and Chief Financial Officer, and Doug Healy, Senior Executive Vice President of Leasing. With that, I'd like to turn the call over to Tom.

Thank you, Samantha, and thanks to all of you for joining us today. After navigating almost two full years battling the impact of COVID, we're very pleased to report an outstanding quarter with almost no COVID-related restrictions in place. As you read in our 8K this morning, we had a very strong operating quarter, and we're pleased to report excellent results. We are seeing huge retailer demand. Our shoppers have come roaring back as the U.S. consumers are continuing to shop with a purpose, and we see a higher capture rate than pre-COVID. Sales are exceeding pre-COVID levels with double-digit gains the past two quarters compared to 2019, and that momentum is carrying into the fourth quarter. Retailer demand is at a level we have not seen since 2015. We expect traffic to continue to increase. The current level is over 95% of the 2019 traffic levels. Some of the second quarter highlights include, on a sequential quarter basis, we had occupancy gains of 90 basis points, and that's on top of the 90 basis point gain we had in the second quarter. At quarter end, our occupancy was 90.3%. We have a ways to go there, but we're making great progress. We saw robust leasing volumes for the quarter and year to date, both were in excess of 2019 levels. Year-to-date, we've executed leases for over 3 million square feet of space, and that compares very favorable to a full-year 2019 level of 3.3 million square feet and a full-year 2015 level of 3.4 million square feet. Once we include the fourth quarter, our full-year 2021 leasing volumes will exceed not only 2019 but the prior high of 2015. We saw same-center NOI growth of 21% in the quarter, and expect the fourth quarter to continue with the double-digit growth we've seen in the past two quarters. We were obviously optimistic about the fourth quarter as we raised the FFO guidance midpoint range to 196, a 3% increase on top of the increase in guidance last quarter. The depth and breadth of the leasing demand has us very optimistic about the future. Some of the larger deals recently signed include Target, which is at King's Plaza replacing JCPenney, Shields All Sports Megastore replacing Nordstrom and Chandler, Primark at Fashion District of Philadelphia, Primark at Green Acres, Pinstripes at Broadway Plaza, and Lifetime Fitness at Broadway Plaza and Scottsdale Fashion Square. And that's just to name a few of the bigger deals. Doug will comment in detail shortly on more of the third quarter leasing activity. In addition to the big box deals, non-traditional mall retail demand in smaller format continues to accelerate with the digitally native brands getting active again on brick and mortar locations after stepping back during COVID. Other interesting additions include a host of new electric car companies taking space in many of our malls, including Polestar and Lucid. Many of our traditional retailers are back with even greater demand for space than pre-pandemic. With retailer bankruptcies down to a record low level and demand for space very strong, this is an excellent leasing environment, which we expect to carry into 2022. Although leasing spreads were down slightly, we expect that trend to reverse itself in the upcoming quarters. During the quarter, we also continued our strategy of selling non-core assets. During the quarter, we sold La Cantata, a lifestyle center in Tucson, Arizona. We generated net cash of $100 million The open-air 246,000-square-foot center sold for $165 million gross. That transaction builds on the March 2021 sale of Paradise Valley Mall, another non-core asset in Phoenix, which yielded net proceeds to Maastricht of $95 million. The cash proceeds from both of those sales were used to reduce debt. The balance sheet moves we've made in 2021 have significantly improved our leverage metrics. Year-to-date, we've paid down debt of over $1.5 billion and reduced net debt to EBITDA by over two full turns and dropped debt-to-market capitalization to 61%. We're very optimistic about our business as we move through the balance of the year and into 2022. Not only is the leasing environment strong and getting better by the month, but we expect significant gains in occupancy, net operating income, and cash flow. And now I'll turn it over to Scott to discuss in more detail the financial results for the quarter.