Macerich Company (The)

Good day and welcome to the Mace Rich Company first quarter 2022 earnings call. Today's conference is being recorded. At this time, I'd like to turn the conference over to Ms. Samantha Greening, Director of Investor Relations. Please go ahead.

Thank you for joining us on our first quarter 2022 earnings call. During the course of this call, we'll be making certain statements that may be deemed forward-looking within the meaning of the safe harbor of the Private Securities Litigation Reform Act in 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 the 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 investor 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 turn the call over to Tom.

Thank you, Samantha, and thanks to all of you for joining us today. We are pleased to report another outstanding quarter with virtually all our operating metrics trending very positively. After a strong second half of 2021, the first quarter of 22 was even better, which is a tribute to our team and the quality of our portfolio. We continue to see robust and accelerating retailer demand. The resiliency of the American consumer is once again on display. Shoppers have come roaring back to our centers to shop with a purpose. We continue to see a high conversion rate, higher than pre-COVID, as traffic is about 95% of 2019 traffic levels, but tenant sales are exceeding pre-pandemic levels, with the first quarter of 22 sales up 11.5% over the first quarter of 2019 and exceeding the first quarter of 21 sales by 14.5%. That is the fourth quarter in a row with double digit tenant sales gains versus the pre-pandemic quarters in 2019. Retailer demand is at a level we have not seen since 2015. All sales categories but one, which was flat, were up in the first quarter. Tenant sales per square foot for the trailing 12 months ended March 31st of 22. came in at an all-time high of $843 per square foot. Some of the quarterly highlights included occupancy at quarter end of 91.3%. That's a 280 basis point improvement from a year ago. Although there was a modest 20 basis point decline from year end, that is very normal due to seasonality. Actually, over the course of the past 20 years, that decline in the first quarter versus the prior fourth quarter occupancy has been in the range of 30 to 100 basis points. So we were on the better end of that historic range. We continue to see robust leasing volumes for the quarter, as in the first quarter of 2022, we executed 220 leases, a 21% increase over last year. We saw same center NOI growth of 25% in the first quarter, compared to the first quarter of 21. That is the fourth double-digit quarterly gain in a row. FFO per share came in at 50 cents, a 13% increase over the first quarter of 21. We beat the midpoint of our guidance, we beat consensus, we narrowed our range, and we increased the midpoint of our guidance range. We continue to ramp up the redevelopment efforts in the first quarter. During the fourth quarter, we announced One Westside in Los Angeles delivered a 584,000 square foot, three level creative office space to Google. We expect Google to open this summer. That project remains ahead of schedule and on budget. The project is being funded by a construction loan. In addition, we have numerous near-term openings with many exciting and prominent large format users including Shields All Sports at Chandler, Target at Kings Plaza, Lifetime Fitness at both Broadway Plaza and Scottsdale Fashion Square, Pinstripes at Broadway Plaza, Primark at both Green Acres and Tysons. These projects are expected to be funded with excess cash flow from operations. Keep in mind that all these deals have been signed and are under construction, but rent will not commence until this year or into 22 and some, excuse me, into 23 and in some cases 24. It speaks well for our continued same center NOI growth going forward. Also within the past few weeks, Caesars Republic at Scottsdale Fashion Square commenced construction of a ground lease to develop a 254,000 square foot 265 key four star hotel. The hotel is well positioned adjacent to a recently developed restaurant collection and next to our grand entryway to our newly developed luxury wing. The opening of Caesars is anticipated in mid-24. Focusing now on the leasing environment, which Doug will elaborate on in a moment, but as expected, given the depth and breadth of the leasing demand, we had a very strong start this year. Leasing interest we are seeing comes from a wide range of categories, including health and fitness, such as Lifetime, food, beverage, and entertainment, and sports, including pinstripes and round one, coworking, hotels, and multifamily, all of which are at demand levels we have never seen before. In addition, the digitally native brands continue to increase their push into brick and mortar locations, including tenants like Aloe Yoga, Allbirds, Lucid, and Polestar, just to name a few. Many retailers have strengthened their balance sheets and are financially in a much better position to expand their store openings than they were pre-COVID. Bankruptcies are at a record low. The combination of all these positive factors have us very optimistic about 22 and 23. We continue to expect significant gains in occupancy, net operating income, and cash flow through the remainder of this year and into next year. And now I'll turn it over to Scott to discuss in more detail the financial results as well as some significant balance sheet activity. Thank you, Tom.