Macerich Company (The)

Please stand by. We're about to begin. Good day and welcome to the May Switch Company second 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 second 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 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 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 investor section of the company's website at maysearch.com. Joining us today are Tom O'Hearn, Chief Executive Officer, Zach Kingsmore, Senior Executive Vice President and Chief Financial Officer, and Doug Healy, Senior Executive Vice President Reasing. With that, I turn the call over to Tom.

Thank you, Samantha, and thanks to all of you for joining us today. We're very pleased to report another strong quarter with the majority of our operating metrics trending very positively. After a strong first quarter, we also had a very strong second quarter. We saw a high level of retailer demand. The resiliency of the American consumer was again on display, and that is reflected in the 2.2% tenant sales increase in the second quarter compared to a very tough, tough comp quarter of the second quarter of 21. Our portfolio average annual sales per foot for tenants under 10,000 square feet was 860. That's our highest level ever. We continue to see traffic at about 95% of pre-COVID traffic, but tenant sales are exceeding 2021 levels and also pre-pandemic levels. With the first half of 22, sales were up 7.6% versus the first half of 21. And sales per foot were up 11%. compared to the pre-COVID quarter ended the second quarter of 2019. The quarter's leasing activity continued to reflect retailer demand that is at a level that we have not seen since 2015. Some of the other second quarter highlights include an occupancy level at 91.8%, which was a 240 basis point improvement from the second quarter of 21, and a 50 basis point improvement on a sequential basis compared to the first quarter of 22. We saw strong leasing volumes for the quarter, significantly in excess of pre-COVID levels. For the quarter, we executed 274 leases. That's a 27% increase over the second quarter of last year, and a 42% increase over the pre-COVID quarter of 2Q19. We saw same seller NOI growth of 5.4% in the second quarter compared to the second quarter of 21, which was yet another strong quarterly gain. FFO per share came in at 46 cents. We beat the midpoint of our guidance and we narrowed and bumped our guidance range. We continue to ramp up our development efforts as we move past COVID-19. We have numerous near-term openings with many exciting large format retailers including Shields All Sports at Chandler, Caesars Republic Hotel at Scottsdale Fashion Square, Target at Kings Plaza, Lifetime Fitness at both Broadway Plaza and Scottsdale Fashion Square, Pinstripes at Broadway Plaza, and Primark at both Green Acres and Tyson's Corner. These projects will be funded with excess cash flow from operations. And all these deals have been signed and they're under construction, but rent will not commence until 23 or 24, which speaks very well for our continued NOI growth going forward. In addition, we're pretty excited to announce the addition of 130,000 square foot Target to Danbury Fair Mall. The signing of Target completes the repurposing of yet another former Sears box. Primark's already in the upper level, and Target will occupy the remainder of the building. Target chooses its real estate very carefully, so the decision to locate in Danbury and Kings Plaza is an enormous testament to the quality of the real estate. Focus now on the leasing environment briefly, and Doug will elaborate in a moment. As expected, given the depth and breadth of the leasing demand, we had a very strong quarter. Leasing continues to come from a wide variety of categories, including health and fitness, food and beverage, entertainment and sports, co-working, hotels, and multifamily. In addition, the digitally native brands continue to increase their move into brick-and-mortar locations, including Aloe Yoga, Allbirds, Vori, as well as the electric vehicle companies such as Lucid, VinFast, and Polestar. Bankruptcies continue to be at a record low. As we move through the balance of the year, clearly there are economic uncertainties due to inflation, rising interest rates, and the war in Ukraine. However, we continue to expect gains in occupancy, net operating income, and cash flow from operations through the remainder of this year and into next year. In additional recent news, last week the Philadelphia 76ers announced that they're planning to build a new arena on a portion of the current Fashion District Philadelphia. We will continue to work collaboratively with the 76ers to be in position to close on our transaction with them sometime in 2023. Obviously, we believe the impact on the center city of Philadelphia and the local communities, as well as on the Fashion District Philadelphia, will be very positive. More details will follow as we get closer to closing in 2023. And now I'll turn it over to Scott to discuss in more detail the financial results for the quarter. Thank you, Tom.