Macerich Company (The)

Ladies and gentlemen, thank you for standing by. Welcome to Q4 2023 Mace Rich Earnings Conference Call. At this time, all participants are in the listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you would need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Samantha Greening, Director of Investor Relations. Please go ahead.

Thank you for joining us on our fourth quarter 2023 earnings call. During the course of this call, we will be making certain statements that may be seen 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 in our SEC filing. 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 SEC which are posted in 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. And with that, I turn the call over to Tom.

Thank you, Samantha. By now, it's old news, but on Monday, we announced my pending retirement after 31 years at Macerich. So today is my 118th Mace Rich earnings call and my last. I will miss all of you. I would like to say I'll miss all of you, but I'm not so sure about that. When I joined Mace Rich 31 years ago, it was to help Mace Segal and Art and Ed Coppola take the company public. We did that in March of 94. Our total market cap was a modest $650 million. Today, our market cap is $11 billion. We went from having a portfolio of malls in the mid markets doing about 350 a foot in sales to a portfolio in major coastal markets doing $836 per foot in tenant sales. There's been a dramatic improvement in the quality of the portfolio to say the least. When I joined Maestrich in 1993, no way in hell did I think I'd be here 31 years later. Nothing in my Ironman background prepared me for a run of that duration. I will be forever thankful to my Mace Ridge colleagues and friends for our collective accomplishments. Today, Mace Ridge is extremely well positioned for the future as I pass the baton of leadership over to a man most of you know, Jackson Shea. He's the right person to take the company forward and to continue to execute on our strategy of densifying and diversifying our portfolio of top quality town centers. Regarding the upcoming leadership change, There is a detailed press release in 8K on the topic, so I will refer you there. So the remainder of this call, we will be focused on the quarterly results and the guidance and outlook for 2024. So now to focus on the quarter, I'm very happy to be leaving on extremely positive news. We had a strong fourth quarter, which included same-center NOI of 3% for the quarter and 4.5% for the year. Occupancy is now up to 93.5%. That's a 90 basis point improvement over the end of 2022. We had a total shareholder return of 46% for 2023. That's a top 10 finish among all REITs. We posted positive releasing spreads of 17.2% for the year. We had quarterly EBITDA margin improvement of over 100 basis points versus the fourth quarter of last year. Our partnership sold the One West Side office building to UCLA for a pro rata share of $175 million to Mace Rich. We did over $890 million of financings that was closed or committed in the fourth quarter. More on that from Scott in a minute. We signed over 4 million square feet of leases during 2023. That's an all-time Mace Rich record, and that's on the heels of the prior record, which was set in 2022. Portfolio average sales per foot was 836, down slightly from last year, but nonetheless, a top quality sales productivity. Bankruptcies continued to be at a record low. We continue to expect gains in occupancy and net operating income as we progress through 2024 and into 2025. Also, keep in mind, as a result of the very strong leasing activity in 22 and 23, we have a very large and healthy leasing pipeline with nearly 2.2 million square feet of leases that have been signed but are not open yet. Once those tenants open, it is going to fuel or NOI growth in 24 and 25. And now I'd like to turn it over to Scott to discuss in more detail the financial results, earnings guidance, and the significant financing activity we had the past few months.

Thank you, Tom. This morning, we're extremely pleased to report a strong finish to the year. As Tom noted, same-center NOI increased 3% during the fourth quarter of 2023 relative to the fourth quarter of 22. when excluding lease termination income. For the year 2024, same center NOI growth, excluding lease termination income was a positive 4.5%. FFO per share for the fourth quarter was $0.56 and was $1.80 per share for 2023 for the year. The quarterly result was $0.03 or 5.7% more than FFO during the fourth quarter of 2022 at $0.53 a share. and was in line with consensus estimates for the quarter. FFO for the year was in line with our most recently issued guidance, which was a midpoint of $1.80 per share. Primary major factors contributing to the quarterly FFO per share increase are as follows. One, an $11 million increase in rental revenues, which included a $13 million increase in top line minimum rent, $2 million increase in recovery revenue, which were offset by a $4 million decline in percentage rent. These trends are consistent with what's been reported over prior quarters. They're driven by improved occupancy, growth, and rental rate, as well as a continued conversion from variable to fixed rent structures with CAM and tax recovery charges. Secondly, we had a $9 million increase in termination income. primarily driven by a single lease termination deal, which was a very strategic transaction that we expect will facilitate a major future redevelopment opportunity. These positive factors were offset by the following. One, an $11 million unfavorable increase in interest expense due to rising rates. This figure excludes accrued default interest, which is consistent with our reporting over the prior quarter. And then secondly, a $4 million decline in non-cash straight-line rental revenue, primarily from the conversion of GAAP to cash rents for the lease with Google at One Westside, which Tom mentioned we've disposed of as a year-end. To recap, as we have emerged from the 2020 pandemic, same-center NOI growth generated by our high-quality Class A portfolio has been tremendous. with NOI growth averaging 7.4% in both 21 and 22, followed by 4.5% same-center NOI growth in 2023. We are extremely pleased with our resilient core NOI growth during the past three years. This morning, we issued our initial guidance for 2024 funds from operations. 2024 FFO is estimated in the range of $1.76 to $1.86 per share, or $1.81 per share at the midpoint. Here are several details underlying this earnings guidance. The FFO range includes an estimated same center NOI growth in the range of two and a quarter to three and a quarter percent. In terms of quarterly cadence for our 2024 estimated FFO guidance, we expect approximately 21% in the first quarter, approximately 24% in both the second and third quarters, and the remaining approximately 31% within the fourth quarter of 2024. Primary major factors that result in a reconciliation between 2023 actual funds from operations and 2024 estimated FFO are as follows. Same Center NOI is estimated to contribute roughly 10 cents of FFO this year. We had roughly three cents of FFO estimated from a relative improvement in valuation adjustments pertaining to our investment and direct investment in retailers. And we had roughly a one and a half cent year over year increase from the acquisition of our partner's interest in Freehold Raceway Mall, a transaction which closed in the latter part of 2023. These positive factors will be substantively offset by the following. One, a seven cent increase in interest expense when viewed on the same center basis. Two, an anticipated four cent decline in land sale gains. We've spoken about this in the past. This decline is due to the robust disposition activity from our land sale program that we've undertaken since 2021, which has significantly depleted our undeveloped land inventory that remains. And then lastly, about a one and a half cent per share dilutive impact from increased share count, which is primarily driven from the company's various share-based compensation plans. To emphasize, consistent with 2023, our 2024 outlook continues to reflect healthy operating cash flow generation of approximately $300 million after recurring capital expenditures and leasing costs, but before payment of dividends. More details regarding our guidance assumptions can be found on page 15 of the company's Form 8K supplemental that was filed early this morning. On to the balance sheet. Over the past few months, we have made considerable progress addressing our debt maturities. In December, we closed a $710 million five-year CMBS refinance of the $666 million loan on Tyson's Corner Center, the new loan bears interest at a fixed rate of 6.6% and is interest only for the entire loan term. Also in December, our joint venture sold one Westside, as Tom alluded to, to UCLA for $700 million. The existing $325 million loan on the property was repaid and approximately $78 million in net proceeds were generated at our 25% ownership share. In January, We closed a $24 million five-year bank loan refinance of the existing $23 million loan on Chandler Boulevard shops. The new loan bears variable interest at SOFR plus 2.5% and is interest only for the entire duration of the loan term. In January also, we repaid the majority of the loan on Fashion District in Philadelphia. Roughly $8 million remains and that matures in April and is anticipated to be repaid at that time. In January, we closed $155 million 10-year CMBS refinance of the existing $117 million loan on Danbury Fair. The new loan bears interest at a fixed rate of 6.39% and is interest only during the majority of the 10-year loan term. We are currently working with the loan servicer on a multi-year extension of the $86 million loan on fashion outlets of Niagara and we do expect this transaction to close later this month. Once closed on that Niagara extension, we will have a very manageable $400 million in maturities remaining in 2024 across three separate loans. To recap the year, we've been extremely active in the debt capital markets during 2023 and year to date. So far in 2024, across eight transactions, including Niagara, we will have refinanced or extended eight loans totaling $2.9 billion or $2.1 billion at our ownership share. This activity included a four and a half year renewal and upsizing of our $650 million revolving corporate credit facility during the third quarter of last year. And let's remind ourselves that closing was amidst a regional banking crisis within the United States. So we're very pleased with our activity throughout last year and to start this year. A year ago, we anticipated improvement in the debt capital markets during the latter portion of 2023, given that the Federal Reserve was expected to be then near the end of its historic rate hiking cycle. And in fact, that expectation has proven true. We're now finding significant opportunities to finance our assets within the sustained strong performance of our Class A retail. We also believe that we are benefiting from a rotation of financing capital away from the office sector and into the Class A retail real estate sector. Our recent transactional activity supports that thesis. In mid-November, we acquired our partner's half share in Freehold Raceway Mall for $5.6 million and the assumption of our partner's share of debt. We now own 100% of Freehold Raceway Mall. We currently have approximately $657 million of available liquidity, which includes $490 million of capacity on our corporate credit facility. With that, I'll turn it over to Doug to discuss the leasing and operating environment. Thanks, Scott.

We closed out 2023 with very strong leasing metrics and leasing volumes. In fact, 2023 was a historic and record leasing year for Mace Ridge, dating back 30 years as a public company. Year-end 2023 sales were down 1.8% from year-end 2022. And after a post pandemic spike in spending across all retail categories, 2023 was clouded with increasing interest rates, inflation, and the constant threat of a recession. In addition, we've definitely seen a change in spending habits. Consumers now focusing on travel, dining out, entertainment, and other various services. This doesn't come as a surprise and we expect 2024 to once again normalize and ultimately reflect more traditional consumer spending habits. Sales per square foot as of December 31st, 2023, were $836. That's down slightly from $847 at the end of the third quarter, and that's primarily due to a decline in the sales of electric vehicles. Trailing 12-month leasing spreads were a very healthy 17%. As of December 31st, 2023, That's up 660 basis points from the third quarter and up over 13% when compared to December 31st, 2022. In the fourth quarter, we opened 391,000 square feet of new stores. For the full year of 2023, we opened almost 1.6 million square feet of new stores, which is 80% more square footage than we opened during the same period in 2022. Notable openings in the fourth quarter, include an expanded and newly reimagined American Eagle flagship at Tyson's Corner Center, Five Below at Valley Mall, Levi's at Los Cerritos, Pandora at Stonewood, and North Face at Broadway Plaza and Flatiron Crossing. In the digitally native and emerging brands category, we opened Beyond Yoga at Broadway Plaza, Purple at Los Cerritos, Warby Parker at Chandler, and Yeti at Washington Square. In the international category, we opened Aritzia and Inimissimi at Corte Madera, Lululemon at Freehold Raceway Mall, Uni-Glo at Green Acres, Zimmerman at Scottsdale Fashion Square, and Zara at Queen Center. Lastly, in the experiential category, we opened Camp at Tyson's Corner and Round One Spocha at Arrowhead Town Center. Now let's take a look at the new and renewal leases we signed in the fourth quarter. In the fourth quarter, we signed 186 leases for 1.1 million square feet. For the full year 2023, we signed leases for 4.2 million square feet, and that's up from 3.8 million square feet, or 12% when compared to the same period in 2022. And as I mentioned earlier, 2023 was a record leasing year for Mace Rich over the past three decades. Notable new lease signings in the fourth quarter include Buck Mason, Kate Spade, Mango, Maggiano's, and Level 99 at Tyson's Corner, Round One at Chandler, Dave & Buster's at Freehold, Launch & Shoprite at Greenacres, a second office lease with San Bernardino County at Inland Center, Artarex at Washington Square, True Food Kitchen at 29th Street, and Viore at Scottsdale Fashion Square. As always, our focus in the fourth quarter was in large part addressing our lease expirations, finalizing 2023 and getting a head start in 2024. In doing so, in the fourth quarter, we signed over 130 renewal leases with 84 different brands totaling 475,000 square feet. With that, we're basically done with 2023 and now have commitments on 44% of our 2024 expiring square footage with another 34% in the letter of intent stage. 2023 was another year of newness for us, once again bringing new, unique, and emerging brands with a major initiative for our leasing team and a way for us to really reimagine and differentiate our town centers from our competition. To that end, in 2023, we signed leases with over 80 new to Mace Rich brands, totaling just over 600,000 square feet. Examples include Beyond Yoga, Yeti, Club Studio, ShopRite, Level 99, Maggiano's, Elefante, and Catch, just to name a few. Turning to our leasing pipeline, at the end of the fourth quarter, we had 126 signed leases for 2.2 million square feet of new stores which we expect to open in 2024, 2025, and 2026. In addition to these signed leases, we're currently negotiating another 80 leases for new stores totaling almost 600,000 square feet which will also open in 2024, 2025, and 2026. So in total, that's over 2.8 million square feet of new store openings throughout the remainder of this year and into 2026. And I want to emphasize, these are new leases with retailers not yet open and not yet paying rent, and these numbers do not include renewals. And I can tell you that this leasing pipeline of new store openings now accounts for $64 million of incremental rent, which represents roughly 8% of our current net operating income. And this incremental rent will continue to grow as we approve new deals and sign new leases. So to conclude, our leasing and operating metrics were very solid in 2023. There was only one bankruptcy in our portfolio in the fourth quarter and only 10 for all of 2023. And bankruptcies overall in both 2022 and 2023 were at their lowest levels since 2013, which is consistent with our significantly reduced tenant watch list. Leasing volumes were at record levels, the result of which is a very strong, vibrant, and exciting pipeline of tenants slated to open this year and into 2026. And as I've said in the past, and it remains the case, while there's still uncertainty in the macroeconomic environment, to date we continue to see little pullback from the retailers. And I think this is a result of the very healthy retailer environment that exists today as well as a testament to our best-in-class portfolio of super regional town centers. So given this and everything Tom and Scott discussed, we remain optimistic as we look to 2024 and beyond. And now I'll turn the call over to the operator to open it up for Q&A.

Thank you. As a reminder, to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please limit to one question and one follow-up. Please stand by while we compile the Q&A roster. The first question comes from Jeffrey Spector with Bank of America Securities. Your line is open.

Great. Thank you. And first, congratulations to Tom and Ed. Wish you the best in retirement. I guess, you know, probably appropriate first question would be for Jackson on, you know, the fact that Tom said, you know, you're the right person to take things forward. Talked about densification efforts, tremendous leasing. Jackson, I know you just started, but you know, could you provide some of your initial thoughts? Like, should we expect any strategy changes at this, you know, do you have in mind?

Hey, Jeff, it's Tom. Jackson is actually not with us here. Okay. He's enjoying some much-deserved time off. He starts March 1st, so I'll just ask you to hang on to that question until then, Jeff.

Okay, sorry about that if I missed that.

No, no problem. If I could then ask Doug and, you know, Congratulations, Doug, on a great 23 in terms of leasing. Appreciate all the stats you provided, including where you stand today on 24. I think you said 80% commitments, square footage, 44% in LOI stage. I guess, would you be able to compare that to where you stood a year ago as you entered 23, which turned out to be a record year? How do you feel today versus one year ago?

Well, there's two parts to that question, Jeff. I think the first part, you were referring to our lease expirations. We're basically done with all of our expiring square footage in 2023, and we have commitments on 44% of our 2024 expiring square footage and another 34% in the letter of intent stage. So we're about 77% there with 2024 expiring square footage. I think the other part of the question really referenced more of our leasing pipeline in which we said we had 126 leases signed for 2.2 million square feet. That's just about, Jeff, where we were at this time last year, give or take just a little bit.

Okay, great. Thank you. Thanks for clarifying the stats. And then if I can then ask a second question, what are you assuming in terms of bad debt, lease termination income in 24 And how does that compare, let's say, to 23 or maybe versus historical? Thank you.

Hey, Jeff, I'll take that. This is Scott. Bad debts, we're assuming those to start to normalize a little bit more relative to 2023. I would say that's about a two penny headwind in 2024 against our same center. I don't expect those to be significant in the fullness of time, but I do expect them to be a little bit larger than they were in 2023, which frankly was a net reversal, and that was just a continuation of recovering some of those latent fully reserved receivables in 23. I expect most of that to be out of the pipeline now, and it'll be trending a little bit more normal. Lastly, termination income, we did provide line item guidance for that, which is $10 million, and that was down about $3 million or so, give or take. versus where we finished in 2020 and 2023.

Great. Thanks, Scott.

Sure.

One moment for the next question. The next question comes from Greg McGinnis with Scotiabank. Your line is open.

Hello. This is Victor Fadev here on with Greg McGinnis. I wanted to follow up on this lease termination income in Q4. I know probably that you cannot provide some specific details, but overall, what type of tenant was that? And you mentioned that it opened some strategic opportunity for you to redevelop that center. So when it will occur, can you provide some more details on that?

Yeah, you're right. I can't speak to the specific tenant or the asset, frankly, other than to say, like I mentioned at the outset, that the line share, that termination fee, pretty much all but roughly a million, million and a half of that was from that single transaction. That transaction was an anchor location in terms of the type of space, but we do expect that to open up a really significant redevelopment opportunity. We are working on pre-development and pre-planning of that right now, as well as entitlement. Once we narrow down the scope and the exact cost and returns, which we expect the returns to be in the low double-digit realm, we will disclose that in our pipeline. But it is a good opportunity. We're very glad to get that transaction completed.

Got it. And then the second question, probably on the leasing demand part, So given that department stores sales were weaker versus broad retail sales in 2023, do you expect more optimization to occur within that space? And have you had any conversations with your tenants about that already?

So I'm not quite sure I caught all of that question. I would say this, though, and this is probably a good thing. As we look into 2024, I would not expect us to put up the same type of volume that we did in 2023 because, in all candor, we're running out of large format inventory. We're running out of boxes, big anchor locations. Over the last few years, since 2021, we've leased about 2 million square feet in over 20 anchor locations, so it's been very productive.

Yeah, I think you're going to continue to see the shift away from department stores and into other big box uses. You saw us open Shields Sporting Goods, for example, in a former department store space. You'll see us open Arte Museum in the former Arclight Theater space. We're going to continue to see different types of uses, diversified uses, taking the department store space and converting that into other uses that frankly drive more sales and traffic. That's a trend we've seen. accelerating over the last five years and that is going to continue as we go forward but it makes sense thank you thank you Michelle our next question comes from Samir canal with Evercore your line is now open

Hi, everybody. Tom, congratulations on your retirement. We will miss you. So, Scott, just on same-store NOI guidance here, you know, certainly leasing is very strong. Pipeline looks great in the 24, but I just want to kind of dive into the same-store NOI growth, you know, that is moderating in 24. Maybe help us think through the drivers of that lower growth in 24 at this time.

Sure, Samir. I'll walk through it. You know, obviously, you know, great growth over the last three years, as I highlighted in my opening remarks. So, you know, for starters, we are dealing with some more challenging comps. In addition, I would say, you know, operating expenses do remain relatively elevated when you think of things like insurance costs, security, labor. I mentioned bad debts. Those are all contributing to some headwind in the same center that I would quantify at roughly 150 basis points or so, headwind in the same center. We are, you know, given the robust leasing environment and re-merchandising our space, we are taking space offline, so there is an element of downtime within that same center guidance. And I would estimate that kind of bracket of roughly 1% headwind in the same center. That's all positive, though, because we're taking underperforming merchants offline. We're putting in much more attractive merchants, much more diversified uses that will draw traffic and better sales volumes at better rent levels. So that is what you typically see in a robust leasing environment. So those are really some of the major moving pieces. And then, of course, as we do with each and every year, we do embed some reserves for the unanticipated. Um, in our, uh, in our guide.

Got it. And just from a modeling perspective, um, help us think through a GNA for the year and also percentage rents. Thanks.

Sure. Uh, GNA, you know, I think if I were to point you to a run rate, I look at 2023 and I would expect maybe a marginal decline versus 2023 and 2024. across management company expenses, net of revenues, rate expenses.

One other thing to keep in mind on the G&A line, Samir, if you take a look at our proxy, last proxy, page 50, you'll see the combined compensation for Ed Coppola and Tom O'Hearn. And from the 8K, you'll be able to ascertain the compensation for Jackson. So that'll be a fairly significant reduction in G&A just as a result of the CEO and president change.

And then Sameer, you also asked about percentage rents. If my memory's right, about 12 months ago, I said we do expect roughly a 15 to 20% decline in percentage rents into 2023 from 2022. And in fact, that played out. If you look at our percentage rents on a pro rata basis, they were down about 16% in 23 versus 22. And again, largely that was a function of conversion of variable rent to fixed rent type structures. I think we worked through the vast majority of those at this point, Doug. I don't expect a lot more of that. As we look into 2024 and we're looking at percentage rent trends versus 23, I expect those to continue to tick down, but not nearly as significantly as they did in 2023. We're estimating roughly about a mid single digit decline in percentage rents And, you know, some of that is just as you get escalations and base rents, you get an increase in breakpoints. So there's a natural transition of variable rent to fixed rent on that basis. But I don't expect the type of leasing activity converting variable to fixed rent that we had in 2023 at all.

Thank you.

Sure. Please stand by for the next question. The next question comes from Floris Van Ditchcom with Compass Point. Your line is open.

Great. Thanks, guys. Can you hear me?

We can hear you, Floris.

Loud and clear. Great. Tom, congrats on the retirement. Good luck in your next venture, whatever you wind up doing.

Thank you, Floris. I remember you when you were 25 and fresh out of UVA, and we were going to visit malls in Northern California.

I remember that. That was, by the way, one of my lowlights, actually, as some of you might have heard. I don't know if I won't share that on this call, but yes, I do remember that. That was a memorable time. I had, I guess, you know, two questions for you. Number one, if you can, you know, one of the issues, I guess, with With the mall sector, and you're not unique, I think some of your peers have had to grapple with this as well, but people don't think there's going to be much growth in the sector. Can you maybe touch on, obviously, the underlying growth was very strong last year. You're expecting a little bit of a slowdown this year, probably with some conservatism baked in. I would imagine, but maybe talk a little bit about some of the key drivers for growth. Obviously, you've touched upon the S&O pipeline. Can you give a little bit more color on what percentage of that S&O pipeline, for example, is luxury tenants? I know there's a big wing coming online at Scottsdale. How much of a driver of growth is that potentially for you going forward?

Well, I'll let Doug talk about luxury in a second, Floris, but as for people saying they don't see the growth in the mall sector, then they're clearly ignoring the facts. All you have to do is look at record leasing volumes in 22 and 23 and then drill down a little deeper and look at the types of tenants that are coming in replacing traditional retail. This isn't apparel retail. This isn't footwear. These are new uses, new and creative food and beverage like pinstripes. lifetime Fitness for example very actively coming in and they can generate an additional 5,000 trips to the center a week just that one tenant alone adding our 10 museum they expect to have a million visitors per year coming to the top level of Santa Monica place so there are a lot of exciting new uses that frankly we didn't have ten years ago so I think whoever said it they didn't see the the the growth driving to the mall business the a quality mall business It was sadly mistaking because all these new uses are driving traffic. They're driving sales.

They're driving productivity They're driving rent and they're going to drive in a wine Hey Flores, it's Doug with regard to your specific questions about luxury as you know years back we finished the luxury wing at Scottsdale Fashion Square in the Neiman Marcus wing and late last year early this year and we're now focusing on bringing luxury, global luxury, to the Nordstrom wing. I think a few calls ago we announced Hermes, which is the bellwether tenant for that property, and we'll be announcing more over the next several months. But to Tom's point, I talk about the leasing pipeline all the time, and it's 2.2 million square feet. It's going to open over the next two and a half years. Those are phenomenal numbers, but the thing that really excites me is the uses we're going to be bringing so that just all new uses new exciting uses you think about din tai fung and you think about elefante true food kitchen viore h m primark dave and busters kiln lifetime fitness tom mentioned pinstripes target level 99 i mean that's really the beauty of this pipeline not just the metrics but the depth and breadth of uses that we're bringing to our town centers over the next two, two and a half years.

Great. Thanks. Maybe a follow-up with Scott. I know you mentioned that Niagara is going to get refinanced, and that might surprise some people, myself included, who thought that might transition back. I know you probably can't say a whole lot, but Does this mean that you will be investing leasing capital in this asset on a going forward basis? And what do you think that can do to the operations for this property going forward as well?

Sure. Floris, you're right. I can't speak in too much detail because the transaction is still, you know, in process. We do expect to secure a multi-year extension of that. You know, the asset still does generate some FFO. It certainly has its challenges given its market positioning with north of the border in Canada and the local market. You know, there still is some, you know, opportunities for that asset and we'll continue to capitalize on those opportunities. But, you know, the bottom line is, you know, it's a negotiation that's still in process Its earnings are created to retain that asset, and we'll report back once we close.

Thanks, Rob.

Sure.

One moment for our next question. The next question comes from Todd Thomas with KeyBank Capital Markets. Your line is open.

Hi, thanks. First, Tom, Ed, congrats on your run. Best of luck in retirement. First, I just wanted to take a stab at asking a prior question. I realize Jackson has not started yet, but Tom, maybe Scott, I'm just curious if you can talk a little bit about where you think there might be opportunity for Jackson to have an impact as you think about the organization today and look ahead.

Well, Todd, I'm not going to speak for Jackson. He'll be starting soon, and you can ask him directly. But I know he does like our strategy of densifying and diversifying our high-quality town centers, and he found that very interesting and appealing. Other things he may be considering, I will leave to him and let him articulate directly to you and others on this call.

Okay. And, Tom, you're staying on for a few months as an advisor. Um, you know, what kind of timeline would you expect for, for Jackson to get, you know, sort of fully situated with the platform, you know, touring assets, markets, um, you know, meeting with, with key retailers, what's the process like for, for, um, you know, for him really stepping into the, the, the CEO role.

Well, many of you on this call know him, I mean, he's going to hit the ground running. I can guarantee you that. Um, so I think there'll be, you know, a lot of travel visiting our offices, visiting our people. getting going and I are still on the board through our current term which runs through May so he will have access to to both of us and I imagine he's going to be a very quick study and hit the ground running so I think that'll all happen very very quickly and you know he's already fairly familiar with the company did his due diligence and I can almost guarantee you he will get a fast start

Okay, that's helpful. And if I could just get one in for Doug, you know, appreciate the detail around the S&O pipeline and the lease signings and LOIs that you've executed around the 24 expirations. You know, can you talk about your expectation for tenant retention during the year and maybe discuss any, you know, known move outs or, you know, post-holiday season, seasonality that you're expecting this year? relative to the last few years where there's been a lot less seasonality than there traditionally is.

Todd, it's Doug. Thank you. I think, and Scott, jump in here, but I think in 2024, our expectation is between 90% and 95% tenant retention, meaning our expirations, our 2024 expirations between 90% and 95% we believe will retain.

I think the second part of your question was regarding an anticipated or just fallout following the holiday. I don't think there's anything out of the ordinary. If we looked at, say, the 2016 through 2019 You know, we had some precursor certainly in the fall of tenants that were likely to close and they were closing in fairly significant rows. We have not had that for the last few years at all. And I can't think of any retailer that said, look, we're going to shut down five or six stores following the holiday season, Doug.

Yeah, Todd, we've talked about this a lot. I mean, many of the retailers that were suffering pre-pandemic just didn't make it through pandemic. And those that came through, came through in a very healthy way. And as I mentioned in my prepared remarks, there's a very, very healthy retailer environment out there with very strong balance sheets. I think the retailers, I know the retailers in 2023 and into 2024 already are speaking up about managing the inventory levels, which is hugely important for their profitability and for the margins, which actually makes them stronger. You know, we're not seeing really any pullback and our watch list is as low as it's ever been in 20 years. So I don't anticipate anything unusual in 2024, if you will.

Okay, great. Thank you. Thanks, Todd.

One moment for our next question. The next question comes from Michael Mueller with JP Morgan. Your line is open.

Hey, Tom. Congratulations. It's been great working with you over the years.

Thank you, Mike. Likewise.

And just have one quick one for Scott. Just curious, what's embedded in the 2024 guidance for NOI margin improvement relative to what you had in 2023?

Yeah, Mike, I think we'll see continued margin improvement.

You know, we've got improvement in rental rate. We've got growth and occupancy. Obviously, excuse me, the pipeline will start to add more and more as we get towards the latter half of the year. It's still a pretty thick pipeline. In fact, I think that pipeline yields roughly $64, $65 million of incremental rent over existing uses. So, you know, that will be heavy in the second half. Conversely, like I said, we've got operating expenses continue to be somewhat of a drag, not a huge drag, but somewhat of a drag. But I do think by the time we get to the end of the year, you'll see continued margin improvement year over year.

Okay. Thank you.

One moment for our next question. The next question comes from Keevan Kim with TrueWorks. Your line is open.

Thank you, and congrats, Tom. And going back to some of the executions that you've done in 2023 and what you have left to do in 2024, are there some tradeoffs that don't show up in the interest rate itself, things like CapEx reserve requirements or other clauses that might be a little bit more restrictive?

Yeah, I'd say, you know, we're always leaning into our underwriting to make sure that we're getting full credit for the pipeline. And, you know, given the depth of the pipeline, any one of these deals we're approaching, whether it's Tyson's or Danbury, to the extent we have a tenant that's not yet come online, we do have to set aside that capital. It's effectively, I guess when you think about it, it's pre-funding that capital, and then we drop back down over the next six to 12 months. And so, you know, for instance, for Tyson's, I think there was an incremental $40 million, give or take, of liquidity. But a lot of that liquidity was soaked up in CapEx reserves for a lot of restaurant uses. We've recently discussed level 99, which is new entertainment use on the east side of the center. So we did have to set aside the anticipated leasing capital to bring that use to opening and paying rent. But other than that, no, I'd say that the environment's pretty normalized. you know, and we're getting deals done. Again, liquidity is back open. I'm happy to say that we probably accounted for roughly 25% of the volume that occurred in CNBS, which was about a little over $7 billion of transactions in 2023. So, you know, the markets are open and functional. And, you know, as you can see from the rates, somewhere in the mid-sixes is where we've been transacting.

And What is a broad refinance rate that we should assume for 2024 refinancing?

I'd say we've been transacting in the mid-sixes, and that's probably representative of where we'll be this year. We'll have to see what the Fed has in store for us for the next 12 months, but based on where we see the forward curve, that's probably a reasonable expectation.

Okay, thank you.

One moment for the next question. The next question comes from Handel St. Just with Mizuho. Your line is open.

Hi, guys. This is Ravi on the line for Handel. I hope you guys are doing well. Just had one or two questions here. Regarding leverage, can you please provide a full year, end of year 24 target? And would you consider issuing equity at current prices? I believe at the investor day, you referenced that you weren't looking to issue equity until the previous target, which is around 18 bucks a share. And we're getting close to that at this point. So just wanted to follow up on that. Thanks.

Robbie, I'll take the second half of that question. We always reserve the right to issue equity. So I'm not going to give you a hard and fast rule in terms of a dollar amount. You've seen us in the past judiciously use our ATM, and we have an ATM in place today, and that's another tool in the capital toolkit that we would keep available to us. So it's certainly possible, and look, we're very focused on de-levering over time. That can happen a few ways, one of which is to drive same-center NOI up, which we fully plan to do, and the other way to effectively reduce debt to EBITDA is via equity raises, so we wouldn't preclude ourselves from doing that. We do not have any of that in the guidance, but that's consistent with past practice as well. Scott, you want to comment on leverage?

Yeah, sure, Robbie. To the first part of your question, I think we could see 40 to 50 basis points of improvement in leverage by the time we get to the end of the year. Roughly 8.2 times is kind of where we're triangulating based on the business plan today.

Got it. Thank you. Thanks. Sure.

One moment for the next question. The next question comes from Caitlin Burrows with Goldman Sachs. Your line is open.

Hi. Good morning there, and congrats, Tom, on your retirement. Thank you. Maybe starting with Santa Monica Place and Scottsdale Fashion Square, I feel like the – expected openings are getting closer on those, and I think combined they're supposed to have an incremental NOI of around $50 million at your share. So I'm just wondering if you can give some further detail on the timing of recognizing that NOI. Could it start in the first half of this year or any other details you can give?

Yeah, Caitlin, both of those projects are going to start to open in late 24, early 25. So I would say you'll see a full, you know, for the most part, you'll see a full impact in 2025, maybe a little bit of bleed into 26. But looking at those individually, Scottsdale will start to open up a lot of those uses in fall. The renovation for that project, I think most of the scaffolding will be down and the physical work will be done by the time you get to the end of the quarter. But in terms of new tenants coming online, they'll start to come online in the fourth quarter. We'll see kind of the full year effect in 25. Santa Monica, you know, we've got some exciting uses coming. First level, Club Studio, which is high-end fitness. Third level, Arte. Both of those are going to be coming on in the first half of 2025. So you'll see some bleed into 2026 there. Den Tai Fung will also be a use that we hope to get online either the end of this year, beginning of next year. So all those are very accretive leases that we expect to be on board, you know, certainly by second quarter of 2025. Okay, got it.

And maybe you guys talked earlier in the call about how percent rents were down in 23 because more was being shifted to base rents, which makes sense. I was wondering if you could go through any details on how much that kind of phenomenon impacted leasing spreads, like that the expiring ABR might have been somewhat lower, and related kind of the level of leasing spreads that you reported in 4Q of almost 20%. Do you think that's sustainable? Thanks.

Sure. Great question. Yeah, certainly, if you look at our expiring rents in 2023, they were a lot lower than what we expect in 2024. And that was really driven, again, by, you know, all those shorter-term deals that we did during COVID, which had more variable rents. And we're accessing those throughout 2023 and renewing those on a longer term, more typical fixed rent structure. So as we reported trailing 12, 17% spreads at the end of the year, and I would expect those base rent spreads to be roughly 50% of that level in 2024. Really, again, just a function of a relatively artificially low base rent expiring in 23 and a more normalized level of base rent expiring in 2024. Got it.

Thanks.

Sure.

One moment for the next question. The next question comes from Nick Joseph with Citi. Your line is open.

Thank you. Just hoping you could walk through the capital needs and the funding plan for leasing-related CapEx and the incremental redevelopment in 2024. Sure.

You know, I think I mentioned in my opening remarks, Nick, good morning, by the way, good afternoon, that, you know, we do expect after recurring CapEx and leasing costs to still have generated roughly $300 million of operating cash flow before payment of dividend. As I look at 24, 25, 26 development pipeline, I think we'll range between $150 to $200 million over those three years. And we're probably somewhere around that midpoint of that for 2024. We've got probably eight to nine, 10 anchor boxes that we continue to work on that will largely be retented and completed by the end of the year. But we'll also be setting the table for some larger scale redevelopments, potentially green acres, potentially flat iron for 2025 and 2026. So that'll give you an idea of some of the character of what we're spending on.

Thank you very much.

One moment for the next question. The next question comes from Alexander Goldfarb with Piper Sandler. Your line is open.

I guess it's still good morning out there. Tom and Eddie, certainly for two decades of working with you guys in REIT land, it's been awesome, and we'll miss our NAE REIT interactions. So wish you guys the best in your next endeavor. So I have two questions here. The first question is, Scott, on the Danbury Mall loan, and you know how much I like that mall, can you just help us walk through and interpret the $155 million new loan relative to the value of that mall? Just given the sales that it does and the dominance in that northern region, would think that the loan is under levered relative to the value of the asset. Obviously, the market today is a tough market to do debt. Maybe just some perspective around how we should interpret the loan balance relative to where the market value of that asset would be sort of in normal times, obviously not right now when people are skittish.

Sure.

Yeah, it's a great asset. It's virtually 100% occupied. I think there's one or two available storefronts. So very happy to get a 10-year deal on it, stagger out that maturity, et cetera, et cetera, especially at a very attractive rate. The loan-to-value, if I recall correctly, was in the low 40s based on appraisal. We typically, as you know from following us many years, we typically finance in the 55% realm. So yeah, there's a little bit of liquidity on the table, but it's the state of the market today. And I think it was a great execution hitting a window. And recall, we've been trying to finance that thing through a difficult capital market environment for almost two years. So it was really nice to be able to hit a window and execute well at a good rate.

Okay.

And then the second question is on the JV, the freehold and Chandler JV, you brought out, you bought out freehold, but Chandler still seems to be a JV. So maybe you could just talk a little bit about what drove the JV to sort of cleave off the one asset. I think you guys said 5.6 million that you used to acquire that. What was unique about that asset versus Chandler that still is in JV, or should we expect something to happen in the near future on Chandler as well?

Alex, really, we can't comment on what motivated or didn't motivate our partner. In that case, it was really their decision. But when given the opportunity, we like the economics, we like the asset, and we had a chance to do that on Chandler. But that was really driven by them and their preference.

Okay. Thank you, Tom.

One moment for the next question. The next question comes from Ronald Camden with Morgan Stanley. Your line is open.

Hey, congrats, Tom and Ed. Just two quick ones for me. Just on going back to the management transition, you know, obviously can't comment for Jackson, but just about the process, the question really is, is there any sort of specific skill set or experience that you've had that you guys were looking for, and can you just comment on why was sort of now the right time for this transition? Just trying to get a little bit more color around sort of the process, what you guys were looking for.

Yeah, Ron, I'll refer you to the press release in the 8K. We did an exhaustive search. We used Ferguson Partners, a very well-known firm that specializes in executive recruitment, and we considered a lot of candidates Those of you that know Jackson know he's very qualified and very capable, and I think we've got an outstanding replacement. In terms of the timing, every CEO should really go out when their company is in a good spot and when they have their health. So that's why it's good timing. Maestrich is in great shape, and I've got my health. So this is the perfect time for me to move on to all those things that I put on the back burner for the last 30 years.

Understood. And then one on, so I saw the Green Acres Mall redevelopment announcement, I think earlier this, I guess last week or earlier this January, but I didn't see it in the supplemental. Is there, is that going to be a large project? Like, how should we think about the economics and returns on that? Or should we just wait for that to be added?

Yeah, it's a wait. I think you'll see it hitting the pipeline.

We are in pre-development and entitlement mode right now. You know, it's going to be a very attractive project. Frankly, that's a gem from the two assets that we acquired back in the 2012-2013 timeframe. Green Acres has performed extremely well. We added a power center. We've been able to re-tenant the mall. In total, the entire property, the entire campus generates over a billion dollars of sales, and we're really, really excited to bring this next phase. But we're studying it, and it will hit the pipeline over the next few quarters. All right. That's it for me. Thank you. Sure.

I show no further questions at this time. I would now like to turn the call back to Tom for closing remarks.

Thank you, Michelle. Thank all of you for joining us today. All kidding aside, I would like to say that it's been my pleasure to work with you, and I will miss all of you. As I approach retirement, I'm highly confident in the future of the company under the leadership of Jackson, our board of directors, and the balance of our incredibly talented leadership team here at Maestrich. I wish you all the best.

This concludes today's conference call. Thank you for your participation. You may now disconnect. Have a great day. Thank you. Thank you. Thank you. Ladies and gentlemen, thank you for standing by. Welcome to Q4 2023 Mace Rich Earnings Conference Call. At this time, all participants are in the listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you would need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Samantha Greening, Director of Investor Relations. Please go ahead.

Thank you for joining us on our fourth quarter 2023 earnings call. During the course of this call, we will be making certain statements that may be seen 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 in our SEC filing. 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 in 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. And with that, I turn the call over to Tom.

Thank you, Samantha. By now, it's old news, but on Monday, we announced my pending retirement after 31 years at Macerich. So today is my 118th Mace Rich earnings call and my last. I will miss all of you. I would like to say I'll miss all of you, but I'm not so sure about that. When I joined Mace Rich 31 years ago, it was to help Mace Segal and Art and Ed Coppola take the company public. We did that in March of 94. Our total market cap was a modest $650 million. Today our market cap is $11 billion. We went from having a portfolio of malls in the mid markets doing about 350 a foot in sales to a portfolio in major coastal markets doing $836 per foot in tenant sales. There's been a dramatic improvement in the quality of the portfolio to say the least. When I joined Maestrich in 1993, no way in hell did I think I'd be here 31 years later. Nothing in my Ironman background prepared me for a run of that duration. I will be forever thankful to my Mace Ridge colleagues and friends for our collective accomplishments. Today, Mace Ridge is extremely well positioned for the future as I pass the baton of leadership over to a man most of you know, Jackson Shea. He's the right person to take the company forward and to continue to execute on our strategy of densifying and diversifying our portfolio of top quality town centers. Regarding the upcoming leadership change, There is a detailed press release in 8K on the topic, so I will refer you there. So the remainder of this call, we will be focused on the quarterly results and the guidance and outlook for 2024. So now to focus on the quarter, I'm very happy to be leaving on extremely positive news. We had a strong fourth quarter, which included same center NOI of 3% for the quarter and 4.5% for the year. Occupancy is now up to 93.5%. That's a 90 basis point improvement over the end of 2022. We had a total shareholder return of 46% for 2023. That's a top 10 finish among all REITs. We posted positive releasing spreads of 17.2% for the year. We had quarterly EBITDA margin improvement of over 100 basis points versus the fourth quarter of last year. Our partnership sold the One West Side office building to UCLA for a pro rata share of $175 million to Mace Rich. We did over $890 million of financings that was closed or committed in the fourth quarter. More on that from Scott in a minute. We signed over 4 million square feet of leases during 2023. That's an all-time Mace Rich record, and that's on the heels of the prior record, which was set in 2022. Portfolio average sales per foot was 836, down slightly from last year, but nonetheless, a top quality sales productivity. Bankruptcies continued to be at a record low. We continue to expect gains in occupancy and net operating income as we progress through 2024 and into 2025. Also, keep in mind, as a result of the very strong leasing activity in 22 and 23, we have a very large and healthy leasing pipeline with nearly 2.2 million square feet of leases that have been signed but are not open yet. Once those tenants open, it is going to fuel or NOI growth in 24 and 25. And now I'd like to turn it over to Scott to discuss in more detail the financial results, earnings guidance, and the significant financing activity we had the past few months.

Thank you, Tom. This morning, we're extremely pleased to report a strong finish to the year. As Tom noted, same-center NOI increased 3% during the fourth quarter of 2023 relative to the fourth quarter of 22. when excluding lease termination income. For the year 2024, same center NOI growth, excluding lease termination income was a positive 4.5%. FFO per share for the fourth quarter was $0.56 and was $1.80 per share for 2023 for the year. The quarterly result was $0.03 or 5.7% more than FFO during the fourth quarter of 2022 at $0.53 a share. and was in line with consensus estimates for the quarter. FFO for the year was in line with our most recently issued guidance, which was a midpoint of $1.80 per share. Primary major factors contributing to the quarterly FFO per share increase are as follows. One, an $11 million increase in rental revenues, which included a $13 million increase in top line minimum rent, $2 million increase in recovery revenue, which were offset by a $4 million decline in percentage rent. These trends are consistent with what's been reported over prior quarters. They're driven by improved occupancy, growth in rental rate, as well as a continued conversion from variable to fixed rent structures with CAM and tax recovery charges. Secondly, we had a $9 million increase in termination income. primarily driven by a single lease termination deal, which was a very strategic transaction that we expect will facilitate a major future redevelopment opportunity. These positive factors were offset by the following. One, an $11 million unfavorable increase in interest expense due to rising rates. This figure excludes accrued default interest, which is consistent with our reporting over the prior quarter. And then secondly, a $4 million decline in non-cash straight-line rental revenue, primarily from the conversion of GAAP to cash rents for the lease with Google at One Westside, which Tom mentioned we've disposed of as a year-end. To recap, as we have emerged from the 2020 pandemic, same-center NOI growth generated by our high-quality Class A portfolio has been tremendous. with NOI growth averaging 7.4% in both 21 and 22, followed by 4.5% same-center NOI growth in 2023. We are extremely pleased with our resilient core NOI growth during the past three years. This morning, we issued our initial guidance for 2024 funds from operations. 2024 FFO is estimated in the range of $1.76 to $1.86 per share, or $1.81 per share at the midpoint. Here are several details underlying this earnings guidance. The FFO range includes an estimated same center NOI growth in the range of two and a quarter to three and a quarter percent. In terms of quarterly cadence for our 2024 estimated FFO guidance, we expect approximately 21% in the first quarter, approximately 24% in both the second and third quarters, and the remaining approximately 31% within the fourth quarter of 2024. Primary major factors that result in a reconciliation between 2023 actual funds from operations and 2024 estimated FFO are as follows. Same Center NOI is estimated to contribute roughly 10 cents of FFO this year. We had roughly three cents of FFO estimated from a relative improvement in valuation adjustments pertaining to our investment and direct investment in retailers. And we had roughly a one and a half cent year over year increase from the acquisition of our partner's interest in Freehold Raceway Mall, a transaction which closed in the latter part of 2023. These positive factors will be substantively offset by the following. One, a seven cent increase in interest expense when viewed on the same center basis. Two, an anticipated four cent decline in land sale gains. We've spoken about this in the past. This decline is due to the robust disposition activity from our land sale program that we've undertaken since 2021, which has significantly depleted our undeveloped land inventory that remains. And then lastly, about a one and a half cent per share dilutive impact from increased share count, which is primarily driven from the company's various share-based compensation plans. To emphasize, consistent with 2023, our 2024 outlook continues to reflect healthy operating cash flow generation of approximately $300 million after recurring capital expenditures and leasing costs, but before payment of dividends. More details regarding our guidance assumptions can be found on page 15 of the company's Form 8K supplemental that was filed early this morning. On to the balance sheet. Over the past few months, we have made considerable progress addressing our debt maturities. In December, we closed a $710 million five-year CMBS refinance of the $666 million loan on Tyson's Corner Center, the new loan bears interest at a fixed rate of 6.6% and is interest only for the entire loan term. Also in December, our joint venture sold one Westside, as Tom alluded to, to UCLA for $700 million. The existing $325 million loan on the property was repaid and approximately $78 million in net proceeds were generated at our 25% ownership share. In January, We closed a $24 million five-year bank loan refinance of the existing $23 million loan on Chandler Boulevard shops. The new loan bears variable interest at SOFR plus 2.5% and is interest only for the entire duration of the loan term. In January also, we repaid the majority of the loan on Fashion District in Philadelphia. Roughly $8 million remains and that matures in April and is anticipated to be repaid at that time. In January, we closed $155 million 10-year CMBS refinance of the existing $117 million loan on Danbury Fair. The new loan bears interest at a fixed rate of 6.39% and is interest only during the majority of the 10-year loan term. We are currently working with the loan servicer on a multi-year extension of the $86 million loan on fashion outlets of Niagara and we do expect this transaction to close later this month. Once closed on that Niagara extension, we will have a very manageable $400 million in maturities remaining in 2024 across three separate loans. To recap the year, we've been extremely active in the debt capital markets during 2023 and year to date. So far in 2024, across eight transactions, including Niagara, we will have refinanced or extended eight loans totaling $2.9 billion or $2.1 billion at our ownership share. This activity included a four and a half year renewal and upsizing of our $650 million revolving corporate credit facility during the third quarter of last year. And let's remind ourselves that closing was amidst a regional banking crisis within the United States. So we're very pleased with our activity throughout last year and to start this year. A year ago, we anticipated improvement in the debt capital markets during the latter portion of 2023, given that the Federal Reserve was expected to be then near the end of its historic rate hiking cycle. And in fact, that expectation has proven true. We're now finding significant opportunities to finance our assets within the sustained strong performance of our Class A retail. We also believe that we are benefiting from a rotation of financing capital away from the office sector and into the Class A retail real estate sector. Our recent transactional activity supports that thesis. In mid-November, we acquired our partner's half share in Freehold Raceway Mall for $5.6 million and the assumption of our partner's share of debt. We now own 100% of Freehold Raceway Mall. We currently have approximately $657 million of available liquidity, which includes $490 million of capacity on our corporate credit facility. With that, I'll turn it over to Doug to discuss the leasing and operating environment. Thanks, Scott.

We closed out 2023 with very strong leasing metrics and leasing volumes. In fact, 2023 was a historic and record leasing year for Mace Ridge, dating back 30 years as a public company. Year-end 2023 sales were down 1.8% from year-end 2022. And after a post pandemic spike in spending across all retail categories, 2023 was clouded with increasing interest rates, inflation, and the constant threat of a recession. In addition, we've definitely seen a change in spending habits. Consumers now focusing on travel, dining out, entertainment, and other various services. This doesn't come as a surprise and we expect 2024 to once again normalize and ultimately reflect more traditional consumer spending habits. Sales per square foot as of December 31st, 2023, were $836. That's down slightly from $847 at the end of the third quarter, and that's primarily due to a decline in the sales of electric vehicles. Trailing 12-month leasing spreads were a very healthy 17%. As of December 31st, 2023, That's up 660 basis points from the third quarter and up over 13% when compared to December 31st, 2022. In the fourth quarter, we opened 391,000 square feet of new stores. For the full year of 2023, we opened almost 1.6 million square feet of new stores, which is 80% more square footage than we opened during the same period in 2022. Notable openings in the fourth quarter, include an expanded and newly reimagined American Eagle flagship at Tyson's Corner Center, Five Below at Valley Mall, Levi's at Los Cerritos, Pandora at Stonewood, and North Face at Broadway Plaza and Flatiron Crossing. In the digitally native and emerging brands category, we opened Beyond Yoga at Broadway Plaza, Purple at Los Cerritos, Warby Parker at Chandler, and Yeti at Washington Square. In the international category, we opened Aritzia and Inimissimi at Corte Madera, Lululemon at Freehold Raceway Mall, Uni-Glo at Green Acres, Zimmerman at Scottsdale Fashion Square, and Zara at Queen Center. Lastly, in the experiential category, we opened Camp at Tyson's Corner and Round One Spocha at Arrowhead Town Center. Now let's take a look at the new and renewal leases we signed in the fourth quarter. In the fourth quarter, we signed 186 leases for 1.1 million square feet. For the full year 2023, we signed leases for 4.2 million square feet, and that's up from 3.8 million square feet, or 12% when compared to the same period in 2022. And as I mentioned earlier, 2023 was a record leasing year for Mace Rich over the past three decades. Notable new lease signings in the fourth quarter include Buck Mason, Kate Spade, Mango, Maggiano's, and Level 99 at Tyson's Corner, Round One at Chandler, Dave & Buster's at Freehold, Launch & Shoprite at Greenacres, a second office lease with San Bernardino County at Inland Center, Artarex at Washington Square, True Food Kitchen at 29th Street, and Viore at Scottsdale Fashion Square. As always, our focus in the fourth quarter was in large part addressing our lease expirations, finalizing 2023 and getting a head start in 2024. In doing so, in the fourth quarter, we signed over 130 renewal leases with 84 different brands totaling 475,000 square feet. With that, we're basically done with 2023 and now have commitments on 44% of our 2024 expiring square footage with another 34% in the letter of intent stage. 2023 was another year of newness for us, once again bringing new, unique, and emerging brands with a major initiative for our leasing team and a way for us to really reimagine and differentiate our town centers from our competition. To that end, in 2023, we signed leases with over 80 new to Mace Rich brands, totaling just over 600,000 square feet. Examples include Beyond Yoga, Yeti, Club Studio, ShopRite, Level 99, Maggiano's, Elefante, and Catch, just to name a few. Turning to our leasing pipeline, at the end of the fourth quarter, we had 126 signed leases for 2.2 million square feet of new stores which we expect to open in 2024, 2025, and 2026. In addition to these signed leases, we're currently negotiating another 80 leases for new stores totaling almost 600,000 square feet which will also open in 2024, 2025, and 2026. So in total, that's over 2.8 million square feet of new store openings throughout the remainder of this year and into 2026. And I want to emphasize, these are new leases with retailers not yet open and not yet paying rent, and these numbers do not include renewals. And I can tell you that this leasing pipeline of new store openings now accounts for $64 million of incremental rent, which represents roughly 8% of our current net operating income. And this incremental rent will continue to grow as we approve new deals and sign new leases. So to conclude, our leasing and operating metrics were very solid in 2023. There was only one bankruptcy in our portfolio in the fourth quarter and only 10 for all of 2023. And bankruptcies overall in both 2022 and 2023 were at their lowest levels since 2013, which is consistent with our significantly reduced tenant watch list. Leasing volumes were at record levels, the result of which is a very strong, vibrant, and exciting pipeline of tenants slated to open this year and into 2026. And as I've said in the past, and it remains the case, while there's still uncertainty in the macroeconomic environment, to date we continue to see little pullback from the retailers. And I think this is a result of the very healthy retailer environment that exists today as well as a testament to our best in class portfolio of super regional town centers. So given this and everything Tom and Scott discussed, we remain optimistic as we look to 2024 and beyond. And now I'll turn the call over to the operator to open it up for Q&A.

Thank you. As a reminder, to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please limit to one question and one follow-up. Please stand by while we compile the Q&A roster. The first question comes from Jeffrey Spector with Bank of America Securities. Your line is open.

Great. Thank you. And first, congratulations to Tom and Ed. Wish you the best in retirement. I guess, you know, probably appropriate first question would be for Jackson on, you know, the fact that Tom said, you know, you're the right person to take things forward. Talked about densification efforts, tremendous leasing. Jackson, I know you just started, but you know, could you provide some of your initial thoughts? Like, should we expect any strategy changes at this, you know, do you have in mind?

Hey, Jeff, it's Tom. Jackson is actually not with us here. Okay. He's enjoying some much-deserved time off. He starts March 1st, so I'll just ask you to hang on to that question until then, Jeff.

Okay, sorry about that if I missed that.

No, no problem. If I could then ask Doug and, you know, Congratulations, Doug, on a great 23 in terms of leasing. Appreciate all the stats you provided, including where you stand today on 24. I think you said 80% commitments, square footage, 44% in LOI stage. I guess, would you be able to compare that to where you stood a year ago as you entered 23, which turned out to be a record year? How do you feel today versus one year ago?

Well, there's two parts to that question, Jeff. I think the first part, you were referring to our lease expirations. We're basically done with all of our expiring square footage in 2023, and we have commitments on 44% of our 2024 expiring square footage and another 34% in the letter of intent stage. So we're about 77% there with 2024 expiring square footage. I think the other part of the question really referenced more of our leasing pipeline in which we said we had 126 leases signed for 2.2 million square feet. That's just about, Jeff, where we were at this time last year, give or take just a little bit.

Okay, great. Thank you. Thanks for clarifying the stats. And then if I can then ask a second question, what are you assuming in terms of bad debt, lease termination income in 24 You know, and how does that compare, let's say, to 23 or maybe versus historical? Thank you.

Hey, Jeff, I'll take that. This is Scott. Bad debts, we're assuming those to start to normalize a little bit more relative to 2023. I would say that's about a two penny headwind in 2024 against our same center. I don't expect those to be significant in the fullness of time, but I do expect them to be a little bit larger than they were in 2023, which frankly was a net reversal, and that was just a continuation of recovering some of those latent fully reserved receivables in 23. I expect most of that to be out of the pipeline now, and it'll be trending a little bit more normal. Lastly, termination income, we did provide line item guidance for that, which is $10 million, and that was down about $3 million or so, give or take. versus where we finished in 2020 and 2023. Great.

Thanks, Scott.

Sure. One moment for the next question. The next question comes from Greg McGinnis with Scotiabank. Your line is open.

Hello. This is Victor Fadev here on with Greg McGinnis. I wanted to follow up on this lease termination income in Q4. I know probably that you cannot provide some specific details, but overall, what type of tenant was that? And you mentioned that it opened some strategic opportunity for you to redevelop that center. So when it will occur, can you provide some more details on that?

Yeah, you're right. I can't speak to the specific tenant or the asset, frankly, other than to say, like I mentioned at the outset, that the lion's share of that termination fee, pretty much all but roughly a million, million and a half of that, was from that single transaction. That transaction was an anchor location in terms of the type of space, but we do expect that to open up a really significant redevelopment opportunity. We are working on pre-development and pre-planning of that right now, as well as entitlement. Once we narrow down the scope and the exact cost and returns, which we expect the returns to be in the low double-digit realm, we will disclose that in our pipeline. But it is a good opportunity. We're very glad to get that transaction completed.

Got it. And then the second question, probably on the leasing demand part, So given that department stores sales were weaker versus broad retail sales in 2023, do you expect more optimization to occur within that space? And have you had any conversations with your tenants about that already?

So I'm not quite sure I caught all of that question. I would say this, though, and this is probably a good thing. As we look into 2024, I would not expect us to put up the same type of volume that we did in 2023 because, in all candor, we're running out of large format inventory. We're running out of boxes, big anchor locations. Over the last few years, since 2021, we've leased about 2 million square feet in over 20 anchor locations, so it's been very productive.

Yeah, I think you're going to continue to see the shift away from department stores and into other big box uses. You saw us open Shields Sporting Goods, for example, in a former department store space. You'll see us open Arte Museum in the former Arclight Theater space. We're going to continue to see different types of uses, diversified uses, taking the department store space and converting that into other uses that frankly drive more sales and traffic. That's a trend we've seen. accelerating over the last five years and that is going to continue as we go forward but it makes sense thank you thank you Michelle our next question comes from Samir canal with Evercore your line is now open

Hi, everybody. Tom, congratulations on your retirement. We will miss you. So, Scott, just on same-store NOI guidance here, you know, certainly leasing is very strong. Pipeline looks great in the 24, but I just want to kind of dive into the same-store NOI growth, you know, that is moderating in 24. Maybe help us think through the drivers of that lower growth in 24 at this time.

Sure, Samir. I'll walk through it. You know, obviously, you know, great growth over the last three years, as I highlighted in my opening remarks. So, you know, for starters, we are dealing with some more challenging comps. In addition, I would say, you know, operating expenses do remain relatively elevated when you think of things like insurance costs, security, labor. I mentioned bad debts. Those are all contributing to some headwind in the same center that I would quantify at roughly 150 basis points or so, headwind in the same center. We are, you know, given the robust leasing environment and re-merchandising our space, we are taking space offline, so there is an element of downtime within that same center guidance. And I would estimate that kind of bracket of roughly 1% headwind in the same center. That's all positive, though, because we're taking underperforming merchants offline. We're putting in much more attractive merchants, much more diversified uses that will draw traffic and better sales volumes at better rent levels. So that is what you typically see in a robust leasing environment. So those are really some of the major moving pieces. And then, of course, as we do with each and every year, we do embed some reserves for the unanticipated. Um, in our, uh, in our guide.

Got it. And just from a modeling perspective, um, help us think through a GNA for the year and also percentage rents. Thanks.

Sure. Uh, GNA, you know, I think if I were to point you to a run rate, I look at 2023 and I would expect maybe a marginal decline versus 2023 and 2024. across management company expenses, net of revenues, rate expenses.

One other thing to keep in mind on the G&A line, Samir, if you take a look at our proxy, last proxy, page 50, you'll see the combined compensation for Ed Coppola and Tom O'Hearn. And from the 8K, you'll be able to ascertain the compensation for Jackson. So that'll be a fairly significant reduction in G&A just as a result of the CEO and president change.

And then Samir, you also asked about percentage rents. If my memory's right, about 12 months ago, I said, you know, we do expect roughly a 15 to 20% decline in percentage rents into 2023 from 2022. And in fact, that played out. If you look at our percentage rents on a pro rata basis, they were down about 16% in 23 versus 22. And again, largely that was a function of conversion of variable rent to fixed rent type structures. I think we worked through the vast majority of those at this point, Doug. I don't expect a lot more of that. As we look into 2024 and we're looking at percentage rent trends versus 23, I expect those to continue to tick down, but not nearly as significantly as they did in 2023. We're estimating roughly about a mid single digit decline in percentage rents And, you know, some of that is just as you get escalations and base rents, you get an increase in breakpoints. So there's a natural transition of variable rent to fixed rent on that basis. But I don't expect the type of leasing activity converting variable to fixed rent that we had in 2023 at all.

Thank you.

Sure. Please stand by for the next question. The next question comes from Floris Van Ditchcom with Compass Point. Your line is open.

Great. Thanks, guys. Can you hear me?

We can hear you, Floris.

Loud and clear. Great. Tom, congrats on the retirement. Good luck in your next venture, whatever you wind up doing.

Thank you, Floris. I remember you when you were 25 and fresh out of UVA, and we were going to visit malls in Northern California.

I remember that. That was, by the way, one of my lowlights, actually, as some of you might have heard. I don't know if I won't share that on this call, but yes, I do remember that. That was a memorable time. I had, I guess, you know, two questions for you. Number one, if you can, you know, one of the issues, I guess, with With the mall sector, and you're not unique, I think some of your peers have had to grapple with this as well, but people don't think there's going to be much growth in the sector. Can you maybe touch on, obviously, the underlying growth was very strong last year. You're expecting a little bit of a slowdown this year, probably with some conservatism baked in. I would imagine, but maybe talk a little bit about some of the key drivers for growth. Obviously, you've touched upon the S&O pipeline. Can you give a little bit more color on what percentage of that S&O pipeline, for example, is luxury tenants? I know there's a big wing coming online at Scottsdale. How much of a driver of growth is that potentially for you going forward?

Well, I'll let Doug talk about luxury in a second, Floris, but as for people saying they don't see the growth in the mall sector, then they're clearly ignoring the facts. All you have to do is look at record leasing volumes in 22 and 23 and then drill down a little deeper and look at the types of tenants that are coming in replacing traditional retail. This isn't apparel retail. This isn't footwear. These are new uses, new and creative food and beverage like pinstripes. lifetime Fitness for example very actively coming in and they can generate an additional 5,000 trips to the center a week just that one tenant alone adding our 10 museum they expect to have a million visitors per year coming to the top level of Santa Monica place so there are a lot of exciting new uses that frankly we didn't have ten years ago so I think whoever said it they didn't see the the the growth driving to the mall business the a quality mall business It was sadly mistaking because all these new uses are driving traffic. They're driving sales.

They're driving productivity They're driving rent and they're going to drive in a line Hey Flores, it's Doug with regard to your specific questions about luxury as you know years back we finished the luxury wing at Scottsdale Fashion Square in the Neiman Marcus wing and late last year early this year and we're now focusing on bringing luxury, global luxury, to the Nordstrom wing. I think a few calls ago we announced Hermes, which is the bellwether tenant for that property, and we'll be announcing more over the next several months. But to Tom's point, I talk about the leasing pipeline all the time, and it's 2.2 million square feet. It's going to open over the next two and a half years. Those are phenomenal numbers, but the thing that really excites me is the uses we're going to be bringing so that just all new uses new exciting uses you think about din tai fung and you think about elefante true food kitchen viore h m primark dave and busters kiln lifetime fitness tom mentioned pinstripes target level 99 i mean that's really the beauty of this pipeline not just the metrics but the depth and breadth of uses that we're bringing to our town centers over the next two, two and a half years.

Great. Thanks. Maybe a follow-up with Scott. I know you mentioned that Niagara is going to get refinanced, and that might surprise some people, myself included, who thought that might transition back. I know you probably can't say a whole lot, but Does this mean that you will be investing leasing capital in this asset on a going forward basis? And what do you think that can do to the operations for this property going forward as well?

Sure. Floris, you're right. I can't speak in too much detail because the transaction is still, you know, in process. We do expect to secure a multi-year extension of that. You know, the asset still does generate some FFO. It certainly has its challenges given its market positioning with north of the border in Canada and the local market. You know, there still is some opportunities for that asset and we'll continue to capitalize on those opportunities. But, you know, the bottom line is, you know, it's a negotiation that's still in process Its earnings are created to retain that asset, and we'll report back once we close.

Thanks, Scott.

Sure.

One moment for our next question. The next question comes from Todd Thomas with KeyBank Capital Markets. Your line is open.

Hi, thanks. First, Tom, Ed, congrats on your run. Best of luck in retirement. First, I just wanted to take a stab at asking a prior question. I realize Jackson has not started yet, but Tom, maybe Scott, I'm just curious if you can talk a little bit about where you think there might be opportunity for Jackson to have an impact as you think about the organization today and look ahead.

Well, Todd, I'm not going to speak for Jackson. He'll be starting soon, and you can ask him directly. But I know he does like our strategy of densifying and diversifying our high-quality town centers, and he found that very interesting and appealing. Other things he may be considering, I will leave to him and let him articulate directly to you and others on this call.

Okay. And, Tom, you're staying on for a few months as an advisor. Um, you know, what kind of timeline would you expect for, for Jackson to get, you know, sort of fully situated with the platform, you know, touring assets, markets, um, you know, meeting with, with key retailers, what's the process like for, for, um, you know, for him really stepping into the, the, the CEO role.

Well, many of you on this call know him, I mean, he's going to hit the ground running. I can guarantee you that. Um, so I think there'll be, you know, a lot of travel visiting our offices, visiting our people. and getting going. Ed and I are still on the board through our current term, which runs through May, so he will have access to both of us. I imagine he's going to be a very quick study and hit the ground running, so I think that'll all happen very, very quickly. He's already fairly familiar with the company, did his due diligence, and I can almost guarantee you he will get a fast start.

Okay, that's helpful. And if I could just get one in for Doug, you know, appreciate the detail around the S&O pipeline and the lease signings and LOIs that you've executed around the 24 expirations. You know, can you talk about your expectation for tenant retention during the year and maybe discuss any, you know, known move outs or, you know, post-holiday season, seasonality that you're expecting this year? relative to the last few years where there's been a lot less seasonality than there traditionally is.

Todd, it's Doug. Thank you. I think, and Scott, jump in here, but I think in 2024, our expectation is between 90% and 95% tenant retention, meaning our expirations, our 2024 expirations between 90% and 95% we believe will retain.

I think the second part of your question was regarding an anticipated or just fallout following the holiday. I don't think there's anything out of the ordinary. If we looked at, say, the 2016 through 2019 You know, we had some precursor certainly in the fall of tenants that were likely to close and they were closing in fairly significant rows. We have not had that for the last few years at all. And I can't think of any retailer that said, look, we're going to shut down five or six stores following the holiday season, Doug.

Yeah, Todd, we've talked about this a lot. I mean, many of the retailers that were suffering pre-pandemic just didn't make it through pandemic. And those that came through, came through in a very healthy way. And as I mentioned in my prepared remarks, there's a very, very healthy retailer environment out there with very strong balance sheets. I think the retailers, I know the retailers in 2023 and into 2024 already are speaking up about managing the inventory levels, which is hugely important for their profitability and for the margins, which actually makes them stronger. You know, we're not seeing really any pullback and our watch list is as low as it's ever been in 20 years. So I don't anticipate anything unusual in 2024, if you will.

Okay, great. Thank you. Thanks, Todd.

One moment for our next question. The next question comes from Michael Mueller with JP Morgan. Your line is open.

Hey, Tom. Congratulations. It's been great working with you over the years.

Thank you, Mike. Likewise.

And just have one quick one for Scott. Just curious, what's embedded in the 2024 guidance for NOI margin improvement relative to what you had in 2023?

Yeah, Mike, I think we'll see continued margin improvement. You know, we've got improvement in rental rate. We've got growth and occupancy. Obviously, excuse me, the pipeline will start to add more and more as we get towards the latter half of the year. It's still a pretty thick pipeline. In fact, I think that pipeline yields roughly $64, $65 million of incremental rent over existing uses. So, you know, that will be heavy in the second half. Conversely, like I said, we've got operating expenses continue to be somewhat of a drag, not a huge drag, but somewhat of a drag. But I do think by the time we get to the end of the year, you'll see continued margin improvement year over year.

Okay. Thank you.

One moment for our next question. The next question comes from Keevan Kim with Truist. Your line is open.

Thank you, and congrats, Tom. And going back to some of the executions that you've done in 2023 and what you have left to do in 2024, are there some tradeoffs that don't show up in the interest rate itself, things like CapEx reserve requirements or other clauses that might be a little bit more restrictive?

Yeah, I'd say, you know, we're always leaning into our underwriting to make sure that we're getting full credit for the pipeline. And, you know, given the depth of the pipeline, any one of these deals we're approaching, whether it's Tyson's or Danbury, to the extent we have a tenant that's not yet come online, we do have to set aside that capital. It's effectively, I guess when you think about it, it's pre-funding that capital, and then we drop back down over the next six to 12 months. And so, you know, for instance, for Tyson's, I think there was an incremental $40 million, give or take, of liquidity. But a lot of that liquidity was soaked up in CapEx reserves for a lot of restaurant uses. We've recently discussed level 99, which is new entertainment use on the east side of the center. So we did have to set aside the anticipated leasing capital to bring that use to opening and paying rent. But other than that, no, I'd say that the environment's pretty normalized. you know, and we're getting deals done. Again, liquidity is back open. I'm happy to say that we probably accounted for roughly 25% of the volume that occurred in CNBS, which was about a little over $7 billion of transactions in 2023. So, you know, the markets are open and functional. And, you know, as you can see from the rates, somewhere in the mid-sixes is where we've been transacting.

And What is a broad refinance rate that we should assume for 2024 refinancing?

I'd say we've been transacting in the mid-sixes, and that's probably representative of where we'll be this year. We'll have to see what the Fed has in store for us for the next 12 months, but based on where we see the forward curve, that's probably a reasonable expectation.

Okay, thank you.

One moment for the next question. The next question comes from Handel St. Just with Mizuho. Your line is open.

Hi, guys. This is Ravi on the line for Handel. I hope you guys are doing well. Just had one or two questions here. Regarding leverage, can you please provide a full year, end of year 24 target? And would you consider issuing equity at current prices? I believe at the Investor Day, you referenced that you weren't looking to issue equity until the previous target, which was around $18 a share. And we're getting close to that at this point, so just wanted to follow up on that. Thanks.

Robbie, I'll take the second half of that question. We always reserve the right to issue equity, so I'm not going to give you a hard and fast rule in terms of a dollar amount. You've seen us in the past judiciously use our ATM, and we have an ATM in place today, and that's another tool in the capital toolkit that we would keep available to us. So it's certainly possible, and look, we're very focused on de-levering over time. That can happen a few ways, one of which is to drive same-center NOI up, which we fully plan to do, and the other way to effectively reduce debt to EBITDA is via equity raises, so we wouldn't preclude ourselves from doing that. We do not have any of that in the guidance, but that's consistent with past practice as well. Scott, you want to comment on leverage?

Yeah, sure, Robbie. To the first part of your question, I think we could see 40 to 50 basis points of improvement in leverage by the time we get to the end of the year. Roughly 8.2 times is kind of where we're triangulating based on the business plan today.

Got it. Thank you. Thanks. Sure.

One moment for the next question. The next question comes from Caitlin Burrows with Goldman Sachs. Your line is open.

Hi. Good morning there, and congrats, Tom, on your retirement. Thank you. Maybe starting with Santa Monica Place and Scottsdale Fashion Square, I feel like the – expected openings are getting closer on those, and I think combined they're supposed to have an incremental NOI of around $50 million at your share. So I'm just wondering if you can give some further detail on the timing of recognizing that NOI. Could it start in the first half of this year or any other details you can give?

Yeah, Caitlin, both of those projects are going to start to open in late 24, early 25. So I would say you'll see a full, you know, for the most part, you'll see a full impact in 2025, maybe a little bit of bleed into 26. But looking at those individually, Scottsdale will start to open up a lot of those uses in fall. The renovation for that project, I think most of the scaffolding will be down and the physical work will be done by the time you get to the end of the quarter. But in terms of new tenants coming online, they'll start to come online in the fourth quarter. We'll see kind of the full year effect in 25. Santa Monica, you know, we've got some exciting uses coming. First level, Club Studio, which is high-end fitness. Third level, Arte. Both of those are going to be coming on in the first half of 2025. So you'll see some bleed into 2026 there. Din Tai Fung will also be a use that we hope to get online either the end of this year, beginning of next year. So all those are very accretive leases that we expect to be on board, you know, certainly by second quarter of 2025.

Okay, got it. And maybe you guys talked earlier in the call about how percent rents were down in 23 because more was being shifted to base rents, which makes sense. I was wondering if you could go through any details on how much that kind of phenomenon impacted leasing spreads, like that the expiring ABR might have been somewhat lower, and related kind of the level of leasing spreads that you reported in 4Q of almost 20%. Do you think that's sustainable? Thanks.

Sure. Great question. Yeah, certainly, if you look at our expiring rents in 2023, they were a lot lower than what we expect in 2024. And that was really driven, again, by, you know, all those shorter-term deals that we did during COVID, which had more variable rents. And we're accessing those throughout 2023 and renewing those on a longer term, more typical fixed rent structure. So as we, you know, we reported trailing 12, 17% spreads at the end of the year. And I would expect those base rent spreads to be roughly 50% of that level in 2024. Really, again, just a function of a relatively artificially low base rent expiring in 23 and a more normalized level of base rent expiring in 2024. Got it.

Thanks.

Sure.

One moment for the next question. The next question comes from Nick Joseph with Citi. Your line is open.

Thank you. Just hoping you could walk through the capital needs and the funding plan for leasing-related CapEx and the incremental redevelopment in 2024. Sure.

You know, I think I mentioned in my opening remarks, Nick, good morning, by the way, good afternoon, that, you know, we do expect after recurring CapEx and leasing costs to still have generated roughly $300 million of operating cash flow before payment of dividend. As I look at 24, 25, 26 development pipeline, I think we'll range between 150 to $200 million over those three years. And we're probably somewhere around that midpoint of that for 2024. You know, we are, we've got probably eight to nine, 10 anchor boxes that we continue to work on that will largely be retented and completed by the end of the year. But we'll also be setting the table for some larger scale redevelopments, potentially green acres, potentially flat iron for 2025 and 2026. So that'll give you an idea of some of the character of what we're spending on.

Thank you very much.

One moment for the next question. The next question comes from Alexander Goldfarb with Piper Sandler. Your line is open.

I guess it's still good morning out there. Tom and Eddie, certainly for two decades of working with you guys in REIT land, it's been awesome, and we'll miss our NAE REIT interactions. So wish you guys the best in your next endeavor. So I have two questions here. The first question is, Scott, on the Danbury Mall loan, and you know how much I like that mall, can you just help us walk through and interpret the $155 million new loan relative to the value of that mall? Just given the sales that it does and the dominance in that northern region, would think that the loan is under levered relative to the value of the asset. Obviously, the market today is a tough market to do debt. Maybe just some perspective around how we should interpret the loan balance relative to where the market value of that asset would be sort of in normal times, obviously not right now when people are skittish.

Sure.

Yeah, it's a great asset. It's virtually 100% occupied. I think there's one or two available storefronts. So very happy to get a 10-year deal on it, stagger out that maturity, et cetera, et cetera, especially at a very attractive rate. The loan to value, if I recall correctly, was in the low 40s based on appraisal. We typically, as you know from following us many years, we typically finance in the 55% realm. So yeah, there's a little bit of liquidity on the table, but it's the state of the market today. And I think it was a great execution hitting a window. And recall, we've been trying to finance that thing through a difficult capital market environment for almost two years. So it was really nice to be able to hit a window and execute well at a good rate.

Okay.

And then the second question is on the JV, the freehold and Chandler JV, you brought out, you bought out freehold, but Chandler still seems to be a JV. So maybe you could just talk a little bit about what drove the JV to sort of cleave off the one asset. I think you guys said 5.6 million that you used to acquire that. What was unique about that asset versus Chandler that still is in JV, or should we expect something to happen in the near future on Chandler as well?

Alex, really, we can't comment on what motivated or didn't motivate our partner. In that case, it was really their decision. But when given the opportunity, we like the economics, we like the asset, and we had a chance to do that on Chandler. But that was really driven by them and their preference.

Okay. Thank you, Tom.

One moment for the next question. The next question comes from Ronald Camden with Morgan Stanley. Your line is open.

Hey, congrats, Tom and Ed. Just two quick ones for me. Just on going back to the management transition, you know, obviously can't comment for Jackson, but just about the process, the question really is, is there any sort of specific skill set or experience that you guys were looking for, and can you just comment on why was sort of now the right time for this transition? Just trying to get a little bit more color around sort of the process, what you guys were looking for.

Yeah, Ron, I'll refer you to the press release in the 8K. We did an exhaustive search. We used Ferguson Partners, a very well-known firm that specializes in executive recruitment, and we considered a lot of candidates Those of you that know Jackson know he's very qualified and very capable, and I think we've got an outstanding replacement. In terms of the timing, every CEO should really go out when their company is in a good spot and when they have their health. So that's why it's good timing. Maestrich is in great shape, and I've got my health. So this is the perfect time for me to move on to all those things that I put on the back burner for the last 30 years.

Understood. And then one on, so I saw the Green Acres Mall redevelopment announcement, I think earlier this, I guess last week or earlier this January, but I didn't see it in the supplemental. Is there, is that going to be a large project? Like, how should we think about the economics and returns on that? Or should we just wait for that to be added?

Yeah, it's a wait. I think you'll see it hitting the pipeline.

We are in pre-development and entitlement mode right now. You know, it's going to be a very attractive project. Frankly, that's a gem from the two assets that we acquired back in the 2012-2013 timeframe. Green Acres has performed extremely well. We added a power center. We've been able to re-tenant the mall. In total, the entire property, the entire campus generates over a billion dollars of sales, and we're really, really excited to bring this next phase. But we're studying it, and it will hit the pipeline over the next few quarters. All right. That's it for me. Thank you. Sure.

I show no further questions at this time. I would now like to turn the call back to Tom for closing remarks.

Thank you, Michelle. Thank all of you for joining us today. All kidding aside, I would like to say that it's been my pleasure to work with you, and I will miss all of you. As I approach retirement, I'm highly confident in the future of the company under the leadership of Jackson, our board of directors, and the balance of our incredibly talented leadership team here at Maestrich. I wish you all the best.

This concludes today's conference call. Thank you for your participation. You may now disconnect. Have a great day.