Macerich Company (The)

Ladies and gentlemen, thank you for standing by. Welcome to the second quarter 2025 Mace Rich Earnings Conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will 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 turn the conference over to Samantha Greening, Assistant Vice President, Director of Investor Relations. Please go ahead.

Thank you for joining us on our second quarter 2025 earnings call. During this call, we'll be making certain statements that may be deemed forward-looking within the meaning of the safe harbor of the Private Securities Litigation Reform Act of 1995, including statements regarding projections, plans, and future expectations. Actual results may differ materially due to a variety of risks and uncertainties set forth in today's earnings results, supplemental, and our SEC filings. Reconciliations of non-GAAP financial measures to the most directly comparable GAAP measures are included in the supplemental filed on Form 8K with the SEC, which is posted in the investor section on the company's website at nasearch.com. Joining us today are Jack Shea, President and Chief Executive Officer, Dan Swanstrom, Senior Executive Vice President and Chief Financial Officer, and Doug Healy, Senior Executive Vice President of Leasing. And with us in the room is Brad Millio, Senior Vice President in Portfolio Management. And with that, I'd like to turn the call over to Jack.

Thank you, Samantha, and good afternoon. I want to begin with where everything starts for us at Maesrich. our people and their commitment to our mission and values. We are collectively a better informed, aligned and operationally focused company. Our second quarter results, the progress on our path forward plan and the acquisition of Crabtree Mall demonstrate how well we have put this mission and values to work together. Thank you all for your contributions that have brought us to this point. Now let us turn to our recent path forward plan. I want to let that update guide our discussion this afternoon. Recall that our path forward strategy is built on simplifying the business, operational performance improvement, and leverage reduction. We are solving for strengthening the balance sheet, fortifying our core portfolio, driving operational excellence, and positioning us for growth. We provided an update to our Path Forward plan in May, which included a comprehensive NOI bridge from year-end 2024 to 2028 for PORFORMA Go Forward portfolio NOI. It also provided a roadmap for 2028 target FFO ranges and a path to our 2028 target leverage ranges. We also provided an update on the composition of our go forward portfolio and identify which properties have been ranked as fortress, fortress potential, steady eddies, and eddies. As Dan will discuss later, you will now see some of our supplemental KPIs broken down under the go forward portfolio. A significant component of the plan is driving operational performance improvement. This all begins and ends with leasing. Leasing is the piece of the plan that best tracks the progress on hitting our 2028 targets. Recall that we are targeting an average of 4 million square feet of leasing in 2025 and 2026. Year to date, we've already signed 4.3 million square feet. I'm pleased to say that we are ahead of schedule on leasing volume and on target for our market rent assumptions used in our five-year plan. I want to focus on our leasing speedometer and snow pipeline. These metrics best track our progress on driving a higher percentage of new lease deals versus renewals, which in turn drive higher spreads and incremental revenue to achieve our NOI targets. We provided a helpful visual for you in the plan update for the leasing dashboard that we refer to internally as the Mace Ridge Leasing Speedometer, which tracks revenue completion percentage for all new leasing activity in the five-year plan. This tool and other technology enhancements we've implemented drive every leasing and capital allocation decision at our properties. Our initial goal on new deals was 50% progress by mid 2025 and 70% by year end 2025. Hitting the 70% goal by year end would put us on track for the 85% completion target by mid 2026. Reaching that goal also puts us on track for our ultimate opportunity to achieve the 130 million in cumulative snow potential. Reaching that mid-2026 leasing goal would effectively complete the new leasing goal outlined in our plan. We remain ahead of this plan on both the new deal completion and the snow pipeline. For new deal completion, we were at 54% at the end of last quarter and 60% in May. Today, we're at 65%. and have a large pipeline of LOIs, which puts us on pace to exceed our 70% year-end target. The snow pipeline has grown from 75 million on a cumulative basis at the end of last quarter and 80 million in May to 87 million as of today. That also has us on track to exceed our snow pipeline target of 100 million by year-end. None of these figures include the addition of Crabtree. I noted on our last call that we were confident we de-risked the key elements of the path forward plan with our leasing, disposition, capital markets, and leverage reduction progress. That progress on the plan positioned us to opportunistically pursue external growth via an attractive transaction. At the end of June, Mace Rich acquired Crabtree Mall, a market-dominant Class A retail center totaling approximately 1.3 million square feet in the Raleigh-Durham, North Carolina MSA for approximately $290 million. The strategic rationale for this transaction is compelling. It's accretive to the path forward planned 2028 target FFO range. powerful entry point to one of the top southeastern u.s markets it holds a market dominant position in a high growth market with the week with top retailers in the country identifying it as the number one or number two must have location in the region we have a perfect opportunity to deploy our operating leasing and marketing platform to reinvigorate leasing momentum and drive permanent occupancy from 74% as of June 30th to closer to 90% by 2028 and capture the embedded NOI growth upside potential. And it's expected to keep us within our stated deleveraging targets under the path forward plan. We're excited to close this acquisition as Crabtree enhances our go forward portfolio and creates a compelling opportunity to drive shareholder value. Doug will comment on the strong leasing momentum we've already seen at Crabtree and the tremendous response and feedback we have received from many retailers who are elated that we now own and manage Crabtree. In closing, I feel very good about where we are on the path forward plan and with the addition of Crabtree to our go forward portfolio. As I noted earlier, We're ahead of plan on leasing. We're also ahead of plan on asset sales and dispositions. We have a clear roadmap for hitting our deleveraging targets. Our team is working well together, executing nicely on the key components of the path forward plan, and properly incentivized and aligned on shareholder value creation. With that, I will turn the call over to Doug.

Thanks, Jack. In my remarks this afternoon, I'll refer to total portfolio statistics and where applicable, I'll provide the go forward portfolio statistics as well. Portfolio sales at the end of the second quarter were $849 per square foot, which is up $12 when compared to the first quarter 2025. However, when you look at our go forward portfolio sales were actually $906 per square foot. Traffic through the second quarter for the portfolio was up 1.6% when compared to the same period in 2024. For the go-forward portfolio alone, traffic was up 2.1%. Occupancy at the end of the second quarter was 92%, down 60 basis points from the last quarter. As we signaled on our last call, this decline is primarily due to the liquidation and closing of our Forever 21 stores. all of which occurred in the second quarter. As I mentioned last quarter, Forever 21 had a lot of square footage but did not pay a lot of rent. Recapturing these stores now allows us the opportunity to re-merchandise the space with higher and better uses that will pay significantly more rent. To date, we have commitments on just over 50% of the closed square footage with another 30% in the letter of intent stage. We still expect to more than double the rent Forever 21 was paying us once we complete backfilling all of this space. The go-forward portfolio occupancy at the end of the second quarter was 92.8%. Trailing 12-month leasing spreads as of June 30th, 2025 remained positive at 10.5%, which is relatively consistent with last quarter. This now represents 15 consecutive quarters of positive leasing spreads. In the second quarter, we opened 332,000 square feet of new stores for a total of 509,000 square feet year-to-date through June 30th. Also in the second quarter, we signed 331 new and renewal leases for 1.7 million square feet. Year to date through the second quarter, we've signed 650 new and renewal leases for 4.3 million square feet. In terms of lease signings, this represents 40% more leases and 75% more square footage than we signed during the same period in 2024. And just looking at new deals, it's doubled the number of leases and tripled the amount of square footage that we signed during the same period last year. all of which are in line with the rental assumptions we used in our five-year plan. We're very excited to announce the signing of 142,000 square foot Dick's House of Sport at Washington Square in what was a vacant Sears box. For those not familiar, Dick's House of Sport is an experiential retail concept that is built on the foundation of a traditional Dick's sporting goods store by adding interactive elements such as climbing walls, batting cages, and golf simulators. Dick's House of Sport is the epitome of destination-oriented and will create a more engaging and immersive experience for customers. We expect this will totally transform the Sears wing, both in terms of better merchandising and increased traffic. Dick's House of Sport is expected to open fall of 2027, and we look forward to doing much more business with this concept, including a Freehold Raceway Mall, which is under construction and opening later this year, and a Crabtree Mall, which is signed and will open spring of 2027. So stay tuned for more news on Dick's House of Sport throughout our portfolio. Other notable leases signed in the second quarter include three stores with Urban Planet, totaling 60,000 square feet to replace Forever 21, at freehold raceway mall king's plaza and south plains we also signed sephora at fashion outlets in chicago and green acres mall cheesecake factory also green acres mall kids empire at freehold raceway mall and tyson's corner and round one at victor valley just to name a few now let's look at our executive leasing committee which reviews and approves deals on a bi-weekly basis As I've mentioned before, this is a much more forward-looking and better representation of the current environment and retailer sentiment. Through the second quarter, we've reviewed over 70% more new and renewal deals and 140% more square footage than we did during the same period last year. and if you look at new deals only we've reviewed double the number of new deals and quadruple the amount of square footage than we did during the same period last year turning to our lease expirations as of june 30th we have commitments on just about 90 percent of our expiring 2025 square footage that is expected to renew and not close with another nine percent in the letter of intent stage In terms of 2026 expiring square footage, we have commitments on almost 30% of our expiring square footage with another 45% in the letter of intent stage. So as you can see, we're basically done with 2025 and in very good shape with our 2026 business. For both 2025 and 2026 lease expirations, we're ahead of pace when compared to this time last year when looking at our 2024 and 2025 expirations. The retail environment remains very strong, even with the noise of uncertainty in the macroeconomic environment and the pending tariffs. As I mentioned last quarter and still stands, the best brands remain very active and continue to take advantage of great space and great centers. To that end, in May, we attended the annual ICSD convention in Las Vegas. It was very well attended by both landlords and retailers. The mood was positive, with many national retailers having significant open to buys and or talking about new brand extensions. It was also good to see many new and emerging brands, such as Alo Yoga, Popmart, Rowan, Goriana, Mejuri, and Fabletics continue to expand their footprints in shopping centers, with a forage in the next ICSC convention in December in New York City. Turning our attention to the Sign Not Opener snow pipeline for our Go Forward portfolio. At the end of the second quarter, we had 179 leases for 1.5 million square feet, of new stores which we expect to open between now and early 2028 in addition to these signed leases we currently have leases out with new stores totaling 1.6 million square feet and these two will open between now and into early 2028. so in total that's over 3 million square feet of new store openings throughout the remainder of this year and beyond This leasing activity has increased our snow pipeline from $75 million as of last quarter to almost $87 million today, with our goal to exceed $100 million by the end of this year. Lastly, as Jack mentioned, we're thrilled to now own Crabtree Valley Mall in Raleigh, North Carolina. Already a great mall and a great market, there's still a ton of potential to garner from this asset. We are reimagining this mall through a more dynamic tenant mix, enhanced customer experiences, and refreshed modern and inviting environments. In just the short 45 days since we've owned Crabtree, the interest from and conversations with existing retailers and those that want to be in Crabtree has been extraordinary. We look forward to many major leasing updates in the very near future. And with that, I'll turn the call over to Dan to go through our second quarter financial results.

Thanks, Doug, and good afternoon. I'll start with a review of our second quarter financial results. FFO excluding financing expense in connection with Chandler Freehold accrued default interest expense and loss on non-real estate investments was approximately $87 million, or $0.33 per share, during the second quarter of 2025. I would like to highlight the following items included in our FFO adjusted for the quarter. Number one, $9 million of interest expense relates to the amortization of debt mark to market resulting from our various JV interest acquisitions, which compares to 3 million in the second quarter of 2024. As a reminder, this non-cash expense is included in interest expense. Number two, $2 million of total combined expenses relating to legal claims expense at one of our properties and severance and staff transition expenses. Following the release of our Path Forward Plan version 2.0, which included an update on the composition of our Go Forward portfolio, we have now begun to include certain supplemental financial and operating information on the Go Forward portfolio in our supplements. We will continue to evaluate additional enhancements or disclosures to our supplement in the coming quarters. Go Forward Portfolio Center's NOI, excluding lease termination income, increased 2.4% in the second quarter of 2025 compared to the second quarter of 2024. Year-to-date, the Go Forward Portfolio Center's NOI has increased 2% compared to the same period in 2024. Turning to the balance sheet, we recently closed on a previously disclosed approximately $160 million two-year term loan with two one-year extension options on Crabtree Mall at an interest rate of SOFR plus 250 bps. We used a portion of the net proceeds to fully repay borrowings on the revolving line of credit associated with the purchase of Crabtree. The term loan also allows for future additional borrowings up to approximately $50 million to fund capital investments and leasing costs at Crabtree Mall. We continue to make strong progress on the balance sheet initiatives contained in our Path Forward plan. For the balance of 2025, we have only one remaining maturing loan in November for approximately $200 million. And we're continuing to proactively address our remaining 2026 debt maturities through a combination of potential asset sales, refinancings, loan modifications, or property givebacks. We currently have approximately $915 million of liquidity, including $650 million of capacity on our revolving line of credit. From a leverage perspective, net debt to EBITDA at the end of the second quarter was 7.9 times, which is almost a full turn lower than at the outset of the path forward plan. And importantly, we've outlined our strategy to further reduce leverage to the low to mid six times range over the next couple of years. We're also making substantial progress in executing on planned dispositions as part of the Path Forward plan. In April, we closed on the sale of South Park for $11 million. This asset was unencumbered. In July, we closed on the sale of Atlas Park for $72 million. We used our 50% portion of the net proceeds from this sale to repay our 50% portion of the $65 million loan on the property that had an effective interest rate of over 9% and a 2026 maturity date. As previously disclosed, we are currently under contract to sell Lakewood, which is expected to close in the second half of 2025, subject to customary closing conditions. We expect net proceeds to may surge of approximately $5 million above the debt balance outstanding. We are also now under contract to sell Valley Mall for $22 million, which is expected to close in the second half of 2025, also subject to customary closing conditions. This asset is unencumbered. These sales transactions are consistent with our stated disposition plan to improve the balance sheet and refine our portfolio. We have made substantial progress on the sales and give back component of the plan and have identified a clear path to achieving our $2 billion disposition target. To date, we have completed over $800 million in mall sales. And as you will see in the disclosure we provided in our supplement, this includes Country Club Plaza, Biltmore, Southridge, the Oaks, Wilton Mall, South Park, and Atlas Park, which are closed. This total also includes Santa Monica Place, in which the loan encumbering this property is in default. The sale of Lakewood and Valley Mall, which again are both now under contract, would increase our sales completed total to approximately $1.2 billion. And then we have identified internally several additional EDI assets for sale or give back over the next one to two years, which would increase total dispositions to the $1.4 to $1.5 billion range. The remaining dispositions in our plan represent the sale of L parcels, freestanding retail, non-enclosed mall assets, and land. As you will recall, our 2025 goal for this bucket of dispositions is $100 million to $150 million in total sales for the year. I'm pleased to report that we currently have approximately 100 million sold or under contract against this target. Year to date, we have now closed on land sales for 55 million at our share and various out parcel assets for 9 million at our share. And we currently have approximately 14 million of additional land sales and approximately 22 million of additional out parcel sales under contract for sale. We continue to expect to be substantially complete on this last bucket of the disposition program by the end of 2026. We'll provide further updates on these sales as we progress through the year. In conclusion, we are making great progress on our path forward plan objectives to reduce leverage, refine the portfolio, and strengthen the balance sheet. With that, we'll turn the call back over to the operator.

Thank you. As a reminder, to ask a question, please press star 1-1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1-1 again. We ask you limit to one question and one follow-up. And our first question will come from Key Ben Kim with Truist. Your line is now open.

Thank you. Good afternoon. Jack, can we first talk about Crabtree? It almost sounds too good to be true. You know, a mall generating sales of $950 a square foot, trading at an 11 cap. So maybe you could just give a little more background into it, you know, how well marketed it was and how you thought about some of the risks with Belk, you know, Macy's there as tenants. Thank you.

Yeah, thanks, Stephen. Good to hear from you. Well, first of all, on the trade area, we'll start from there. We look at that trade area, and within that Raleigh-Durham MSA, there's approximately 10 centers that account for about 6.8 million square feet of GLA. So that's about 3.1 square feet per capita. One of those malls, Triangle, is about 1.3 million, and we think that's kind of on the road to be repurposed. So overall, like the GLA per capita in the Raleigh-Durham area, we expect it to be around 2.4 million, 2.4 square, 2.4 square feet per capita. So that's obviously, in our opinion, like a good ratio. But specific to Cadtree, I think it was a unique situation for us. It had a value-add component, right? The NOI is going from 32 million to 36 pro forma with the STEL. north of $40 million, it did require some real leasing effort and capital to kind of reimagine some of the merchandising mix and drive more incremental traffic. The other thing that was unique to Crabtree was just the size. Because that NOI was ramping, you know, I suspect it would be difficult to get a more permanent highly leveraged loan on that asset with the NOI ramping like that. So more than likely that required probably competitors to put in a fairly significant equity check north of 100 million. And we suspect that most of the people we were competing at were looking at opportunistic IRRs. So I think there was a unique asset. I mean, I'm not sure we're going to be able to replicate that kind of cap rate in the future, but we hope so. But we're elated to own this asset and As Doug talked about, the leasing interest and momentum that we have and the opportunity to kind of reconfigure, you know, without getting specific, some of the merchandising in that center is going to really be able to drive a lot of traffic, especially, as I mentioned, that we think one of the major malls in that area are probably going to potentially get repurposed.

Okay, and I believe that mall has the only Apple store in Raleigh located in it. does that inclusion of that very highly productive retailer move the sales per square foot productivity to a significant degree? I know it always does, but just curious, just given this unique situation.

Yeah, I mean, we look at, you know, when you look at sales, you look at them with Apple, without, because Apple is really highly productive from the sales per square foot basis. Even if you excluded the Apple store, as I think we put in the materials, you know, the sales per square foot is still very productive. And like I said, if you look at the permanent occupancy in that center, that's the thing that excited us so much, the ability to drive more market rent, more permanent occupancy. We've already done a merchandising mix analysis. There's a lot of brands that need to be represented in it or not. And I think that those brands know that we're committed long-term to this trade area and to this location. So I think that gives them a lot of confidence that they can be there and perform. If you get a chance to go down there, we're already repainting the interior of the center, and we've got capital plans for the parking lot railings that we'll start to push through later this year as real enhancements to the center.

Thank you, Jack. Sure.

Thank you. And the next question will come from Linda Sy with Jefferies. Your line is open.

Hi. Good afternoon. The overall pace of your leasing is quite impressive with over 3 million opening between now and next year and over 100 million by year end. You're hitting your goals and then some. What other benchmarks do you need to hit before you reinstate guidance?

I think the asset sales are an important component as well because, you know, that has a lot of disruption to earnings, especially the timing. So, you know, we unfortunately have two pedals that we've got to push at the same time. We're balancing asset sales and leasing and all are going well. But to try to predict, you know, timing on asset sales, some of these can kind of delay or move sooner than later. So we'd rather not try to Put guidance, be constrained by guidance numbers versus just keep peddled on the metal for asset sales and leasing.

Thanks. My second question is, it looks like your bad debt was down year over year. How is the watch list trending? We saw that Claire's filed.

Yeah, hey Linda, this is Dan. That's right, bad debt through the first half of the year is about $2.8 million, rolled up to about $5.6 million for 2024. So our watch list does continue to be at an all-time low. With respect to Claire's, you know, we have about 33 locations in our Go Forward portfolio, which represent about 50 basis points of rents. These spaces are roughly 1,300, 1,400 square feet, but are in good locations. We're confident we can release those probably at least at the existing rents, but with healthier tenants that will improve the merchandising at our centers. And in fact, as part of the go forward plan, we had already anticipated getting a number of those spaces back in our plan. So given the size and location of the spaces and the relatively small total rent they were paying, we don't see any impact to the five year plan. And as Doug alluded to in his remarks, I think importantly, And to your point about the bad debt being lower than last year, we don't think Claire's is indicative of the strong retailer environment that we're seeing today.

Has your bad debt guidance changed?

No. Thank you.

And the next question will come from Michael Griffin with Evercore. Your line is open.

Great, thanks. I'm curious if you could give some color on the TIs in the quarter. I noticed it jumped pretty notably compared to last quarter. It seems like it did some more new leasing, so that probably drove a portion of it. But just give us a sense of maybe what the concessionary environment looks like currently.

Maybe I'll start with, remember that we've got a very high number of anchor stores that are in play right now. Anchor stores, depending on how you decide to resolve them, whether it's, you know, you get a Dick's House of Sport or you chop it up or you decide to put another use in there, all require different levels of CapEx or tenant allowance. There's also landlord work involved in a lot of this if you're reconfiguring an existing department store. I would say that when we talk about our new leasing, you know, that momentum, a lot of it is in line and generally I would say our TA expense has not really changed today year-to-date or much at all still in that one to one and a half times annual rent anchor stores are very different kind of question and there's not one size that fits all you know a deal at Tyson's will look very different than a deal at Washington Square or a deal in the Steady Eddie asset so I expect that you'll see TAs and landlord work go up and continue to move up as we've stated. We get after a lot of these vacant, unproductive anchor stores because our goal is to drive traffic in those wings. As Doug talked about the Sears wing at Washington Square, that's been kind of defunct for a long time. It's going to be extremely exciting when Dix is finally open down there and we're able to really re-merchandise that wing And so we're just going to replicate that almost 30 times across our portfolio. There's about 28 opportunities in play right now. If you've went out to see Shields, same effect. You put a dominant, great driver of traffic at the end of that wing, and you can really do a lot of things in line leading up to that location. So our priority, in terms of a strategy shift, starting a year and a half ago, was you really get after these vacant acres. And that really meant foregoing maybe some of the densification opportunities that prior leadership was looking at, and really more what's going to drive traffic. Traffic drives sales. Sales drives our ability to raise rent and have tenants cover their cost of occupancy.

Thanks. Appreciate the context there. And then maybe just switching over to sort of external growth activities. You clearly demonstrated finding attractive deals with the Crabtree acquisition. As you kind of play out that proof of concept on the go-forward path, whether it's being ahead of your leasing expectations, that snow pipeline, what have you, does that give you maybe more confidence to turn that acquisition engine on? Are these deals more opportunistic? You know, just trying to wrap my head around how you're thinking about external growth activities in the context of the go-forward plan.

I mean, I'd say, Blake, I'd start with, you know, Crabtree made sense from a portfolio contribution configuration, you know, for Mace Rich. We, candidly, we're looking at some other centers. I would say that, you know, not all centers are the same, not all going in cap rates are the same. You know, we really look at that relationship of market rents, the ability to reignite leasing momentum, you know, what the trade area and competition dynamic looks like. You know, Crabtree really set up perfectly for that. I can say there are other things out there that are also pretty interesting, whether or not we decide to move forward, whether or not it meets our, you know, I call it low to mid-teen IRR thresholds. And as accretive to our portfolio, I mean, time will tell. But, you know, one of the things that gave the board a lot of confidence and us as senior leaders, you know, the momentum that we're seeing in our business from a leasing and dispo standpoint are very significant. I mean, I know Doug talked about all the leasing and doing comparisons, you know, to last year's Last year, I mean, the way I think about it is we have three, in our Go Forward portfolio, we've got 3.1 million square feet of signed leases. We've got 2 million square feet of leases out. That typically has a very high 95% historical completion rate. And we've got 2.3 million square feet of LOIs where we're kind of trading paper with a tenant. Now, that historical ratio might be 50%, you know, 60%. But what that tells me is I see 8 million square feet of opportunity that's either signed, leases out, or LOI. And like I said, we're only 70% through the year, and we've still got another year plus to finish our plan. So I think we're way ahead of plan, and we're just going to keep driving it. And we're at market rents, too. And that's the same TA assumptions, tenant allowance assumptions that we had proformed in our five-year plan.

Great. That's it for me. Thanks for the time.

Thanks. And the next question comes from Jeff Spector with Bank of America. Your line is open.

Great. Thank you. Just coming back to Crabtree, again, I understand the strategy. Thanks for laying all that out. market positioning, leasing opportunity. I guess, can you just weigh the decision, again, buying Crabtree, the capex required, versus, let's say, using that cash on hand to just pay down debt? And obviously, with Crabtree, your leasing team now focusing on a new market, I guess, can you just talk through that decision? Thank you.

Yeah, I mean, we had a lot of cash and on hand was very ideal or opportunistic for us. I suppose when we thought about the idea of paying down debt versus pursuing an acquisition like Crabtree, we think that just the implied growth rate of Crabtree's NOI, what that does, actually the growth rate is higher than our core growth rate. So on the one hand, we think It's going to be accretive from just a pure, you know, standing start NOI growth rate versus our core portfolio. So that was a big plus. The second was, you know, that point about where we are in the leasing evolution of what we need to accomplish. We just have a high degree of confidence that we're going to get this done ahead of schedule, on market rent, and within the TA ranges that we've outlined. You know, one of the steps that I share with you is of that remaining go-forward bucket of LOIs and prospects that I talked to you about, that last question, you know, 90% of that space, of that new remaining space are A, B, and C-graded space in our portfolio. Another way to look at it is 66% of that new incremental rent that we're looking for for our LOIs in a prospecting bucket are at our fortress and fortress potential assets. So if you just step away, you'd say they've got remaining space at some of their best centers in their best quadrant of spaces that are remaining. So if I were at a much lower percentage where I didn't have that visibility, we might not pursue a crab tree. We might pay down debt. But we feel like we've really flexed over that point of where Like, I think we're really in a different position than where we were at the beginning of the year.

The only thing I would add to Jack's comments is that we are still expected to keep the company within our previously stated deleveraging targets under the Path Forward plan. So even with this acquisition, we remain in our target leverage range as part of the plan.

Thank you. Maybe, Jack, this ties to your initial comments. You talked about the team being better aligned. I know we've talked to you in the past about your leasing systems, I guess. How does that all come together? And maybe just tie it to your comment. I think you said you may look at other, you know, potential acquisitions.

Yeah, it was interesting. We did a kind of case study internally, like, you know, lessons learned in the Crabtree process. And I think it really works quite well. amazingly well, given how we do our business today, the technology and the systems and the process that we put in place. It's it's hard to describe how well the company is actually working right now. Like we didn't just magically go lease all this space. I mean, we had a plan. It was built on a five year plan. There was a lot of realignment with the operating teams. There's very specific criteria that are met for spaces in our portfolio with market rents and TA assumptions that flow into that five-year model. So we're able to just make decisions very rapidly. It frees up the team to go forward. And we've unburdened a lot of our sales team, leasing team, with things that, you know, so they can do their jobs more efficiently. So just across the board, it's helped us achieve the leasing goals that we need. And when we evaluating Crabtree and actually are integrating it, it's been, I can't really compare because I wasn't here that long ago, but for what people tell me that have been around for a while, it's been a pretty seamless process so far. So we hope to get maybe another opportunity or two to try out, to put into the business.

Great. Thank you.

Thank you.

The next question comes from Floris Van Ditchcom with Ladinburg. Your line is open.

Hey, good evening, guys. Thanks for taking my question. Just maybe, you know, talking about the ethanol pipeline, you know, it's a large number, 85 million people. Obviously, you had some leases, you know, commenced during the quarter. Curious, you know, what commenced during the quarter or how much was added. And as a percentage of your going forward NOI, what is this? I mean, this is, you know, approximately 10% of your, you know, your EBITDA as you say it is today. But as a percentage of your going forward, it's got to be bigger. Maybe if you can give us a little bit more detail on that and also maybe, you know, talk about the composition of that S&O pipeline, because presumably if your average ABR is $73 a square foot right now in your going forward portfolio, how much of that S&O pipeline is in the A bucket and B bucket versus C bucket? And what is the rent difference between those?

Hey, Flores. I'll start and then Brad and Jackson chime in. If you think about your first point on the snow as a percentage of NOI. In the Path Forward presentation that we put out, we gave the Go Forward pro forma portfolio NOI was about 720 million. So kind of look at the 87 of snow as a percentage of that, it's 12%. And obviously the ultimate opportunity of 130 million of snow is significantly higher over that 720. In terms of snow, I think the second part of your question was snow contribution to date. Again, in the path forward plan we had outlined, and this is on the $80 million as of May that we expected, about $25 million contribution in 2025. About $10 million of that has been realized to date. In terms of the last piece, the composition,

Yeah, so if we're at, hey, it's Brad. We're at $87 million today on the snow and, you know, with an ultimate goal to get it to $130 million. So of that additional $43 million, 90% of it is anticipated to come from our A, B, and C rated spaces. So we feel really good about that.

And as you think about those A rated spaces or B rated spaces, what kind of premium rents do you get relative to the rest of the portfolio?

Yeah, certainly we got to hire rents on our A and B spaces. You know, I think one of the keys here is that we have, you know, in our five-year plan, there's a specific market rent assigned to every single space. So whether it's A, B, or C, we know what the target rent is that we need to hit for each space.

And then maybe my second question, sorry, and I know I sort of cheated on my first question because it was multi-part, but could you talk a little bit about the temp rate tenancy opportunity. I think you mentioned, obviously, at Crabtree Valley, 74% is permanent, or there's a huge temp opportunity there. Presumably, that also is incremental S&O potential in the portfolio. But maybe talk about what the temp tenancy percentage is today in your core portfolio, and where do you think that'll be at the end of 26?

Of course, you know, we kind of gave wide end ranges for 2028. Like, I don't want to try to give incremental because, you know, to answer, we're not putting out quarterly guidance. And if I give you a number, you'll probably try to do it. And so, I think what I would tell you is that, you know, our goal is to really drive unproductive or temp tenants, you know, out of the center because there's demand for, really high-quality tenants at this point, and we're showing that through our leasing momentum. And I would rather not constrain ourselves to give you a target for 26. We might exceed it. We might not exceed it. I don't want to be constrained that way. So you can rest assured we're going as quickly as we possibly can to make the right decision, to put the right tenant where we think it's going to, A, drive the most rent, but, B, actually drive the most traffic. you know, as part of the merchandising plan in each of these centers. And then, you know, at Crabtree, we think there's an amazing opportunity to really tighten up permanent occupancy in that center. I would say that the prior owner, you know, did not probably commit the kind of capital that was necessary over the last few years coming out of COVID. There's clearly demand. We're seeing it, and we're going to get after it. It does cost money, and it does take time. And I also think that a lot of those same tenants really want to see capital going into the center, which we've committed to do. And so they've seen it. They know what we're doing. And in kind, you'll see updates from us, you know, maybe at the end of the year where we show progress before and after, and it'll be quite significant.

Jack, the only thing I would add to that, and you've done a great job sort of explaining Crabtree and everything that we're doing, but from a retailer standpoint, we're talking to them all the time. They are elated that Mace Ridge bought this property. They know exactly what a Mace Ridge property looks like, feels like, and how it's leased. So already, I think I said this in my opening remarks, in the short time that we've had this, I can't tell you how many retailers proactively reached out to us and said, hey, We want to expand our store. We want to right-size our store. We want to invest capital. We haven't because we didn't know who was going to own this thing. So those are the ones that are currently in the mall. Then the ones that are in the mall that want to be in the mall has been nothing short of extraordinary. So I think, as I said, we're going to have a lot of real quick meaningful updates in the very near future. Thanks, Scott.

Appreciate it. Finally, I talked about this inflection point in mid-2026. That's when you're going to really start to see the impact of all this leasing that's really going to be coming through the P&L.

You'll start to really see it. Thanks, Jack. Thank you.

And our next question will come from Vince Tybone with Green Street. Your line is open.

Hi, good afternoon. Could you discuss the rationale in keeping South Plains Mall as part of the gold forward portfolio? When you consolidated the center last year, I recall you saying, you know, there's really likely no equity remaining at that property after the $200 million mortgage. So curious kind of what changed, what made you presumably want to contribute more equity into that center to get it refinanced versus just handing the keys back to

That's what I'd say on that. Look, this list of properties still could change a little bit. This is the go-forward list at this moment in time. Specific to the South Plains, we are in discussions with the lender at this moment seeking an extension. We think that with the demand in the trade area, with the right terms of an extension, we think we can kind of create NOI list that will sort of be at the point where at the end of three years from now, that loan and NOI will be more in balance. So I would just leave it to say that it's on the list now. It may come off the list, right? So it's going to be very dependent on the discussion that's happening right now with the lender. I mean, you've done the math. So, you know, the debt yields are in the high single digits. You're right. compared to putting equity somewhere else, like in a Crabtree, it's a lot more attractive. So, but with the right loan structure, you know, we think there might, there could be an interesting opportunity.

No, that makes sense. And I figured your negotiations with the lender there. And then can you, just given the portfolio list could be fluid, are you able to share any insight into the performance for the remaining non-go-forward assets in terms of how much NOI is growing or declining for those assets? I mean, I might be able to do some back-of-the-envelope math to get the first quarter results, but I'm not sure if there's any noise there. So I was hoping you can just share kind of ballpark where – how NOI is trending year-to-date for the current non-go-forward properties, Dave Stork?

Yeah, I would say, like, high level, Vince. Like, we're not putting capital into those properties. You know, the leasing that's happening there, you know, it's being handled differently. The asset management teams that are operating those assets are treating them differently. um so i would just say they're not growing at the same rate as our go forward portfolio not not even close actually um we're really just trying to maintain occupancy as a priority in in those centers um and you know in some you know as we as we kind of move through the portfolio and look other people have different ideas or other we're clearly selling other properties where there are other buyers that may have a different angle or different focus that that that can create value for that asset. I mean, for us, it's really just a prioritization concept where we only have a certain amount of capital, a certain amount of bandwidth, a certain amount of leasing effort. So we're really trying to concentrate that effort into that go-forward portfolio.

No, that makes sense. Is it fair to assume, too, any of those malls are effectively on the market given the release in May?

Yeah, I mean, I think that's for sure. I mean, I would say they're on the market. The thing that's interesting about those properties, they generate cash flow, in some cases FFO, some of them are unlevered. So they're additive to what we're trying to do right now, which is the capital is good for the company and we can use that capital to reinvest. But in the end, we are operating and leasing and managing those properties differently now.

Thank you, Jim.

Sure.

The next question will come from Ronald Camden with Morgan Stanley. Your line is open.

Hey, a couple quick ones, or just one. On the go-forward portfolio, that sort of NOI growth, maybe can you talk about what are some of the factors that are holding that back sort of this year, whether it's Forever 21, whether it's transition from temp to permanent, and just some updated thoughts on once you get that reflection point you talked about next year, what sort of a normalized growth rate we should be thinking about for the go-forward banks? Yeah.

Hey, Ronald, this is Dan. I think you hit a few of the points with Forever 21 this year. Also, all the leasing efforts and repositioning efforts as it relates to 2025 specifically. I think if you look at our step back and look at our path forward presentation, you know, we put out for the go forward portfolio, you know, over the next four years, a midpoint CAGR go forward portfolio of 5.2%. I think we've been pretty clear that, you know, that really ramps up to Jack's point in kind of a mid-26 inflection point. So we've said for 2026, we can see that being 3% to 4%, but it significantly ramps from there. But the important point is, you know, over the next four years, it's north of a 5% NOI growth rate for the go-forward portfolio.

Helpful. And if I could sneak a quick follow-up on just Crabtree. The capex budget that you have for the asset, maybe just high level, what is that going towards? I mean, there was some articles about sort of the parking lots and flooding and different things. Is that just maybe details on what the capex plan is going towards? Thanks.

Yeah, so, you know, it's over a couple of different items. It's obviously some of the releasing activity that's going to be there, but Big picture, you know, as Doug alluded to, we're going to reimagine the center through more dynamic tenant mix, modern environments, refreshed experiences. We're doing 200,000 square feet of common area that will be reimagined, painting, lighting redesign, handrails, a new furniture package. We're doing some interior signage and wayfinding, some greenery. We're doing a food court that's going to be revitalized. new vertical transportation, the parking deck, as you alluded to. So I think that gives you a mix of what we're looking to do at the asset. We've outlined about $60 million in total over the next couple of years.

And also the prior seller, they had already initiated a storm drain reassessment, redesign that will alleviate some of that flooding that's historically happened at that center. So that work is already in place. The parking stuff that we're working on is just make it more visually enhancing. Some of the sealant needs to be redone. So I would say a lot of it's going to be more cosmetic-oriented and sort of client-facing, which I think will be good. We really haven't seen capital go in in that way for quite some time.

Thanks so much.

And our next question will come from Omoteo Okasanya with Deutsche Bank. Your line is open.

Good afternoon.

Over this earnings season, we've had a couple of the multifamily REITs kind of talk about LA still struggling. A couple of the industrial guys have talked about it. Again, you guys are not necessarily an LA story. But just curious if you could talk a little bit about how your portfolio is performing kind of across all your different California locations, whether it's L.A., Orange County, or Northern California.

Yeah, I would say, like, you know, our California exposure is unique. You know, obviously we have the Bay Area. You know, we've got Corna Madera, Broadway Plaza. Those are doing quite well given, you know, some of the, I call it more headline news in downtown San Francisco, although I believe the mayor is doing an excellent job up there in terms of trying to address some of the perception issues in that city. You know, when you go to Central California, Modesto and Fresno, those centers are doing well. They're within sort of defined trade areas. You know, Southern California for us, you know, the portfolio is kind of in a kind of a reshape, right? You know, we've decided we sold the Oaks. know santa monica place is in transition uh with the lender lakewood is under contract so if you look at what we have left and to go forward los cerritos that is a that's that's mall is doing gangbusters right now um lots of traffic lots of sales lots of tenant demand the area that we're most focused on right now which is an opportunity is the former sears location We are looking at an anchor option there that we believe, you know, can't really talk about it right now, but that will bring a lot of traffic, a lot of demand into that wing of the center. We've got a very, very unique tenant that we're in negotiation on in the former Forever 21 location, which is in that same Sears wing. So we're super excited about the potential for Los Ritos. Victor Valley is a very solid center. It's in a very captive trade area. I wouldn't call it LA. It's in that Southern California beltway, but it's the only mall in town up in Victor Valley. We have Inland Center. Inland's got more competition with Victoria Gardens and Ontario Mills that surround it and some of the power centers. But if you look at this, in terms of our LA exposure, I would say Southern California We feel really good about Los Cerritos, which is our most important asset down there at this point, and Victor Valley. And then the others are part of the EDDIE package.

Thank you.

We are over our allotted time today. We have time for one more question, and that question will come from Ravi Vaidya with Mizuho. Your line is open.

Hi there. Good evening. I hope you guys are doing well. I wanted to ask about the opportunity with Forever 21. You mentioned that a good number of the backfills have been signed. A bunch are under LOI as well. How many of these are straight-up single backfills, and how many require a split of the box, which would require more capex? Thank you.

I think, Robbie, it's Doug. I would say, and Brad fact-checked me, I would say the majority of the Forever 21 boxes are straight back fills, with the exception being a few that we may need to demise one or two or three ways. And as I said in my remarks, we're about 50% committed, another 30%. in the LOI stage. So, you know, not only were you going to basically double the rent that Forever 21 was paying, but you're going to see some uses come in that far exceed what Forever 21 was doing in the shopping center. So we're super excited to get those spaces back, to be very honest with you.

Got it. That's helpful. And maybe just the impact that the Dick's Sporting Goods and the Foot Locker merger have. What's the potential store closure impact there, and what's the backfill opportunity? Thanks.

Yeah, I mean, Adam, we're not aware of any kind of closure lists or anything like that. If anything, I think that having a Dix credit become our number one tenant, you know, if you look at it with the combined Foot Locker Dix contribution, I mean, I think that's going to be a lot positive for us, and I think that... The Foot Locker stores that we have in our go-forward portfolio are quite productive, and so we'll patiently wait to see how that Dix potential transaction moves forward and reacts from there.

Got it. Thanks, guys.

I would now like to turn the conference back over to Jack Shea for closing remarks.

Well, I want to thank everyone here, especially all of the colleagues that work here at Macewich. I mean, they've been doing yeoman's work across the platform and couldn't do this without them. And we look forward to more updates and continual momentum on achieving our path forward plan. Thank you.

This concludes today's conference call. Thank you for participating. You may now disconnect.