Area malls’ owner optimistic about future The Mesa Tribune | The Hometown Newspaper for the city of Mesa, AZ

Area malls’ owner optimistic about future

December 20th, 2020 Mesa Tribune Staff
Area malls’ owner optimistic about future
Business
2

By Wayne Schutsky
Tribune Staff Writer

The COVID-19 pandemic and associated shutdowns have hurt shopping malls across the country, but executives with Macerich see some small signs of improvement heading into 2021.

Macerich, the California-based real estate investment company that owns and operates Scottsdale Fashion Square, San Tan Village Mall in Gilbert, Superstition Springs Centers in Mesa and Chandler Fashion Center, last month held a conference call with investors and told them conditions improved between the second and third quarters this year.

Macerich said the overall occupancy rate for the company’s malls was at 91 percent – down three percent from the same time one year ago.

Traffic at Macerich’s malls was at about 80 percent compared to a year prior and sales were trending at 90 percent compared to one year ago, according to the call.

Zacks Equity Research, an investment research firm, reported that Macerich’s revenues of $185.8 million for the third quarter were down 19.6 percent compared to a year ago.

But the Macerich executives noted some signs of optimism. They noted that all of its malls had reopened as of Oct. 7 and it had around $630 million in cash and cash equivalents, up from $573 million in June.

Macerich is also seeing improved rent collections, which had become a problem for malls earlier this year after many states shuttered retail stores.

The company collected about 80 percent of its billed rents in the third quarter, up from 64 percent in the second quarter.

Additionally, Thomas O’Hern, CEO of Macerich, said Macerich came to deals with most tenants who missed rent payments to defer back rent payments to 2021 “in many cases in exchange for landlord-friendly amendments to leases.”

That included deals with most of the company’s top-200 retailers.

Of those 200 retailers, Macerich had reached agreements with 147 of them and was nearing agreements with another 23, according to information presented on the call. Even with those deals in place, Macerich or related entities have a number of lawsuits pending in Maricopa County Superior Court for unpaid rent.

Macerich-owned entities have at least nine active lawsuits alleging breach of contract against tenants at Scottsdale Fashion Square and Chandler Fashion Center, including The Disney Store, Gap, Banana Republic, Express, Guess, The Children’s Place, J. Jill, Talbots, MAC Cosmetics and Windsor Fashions.

Macerich leadership said the closure of local stores during the pandemic and retailer bankruptcies was largely to blame for the drop in occupancy.

Kingmore said Macerich is in the process of paying off loan deferrals for a total of 19 properties.

This all came after Macerich invested $140 to $160 million to renovate Scottsdale Fashion Center and build a luxury wing that opened up in late 2018 featuring high-end retailers like Louis Vuitton, Gucci and Bulgari.

Not all experts thought the expansion was a smart play, even pre-pandemic, as online shopping continues to eat into traditional retail sales.

“Absolutely bad idea,” said Hitendra Chaturvedi, professor of supply chain management at Arizona State University’s W. P. Carey School of Business.

Chaturvedi said the pandemic is only accelerating the shift away from brick-and-mortar retail experiences to online shopping and has also hurt sales of luxury clothing items like those sold in the new wing at Fashion Square.

“When you are buying a Gucci or high-end… you typically end up going out with people and going to places where you can show off some of the stuff,” Chaturvedi said.

“With us staying at home, if you look at the data, you will see that high-end shoes and clothes and accessories sales have come down.”

In November 2019, the Fool reported Macerich’s malls posted yearly sales per square foot of $800, up from $707 the year before.

Still, even if 2021 includes a return to normal shopping habits, Macerich may sell off non-core assets in order to better its financial position.

The company did something similar coming out of the Great Recession when it sold 25 properties and generated around $500 million in liquidity, O’Hern said.

“We expect post-pandemic, post-vaccine things will return to a more normal level, and we will have the opportunity to dispose of non-core assets and use that capital for reducing leverage levels.”

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