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Macerich: Why Healthy Base Rent Growth Bodes Well for the Company


Nov. 3 2015, Updated 10:09 a.m. ET

Healthier sales per square foot

For the year ended September 2015, Macerich’s (MAC) mall tenants’ annual sales per square foot for the portfolio rose 10.3% to $630, compared with $571 for the same period of the previous fiscal year. Sales are based on reports by retailers leasing mall and freestanding stores for the trailing 12 months to tenants that have occupied such stores for a minimum of 12 months.

On a same center basis, annual sales per square foot rose to $630 for the year ended September 2015, up from $585 during the same period of the previous fiscal year. The releasing spreads for the year ended September 30, 2015, were up 16.3%.

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Occupancy rate declines marginally

Macerich’s total portfolio occupancy for mall portfolio declined from 95.6% in 3Q14 to 95.4% in 3Q15. Occupancy is the percentage of mall and freestanding GLA (gross leasable area) leased as of the last day of the reporting period. Though the occupancy rate has declined marginally, it doesn’t bode well for the company as higher occupancy ensures higher rental income.

Base rent improves further

Macerich’s base rent PSF (per square foot) for all regional shopping centers improved from $43.80 in 3Q14 to $48.97 in 3Q15. This represents a year-over-year jump of 11.8%. Base rent PSF is the average base minimum rent charge to all tenants each month. Average base rent per square foot is based on spaces 10,000 square feet and under. Base rent is one of the most important indicators of an REIT’s (real estate investment trust) performance as the rise in minimum rent could lead to an improvement in the company’s top line.

Other companies in the retail REIT (real estate investment trust) segment, such as Taubman Centers (TCO), Pennsylvania Real Estate Investment Trust (PEI), and CBL & Associates Properties (CBL), released their 3Q15 earnings this week. Macerich makes up 1.3% of the iShares US Real Estate ETF’s (IYR) portfolio.


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