EUR 850.00 For Business Accounts Only

Morningstar | MAC Report 2/19/19

Macerich has successfully repositioned the company over the past decade as a true owner and operator of Class A regional malls. Over the past six years, the company has sold over $4 billion in mostly lower-quality assets, either directly owned or owned through joint ventures, and recycled the capital into acquiring new Class A malls, buying out its partners' share in the unconsolidated portfolio or redeveloping its own portfolio. As a result, the company's portfolio should produce higher tenant sales productivity, occupancy levels and rent and therefore is much better-positioned to face the economic headwinds of e-commerce. We expect Macerich to continue improving its portfolio through redevelopment, opportunistic acquisitions, and asset sales, which should deliver strong earnings growth for Macerich over time.Macerich's moves to improve its portfolio quality were necessary to position the company for the omnichannel strategy many retailers are pursuing. E-commerce continues to pressure brick-and-mortar retail as consumers increasingly move their shopping habits online. Macerich exited the assets that are likely to see falling sales growth and occupancy levels as e-commerce takes market share. Although many retailers will look to reduce their store count over the next decade, the high foot traffic and sales productivity of Class A malls that now make up Macerich's portfolio continue to make them attractive places for retailers to place stores. Additionally, many e-tailers are beginning to open stores in the Class A mall space as a high-quality physical presence provides additional marketing, a showroom for products they want to highlight from their online store and as another source of sales. While brick and mortar sales growth might produce sales growth that will be below inflationary levels on average, we believe performance will be bifurcated between the high-quality assets that Macerich now almost exclusively owns and the low-quality assets that the company disposed of over the past few years. As a result, Macerich should be well-positioned to face the challenges in retail over the next decade.