Macerich Company (MAC) in 2023: A Risky but Potential Investment with Focus on Omnichannel Retail and Mixed-Use Properties
Macerich Company (MAC) is a real estate investment trust (REIT) that operates a portfolio of premium shopping centers in vibrant markets, with a focus on omnichannel retailing and developing mixed-use assets. The company's high concentration of premium malls in densely populated areas with affluent consumers offers solid scope for generating decent cash flows. Its well-capitalized retailers and well-laddered lease maturity schedule help it navigate through challenging times.
Macerich has been actively engaged in enhancing its asset quality and customer relationships by increasing the adoption of the omni-channel model and shifting toward re-use and mixed-use properties through recapturing and repositioning of anchor tenants. The company has also been focusing on an aggressive capital-recycling program, which involves the divestiture of non-core and slower-growth assets and the usage of the proceeds to increase its presence in core markets and invest in higher-growth properties. In 2025, Macerich expects to incur approximately $250-$300 million for development, redevelopment, expansion, and renovations.
However, the growing adoption of e-commerce by consumers raises concerns for Macerich, as it has a substantially leveraged balance sheet. The bankruptcy of several tenants, including Forever 21 and Express, is expected to negatively impact the company's performance in the upcoming quarters. In 2024, Macerich witnessed 13 bankruptcy filings from its tenants, totaling 54 leases. Additionally, Macerich's substantially leveraged balance sheet limits its ability to withstand any credit crisis or unexpected negative externalities in the future.
Despite these challenges, investors may consider better-ranked stocks from the broader REIT sector such as EPR Properties (EPR) and W.P. Carey (WPC). Both stocks currently carry a Zacks Rank #2 (Buy). The Zacks Consensus Estimate for EPR's 2025 FFO per share has moved three cents northward to $5.06 over the past month, while the consensus estimate for WPC's 2025 FFO per share has been revised upward by 1.2% to $4.88 over the past two months.
In conclusion, while Macerich faces challenges from the growing e-commerce trend and the bankruptcy of some tenants, its focus on enhancing asset quality and customer relationships through omni-channel retailing and mixed-use properties offers potential for growth in the long run. Investors may consider EPR Properties and W.P. Carey as alternative investments with a Zacks Rank #2 (Buy) and attractive FFO per share estimates for 2025.
