The Macerich Company (MAC), a fully integrated real estate investment trust (REIT), reported third quarter 2010 FFO (fund from operations) of $93.3 million or 66 cents per share, compared with $88.7 million or 97 cents in the year-earlier quarter. Fund from operations, a widely used metric to gauge the performance of REITs, is obtained after adding depreciation and amortization and other non-cash expenses to net income. The reported FFO for the quarter beat the Zacks Consensus Estimate by 2 cents.
 
Total revenues during the quarter were $190.7 million, compared with $200.7 million in the year-ago period. Total revenues for the reported quarter well exceeded the Zacks Consensus Estimate of $177 million.
 
Overall portfolio occupancy at quarter-end was 92.6% versus 91.0% in the year-ago period. Mall tenant sales increased 5.8% during the quarter to $426 per square foot for the twelve-month period ended September 30, 2010, primarily due to the gradual revival of the overall economy. Same-store net operating income also increased 2.6% year over year to $148.5 million.
 
Macerich continued its active development and redevelopment programs. During the quarter, the company opened a 524,000 square foot open-air shopping mall in Santa Monica, California. The property is 94% leased and is anchored by prime retailers such as Nordstrom Inc. (JWN) and Tiffany & Co (TIF).
 
During the quarter, Macerich refinanced property loans worth $250 million. Subsequent to the quarter-end, the company also refinanced a $114 million mortgage loan secured by its Stonewood Center property, and a $232 million mortgage loan collateralized by its Freehold Raceway Mall property. Consequently, Macerich has $55 million of mortgage debt maturing in the remainder of 2010. At quarter-end, Macerich had cash and cash equivalents of $486.4 million and total debt of $5.9 billion.
 
For full year 2010, Macerich expects FFO in the range of $2.60 to $2.70 per share. We maintain our Neutral rating on the stock, which presently has a Zacks #2 Rank translating into a short-term ‘Buy’ recommendation and indicates that the stock is expected to outperform the overall U.S. equity market for the next 1–3 months.

 
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