Our long-term recommendation for Macerich (MAC) is Underperform as we anticipate it to perform well below the broader market. The prolonged recession has led to increased tenant bankruptcies, reduction in disposable income, and lower consumer discretionary spending.
In addition, Macerich has an active development pipeline, which increases operational risks in the current credit-constrained market. However, Macerich is one of the largest operators of regional and community shopping centers in the U.S. with assets in high barrier-to-entry markets, which has enabled it to hold rents fairly stable.
The stock is trading at a premium to the peer group, based on forward FFO estimates. Our long-term Underperform recommendation on the stock indicates that it would perform well below the broader market. Our target price of $38.00, 14.2X 2010 FFO/share, factors in this view.Zacks Investment Research
