10-Q: Macerich Q3 2025: FFO Rises Amid Portfolio Reshaping

Macerich reports improved Q3 2025 net loss and increased FFO, driven by active portfolio management and leasing gains, despite higher interest expenses and ongoing debt challenges.

Summary

• Net loss attributable to the Company for Q3 2025 improved to $87.36 million, compared to a net loss of $108.19 million in Q3 2024.
• Net loss attributable to the Company for the nine months ended September 30, 2025, was $178.39 million, a significant increase from a net income of $17.09 million for the same period in 2024.
• Funds From Operations (FFO) attributable to common stockholders and unit holders (diluted, adjusted) increased by 8.6% to $93.40 million for Q3 2025, up from $85.97 million in Q3 2024.
• FFO (diluted, adjusted) for the nine months ended September 30, 2025, increased by 7.8% to $268.07 million, from $248.67 million in the prior year period.
• Leasing revenue increased by 16.6% to $237.23 million for Q3 2025 and by 19.0% to $705.60 million for the nine months ended September 30, 2025, primarily due to JV Transition Centers and the acquisition of Crabtree Mall.
• Interest expense rose by 27.3% to $72.70 million in Q3 2025 and by 43.4% to $213.70 million for the nine months ended September 30, 2025, largely due to JV Transition Centers and default interest on Santa Monica Place.
• The Company recorded a net loss on sale or write-down of assets of $72.63 million in Q3 2025, compared to a loss of $16.61 million in Q3 2024, primarily due to a $91.0 million impairment loss at Santa Monica Place.
• Cash and cash equivalents significantly increased to $290.16 million as of September 30, 2025, from $89.86 million at December 31, 2024.
• The leased occupancy rate was 93.4% at September 30, 2025, a 0.3% decrease from 93.7% at September 30, 2024, but a 1.4% sequential increase from 92.0% at June 30, 2025.
• Releasing spreads (new and renewal leases vs. expiring leases) increased by $3.86 per square foot, or 5.9%, for the trailing twelve months ended September 30, 2025, marking the sixteenth consecutive quarter of positive spreads.
• Comparable tenant sales for spaces less than 10,000 square feet increased by 0.5% for the trailing twelve months ended September 30, 2025, and by 3.1% for Q3 2025 compared to the same period in 2024.
• The Company acquired Crabtree Mall for $290.0 million in June 2025 and completed several dispositions, including Lakewood Center for $332.1 million (with buyer assuming a $317.1 million loan) and Atlas Park (JV sale) for $72.0 million.
• The $300.0 million non-recourse loan on Santa Monica Place defaulted on April 9, 2024, with a court-appointed receiver assuming control in Q1 2025.
• The $198.9 million mortgage loan on South Plains Mall is expected to be in technical default as of November 6, 2025.

Sentiment

Score: 6

Explanation: The company shows mixed results with strong operational improvements in FFO, leasing, and tenant sales, alongside active portfolio management. However, significant year-to-date net losses, rising interest expenses, and ongoing debt challenges (Santa Monica Place default, South Plains Mall expected default) temper the positive outlook. The 'Path Forward Plan' is a strategic positive, but its full impact is still unfolding.

Positives

• Net loss for Q3 2025 improved by $20.83 million compared to Q3 2024.
• Adjusted FFO increased by 8.6% for Q3 2025 and 7.8% for the nine months ended September 30, 2025, indicating stronger operational performance.
• Leasing revenue grew significantly by 16.6% in Q3 2025 and 19.0% year-to-date, driven by strategic acquisitions and transitions.
• The Company achieved its sixteenth consecutive quarter of positive base rent leasing spreads, with a 5.9% increase for the trailing twelve months.
• Comparable tenant sales for smaller spaces increased by 3.1% in Q3 2025 and 0.5% for the trailing twelve months, demonstrating tenant strength.
• Traffic levels at Centers increased by 0.1% for the first three quarters of 2025 compared to 2024.
• A robust new store leasing pipeline is expected to generate approximately $99 million in additional gross revenue through 2028.
• Cash and cash equivalents increased substantially by 222.9% to $290.16 million, enhancing liquidity.
• The Company successfully refinanced or extended approximately $1.9 billion in near-term, non-recourse loan maturities from early 2024 through Q3 2025.
• The revolving credit facility of $650.0 million had no outstanding borrowings and $649.4 million in availability as of September 30, 2025.
• The Company is in compliance with all applicable financial loan covenants as of September 30, 2025.

Negatives

• The Company reported a net loss of $178.39 million for the nine months ended September 30, 2025, a significant decline from a net income of $17.09 million in the prior year period.
• Interest expense increased substantially by 27.3% in Q3 2025 and 43.4% year-to-date, impacting profitability.
• A significant loss on sale or write-down of assets of $72.63 million was recorded in Q3 2025, primarily due to a $91.0 million impairment loss at Santa Monica Place.
• The leased occupancy rate slightly decreased by 0.3% year-over-year to 93.4% at September 30, 2025.
• The $300.0 million non-recourse loan on Santa Monica Place defaulted on April 9, 2024, and the property is now under receiver control, with disposition expected via foreclosure or similar means.
• The $198.9 million mortgage loan on South Plains Mall is expected to be in technical default as of November 6, 2025, indicating ongoing debt challenges.
• Management Companies' revenue decreased by 26.4% for the nine months ended September 30, 2025, due to lower management fees from JV Transition Centers.
• The Company's total equity decreased by 9.2% to $2.58 billion as of September 30, 2025, from $2.84 billion at December 31, 2024.
• Cash used in investing activities increased significantly by $300.8 million for the nine months ended September 30, 2025, primarily due to property acquisitions and contributions to joint ventures.

Risks

• General industry, global, national, regional, and local economic and business conditions, including tariffs, elevated interest rates, and inflation, could negatively affect demand for retail space, tenant creditworthiness, and lease rates.
• Elevated interest rates may continue to increase borrowing costs on floating-rate debt and new fixed-rate debt, potentially leading to defaults on mortgage loans and higher operating expenses.
• Adverse changes in real estate markets, including competition, evolving retail formats and technology, and risks associated with real estate development and redevelopment (such as inflation, supply chain disruptions, and construction delays), could impact operations.
• The liquidity of real estate investments may be affected by market conditions, making it harder to sell assets or obtain favorable financing.
• Government shutdowns, actions, and legislative/regulatory changes could adversely affect business operations and financial results.
• Co-tenancy clauses in leases may be triggered by anchor or small tenant closures, potentially reducing lease revenue.
• The pace of tenant bankruptcy filings, as seen with Express, Forever 21, and Claire's, could continue to impact leased space and annual leasing revenue.
• Interest rate cap and swap agreements may not be fully effective in mitigating exposure to interest rate fluctuations.
• There is no assurance that the Company will be able to access capital in future periods on similar terms and conditions, given fluctuating capital and credit markets.
• The $198.9 million mortgage loan on South Plains Mall is expected to be in technical default as of November 6, 2025, which could lead to further financial strain or asset disposition.

Future Outlook

The Company anticipates meeting its liquidity needs through cash from operations, joint venture distributions, working capital, and revolving credit facility borrowings. It is actively implementing its 'Path Forward Plan' to deleverage its capital structure, aiming to reduce its Net Debt to Adjusted EBITDA ratio over the next three to four years. This plan involves potential asset dispositions (including non-core properties and defaulting on certain mortgage debts), organic EBITDA growth, selective new development, and common stock issuance. The Company expects to generate positive cash flow after recurring operating and leasing capital expenditures and dividend payments in 2025. While interest rates have begun to decrease, they remain elevated, and the Company expects increased interest expense from refinancing or extending loans. The Company will be very selective in undertaking future development or redevelopment projects and may pause existing projects if they are no longer economically viable. The Company expects the pace of bankruptcy filings in 2025 to be lower than the average over the last decade but will continue to monitor economic conditions.

Management Comments

• "The Company believes that diversity of use within its tenant base has been, and will continue to be, a prominent internal growth catalyst at its Centers going forward, as new uses enhance the productivity and diversity of the tenant mix and have the potential to significantly increase customer traffic at the applicable Centers."
• "The Company expects that all loan maturities during the next twelve months will be refinanced, restructured, extended and/or paid off from the Company's revolving loan facility or with cash on hand, with the exception of Santa Monica Place."
• "The Company will be very selective in undertaking any future development or redevelopment projects and may choose to pause existing projects if the Company believes they are no longer economically viable."

Industry Context

The retail real estate sector continues to navigate a complex environment characterized by elevated interest rates, inflation, and evolving consumer behaviors. Macerich's focus on redeveloping existing assets, diversifying tenant uses, and actively managing its portfolio through strategic acquisitions and dispositions aligns with broader industry trends where landlords are adapting to create more experiential and mixed-use destinations. The positive leasing spreads and comparable tenant sales growth suggest resilience in Macerich's premium mall portfolio, contrasting with challenges faced by lower-tier malls. However, the ongoing impact of tenant bankruptcies and high borrowing costs remains a sector-wide concern, particularly for highly leveraged REITs.

Comparison to Industry Standards

• Macerich's 16th consecutive quarter of positive base rent leasing spreads (5.9% increase) demonstrates strong leasing execution, which is a positive indicator compared to some peers struggling with rental growth in a competitive retail landscape.
• The 93.4% leased occupancy rate, while slightly down year-over-year, shows a sequential increase and remains competitive within the regional mall REIT sector, often compared to peers like Simon Property Group (SPG) or Federal Realty Investment Trust (FRT) which typically maintain high occupancy levels.
• The increase in comparable tenant sales (3.1% in Q3 2025) suggests that Macerich's properties are attracting consumer spending, a key metric for retail REITs, and is generally in line with or slightly above the performance of well-located, high-quality mall portfolios.
• The significant increase in interest expense and the default on the Santa Monica Place loan highlight the challenges faced by some retail REITs with substantial floating-rate debt or properties in struggling submarkets, a situation that has been more pronounced for companies with higher leverage compared to industry leaders with stronger balance sheets.
• Macerich's 'Path Forward Plan' to deleverage and refine its portfolio is a common strategy among retail REITs seeking to optimize asset quality and reduce debt in the current economic climate, similar to efforts seen at CBL Properties or Washington Prime Group in previous years, albeit Macerich's portfolio is generally considered higher quality.

Related Party Transactions

• Certain unconsolidated joint ventures engage the Management Companies for operations management, reimbursing for compensation, insurance, and administrative expenses.
• Management fees charged to unconsolidated joint ventures were $3.64 million for Q3 2025 and $10.43 million for YTD 2025.
• Development and leasing fees charged to unconsolidated joint ventures were $1.73 million for Q3 2025 and $5.30 million for YTD 2025.
• Due from affiliates includes $1.71 million of unreimbursed costs and fees from unconsolidated joint ventures due to the Management Companies at September 30, 2025.

Stakeholder Impact

• Shareholders: Experience improved Q3 net loss and FFO, but a significant YTD net loss. The 'Path Forward Plan' aims for long-term value creation through deleveraging and portfolio optimization, but ongoing debt challenges and potential capital raises could introduce volatility. Dividends are maintained at $0.17 per share.
• Creditors: The Company is actively managing its debt maturities and is in compliance with loan covenants, but the default on Santa Monica Place and expected technical default on South Plains Mall highlight risks for lenders on specific properties. The overall debt level remains substantial.
• Tenants: Positive leasing spreads and increased comparable tenant sales suggest a healthy environment for retailers in Macerich's centers. However, the pace of tenant bankruptcies (e.g., Express, Forever 21, Claire's) continues to be a factor, and co-tenancy clauses could impact some tenants.
• Employees: Management Companies' operating expenses increased due to compensation, including employee severance costs, indicating some workforce adjustments. Share and unit-based plans are in place as part of compensation.
• Joint Venture Partners: Active acquisitions and dispositions of joint venture interests, as well as contributions to joint ventures for redevelopments, directly impact partners' investments and returns.

Next Steps

• Continue implementing the 'Path Forward Plan' to deleverage the capital structure and refine the portfolio over the next three to four years.
• Actively address near-term, non-recourse loan maturities through refinancing, restructuring, extension, or payoff.
• Continue negotiations with the lender regarding the $198.9 million mortgage loan on South Plains Mall, which is expected to be in technical default as of November 6, 2025.
• Monitor the disposition of Santa Monica Place, which is under receiver control and expected to be completed in the near future through foreclosure, deed-in-lieu, or other means.
• Be selective in undertaking future development or redevelopment projects and potentially pause existing projects if they are no longer economically viable.
• Continue to pursue strategic acquisition opportunities that complement the Company's portfolio.
• Manage capital expenditures for tenant allowances and deferred leasing charges (expected $50.0M-$75.0M in next 12 months) and development/redevelopment ($250.0M-$300.0M in next 12 months).
• Monitor the impact of tariffs and other economic conditions on tenants and the pace of bankruptcy filings.
• The Board will review the dividend amount on a quarterly basis.

Key Dates

Recommendation

Macerich is in a transitional phase, actively executing its 'Path Forward Plan' to strengthen its balance sheet and optimize its portfolio. While Q3 2025 showed improved net loss and FFO, along with strong leasing metrics and tenant sales, the significant year-to-date net loss and persistent challenges with elevated interest expenses and specific property debt defaults (Santa Monica Place, expected South Plains Mall default) present considerable headwinds. The company's strategic dispositions and redevelopments are positive long-term moves, but the full impact of these initiatives and the deleveraging efforts are still unfolding. Given the mixed financial performance and ongoing market uncertainties, a 'hold' recommendation is appropriate as investors await clearer signs of sustained financial improvement and successful execution of the strategic plan.

Keywords

REIT, Retail Real Estate, Shopping Centers, Malls, Financial Performance, SEC Filing, 10-Q, Earnings, FFO, Occupancy Rate, Leasing Spreads, Debt Management, Asset Dispositions, Acquisitions, Redevelopment, Interest Rates, Inflation, Capital Structure, Path Forward Plan