Ladies and gentlemen, thank you for standing by. Welcome to the Third Quarter 2024 Macerich Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. Please be advised that today's conference is being recorded. I would like now to turn the conference over to Samantha Greening, Director of Investor Relations. Please go ahead.

Thank you for joining us on our third quarter 2024 earnings call. During the course of this call, we will be making certain statements that may be deemed forward-looking within the meaning of the Safe Harbor of the Private Securities Litigation Reform Act of 1995, including statements regarding projections, plans, or future expectations. Actual results may differ materially due to a variety of risks and uncertainties set forth in today's press release and our SEC filings. Reconciliations of non-GAAP financial measures to the most directly comparable GAAP measures are included in the earnings release and supplemental filed on Form 8-K with the SEC, which are posted on the Investors section of the company's website at macerich.com. Joining us today are Jack Hsieh, President and Chief Executive Officer; Scott Kingsmore, Senior Executive Vice President and Chief Financial Officer; and Doug Healey, Senior Executive Vice President of Leasing. With that, I turn the call over to Jack.

Thank you, Samantha, and good day, everyone. Before commenting on the third quarter, I would like to briefly discuss the change in Scott Kingsmore's role at Macerich. Scott has been with Macerich for 29 years and has provided valued service across a variety of roles within the company. I'd like to thank Scott for those many contributions to Macerich over the years and for helping in my transition. Scott was invaluable to me in designing our Path Forward plan. He will be missed by all of us. Dan Swanstrom, whom I have worked with for many years when we were both former investment bankers in Morgan Stanley's Real Estate Group, will be joining Macerich as our new EVP and CFO. Dan's banking experience and two CFO roles will bring valuable perspective to Macerich as we continue to execute our Path Forward strategy. We will be incurring severance charges in the fourth quarter related to Scott and two other senior executives that will result in a $0.02 reduction to our fourth quarter earnings. Our third quarter saw continued improvement in operational results, a testament to our outstanding team and quality shopping centers. Our occupancy, leasing activity, and same-store NOI improved over the previous quarter. Excluding the Eddie assets, our sales per square foot was $9.10, our occupancy rate was 95.4%, same-store NOI was 2.8%, and traffic was up 1.6%. I'm excited about the progress we are making on our Path Forward initiative. On the debt initiative, we are targeting a $2 billion reduction in long-term debt as part of that aspect of our plan. Based on closed dispositions, progress with lenders on potential loan givebacks, a binding $157 million purchase and sale agreement for the Oaks, and other signed asset agreements, we have approximately 60% of the $2 billion target, or $1.17 billion, either completed or currently in play. The balance of effort to reduce the remaining debt will be through sales, givebacks on a few remaining Eddie properties, and a focused disposition effort on freestanding retail assets, vacant land sales, and smaller open-air centers around our regional shopping centers. We will be embarking on that sales process in early 2025. We're making solid progress on achieving the NOI gap that we are solving for in our Path Forward plan. Based upon expected lease renewals, signed but not open leases, and re-leasing opportunities, we are very encouraged about our ability to meet our internal target of incremental NOI that is necessary for our plan. The next 24 months will be critical for us as we target leasing of select current vacant temporary leased spaces and former Forever 21 and Express Space in our Fortress and Steady Eddie portfolio. We will share more information on an NOI bridge early next year. A core aspect of our path forward is simplifying the business. The announced acquisition of our partners' interest in Pacific Premier Retail Trust, the entity that owns Los Cerritos, Washington Square, and Lakewood Center, goes a long way towards helping us meet that objective. The overall deal is long-term accretive to FFO per share. We will be able to refinance high-cost debt at Washington Square and aggressively pursue redevelopment plans for Los Cerritos. Both of these centers are outstanding properties and fit into our fortress and fortress potential categories. We will immediately begin exploring sale options for Lakewood Center and Eddie Property. With that, I'll turn the call over to Doug for more leasing color.

Thanks, Jack. We had another solid quarter in both leasing volumes and metrics. Sales per square foot at the end of the third quarter were $834, which is down by $1 compared to the last quarter. Excluding our Eddie properties, sales per square foot were $910. Comparative sales in the third quarter were down about 1% from the same quarter in 2023. Year-to-date sales are also down about 1% compared to the same period last year. The macroeconomic environment is still a factor, and besides the wealthy, consumers are remaining cautious, focusing mainly on essentials. Nonetheless, there has been an increase in discretionary sales of innovative and differentiated products, with retailers that can offer new options being rewarded. As I have mentioned before, we have not seen a clear correlation between sales and retailer demand, as our deal flow, in terms of square footage, is 40% greater compared to the same time last year. Regarding the holiday season, all signs suggest increases will be between 3% and 3.5% compared to last year. Given the shorter season between Thanksgiving and Christmas, we anticipate holiday shopping to start early, with retailers being more promotional than in the last few years, resembling pre-COVID behavior. Traffic in the third quarter increased by 2.4% compared to the third quarter last year, and year-to-date traffic is up 1.6% in the same period of 2023, with 70% of our centers showing positive trends. Importantly, traffic across our portfolio has returned to pre-COVID levels from 2019. Occupancy in the third quarter was 93.7%, up by 40 basis points from the second quarter and 30 basis points from a year ago. Portfolio occupancy without our Eddie properties was 95.4%. Trailing 12-month base leasing spreads remain positive at 11.9% as of June 30, 2023, marking three consecutive years of positive leasing spreads. In the second quarter, we opened 225,000 square feet of new stores, bringing our year-to-date total to 1 million square feet of new store openings. One notable opening in the third quarter was Primark at Tysons Corner Center, completing the remix of the 70,000 square foot L.L. Bean Box. We replaced L.L. Bean with Primark, Lululemon, Old Navy, and Kendra Scott. This change has increased traffic in that area by 40%, and we project combined sales from these four tenants will be at least five times higher than L.L. Bean sales. Looking at the new and renewal leases we signed in the third quarter, we signed 220 leases totaling 830,000 square feet. Year-to-date, we have signed leases for 2.6 million square feet. We are excited to announce a 50,000 square foot restoration hardware design gallery in the former Neiman Marcus Box at Broadway Plaza in Walnut Creek. This showcases transformational leasing and repurposing of a vacant anchor store in our portfolio. The RH Gallery will integrate food, wine, art, and design for an immersive retail experience. The design is being finalized and features six contemporary Venetian plaster Mediterranean buildings connected by four gated courtyards, leading to a 30-foot high glass train and garden restaurant surrounded by fireplaces, fountains, and an outdoor wine experience. The RH Gallery at Broadway Plaza is expected to open in 2026. Another significant signing was Chanel at Scottsdale Fashion Square, where they will open an 11,000 square foot flagship boutique in Phase 2 of our luxury development in the Nordstrom wing. This will be the first Chanel location in Arizona, offering a full range of their collections, including ready-to-wear, handbags, shoes, accessories, jewelry, watches, fragrance, and beauty products. Chanel joins other prestigious luxury brands like Hermes, Celine, Tiffany, Van Cleef, and Burberry. The scheduled opening is in 2027. Regarding our 2024 lease expirations, we now have commitments on 84% of our 2023 expiring square footage that are expected to renew, with another 13% in the letter of intent stage. This effectively completes our management of 2024 expiring square footage and we are already progressing into 2025. For our 2025 expiring square footage, we are approximately 25% committed, with another 35% in the letter of intent stage. In the third quarter, only one tenant in our portfolio filed for bankruptcy, representing just 6,000 square feet across two locations. As previously mentioned, aside from Express, only about 100,000 square feet of space has been impacted by bankruptcy filings this year. Turning to our signed but not yet opened pipeline, at the end of the third quarter, we had 133 leases signed for 1.7 million square feet of new stores expected to open by early 2027. Additionally, we are negotiating leases for new stores totaling just under 750,000 square feet, planned to open through the remainder of 2024 and into 2025, 2026, and early 2027. In total, that's almost 2.5 million square feet of new store openings during the remainder of this year and beyond. This leasing pipeline accounts for $80 million in incremental rent that will be realized from now through early 2027. With that, I’ll turn the call over to Scott to review our third-quarter results and recent transactional activity.

Thank you, Doug. FFO per share for the third quarter was $86 million, or $0.38 per share, meeting our expectations. This reflects a decrease of $14 million compared to the third quarter of 2023, which was $100 million, or $0.45 per share. Same-center NOI rose 1.9% this quarter, both with and without lease termination income, and increased 2.8% excluding the Eddie Group of assets. The key factors affecting the quarterly FFO trends include: a $7 million decline in land sale gains due to a significant land sale in Scottsdale in the third quarter of 2023; a $5 million rise in interest expenses due to increasing rates; a $4 million increase in corporate overhead mainly attributed to changes in incentive-based compensation last year and accrued leasing costs; and a $2 million net decrease in other income, resulting from a significant one-time adjustment last year. However, these negative impacts were offset by a $3 million increase in rental revenue per share. Moving on to balance sheet matters, we have made considerable advancements under the Path Forward plan through several transactions, including acquisitions, dispositions, and refinancings. Since the end of the second quarter, we sold our 50% interest in Biltmore Fashion Park in Phoenix for $110 million at an implied 6.5% cap rate. On October 24th, we completed the acquisition of our partner's 40% interest in the Pacific Premier Retail Trust Portfolio for $122 million at an implied weighted average cap rate of 7.4%, funded by proceeds from our ATM facility. This acquisition follows our earlier purchase in May of the same interest in Arrowhead Towne Center and South Plains Mall for $37 million at a 7.2% cap rate. We are currently under contract to sell The Oaks for $157 million, with the closing expected in the fourth quarter, subject to standard closing conditions. In the third quarter, we sold 9.4 million common equity shares for $152 million through our ATM facility at an average share price of $16.14, proceeds that were used to finance the PPRT acquisition and lower our leverage on Queen Center. Now I’ll break down the financial effects of the PPRT acquisition. Initially, this transaction increases FFO by $0.01 per share on an annualized basis, not accounting for the temporary dilutive effect of adjusting the PPRT debt to market. This FFO impact will be modified as follows: we anticipate refinancing Washington Square early next year at an estimated interest rate of around 6%, which we estimate will boost FFO by about $0.06 per share if funded with cash. Therefore, the PPRT transaction’s baseline FFO measure will be $0.07 after considering the Washington Square refinancing. The impact of marking the debt to market will differ each year, as the related loans mature over the next few years. In 2024, the expected incremental effect from marking the debt to market is approximately $0.01 dilutive. In 2025, this impact is expected to increase to around $0.09 dilutive; then in 2026, it will reduce to $0.06. By 2027, it will further decrease to $0.02 dilutive, and in 2028, there will be no remaining impact as all three loans will have matured. On the refinancing side, we successfully closed an $85 million 10-year refinance on the loan for the Mall at Victor Valley at a fixed interest rate of 6.72%, which will remain interest-only throughout the loan duration. We also closed a $525 million five-year refinance of the Queen Center loan, at a favorable fixed rate of 5.37%, which is also interest-only for its entire term. The debt capital markets remain strong and very accommodating, particularly for Class A mall retail. We are thrilled with the execution and rates we've secured for the Queen Center refinance. Since the start of 2024, we have finalized $1.3 billion in loan refinancings or extensions, with approximately $1.15 billion attributed to Macerich's share. Currently, we are engaged in 10 dispositions totaling around $1.17 billion. We have about $667 million in available liquidity, factoring in the recent closing of the PPRT acquisition and the Queen Center refinance. Our leverage has been reduced to 8.22x at the end of the quarter, showing a decrease from 8.76x at the end of 2023. Lastly, after nearly 29 years with Macerich, I will be stepping down with great pride. I have greatly valued the relationships built over the years with our investors, analysts, bankers, lenders, partners, and various service providers. My colleagues, both current and past, will be what I miss the most. I wish everyone continued success as we move forward together. Thank you for your friendship, support, professionalism, tenacity, and the wonderful memories we've created. I look forward to a smooth transition to Dan. Now, let's return to the main business and open the call for questions.

Thank you. Our first question will come from Jeffrey Spector with Bank of America Securities. Your line is open.

Great. Thank you. First, Scott, I feel the same way. Thanks for all your help over the years and best of luck on your next steps. Dan, we look forward to working with you. My first question for Jack is just, with the market today pricing in higher rates, I guess assuming a slower Fed cutting cycle. Do you think that impacts any of the plans, the disposition plans or any of the other plans over the coming months?

Hi, Jeff. I would prefer rates to be going down rather than up. We will have to see how things unfold with the new government and the long-term direction of rates. However, we are currently ahead of our plan in terms of positive outcomes at the present rate level. The deals we mentioned, amounting to $1.17 billion, are progressing well, and we are very optimistic about them. The only remaining significant item is the Lakewood Center, which carries $325 million in debt. We also have a portfolio of compelling net lease properties that we believe we can successfully manage in the mid-7% range, if not better. We're in the process of organizing those assets to go to market, some of which are being blended and extended while others need lender discussions. The team I brought over from Spirit is well-prepared to move forward. I'm very confident in managing the $2 billion. My main focus is on our leasing goals, which I have challenged the team to pursue, and we are actively working on that now. To answer your question, current rates are not a concern for me. We have Washington Square ready to enter the market, and the debt rate on that is 9%, so I’m confident we can achieve better results.

Thank you. That's helpful. And then my second question, a follow-up. I think Doug talked about the consumer a bit that strength at the high-end, but alluding to maybe some weakness at the low end. I guess, can you elaborate on what you're seeing from the consumer? Is it certain markets? Is it certain types of assets according to your various buckets? Is it certain categories? Thank you.

Hi, Jeff. It's Doug. Now we're seeing it across the board. I think our sales have been flat for the last two to three quarters. But again, we're up against some extremely high comps in the past couple of years. And as I mentioned in my remarks, essentials are the key right now, but we are seeing discretionary start to move to those retailers that are providing newness and innovation. So that's a challenge for all of them out there. I think that holiday hopefully between 3% and 3.5% will be solid, and we expect the retailers to be a little bit more promotional. As I said, that's consistent with pre-COVID behavior. That's where we are right now, John.

Great. Thank you.

Thanks, Jeff.

And our next question comes from Floris van Dijkum from Compass Point. Your line is open.

Thanks for taking my question. Scott, I wish you best of luck in your new ventures. Thanks for your help so far. Jack or Scott for that matter, as we look at the equity that was raised, again low price, but our calculations around a 7.2% implied cap rate, you put that to work at a 7.4% cap rate. Presumably, that should be accretive, as I think you discussed on your comments so far. Just on a simple basis. Maybe could you talk about what this does to your growth rate, because two of these assets in particular, Washington Square and Los Cerritos are two of your top assets in our view? How should we think about this for your growth? What kind of impact does this have on your growth going forward?

Maybe I'll try to take that on, Floris. We, and I don't want to get too much into growth rates because obviously we're working through that right now on our five-year models. I'll talk about that later in the call. But to me, the biggest opportunity for us, for Macerich, the way our partnership agreement was set up with our partner on PPRT, it had equal kind of control rights on refinancing. It had equal control rights on CapEx, and leasing commitments. In the case of Washington Square and Los Cerritos, we own the Sears anchor location 100% versus the JV. So, when I look at that situation, I knew we had great assets. I knew this was going to be really positive, once we could kind of get our partner to move with us. To be honest with you, now that we were able to buy them out, we're just going to be able to accelerate our business plans, which we have on those two properties. We're going to get after it very quickly with the leasing and development teams. Those are fantastic properties. We've got some great anchor solutions up at Washington Square, which we think is going to help unlock that property. We're evaluating the possibility of attracting more luxury into that center given just what's going on in that Portland market. Los Cerritos, as you know, we've talked about, that's a gem. We're excited about the entitlements that we have on the multifamily and we're just trying to lock in the final retail solution that's going to anchor that Sears location. And we're going to continue to upgrade that tenancy. It's a fantastic center. I would just say it's going to help our growth rate just because we have the ability to execute, to refinance 9% debt on Washington Square, move forward on some of these development initiatives, and just lease, lease, lease without having to be constrained by other partners that don't have the same ideas, given long-term interest in those properties.

Thanks, Jack.

So it's going to help our growth rate.

Yes, it should help you. My follow-up question is regarding the increase in your S&O pipeline. Is it around 300 basis points? Can you talk about the timing of how much of that will impact earnings in 2025? Also, how much will affect beyond 2025 and into 2026?

Yes, Floris. Again, the incremental pipeline is $80 million. We're now looking out into 2027 that we're doing 2026 store openings. In fact, we just announced the Chanel deal a few minutes ago, which will open up next year. In terms of the cadence, we expect some of that $80 million to be hitting this year currently, as stores open and as stores anniversary that have been recently opened, about a $25 million impact in 2024, about a $34 million impact in 2025, and the balance into 2026 and 2027. The good news is we've found that, that pipeline has only continued to increase, which means the pace of new signings is outpacing the store openings. We do have a pretty robust pipeline. I would think the fourth quarter may tick down a little bit, because we do have a fair amount of openings, exciting openings coming in the fourth quarter, but the environment is great, so the bucket keeps refilling. Lastly, one comment, you asked about the spread. Yes, it's roughly a little over 3%, between fiscal and leased occupancy.

Thanks, Scott.

Sure. Thank you, Floris.

And the next question comes from Craig Mailman with Citi. Your line is open.

Hi. Good afternoon. Just want to follow up on the leasing side. Demand continues to be good, spreads continue to head in the right way. How is CapEx trending relative to the expectations in the strategic plan?

I would say, there's really no substantive differences, Craig. We do disclose, and I have the page number handy, but we do disclose period-over-period CapEx both from an operating CapEx and from a leasing standpoint. I think you'll find that there's really no substantive differences across periods. In fact, look at Page 17 in the supplemental, and you'll see that. I don't think there's really anything atypical about the environment. I'd say, one thing to note is as we made a lot of progress this year and last year and prior years, as we look at our go-forward portfolio excluding our Eddie assets, we have leased the lion's share of any available anchor stores. In fact, I think we only have six that are uncommitted today. So a lot of those uses are sitting in our pipeline. We can't wait to get them open and see the traffic and sales and energy boost to the properties. But from a CapEx standpoint, the amount of that large space is certainly narrowing, and we've got a good handle on it.

I would like to mention one more point about leasing. In our last call, we discussed improvements we've made to our leasing processes, including the implementation of a CRM system that allows our leasing team to actively comment on the status of various spaces in our portfolio. We have started a project to rank spaces from A to F throughout the entire portfolio, with square footage prices reflecting where we believe current lease rates should be set. This initiative is being carried out collaboratively between asset management and leasing teams. We are using the A to F rankings along with specific targets for vacant and temporary lease opportunities, and we have aligned this information with our five-year operating plans. To summarize, we find the most value in signing new leases, which significantly contributes to occupancy costs for Macerich. Our goal is to continually close deals; we know this must occur within the next 24 months. There are specific spaces and strategies in place, with accountability on the leasing teams to drive this forward. The asset management team now has the necessary tools to monitor and evaluate our performance against these five-year plans, and we've conducted thorough asset reviews. Overall, our approach is much more targeted and focused to achieve our important NOI goals.

That's helpful. And then just on the follow-up, equity has always been part of the strategic plan. You guys pulled the trigger on a bit this quarter to fund some near-term uses. Can you just talk a little bit about, I know you went through the PPRT and the $0.07 of FFO. But, could you help us kind of think through the time it takes to recoup the dilution on the NAV side of issuing, at least our NAV? I don't know what you guys are internally, but between that and the uses in PPRT, and then just more broadly as you think about equity as a source and part of the funding and the strategic plan, kind of how you're thinking about that going forward, kind of matching it up and minimizing dilution?

I mean, I'll take a start and then just Scott can follow up. First of all, when you look at PPRT, if you look at the allocation of cap rates, Washington Square and Los Cerritos were acquired at a 6.8% cap rate. Lakewood, in our view, has an implied 9.6% cap rate for the blended 7.4%. That's one aspect of how you might think about NAV dilution. The other aspect I would say is I actually believe that if you did an NAV analysis of our entire portfolio including JV interests and assets like Fashion Square and Tysons, by consolidating NAV in those two centers, which we believe have a lot of growth embedded not only in NOI but in cap rate compression as this asset sector continues to stabilize. We think we'll be able to exceed any kind of initial NAV dilution that might be at play. And then, plus the other piece is the 9% interest rate on Washington Square. I mean, you've got an over-leveraged asset with a high coupon, kind of everyone, us and our former partner are looking at each other, trying to figure out what to do and can't move forward. I would say that just by virtue of getting off the clock, it's going to enable us to actually drive more growth and sort of be able to capture that NAV accretion by virtue of being able to put the investment in the assets, so we can actually take market share. I don't know, Scott.

Jack, great commentary. I have nothing to add.

Okay. In terms of like other equity, we were very specific about the use of proceeds. Look, we're going to reload our ATM because it's all finished. So don't be surprised about that later next week or something. And I think, look, we're always open to continue to consolidate. That's a long-term strategy of simplifying the business. I don't have anything really to report on active discussions with our partners at the moment. Of course, we'll always evaluate the equity market. It's part of the plan. There's no gun to our head on when we have to do it. But we'll just continue to monitor. We like the progress right now. We believe that we're at a really good pace across the varied aspects of our plan, the sales, the givebacks, the NOI pieces. Everything is going well in that regard.

Great. Thank you.

Our next question comes from Samir Khanal with Evercore. Your line is open.

Hi, good morning, everybody. I guess, Jack, I mean, I know you talked about focusing on incremental leasing here. But just looking at sales, and I know you guys talked about it being flat. But, give us an idea of your ability to continue to push rents here. I know leasing spreads have been pretty good, but it's sort of backward-looking. But as you think about what you're seeing under the negotiations that you're having with tenants, I mean, kind of what are they saying as you negotiate these leases? Thanks.

Hi, Samir, it's Doug. I can address that. I've mentioned that there's no direct connection between flat sales and retailer demand. We've experienced three quarters of flat sales, yet we've reviewed over 40% more square footage in our Executive Leasing Committee compared to this time last year, which was a record leasing year for us. This reflects both the strength of our portfolio and the sophistication of retailers. A few quarters of flat sales don’t impact their long-term strategies, especially since they sign leases for up to 10 years. Regarding your question about pushing rates, as occupancy rises and we reduce supply, we have unprecedented retailer demand, giving us a better chance to increase rates. However, we must balance this with proper merchandising in our shopping centers. Rate adjustments are a science, while merchandising is an art, and both are essential. As we work on increasing rates, it's important to also focus on merchandising. If we develop centers that are well-merchandised and attractive to shoppers, the rent will naturally increase over time.

I guess as a follow-up, when you're talking about flat sales, I mean, what's sort of driving that? Is it luxury that's kind of flowing a little bit and maybe just provide a bit of color on categories? Thanks.

Yes. All categories basically are flat. We don't have a lot of luxury, Samir, the exception of Scottsdale. That's not really a factor for us. Again, we've had some huge comps in 2022 and 2023. It's tough to comp against them, but there's been a change in spending. As I said, really essentials are in play. I think I talked about this on the last call. Discretionary spending really in the last probably 6 to 12 months has turned from discretionary retail items to discretionary services. For example, our services or entertainment. We're starting to see people spend more money on vacations, on entertainment, on leisure activities, etc. They haven't been able to do that for a very long time. I think that's just a temporary play and everything will come back full circle. We expect that to happen at the beginning of 2025.

Thank you, Guys.

Yes. I think if you're looking at Q3 2024 versus Q3 2023, the home furnishings were kind of the worst performer of our categories. Major categories, fast food is actually slightly positive. And if you look at the broader, other categories like jewelry, general, shoes, restaurants, apparel, they were all just slightly 1% or so negative. Within those, if you went into the detail of those, you'd see some up 3%, some down. All sort of within that kind of plus-minus band, with the exception of like home furnishings, which had a larger drop.

Yes. That's no surprise. I mean, if you think about coming out of COVID, what do people do? They renovated their homes. They spent money in their homes. That's all they could do. For two solid years, home furnishings led all categories in terms of sales comps. It's not really a surprise to see that flatten out a little bit.

Got it. And did you guys provide any cap rate?

I understand the concerns about re-leasing when you're achieving $900 a square foot. However, considering the situation with ABC, we have underperforming tenants in prime locations that should be generating more revenue. It's up to our leasing team to identify opportunities to replace these tenants with ones that can better meet our occupancy cost requirements. This involves a strategic approach rather than simply increasing rents across the board. We focus on securing tenants in high-demand areas while acknowledging there may be some downtime during this transition. That's why we've developed a plan that doesn't depend on short-term results, as we have a specific target net operating income in mind, and we are confident we have a strategy to reach it. Importantly, we do not subsidize leasing for the national portfolio at Eddie properties since I started here, ensuring we achieve optimal results for non-Eddie properties while working to maintain occupancy at Eddie properties without significant investment.

Thanks, Jack. Did you one last thing, did you provide a cap rate on the Oaks? Sorry, if I missed that.

No, we didn't. I just say it's a 13% cap.

Okay, great. Okay. Thank you.

Yes. It's like $150 million of debt on it. It's a $157 million purchase price.

Our next question comes from Alexander Goldfarb with Piper Sandler. Your line is open.

Hi. Thank you and good morning out there. Scott, wish you the best. It's been great working with you and certainly appreciate the interactions over the years and welcome Dan aboard. I guess the first question, Scott, maybe just going back to the Pacific JV buyout. Just on the numbers, you mentioned $0.07 accretive, but you also mentioned some dilutive marks over the next few years after you did a debt mark-to-market. Holistically, is it $0.07 total accretive inclusive of those dilution marks, or is it $0.07 initially and then it's going to have dilution against that over the next few years?

Yes. It's $0.07 excluding the impact of the debt mark-to-market, and then I provided the incremental impact of that debt mark-to-market, year-by-year, just so you could see the burn-off of that as we move forward. But $0.07 after the washing taking into account the accretive impact of the Washington Square refinance is the baseline measure. You'll just then tack on the incremental mark-to-market each year, as I outlined.

Okay. And then Jack, you've been in there a while. You've announced some new malls that are for sale like The Oaks. As you look at the portfolio now, are there are you finding more malls that are, I guess, more Eddie's, if you will, or how are you shaking out as far as the portfolio that you ultimately want versus the Eddie's that you plan to sell? I'm just trying to understand if there are more Eddie's that you're finding or the other way around.

I'd say it's sort of like there might be one or two more kind of on the cusp that are kind of in between that bottom steady Eddie and Eddie. A lot of it is going to determine if we have a plan to sort of get that asset to be more thriving, and does the plan kind of make economic sense in terms of investment and things like that? So I would say like there are two on the cusp that sort of hold or kind of drop down. We're continuing to evaluate it. But look, we're trying to tighten up this company, where we have effectively really powerful centers that can kind of drive demand and NOI growth like we're seeing at Tysons and Fashion Square. You keep reinventing those properties and they just keep doing more. Those are just great examples of properties and we have other properties like that, whereas we're going through these redevelopment plans and releasing plans and putting capital in, where we think we can really drive share, because the traders are there and sort of the competition around some of them are fading. I'd say, like, Washington Square is a great example. We're really excited about that opportunity to take that asset up another level in terms of NOI contribution and just overall productivity.

The $2 billion that you referenced as the target, you could exceed that if you find these two assets and maybe others or that $2 billion is inclusive of what you're contemplating?

No. The $2 billion is really inclusive of the remaining Eddie's that are left. Like I said, we've just got 40% of the way to go, and we've got pretty good confidence on being able to get that done. We feel like we'll get that $2 billion out of the way in a relatively short period of time, and we'll start focusing on the NOI bridge because that's really what you all should be thinking about once we give you the information.

Okay. Thank you.

Yes. We're very confident about the $2 billion at this point.

The next question comes from Michael Mueller with JPMorgan. Your line is open.

Yes. I guess for Scott, really appreciate having worked with you for the past 25 years or so as well. So, look forward to staying in touch going forward. In terms of the question, Jack, just a high-level one. Have you seen any notable changes in third-party capital's interest in traditional regional malls since you started this process earlier in the year?

I think what I found was interesting is look, The Oaks, we made a decision to sell The Oaks. That was one that was in our backyard. There were major redevelopment initiatives that we had studied in order to move forward. We obviously made a decision to have that. It was ranked in Eddie. I think what's encouraging to me is that the buyer of that asset has been able to secure debt for an asset like that, which is, it's an asset that needs to sort of be reengineered, especially the retail. It's got a development opportunity that has entitlement, but there are still some moves that are required. But that buyer seems to be able to have secured financing, which I think is a really compelling opportunity for us, as we look to monetize some of these other assets. Clearly, this buyer has equity. They're at risk at this point. That to me was encouraging. Look, pricing, there haven't been a lot of trades on enclosed centers. I'm excited about the two centers that long-term we're going to keep at Washington Square and Lakewood. Those are, and I'm sorry, Cerritos. So I think there's more to come. I don't think there's a lot of transparency. There hasn't been a huge amount of A-plus centers sold. But the fact that lenders are coming into what I call B opportunities or maybe properties that could become As that need a lot of reconstruction, that to me is encouraging. That wasn't really as evident when I first started the company in March of this year.

Got it. Okay. That was it. Thank you.

Our next question comes from Linda Tsai with Jefferies. Your line is open.

Thank you, Scott. Thank you as well, and I wish you the best. The acquisition cap rate of 7.2% to 7.4% for buying the centers that you want to own in their entirety, does that cap rate stay in that zip code as you continue to buy out your better assets, or would you expect it to compress as stabilization, you referred to, continues?

I think it's probably going to compress. Just look, the business is really good. So it's sort of, why open-air centers trade way inside of an enclosed mall when there's so much leasing and demand for space and NOI growth sort of surprised me. But, yes, I would say as we kind of look forward in new deals, my guess is they're going to continue to compress over time, just because the growth rate is there as we look at IRRs for these kinds of investments.

And then, Jack, when you look at your portfolio today, what does the future portfolio have to look like? What are the market conditions you're looking for that would make you effectuate a sale of Macerich?

I didn't want to sell. I'm relatively new here. However, I am open to the possibility of selling Macerich. We, as public executives and the Board, must consider various strategies. One appealing aspect of this opportunity is that our company faces limited competition in the public REIT sector for what we do. Our operations are quite unique; not everyone can effectively lease and manage these types of properties nationally. I am actually quite optimistic about the properties that will return to our lenders. I wonder what will happen to them—will they stay with the servicer for some time? Ultimately, they will likely come back and present interesting opportunities if we can acquire them at a lower cost. I believe that this could be a chance for those who can navigate this business effectively. My plan is to position Macerich to capitalize on this opportunity. So yes, we will continue to refine our portfolio, enhance our balance sheet, and improve our processes. If we are lucky enough to secure a competitive cost of capital, we will utilize it in ways that add value. That is our approach.

Thanks.

The next question comes from Caitlin Burrows with Goldman Sachs. Your line is open.

Hi. Good morning, good afternoon, everyone. I guess maybe the answer might be that you're not too worried about specific quarters right now. But with leasing as strong as it has been for multiple years now, I guess it is somewhat surprising that occupancy hasn't been increasing more. So I was wondering if you could talk through what you think some of the reasons why that upside has been limited? Occupancy was up 30 basis points year-over-year. Do you think that can accelerate, or might there be other headwinds from Forever 21 like you mentioned or others that kind of keep it in that range?

I want to emphasize the importance of focusing on our strategy beyond just quarterly and annual budgets. Our occupancy rate is set to increase as we execute our plans effectively. We have identified the necessary locations, and there is a strong commitment to completing our objectives. As Doug mentioned regarding renewals, we are significantly ahead in that aspect. If we follow through with our plans, our permanent occupancy will rise, and there's a clear understanding within the team about what needs to be done. We are determined to pursue these opportunities every day, and you can expect to see an increase in our permanent occupancy as a result.

Got it. Okay. And then maybe kind of along the lines on what's today like a quarterly focus versus a long-term focus. I realize FFO and AFFO per share are not the near-term focus. But given the direction they've been going and I know the dividend is a Board decision. Wondering if you could talk about the dividend, how your payout ratio today compares to where you want it to be, and if you think the dividend is at a good spot?

I mean, look, I think I've said before, we're not going to put guidance out for next year either. We're going to probably the Board, I think, is comfortable keeping the payout of the dividend at its current level because that's our best source of cash flow as we reinvest back into the portfolio, especially on this leasing initiative I just talked about, and some of the selected elements that we're pursuing. Look, my goal is to get to that $1.80 or higher and start to actually increase our dividend payout ratio, commensurate with an ability to grow the business on a very steady basis, not having an over-levered balance sheet or pressure, and things like that. We will do that in time. But probably for the next period of time, as we go through this execution, my guess is not the Board decision. It will probably stay kind of in its current position.

Thanks.

Our next question comes from Haendel St. Juste with Mizuho. Your line is open.

Hi, there. Good morning. Scott, it's been a pleasure. All the best. And Dan, look forward to working with you again. So Jackson, Jack, you previously outlined a four-year timeline getting to FFO at $1.80 by year four, getting your leverage down, but certainly seems like things are moving at a far quicker pace. As you've indicated several times on this call, you're moving at a breakneck speed. I think we're all curious kind of is this still a four-year process? Can you, in fact, get there sooner as it seems? Is it more of a three-year process? I might have misheard, but it sounds like you don't expect to provide FFO guidance next year. When should we expect that? Is that maybe year after next? Some color and context there. Thanks.

Yes. I'd say probably the year after that would be kind of a reasonable period. I think this NOI Bridge that we provide you all, as I said, is going to be very, very valuable. We have it internally. I think that's going to be very valuable because you can benchmark what we're doing. I would say that as we start to be able to get disclosure like Scott went through, I know it's pretty painful as we went through it, the Washington, the PPRT accretion and dilution because of the mark to market debt. And then we've got this issue of being able to give properties back like Santa Monica. We're still on title. We're still managing the asset. We're still going to be there probably until later next year. So there are some just structural things that will take the next one to two years. We may well be finished with the plan in the following year where you'll see they're finished, based on the NOI bridges that we show you. It just will take those several months for things to kind of clean up your earnings. But my hope is we're able to kind of through select disclosure, provide you the tools to be able to give you confidence that we're contractually there, if that makes sense. Once we start to outline more assets, more Eddie's, which we plan to do, more NOI bridge, more progress on this ABC stuff, you're going to see it and you'll say, okay, absent some major credit loss, these guys are getting there. And just a question of at what period.

That's helpful. And then, within that just thinking about kind of this broader bridge over the next couple of years with FFO. I think a lot of us were through our modeling process assuming that FFO would bottom somewhere, perhaps in the $1.50-ish range, is that next year or the year after, who knows, but curious if that's a reasonable expectation, and then in fact, if that could be something that is perhaps in that year three of this plan as well? Thanks.

Thank you for the discussion. We've intentionally set a four-year vision due to various factors affecting our portfolio. It's difficult to predict when some assets will exit as we return them to lenders and manage interim earnings disruptions from non-cash marks. This uncertainty is why we withdrew specific guidance and instead offered a longer-term perspective. We prefer not to constrain ourselves with interim estimates, as they may not accurately reflect our plans. Currently, we are progressing well with refinancings, giving us flexibility for decision-making within our plan. Our NOI execution is on track, and the details of our disposition strategy are coming together, with pricing estimates aligning with our expectations. Overall, things are moving positively, but it would be challenging to provide interim predictions at this point.

Fair enough. Thank you.

Yes. Thanks, Haendel.

I would now like to turn it back over to Jack Hsieh for closing remarks.

Great. Thank you. Dan will be on at NAREIT, so you all get a chance to visit with him. And I just want to go ahead and once again, thank Scott. He has been an outstanding professional as it relates to dealing with this transition, and we all owe him a debt of gratitude. So thank you very much.

Thank you, Jack. Thanks, everybody.

This concludes today's conference call. Thank you for participating. You may now disconnect.