Ladies and gentlemen, thank you for standing by. Welcome to the Fourth 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 fourth quarter 2024 earnings call. During 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, and 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 is posted on the Investors section of the company's website at macerich.com. Joining us today are Jack Hsieh, President and Chief Executive Officer; Dan Swanstrom, Senior Executive Vice President and Chief Financial Officer; and Doug Healey, Senior Executive Vice President of Leasing. And with us in the room, we have Brad Miller, SVP of Portfolio Management. And with that, I turn the call over to Jack.

Thank you, Samantha, and good afternoon. Over the last year since joining Macerich, I have become increasingly confident in our mission to operate and own thriving retail centers that bring our communities together and create long-term value for our shareholders, partners, and customers. We launched Macerich's Path-Forward early in my tenure, and I'm pleased with our steady progress. This clear, executable plan is designed to accomplish three key objectives over its five-year horizon. One, simplify the business; two, improve operational performance; and three, reduce leverage. During 2024, we were successful in simplifying our business through selectively consolidating joint venture interests at Arrowhead Towne Center, South Plains, Los Cerritos, Washington Square, and Lakewood. Our equity offering in late 2024 de-risked that portion of our plan and the refinancing of Queens Center is well below our target refinancing rate. We're well underway on loan give-backs and mall sales and are now focused on outparcel land and select open-air retail sale opportunities around our shopping centers. A big focus of mine has been to improve internal processes and restructure many aspects of our approach to asset management, leasing, property management, portfolio management, and development, which will best position the company to drive improved operational performance and to deliver long-term value creation. I'm pleased with the progress on several key initiatives to date. Our process improvement committee has been successful in implementing a new leasing dashboard tool whereby leasing, asset management, legal, tenant coordination, construction, and senior leadership all collaborate seamlessly together, which has vastly improved our visibility and efficiency around leasing and tenant coordination. Our asset management and portfolio management teams are now a standalone group whose mission is to be the asset owner at Macerich, responsible for driving cash flow and long-term value through operations, utilizing our leasing, development, and property operations teams. Our asset and portfolio management teams led the effort to create five-year Argus business plans for each asset, which is now a bedrock tool that we use to evaluate leasing capital decisions. The permanent specialty and department store leasing teams are all now under one leadership and reporting structure. Property operations, marketing and development are also under a new leadership structure. Working collectively with our asset management, portfolio management, and leasing teams, we have ranked all tenant spaces throughout our portfolio with an A through F grade and determined market rents for each particular space. An important aspect of our Path-Forward Plan is to take advantage of driving more incremental revenue out of our portfolio through leasing vacant, temporary leased, and under market A, B, and C rated spaces within our portfolio. Each of these organizational process, analytical, and technological enhancements provide our team with the strategic roadmap and tools to drive leasing and NOI over a multi-year horizon. With respect to the NOI component, our leasing team is hyper-focused on what needs to get done in the next two years. To help frame the leasing initiative, in 2023 and 2024, we averaged approximately 3.75 million square feet of annual lease volume. We are targeting an average of 4 million square feet of leasing in 2025 and 2026 and focusing on creating a higher percentage of new lease deals versus renewals in our annual mix of business. New deals contribute vastly to our releasing spreads and incremental rental revenue. The effect of this shift in mix is new deals typically involve more rental revenue downtime in the range of 12 months to 18 months. In 2024, we achieved 8.8% base rent releasing spreads for permanent tenants under 10,000 square feet. New leases signed during this period were 17.6% higher base rent versus the prior period permanent rent. Including vacant and temporary lease space to the aforementioned group of spaces, the releasing base rent percentage increase was over 50%. Our current physical permanent occupancy for our go-forward portfolio is 84%. We are targeting an 89% physical permanent occupancy rate by 2028. Approximately 50% of this increase is already accounted for by our current SNO pipeline of $66 million. Having the ability to forecast the longer-term impact of this change in leasing mix, coupled with continued strong leasing demand, is an excellent setup for us to achieve our incremental NOI goals for 2028. We are being very intentional in our decisions to optimize lease outcomes and rental revenue uplift within our portfolio that aligns with our strategic financial objectives for 2028 under the Path-Forward Plan. This is a massive change in mindset and operations for the company, which has historically been more focused on managing the business to annual near-term FFO targets. There is a compelling opportunity to get after under market and vacant A, B, and C rated spaces in our centers. Maximizing each space and their total revenue potential over the long term will result in a higher volume of tenant remerchandising, space movements, and temporary downtime in rental revenue. To recap, I feel very good about how things are progressing on our Path-Forward Plan. We've made substantial progress to date. We have a clear roadmap with tools and new processes for leasing over the next 18 months to 24 months and beyond, which will drive incremental rental revenue and a more improved and resilient permanently occupied portfolio. We are currently 39% complete in our leasing goals towards our plan. Our asset givebacks to lenders will play out over the next two years as loan maturity dates trigger on Eddy properties. We have an identified group of outparcel land and malls that the team is executing sale transactions, which will continue over the next three years, and we are currently funding our development pipeline, which will contribute NOI in 2026 through 2028. With that, I'll turn the call over to Doug.

Thanks, Jack. We had another solid quarter and year for that matter both in terms of leasing volumes and metrics. Sales per square foot at the end of the fourth quarter were $837, and this is up $3 compared to the last quarter. Sales per square foot excluding our Eddy properties were $915. Comparative sales for the fourth quarter and for the year were basically flat when compared to the same period in 2023. As I've stated in the past, we have yet to see a correlation between sales and retailer demand as evidenced by our deal flow both in terms of number of deals and square footage when compared to the same period last year. And I'll get into this more in a moment. Traffic for the year was up almost 2% when compared to 2023. Most importantly, the portfolio traffic is back to our pre-COVID levels. Occupancy in the fourth quarter was 94.1%. This is up 40 basis points from the third quarter and up 60 basis points from a year ago. Portfolio occupancy, excluding our Eddy properties, was 95.8%. In the fourth quarter, we opened 530,000 square feet of new stores. This brings our total for 2024 to 1.5 million square feet of new store openings, which is just about on par with where we ended up in 2023. Now, let's take a look at the new and renewal leases that we signed in the fourth quarter. In the fourth quarter, we signed 223 leases for 1.1 million square feet. For the full year 2024, we signed leases for 3.7 million square feet, which is just about where we ended up in 2023. And let's keep in mind, 2023 was a record leasing year for us dating back 30 years when Macerich first became a public company. 2024 was also another year of newness for us. Once again, bringing new, unique, and emerging brands was a major initiative for our leasing team and a way for us to really re-imagine and differentiate our shopping centers from our competition. To that end, in 2024 we ended up with commitments on nearly 430,000 square feet of new to Macerich brands. Examples include Helly Hansen, Princess Polly, Missouri, Carhartt, Seafood City, Akira, Rivian, Buck Mason, CELINE, POP MART, and Mendocino Farms, just to name a few. So once again, a very solid volume of leases signed in 2024. However, that's what we've done in the past. I like to focus on the future and our current leasing velocity. And as I've said before, at Macerich, we review deals every two weeks. And year-to-date in 2025, we reviewed 55% more deals than we did during the same period last year. But most importantly, we reviewed three times the new deals and over five times the new deal square footage than we did during the same period last year. And once these deals are reviewed and approved, they go to lease, get signed, and eventually become part of our signed not open pipeline. I realize it's early in the year, but these statistics are very encouraging and indicative of the healthy retailer environment that exists today. So far, neither sales nor the macroeconomic environment seem to have had any effect on retailer demand. I also believe this is a testament to Macerich's must-have portfolio. Turning to our lease expirations. To date, we have commitments on 63% of our 2025 expiring square footage that is expected to renew and not close, with another 21% in the letter of intent stage. So between commitments and LOIs, we're just about 84% done with our 2025 lease expirations. In the fourth quarter, we had only four tenants in our portfolio file bankruptcy. In all of 2024, we had just 13 tenants in our portfolio file bankruptcy totaling only 54 stores, 26 of which were the express bankruptcy. And of the 26 express stores that we had in our portfolio, only nine closed. And of that nine, we have commitments or are negotiating LOIs on 75% of that closed square footage. Turning to our signed not open pipeline, at the end of the fourth quarter, we had 104 leases signed for 1.2 million square feet of new stores, which we expect to open between now and into early 2028. In addition to these signed leases, we're currently negotiating leases for stores totaling just under 875,000 square feet, which will also open during the remainder of 2025 and into 2026, 2027, and early 2028. So in total, that's over 2 million square feet of new store openings throughout the remainder of this year and beyond. And this pipeline of new store openings now accounts for $66 million of incremental rent of which $27 million will be realized in 2025, with the remainder being realized between 2026 and into early 2028. And with that, I'll turn the call over to Dan to go through our fourth quarter and year-end financial results.

Thanks, Doug, and good afternoon. I'm pleased to be participating in my first earnings call with the Macerich team. I'll start with a review of fourth quarter financial results. FFO excluding financing expense in connection with Chandler Freehold, gain on extinguishment of debt, accrued default interest expense, and loss on non-real estate investments, was approximately $117 million or $0.47 per share during the fourth quarter of 2024 as compared to approximately $128 million or $0.57 per share for the fourth quarter of 2023. The primary drivers of the $11 million decrease in FFO include higher interest expense and the severance expense incurred in the fourth quarter of 2024. $7 million of the increase in interest expense relates to the amortization of debt mark-to-market resulting from our various JV interest acquisitions. This non-cash expense is included in the interest expense on our P&L; severance expense for the quarter was approximately $5 million and is included in management company's operating expenses on our P&L. I would note that as it relates to the amortization of the debt marks-to-market resulting from the JV buyouts, we expect this to have an incremental $0.09 per share reduction to 2025 FFO adjusted as compared to 2024 all else equal. This reflects a full year impact in 2025 versus the partial year impact in 2024 when we acquired these JV interests. As a reminder, these are non-cash interest expense items, and they roll off the P&L by 2027 as the various loans mature. Same-center NOI excluding lease termination income decreased 0.4% in the fourth quarter of 2024 compared to the fourth quarter of 2023. And for the full year ended 2024, same-center NOI excluding lease termination increased 0.2% compared to 2023. Adjusting for the negative impact of the express bankruptcy, same-center NOI growth would be about 1% year-over-year. Excluding Eddy assets, this adjusted 1% growth would increase to 2.1% for the year. Turning to the balance sheet. We made considerable progress in 2024 managing our debt maturities. We closed on seven transactions for over $1.3 billion of loans or $1.1 billion at our share. During the fourth quarter, we closed on a five-year refinance of Queens Center at an attractive fixed interest rate of 5.4%. We just recently paid down the approximately $15 million mezz loan or about $7.5 million in our share on Flatiron Crossing that carried a high interest rate of SOFR plus 12.25%. For the balance of 2025, we have less than $300 million net share of maturing loans, and we've already started to address our 2026 debt maturities with the repayment of two loans, Washington Square and The Oaks. We'll provide further updates on our debt maturities as we move through 2025. We currently have approximately $683 million of liquidity, including $540 million of capacity on our line of credit. From a leverage perspective, I'm pleased to report that debt to EBITDA at year-end 2024 was slightly below 8x, which is almost a full turn lower than one year ago, and we've outlined our strategy to further reduce leverage to the low to mid 6x range over the next several years. We continue to make significant progress in executing the Path-Forward Plan. In October, as previously announced, we closed on the acquisition of our partner's 40% interest in the PPRT portfolio. The net acquisition price was $122 million, and we assumed our partner share of debt outstanding. We now own 100% of Los Cerritos, Washington Square, and Lakewood. This transaction is consistent with our stated objective to proactively consolidate select joint ventures and to simplify the business. In November, the company priced an underwritten public offering of 23 million shares of common stock at a price to the public of $19.75 per share, for gross proceeds of approximately $454 million. We used the net proceeds from this upsized offering together with cash on hand to repay the $478 million Washington Square mortgage loan that had an interest rate of SOFR plus 400 bps and that had a 2026 maturity. This transaction is consistent with our stated multi-pronged strategy to reduce leverage and improve the balance sheet. In December, we closed on the sale of The Oaks for $157 million. We used the net proceeds from this sale to repay the $148 million loan on this property that had an effective interest rate of approximately 7.75% and that had a 2026 maturity. We also closed on the sale of Southridge for net proceeds of $4 million, and we are currently under contract to sell Wilton Mall for $25 million, which is expected to close in the first half of 2025 subject to customary closing conditions. This asset is unencumbered. These sales transactions are consistent with our stated disposition plan to improve the balance sheet and refine our portfolio. To recap on the Path-Forward Plan, significant progress to date on our three key pillars to reduce leverage: one, Jack provided commentary on the NOI growth component and the roadmap for the team over the next two years to execute on this prong of the leverage reduction plan; two, we have achieved the equity issuance component of the plan; and three, we have made substantial progress on the sales and give-backs component of the plan and have identified a clear path to achieving our $2 billion disposition target. To date, we have completed almost $800 million. This includes Country Club Plaza, Biltmore, The Oaks, and Southridge, which are closed; Santa Monica Place in which the loan encumbering this property is in default; Wilton which is under contract; and Atlas Park, which is currently being marketed for sale. And then we have identified internally four assets totaling about $350 million to $400 million for sale or give-back over the next one to two years. That brings us to almost 60% of our $2 billion target. The remaining 40% of the plan includes the planned sale of one enclosed mall over the next year and the sale of $500 million of outparcels freestanding retail, non-enclosed mall assets and land. On the $500 million, we expect to close $100 million to $150 million of sales in 2025, which we anticipate will be more weighted towards the second half of the year. And then we expect the balance of the $500 million in sales to close in 2026, into the first half of 2027. We'll provide further updates on these sales as we progress through the year.

Thank you. And the first question will come from Floris Van Dijkum with Compass Point. Your line is open.

Hey, thanks, guys. So a couple of questions. Let me start with same-store NOI. I know you haven't given any guidance, but if I look at the SNO that's going to hit in 2025, Dan, I think it's around $27 million of the $66 million existing pipeline that you've outlined. That would appear to be 3% growth. I guess, it depends a little bit on the timing of that. But again, with the fixed rent bumps etc. It seems like your same-store NOI growth in 2025 is going to be significantly improved over 2024. Am I missing something?

Hey Floris, this is Jack and I'll take this first. So I tried to give reference around the totality of new leasing that's happening and the frictional downtime when we either take out a temporary tenant or a lease permanent, and revise upwards for a better tenant that's going to pay more rent. That's basically a loss of rental revenue. Now that's offset by renewals and the timing of the SNO pipeline coming through. The way we've modeled this, it's going to be candidly more flat for the next couple of years and then stair-step up in 2027 and 2028 given the profile of how this is all going to model out. So when I look at same-store NOI and candidly FFO over the next couple of years, that's not going to give you the real answer on our progress and what really will start to show progress is, I mentioned 39% of our goals that relate to cost of occupancy or rent are achieved. And so we'll give updates as we move along. But as that percentage goes up, you should have confidence that all that rent will start to come online as it churns through vacant, temporary leased and what I call low performing permanent tenants that we have targeted to take out of the portfolio.

So Jack, just clarify, I think you've indicated that you've got about 17% or 18% spreads on your new leases and you're presumably, does that also mean that if you're assigning those new leases at similar occupancy cost ratios as your existing rents that sales on those new leases are going to be call it 18% to 20% higher than your existing portfolio? Should we start to see some of that filter through in your…

I think you'll start…

Group sales numbers in the portfolio.

I think you'll see it. Well, first of all too, I referenced that 50% number. So that includes for tenants under 10,000 square feet where there's obviously a big opportunity for leasing. If you include vacant, temp tenants and perm through 2024, that releasing spread was over 50%. We have a meaningful amount of vacant and temp A, B, and C class rated space in our portfolio. You're probably asking like how did we get that? Well, if you're running a company based on annual budgeting targets and not looking out on how leasing impacts forward future performance, that's how you get there. You'll get you bump along at 3% to 4%. You're going to keep your temporary tenant percentage will not go down because you want to keep that rent in place. You'll probably keep tenants that are less desirable permanent tenants in place. And we've got opportunity in our better centers just to kind of redo that and that's where I talk about this higher percentage of mix. Now the net result of that, you may see some quarters where it goes up, but it also may go down. And for this portion of the plan, it's almost like I'm treating it like we're a private company because there's a big opportunity to capture a meaningful spread of rental revenue if we do this. We haven't provided the details of it, which we plan to lay out later this year in this NOI bridge, but it's a pretty compelling opportunity and that's the result of it is going to be more noisy same-store NOI and probably FFO from period to period.

Let me ask my second question, if you don't mind. As I'm looking at, obviously, you still have some expensive debt in particular South Plains at almost 8%. I don't know whether you're going to keep that one or not, but you've got a really attractive development pipeline, Green Acres with I think 13% returns that's $130 million if I'm not mistaken. And then Scottsdale 17% returns on that. Wouldn't it make sense to fund all of that with equity, including the debt pay down simply because it's accretive relative to the 7.1% implied cap rate you're trading on? Or how do you think about that? Or are there other opportunities that you see where that might make sense?

You have the option to do that. It is clearly beneficial from a mathematical standpoint to use equity for funding. However, our current strategy on issuing equity is focused on specific opportunities, such as consolidating a joint venture or utilizing funds in a way that is advantageous, like reducing our development pipeline through equity or acquiring a property. Outside of situations like these, we believe our equity requirements are already met, and we have sufficient free cash flow to implement our plan after accounting for dividends and interest. While it would be mathematically advantageous to finance the development pipeline with equity in the long term, we feel confident in our current position.

Thanks, Jack. Thank you.

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

Hey, good afternoon. Jack, you mentioned the new dashboard and the five-year ARGUS runs that have improved the process. Is there any early indication of how this is impacting efficiency, such as reduced legal costs or faster project timelines? Any insights that could provide some tangible estimates would be helpful.

Okay. Hey, thanks, Craig. Well, some of the comments that Doug talked about what we've seen year-to-date, I think that's partially the environment, but it's partially us having the tools to know what space to go after and how to do it. When I first got here a year ago, when I went to review a lot of properties did on-site visits. One of the consistent themes that I had heard from our leasing team every time I went to a new property, met with the leasing team, asset management, development, on-site manager, kept hearing it time and time again. The leasing team spent so much time in the re-budgeting process that this company did, which was typically three times a year. There were three re-budgeting forecasts throughout the year. And the amount of time that it took for them to stop what they were doing, reforecast their pipeline, apply new market rents to different space that they were focused on took up a lot of time. The second thing that took up a lot of time was there was no system at the company to communicate the current status of discussions with tenants, which kind of shocked me. So everyone had their own spreadsheet, their own list, and there were hours and hours spent by people on conference calls trying to update national tenants across our regions where people are located in terms of leasing team. And so when you couple like the reforecasting coupled with the lack of visibility, there were thousands of man hours at Macerich were spent on things that were not driving future revenue opportunity. If you fast forward today, this leasing dashboard is effectively a CRM for us. And so at any given time, Doug, myself, Brad, can pull up or an asset manager can find out a space that's designated to a leasing rep, where that last conversation was, what the target rent was. And that tenant can be seen by everyone in that conversation, everyone in the company, whether it's tenant coordination, asset management, legal. And we've got a quarterly review process now where it's really driven by asset management, where they can basically go through a leasing plan and look at space C10. The last comment on that was like three months ago. Well, that's really not going to be very effective if we're targeting C10 to be leased on time over the next two years. So the result of all this is I think there's tremendous efficiency. It's creating more opportunity for boots on the ground to achieve these targets that we're looking for. And I mean, Brad, you've been here for a long time, but he's in portfolio. You're the architect of a lot of the old process. Tell me what you think efficiency-wise.

So right, going from an annual budget process of having annual lease goals and revisiting those annual goals three times a year to now having a five-year plan where we get visibility into the leasing progress really on a daily basis and the shifting of resources is producing results. I mean, as Doug mentioned, it's early innings this year, but we're seeing good progress and we know exactly where we need to be. And the 39% complete is to us on track to hit our goals.

That's helpful. Then maybe the follow-up, you guys are effectively raising your annual leasing goal by about 250,000 square feet. How much of that is your capacity kind of improvement now that you have some of these processes in place versus just the amount of demand that you're seeing and the ability to get some of that through the door?

Hey Craig, it's Doug. I'll take that one. Yes, we are clearly benefiting from a strong retail environment that has lasted over the past couple of years, and we don't anticipate any changes in the near future. This provides us with significant support. Regarding the processes that Jack and Brad mentioned, we have a clear trajectory for where we need to be by the end of 2028. In my view, we need to reach certain milestones by the end of 2027 or possibly 2026 to achieve our revenue targets by 2028. We've made several internal adjustments, and while I won’t delve into the specifics, Jack touched on it. We have consolidated all anchor store leasing and specialty leasing under one management structure. Previously, these were handled in separate silos, but now all revenue operations fall under my supervision, and my teams are collaborating effectively to meet our 2028 objectives. One of the crucial steps we've taken, which Jack briefly mentioned, is our intense focus on permanent leasing. While we continue to prioritize specialty leasing, we have a dedicated team on-site solely focused on temporary leasing. The advantage is that they now operate within our permanent leasing framework. Although their primary focus remains on specialty leasing, they are aligned with our permanent leasing objectives for 2028. These internal changes are contributing significantly to the momentum I referenced earlier in my opening remarks.

Great, thank you.

Thanks, Craig.

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

Hi, thanks for taking my question. Jack, appreciate the systematic rigor you're proliferating at Macerich. I know you introduced the same types of processes at Spirit too. My question is SNO as a percentage of NOI. How should we think about the growth rate in 2025 versus 2024 and 2026 versus 2025?

Hey Linda, it's Dan. We had outlined that the total SNO for 2025 is $66 million, which would comprise $27 million of that $66 million. Can you remind me what the second part of your question was in comparison to what?

Oh, I was just trying to think about it like SNO as a percentage of NOI and what those growth rates could look like how much that grew in 2024 versus 2023, 2025 versus 2024, 2026 versus 2025.

I mean, I would say, Linda, here's the way I think about it. Rather than give you a percentage, an important part, I've mentioned to you like this mix of more new versus renewal. If you looked at our historical five-year average of tenants under 10,000 square feet, typically that ratio is about 34% new leases versus renewals over that five-year period. In 2025 and 2026, we're targeting 45% new tenants in our game plan. So that's going to automatically, obviously increase the SNO pipeline substantially if we're able to accomplish this, which we believe we are. So I don't think it's going to be, it's going to be quite different than historical because it's very intentional about attacking vacant, I'll call it non-productive A tenants that can be upgraded, some under market, some temp. There was a surprising amount of opportunity within our 20 yard lines of the main mall where it's just like why do we keep these tenants here? Why are they here? Well, we're focused on annual FFO targets and budgets and reforecasting. We can't kick them out. It's the wrong thing to do for the center and we can get and make more money. So if you think about what we're trying to solve for in 2028, if we do what we say, we're going to end up with a much more resilient, permanently occupied portfolio with strong vibrant tenants. That's the result of this. And we can have a better merchandising mix, which will drive traffic. We can get rid of some of the legacy tenants that are candidly not performing well or at risk, which is something that was harder to do under the way we used to do things, which were kind of within the annual period. So to answer your question that the SNO is going to go up, it's just going to as we kind of crank through this, we can already see it.

Thanks. And then what's the spread difference between the new rents and the renewals?

For properties under 10,000 square feet, the difference is 8.8% compared to 17%. So, what would be the renewals? Is it 8%?

5.8%.

5.8%. Sorry. But once again, mix has a huge variance of these numbers the mix. And we'll start to disclose going forward much more detail about leasing mix because you obviously need it. If I just give you 8.8%, that doesn't really tell you too much. So we'll start to give you more details when we move forward at the end of the first quarter on the mix that we're talking about. I think it'll be helpful for you.

Thanks. Just one last follow-up related to that. In leasing up the A, B, and C space that you didn't focus on previously, what's the weighting of those spaces like percentage of A versus B and C? And then are you able to turn C spaces into Bs and B spaces into As?

It's less about. I'll let you go, Brad on that.

Sure. In our plans moving forward, 90% of our leasing activity is focused on A, B, and C spaces. There is still strong demand from tenants to lease these spaces according to our plan.

And the next question will come from Jeffrey Spector with Bank of America Securities. Your line is open.

Hi, this is Andrew Reale on for Jeff. Thanks for taking our questions. Just on the consumer, last quarter you pointed to this shift in discretionary spend away from goods and more into services. Just wondering if you've seen any capitulation back towards goods-oriented spend and what your overall thoughts are on the outlook for discretionary retail in 2025.

Yes. Hey Andrew, it's Doug. It's a great question and I did talk about that. Coming out of COVID, everybody was buying things. I mean, they were remodeling their homes, they were buying shoes, they were buying apparel, all stuff that they couldn't do for 18 months. And that's why we saw huge comp sales across our portfolio over the last 2.5 years. But you're right, I did talk about the fact that consumer behavior was changing. And it was people for the first time felt more comfortable to socialize. They felt more comfortable to go on vacation, to go on cruises, to go to concerts. And we're still seeing that. But now you think about it, this has probably been going on for the last 18 months say, now it's time for replacement. So I think the key word on a go-forward basis is replacement and replacing those products that were bought coming out of COVID and that's what we saw in the fourth quarter for sure, in November and December, that's what we started comping up. But I think that's sort of the buzzword around the industry right now is replacement. I think you're going to see that all cycle back to a little bit more normality.

Okay, thanks. And then just a quick follow-up of the 2025 expirations, I think you said in your remarks 84% of those spaces are now committed or under LOI. Just curious, how does that compare to this time last year? Thanks.

Just a little bit ahead of where we were last year.

And the next question comes from Steve Sakwa with Evercore. Your line is open.

Thanks. This is Manus on for Steve. It looks like you're making some really good progress on all fronts for the Path-Forward. Are there any areas, Jack, that you feel like are slower than what you would have expected now that we sit here from the point of being in February of 2025. And maybe if you could touch on what you believe maybe is the biggest risk going into 2025 that could impact the execution of the Path-Forward. Like my first question.

Yes, I would say we're quite comfortable with the debt to EBITDA range and the earnings projections we shared last year for our plans after reviewing the detailed business plans. One insight from the ARGUS exercise indicated that the expected costs for landlord work and tenant allowances were higher due to the focus on new tenants, which was somewhat disappointing. However, we've also experienced many positive surprises, including equity, refinancing, and some sales. Another potential challenge we face could come from any delays in our development pipeline. At Green Acres and Nordstrom's, we are on track, but there is a delay at Flatiron, and we are working diligently to advance that project. Overall, we have a clear vision of our objectives, and the recent management restructuring and staff realignment have significantly improved our operational effectiveness compared to the past. I am confident in our capabilities, and we are determined to achieve our goals.

That's perfect. I appreciate that. It's actually perfectly translating into my second question, which was going to be on CapEx. You just mentioned that based out of these ARGUS run exercises, it looks like that is maybe trending higher. So I just wanted to clarify is that maybe now essentially translating in CapEx for 2025 as a percentage of NOI or however you want to base it off, potentially trending higher than previously anticipated or higher compared to 2024. Any color there would be super helpful.

I mean hopefully, we can beat those assumptions because they're just assumptions right now. But if we're able to achieve the level of velocity that we talked about, 4 million square feet, 45% new, under 10,000 square foot tenants, that's going to incur theoretically more capital costs in 2025 and 2026 versus historical because we're running at higher volumes and new percentage of new tenants versus renewals.

Yes, I would just add relative to the initial plan to Jack's point, it's a little bit more near-term 2025 and 2026 spend but then it levels off in 2027 and 2028 versus more of a smooth spend over the four years.

Perfect. That's it for me. Thank you.

The next question comes from Vince Tibone with Green Street. Your line is open.

Hi, thanks for taking my question. For the $400 million of planned lender malls that Dan mentioned earlier, what is the current weighted average debt yield on those assets? Just to help from an FFO perspective and then also on the $500 million of potential dispositions, how should we think about the quality potentially cap rates on those more selective dispositions? Is it fair to assume it's going to be more Eddy properties in addition to some freestanding as you mentioned, but any color there to help FFO modeling would be helpful.

And Vince, on the second part, you're asking specifically about the $500 million of sales.

Yes, that's what I was referencing. Yes.

Yes, so those are more outparcels freestanding retail, land parcels, and non-enclosed malls. So as we looked at the plan at the beginning we had said we thought we could accomplish the dispositions about a weighted average 8% cap rate. If you look at the profile of these types of assets, we think those are sub 8% cap rate transactions. But again that piece of it is sort of sub 8% and then it counters off the rest of the sales to kind of get to a weighted average of around 8% as it relates to kind of the overall assumptions on the dispositions. On the first part of your question, on debt yields, those are typically what we're looking at, sort of like high-single-digit debt yields for the three or four assets that we've identified.

No, that's really helpful, and I appreciate the clarification on the $500 million. When you said non-enclosed malls, I thought open air centers potentially. So I'm glad I clarified that. And then maybe just changing gears a little bit. Could you give an update on the potential densification at Los Cerritos now that it is wholly-owned, like is that something you could potentially break ground on in the next year or two? Just curious how you're thinking about the structure of that project, whether you do it on balance sheet, use a joint venture partner. Just love to get your latest thoughts there.

Los Cerritos presents an exceptional opportunity under our control. The center continues to perform very well, and we have interest from a strong anchor tenant looking to take over the Sears location. However, that move could limit our ability to develop residential space in that area. Right now, our focus is on maximizing the entitlement potential for residential density. We are likely to sell the land with full entitlements; while we could sell it currently with partial entitlements, we believe we can achieve greater value by obtaining complete entitlements. Considering the construction ourselves would depend on the returns compared to other investment opportunities in our portfolio. This is a prime site that is only improving, and we see significant demand for that area. Our goal is to secure maximum entitlements before deciding on the next steps.

Great. Thank you.

Thank you.

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

Hey, good morning out there. And yes, I mean, you guys have certainly achieved a lot in a short period of time. So two questions here, Jack. First is just looking at your cash balance. I think it's about $135 million right now. There's certainly a lot that you're doing, especially around CapEx leasing. So just want to understand is there a minimum cash level that you guys think about as you're executing your plan and then how do you balance having cash on the books versus debt pay down?

I'll let Dan. Dan, go ahead.

Yes, this is Dan. I'll take that. Where we're at now from a cash balance is generally where we would be sort of comfortable operating within that range. I think holistically, as we look at our sort of sources and uses, we have free cash flow from the business about $300 million after funds available for addition, sorry, funds available for distribution after our operating CapEx and TAs, if you look at 2024, most of that will obviously the run rate on the dividend and then what's left funds the development. And to the extent our cash balances dip down a little bit, from a timing perspective, we could use our line of credit to temporarily fund some of that. Or we're also looking at a refinancing right now, which would provide some excess proceeds in the near-term. And then as I mentioned earlier, once we get through 2025 and 2026, then the free cash flow of the business starts to produce more and then we have more optionality at that point in time to pay down debt. So right now, it's kind of funding the TAs for the leasing and the development in the near-term. And then as we build cash balances out in the out years, we have more optionality to pay down debt.

Okay. And then the second question is, there's a lot that's going on as you improve the tenancy. So Jack, you mentioned occupancy probably going to come down as you pull out legacy tenants, replace them with better performers. At the same time, there's some dispositions planned. Is there some sort of framework that you can provide in terms of the FFO or NOI hit that's going to occur say this year, next year, before it obviously rebounds? Just I know you're not giving guidance, but still it sounds like a lot of moving parts and just is there sort of an aggregate number that we can think about impacting this year and next that would help us think about this transition phase that you're going through?

It's hard to give you a precise answer to that because if we dispose of an asset faster, that makes an effect, leasing our current leasing plan impacts this. I mean, the best way I can describe it is I think our same-store NOI is going to be roughly flat, slightly up, maybe slightly down, but generally in this flat area for the next couple of years. And then it's going to start to dramatically start to increase. And as we're increasing, we'll be shedding the residual remaining Eddy assets that are loan give-backs. And we'll be monetizing a lot of that $500 million outparcel of land that would be used to pay down debt. And then you sort of square up on getting into that zone we talked about mid-6s, low-6s, $80 plus or minus.

And then, Jack, is there like percent of same-store NOI as we think about it, what percent is that of the total NOI right now? Is that like 80% of total NOI? Like because obviously you got some assets that are going to be moving on.

I'm not sure that's the best way to approach this, to be honest. There are too many variables at play if you're trying to model it precisely. That's why we're not really focused on that. I can tell you I'm not focused on it. We're looking at same-store NOI over the next 12 to 24 months because if we achieve our goals, the increase will be more significant. This is something we will try to present when we share the materials we discussed regarding this transition. I think that will be more useful in illustrating what we are aiming for.

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

Hey there. So I wanted to follow-up on some earlier comments. Talking a lot about the strong leasing demand. I guess I'm curious how that's showing up in your leasing negotiations. Are you getting more term, better bumps? And I'm also curious what you might be hearing from your tenants in regards to the potential impact of tariffs as you're having these leasing conversations. Thanks.

So I'll take the first question first leasing demand and I talked about this a little bit earlier. I mean, we've got a great tailwind right now; we've got a very healthy retailer environment and we have a must-have portfolio. Even with everything that's going on in the world, if you think about it, the majority of tenants that we're leasing to are very sophisticated national retailers that can see past six months or see past 12 months, they're signing leases for 7 to 10 years. I would say as our occupancy continues to increase, that will naturally by definition help our revenue structure. So I would say the lease terms are similar to the way they've always been, but I think cost of occupancy potential will certainly increase as occupancy increases.

Yes, I was going to say…

Yes, go ahead.

Yes, I also want to mention that regarding renewals, in the past, they were typically shorter, lasting one to two years, because there was no clear plan for the malls, and they wanted to avoid downtime. As a result, they put off making decisions. Now, however, for renewals with tenants we want in our centers, we are pursuing longer terms, which marks a shift in strategy. Additionally, when we look at some of the retailers releasing their earnings and guidance for 2025, while the guidance isn’t overly ambitious, it also isn’t heavily influenced by tariffs. People are certainly contemplating this issue, but so far, it doesn't seem to be reflected in the earnings and guidance estimates from retailers for 2025. Many of our retailers have already implemented strategies to navigate the challenges with China and other affected regions. Retailers that depend on lumber from Canada or produce from Mexico will be particularly sensitive to any direct tariff impacts.

That's helpful. I appreciate that. And maybe some commentary, some color, some insight into the tenant watch list here and maybe what level of bad debt reserves you might be using in your budgeting. Thanks.

So Haendel, our watch list right now, and I'll let Dan comment after I do, but our watch list is significantly lower than it's ever been. I mean if you compare our watch list to 2019, we have about 60% fewer tenants on it and 45% less square footage, which makes a lot of sense. One, we have a very healthy retailer environment right now. But two, we've talked a ton about this, all the failing retailers, the struggling retailers pre-COVID; they didn't make it out of COVID. So that diminished our watch list exponentially. And Dan, do you want to take the financial end of it?

Yes. Haendel it's about 75 bps to 100 bps.

Okay.

That is all the time that we have for questions. I would now like to turn the call back over to Jack Hsieh for closing remarks.

Thank you. We're pleased to report our progress on the many strategic initiatives within our Path-Forward Plan. And we look forward to seeing many of you at the upcoming Citi Conference in Florida. So thank you very much for your time this afternoon.

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