Macerich Co Q4 FY2025 Earnings Call

Thank you all for joining us. Welcome to the Fourth Quarter 2025 Macerich Earnings Conference Call. This conference is being recorded. I will now hand it over to Alexandra Johnstone, Vice President of Finance and Investor Relations. Please proceed.

Thank you for joining us on our fourth quarter 2025 earnings call. During this call, we will make 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 earnings results, supplemental and our SEC filings. Reconciliations of non-GAAP measures to the most directly comparable GAAP measures are included in the supplemental filed on Form 8-K with the SEC, which is posted in 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 is Brad Miller, Senior Vice President of Portfolio Management. With that, I would like to turn the call over to Jack.

Thank you, Alexandra, and good afternoon, and thank you for joining us. Before I begin, I want to thank the entire MAC team for their outstanding contributions throughout 2025. This was a year of significant execution and progress made possible by the dedication and hard work of our people across the organization. 2025 was a pivotal year for the company. We entered the year with clear objectives under our Path-Forward plan, simplifying the business, driving operational performance improvement and reducing leverage. I'm pleased to report that we've delivered against each of these pillars. Today, I'll spend time on our operational performance and leasing achievements and then turn it over to Doug and Dan to discuss the portfolio and balance sheet in more detail. Let me start with leasing, which continues to be the engine driving our Path-Forward plan. For the full year, we signed 7.1 million square feet of new and renewal leases on a comparable center basis, an 85% increase over full year 2024, setting a new company record. Turning to our leasing speedometer, which tracks revenue completion percentage for all new leasing activity required to achieve our 5-year plan, we are at 76% today, exceeding our 2025 year-end target of 70%. This puts us well on track for our mid-2026 target of 85% and positions us to substantially complete our new leasing objectives by year-end 2026. Importantly, we are achieving our target market rent assumptions in the plan. Another way to look at how far along we are with leasing is in terms of the new deals left to sign in our 5-year plan. We are tracking a total of approximately 1,000 new deals in this plan. We now have 650 new deals open, executed or in lease documentation. All that remains is 350 uncommitted new deals totaling 1.6 million square feet, of which 150 are in the letter of intent stage. Our signed not open pipeline has grown to approximately $107 million, exceeding our 2025 year-end target of $100 million. This is relative to our total cumulative SNO opportunity of approximately $140 million in excess of the revenue generated in 2024. We have high confidence in achieving the full opportunity. Of the $140 million of total SNO, the estimated incremental annual contribution is $30 million in 2026, $40 million to $45 million in 2027 and $45 million to $50 million in 2028. I'm excited about the progress we've made on our anchor initiatives. We targeted 30 anchor and big box replacements in our Path-Forward plan, and I'm pleased to report that all 30 are now committed. We have 5 anchors open, 5 under construction, 11 executed and 9 with leases out. Consistent with the update we provided with our NAREIT presentation in December, these 30 anchors total 2.9 million square feet and are expected to generate approximately $750 million in annual tenant sales. More importantly, they're expected to drive traffic, extend dwell time and catalyze in-line leasing throughout our centers. On the disposition front, we've made substantial progress toward our $2 billion goal. We've completed $1.3 billion of total mall and outparcel sales transactions to date. The team is very focused on getting the remaining mall and outparcels sold. I want to spend a moment on Crabtree, which we acquired in June. We are on track with our renovation plans and the new DICK'S House of Sport store will open later this year. We were also pleased to see last month's announcement by Belk that they are consolidating their 2 locations at Crabtree into a full store remodel and long-term lease extension of their flagship location at the east end of the property. Belk is a leading brand in the Carolinas and their new store with a wine and coffee bar, personal shopper studio and other amenities will complement the remerchandising and leasing initiatives we have underway. We have already secured a commitment for backfilling the second Belk's anchor store with an entertainment-oriented retailer. Along with a very productive Macy's store, this solidifies the asset. Additionally, with the in-line space, we have commitments on 18 new and 31 renewal leases. While we've only owned the mall since June, I believe we've already demonstrated that the platform we've built can create value. We'll continue to look forward for additional opportunities to put our platform to work. The milestones we delivered in 2025, leasing volume well ahead of plan, all 30 anchors committed, $1.3 billion in dispositions completed, demonstrate that the Path-Forward plan is no longer just a plan. It's well along the way to completion across every pillar. As we enter 2026, I have tremendous confidence in our trajectory. The heavy lifting of derisking the Path-Forward plan is substantially complete. Our key focus areas for 2026 are: one, completing the leasing pipeline of 350 additional new leases, 150 are in the LOI stage; two, solidifying the remaining 2026 lease expirations and continuing to get ahead of the 2027 expirations; three, getting tenants in the physical spaces built out and paying rent on time; four, completing the remaining dispositions; and five, continuing to evaluate new acquisition opportunities that are accretive to our plan and portfolio. Lastly, I want to note that we expect to provide an updated Path-Forward plan 3.0 at REIT Week in June, and we intend to return to providing earnings guidance beginning in 2027. Doug, why don't you discuss the portfolio and leasing activity in more detail?

Thanks, Jack. Portfolio sales at the end of the fourth quarter were $881 per square foot. That's up $14 when compared to the last quarter, and this now represents a high watermark for the company dating back to when we went public in 1994. When you look at our go-forward portfolio, sales were actually $921 per square foot. Traffic for 2025 was flat when compared with the same period in 2024. Occupancy at the end of the fourth quarter was 94%, up 60 basis points from the last quarter, with the majority of this increase coming from permanent occupancy versus temporary occupancy. The go-forward portfolio occupancy at the end of the fourth quarter was 94.9%, also up 60 basis points from the last quarter. Trailing 12-month leasing spreads as of December 31, 2025, were 6.7%, up 80 basis points from the last quarter, and this now represents 17 consecutive quarters of positive leasing spreads. In the fourth quarter, we opened 416,000 square feet of new stores for a total of 1.3 million square feet for all of 2025. Most notably, we opened our first DICK'S House of Sports store at Freehold Raceway Mall in the former Lord & Taylor Box. Grand opening was one of the best in their 35-store chain, and the store continues to outperform all expectations. As a result, we've seen an increase in traffic, not only in their wing, but also in the mall overall. And this has already had a positive effect on leasing space outside the DICK'S location on both levels of the mall. We remain very bullish about this concept. Of the 9 commitments we have with DICK's House of Sport, as mentioned, Freehold is now opened, and we currently have 4 additional stores under planning and/or under construction at Crabtree Valley Mall, Tysons Corner Center, Washington Square and Valley River. Crabtree will open in the fall of this year. Tysons Corner and Washington Square will open in the fall of 2027 and Valley River will open in the spring of 2028. And we're working on adding to this list. So stay tuned for more announcements in the very near future. As Jack mentioned, leasing was very strong in 2025. For the year, we signed 7.1 million square feet of new and renewal leases. This is 85% more square footage than we leased in 2024, and 2024 was a record year for us. And it's important to note that of the 7.1 million square feet, 30% were new lease signings. Turning to our lease expirations. 2025 is behind us, and we're now focused on 2026. To date, we have commitments on 80% of our 2026 expiring square footage that is expected to renew and not close with another 16% in the letter of intent stage. This is unprecedented for us this early in the year. To put it in perspective, at this time last year, we were only 63% committed for our 2025 renewals. So we can now focus on our 2027 and in some instances, our 2028 lease expirations. Being able to work this far into the future significantly derisks the renewal portion of our 5-year plan. The retailer environment and tenant demand remains strong. In 2025, we reviewed and approved 40% more deals and 30% more square footage than we did in 2024. It's early days, but thus far, we're on par with where we were last year at this time. Further to this point, in December, we attended the annual ICSC Leasing Conference in New York City. Approximately 10,000 landlords and retailers attended to talk about current and future business. In just 2 days, we had almost 300 meetings with over 200 different retailers looking to do business in our portfolio. All categories remain active, including traditional retailers, international retailers, entertainment, experiential, food and beverage, wellness, and emerging brands. And we continue to sign leases with some of the best brands in our industry, such as Apple, Zara, Aritzia, Lululemon, Alo Yoga, American Eagle, Abercrombie & Fitch, Gorjana, Addicted, and Warby Parker, just to name a few. As I've said in the past, never has the depth and breadth of retailer demand been what it is today. And again, I think this speaks to not only the health of our industry, but also to our portfolio of pure-play Class A retail centers. And with that, I'll turn the call over to Dan to go through our fourth quarter financial results.

Thanks, Doug, and good afternoon. I'll start with a review of fourth quarter financial results. FFO, excluding financing expense in connection with Chandler Freehold, accrued default interest expense and gain on non-real estate investments was approximately $129 million or $0.48 per share during the fourth quarter of 2025. I would like to highlight the following item included in our FFO adjusted for the quarter. Legal claims settlement income of $16.1 million, partially offset by corporate expenses related to annual incentive bonus payouts above target levels, which resulted in an $8.4 million net impact or $0.03 per share. Go-Forward portfolio centers NOI, excluding lease termination income, increased 1.7% in the fourth quarter of 2025 compared to the fourth quarter of 2024. For 2025 full year, the Go-Forward portfolio centers NOI increased 1.8% compared to 2024. Turning to the balance sheet. We continue to make strong progress on the balance sheet initiatives contained in our Path-Forward plan. 2025 was an incredibly productive year by the team with transaction and financing activities. We have now closed on approximately $1.3 billion in dispositions, reduced leverage by a full turn lower and addressed each of our 2025 debt maturities as well as a substantial portion of our 2026 debt maturities. Earlier this month, we closed on a 4-year loan extension through November 2029 on our South Plains property. This $200 million loan extension was completed at the existing interest rate of approximately 4.2%. We're continuing to proactively address our remaining 2026 debt maturities through a combination of potential asset sales, refinancings, loan modifications or, if necessary, property givebacks. With respect to our 29th Street property, this $76 million loan at the company's pro rata share is now in default after its recent maturity date. As we are currently in discussions with the lender on the terms of this loan, we do not have any additional commentary at this time. We currently have approximately $990 million in liquidity, including $650 million of capacity on our revolving line of credit. From a leverage perspective, net debt to EBITDA at the end of the fourth quarter was 7.78x, which is a full turn lower than at the outset of the Path-Forward plan. And importantly, we've outlined our strategy to further reduce leverage to the low to mid-6x range over the next couple of years. We are making substantial progress in executing on dispositions as part of the Path-Forward plan. As previously announced, during the third quarter, we closed on the sale of 3 retail centers for approximately $425 million. During the fourth quarter, we closed on the sale of various outparcels and land for $42 million, which included the sale of the retail strip center at Washington Square for $26 million. Year-to-date, we have closed on the sale of an additional outparcels and land for $15 million. These sales transactions are consistent with our stated disposition plan to improve the balance sheet and refine the portfolio. We have identified a clear path to achieving our $2 billion disposition target. To date, we have again completed approximately $1.3 billion in total dispositions and the disclosure we've provided in our supplement includes a summary of these asset dispositions. We have also identified several additional Eddy assets totaling $200 million to $300 million for sale or give back over the next year or so, which would increase total dispositions to the $1.5 billion to $1.6 billion range. One of these assets is La Cumbre Plaza, which is now under contract for approximately $11 million. This asset is unencumbered. The ongoing sales of certain outparcels and land represent the remaining $400 million to $450 million of dispositions to achieve our total $2 billion disposition target. We currently have approximately $15 million in additional outparcel and land sales under contract for sale and over $50 million in various stages of negotiation. We'll provide further updates on our disposition activities as we progress through the year. In conclusion, we are making great progress on our Path-Forward plan objectives to reduce leverage, refine the portfolio and strengthen the balance sheet. With that, we'll turn the call over to the operator.

The first question comes from Vince Tibone with Green Street.

You mentioned that you continue to evaluate acquisition opportunities. Could you just discuss kind of what types of properties would be most likely acquisition candidates for Macerich over the near term? Like are you looking for more value-add deals like Crabtree, where it can be immediately earnings accretive as well? Or would you consider stabilized, higher-quality centers that would have lower cap rates, probably 7 or lower just to add to the value of the portfolio? Curious how you're thinking about, just the acquisition landscape and most likely acquisition opportunities near term?

Our main priority is to ensure that any acquisition we pursue enhances our FFO plans and targets for 2028. It's also essential that it aligns well with the metrics of our current portfolio. In the short to medium term, we are focusing on value-add opportunities, such as Crabtree, which involves re-leasing or lease-up initiatives rather than redevelopment projects. Given our current cost of capital, we are unlikely to pursue stabilized assets yielding around 7% or less on our own, although we might consider it with a capital partner. For now, our emphasis will remain on those value-add lease-up opportunities. Additionally, we recently welcomed David Keane, who has experience in acquisitions and has already engaged in our property review process and Board meetings while touring assets.

No, that's all helpful information regarding the acquisition side. If you were to find a deal similar in size to Crabtree, can we assume you would issue equity? Or might you increase asset sales beyond $2 billion to maintain leverage neutrality? What would be your most likely funding source for a sizable deal you wanted to pursue?

I believe that when it comes to selling properties to acquire others, we've seen significantly more interest from capital partners regarding acquisition transactions. Our goal is to simplify the business, so ideally we would prefer to issue equity if it aligns well with our cost of capital. While we can't predict our stock price, that would be our first choice. Our second option would involve partnering with a capital partner who shares our vision for the asset and the strategy. Recycling a property for this purpose would be a distant third option.

And our next question will come from Samir Khanal with Bank of America Securities.

This is Andrew Reale on for Samir. It seems like there's a lot of tailwind from this leasing momentum. So just given the strength of your leasing pipeline now, how should we start to think about the magnitude and timing of the growth inflection in the second half and even into 2027 at this point?

Yes. Andrew, as we've talked about and Jack kind of outlined our SNO pipeline, which has $30 million of estimated contribution in '26. I would note that is back-end weighted in '26, consistent with how we've talked about the second half inflection point. But I think the real power of the SNO pipeline, you can see in '27 and '28 in terms of the dollar numbers that are coming through in those years, $40 million to $45 million in '27, $45 million to $50 million in '28. So that kind of lines up with the inflection point from a growth perspective.

Okay. And then just as a follow-up, it seems like holiday season was pretty strong. Could you just speak to the overall health of the consumer, if performance has been consistent across the portfolio, if there's some bifurcation between the top and bottom of the quality spectrum?

Yes, I would say that we are definitely seeing the emergence of a Pay-Shapes consumer. If we consider some positive indicators from our tenants, this year we expect a higher tax refund for people in the country. We have the World Cup coming, which will likely increase customer traffic in the U.S., along with the Olympics in 2028. The challenges that Saks is facing can present interesting opportunities for Macy’s and Nordstrom to rethink their strategies regarding luxury items and overall luxury demand. Focusing on the upper tier of the market that we are primarily engaged with, our traffic for the go-forward portfolio in 2025 was essentially flat, up about 20 basis points, but in-line sales increased by 1.5%. When we look at luxury specifically, those sales grew by nearly 5.5%. This suggests promising signs for potential future growth. I’ve spent considerable time with retailers, which is a new experience for me, and they are very aware that consumers are spending, but in a selective manner. They recognize the divided economy across different income levels. A consistent theme we hear from our retail customers includes the importance of branding, fit, merchandising, and innovation. Promotional items are now being targeted more effectively. Overall, the retailers' outlook is cautious yet constructive, a sentiment we observe in our leasing activities. There is a genuine demand for the available retail space we have. What’s particularly striking is that physical retail stores remain the most profitable channel for these retailers at this time. While they do have omnichannel strategies, their physical locations generate the most profit. The lack of new supply in the type of real estate assets we operate in is advantageous for our current objectives.

And our next question will come from Michael Griffin with Evercore.

Just on the leasing pipeline, with 2026 derisked as much as it is, have you started maybe being able to actively, maybe not renew a certain amount of space in hopes of capturing higher rents? It just seems like with what feels like a lot more leverage that you might have on the leasing front. Just curious how you break down kind of the cost benefit between renewing a tenant, keeping them in place versus actively taking that space back and trying to re-lease it at a higher rate.

That's a great question. I would say, overall, when we set up this plan, we have 1,000 new leases. We had pro forma market rents in there that are very specific to each space of these 1,000 that we talk about. And on the renewals, we pro forma positive spreads on those as well, right? So you have 2 levers trying to happen at the same time. For us, and I'd say like the unfortunate thing is we've set a target out there in 2028. Time is kind of not our friend. And while we might be able to get more, if we start to lose time, we might get more, but it will come in through 2028. So we're trying to balance what we can get done today based on the pro formas that we've run to back up this Path-Forward plan versus trying to extract the very last dollar that's possible. I think the question is a really good one because I think we haven't really talked about what happens after 2028. But if you think of the amount of investment that we're putting into these centers, the 30 anchors, when we start to really look at renewals from '28, '29, '30, I think there's tremendous opportunity that we'll see that we've never really been able to see, say, over the last several years, just given how fully leased up these in-line levels will be relative to historical standards.

That's certainly some helpful context. And then maybe just one on external growth. You talked about acquisition, your potential opportunities earlier. But I'm curious if you've evaluated maybe other revenue streams, whether it's bridge lending, Mezz financing, or third-party management. Just are there other levers you think you can pull sort of on the revenue growth side, maybe outside of those potential external growth opportunities as it relates to acquisitions?

That's a great question because one aspect I appreciate about this business is the limited number of individuals capable of executing it on a national scale. While it might be tempting to explore that avenue, I believe our main focus should remain on our current initiatives, which are quite extensive. We aim to gradually integrate quality acquisitions into the company, and for the foreseeable future, that will be our primary focus. We also have the chance to engage in Mezzanine and other structured financing since the financing options are quite distinctive for this asset base. However, as I mentioned, in the short term, we will concentrate on the foundational elements of our plan that are clearly outlined for this year.

And our next question will come from Floris Van Dijkum with Ladenburg.

I wanted to ask about the Go-Forward portfolio. Obviously, higher sales, better occupancy. Presumably, these are the assets you're going to be spending your capital on. Could you maybe just give us a little bit more information, what percentage of total NOI does that portfolio represent today?

Yes. Floris, this is Dan. I'll refer you guys over to our supplement. If you kind of look at Page 7, we've got NOI go-forward portfolio for the full year 2025 was $738 million relative to NOI for all the centers of $841 million. So obviously, it represents a substantial majority. And trending towards just the Go-Forward amounts.

The other question is regarding your SNO pipeline. Can you provide more details on what percentage of your square footage that represents? Also, could you share information on what percentage of the $107 million, which is ahead of estimates, is attributable to luxury? Jack, you mentioned luxury having 5.5% sales growth. How much expansion do you anticipate in your portfolio from that particular segment?

I can start with the first part on the $107 million. It's not a large part. Luxury is relatively a small segment of our business, primarily at Scottsdale and to a lesser extent at FOC.

Yes, I agree, it's Doug, Floris. Our luxury focus is in Scottsdale, starting with the Neiman Marcus Wing. Due to the demand after finishing that wing, we moved on to Nordstrom and established a luxury section there. At this point, we are nearly finished with around 90% committed. Most of those luxury retailers have already been processed. If you consider Tiffany and Hermes, as well as Salem, there are only a few left to open, which will happen this year and into 2027. Thus, the luxury aspect will likely make up a small percentage of our pipeline.

I think you were asking about SNO. Regarding SNO, it includes anchor stores and in-line stores. I'm not sure if I'm addressing your question properly, but we consider 1,000 in-line stores, which accounts for about 20% to 25% of our in-line portfolio moving forward. In terms of sheer numbers, we're effectively influencing 20% to 25% of our in-line floor plan. Additionally, we have 30 anchors that will improve leasing for the in-line spaces and generate traffic and rent. Looking at the remaining 1.6 million square feet of new leases, 90% of the 350 uncommitted spaces are in A, B, and C rated areas, with about two-thirds located in our high-potential properties. These aren't undesirable spaces; they are high-quality locations within our best centers. I'm confident we'll achieve the right rates, and our focus is on securing the right tenants for these centers. We're seeing positive indicators, such as when SCHEELS opened at Chandler Center in Arizona, generating a 21% increase in mall traffic and achieving over $150 million in sales. The transformation in that area is remarkable. At Tysons, despite its strength, traffic increased 16% year-over-year in the fourth quarter due to the openings of Level 99, Skims, a Zara relocation, Addicted, and Maggiano's. These openings significantly impacted the center, and we're also planning for two major food retailers on the property's west side that will draw substantial traffic. While I can't disclose the names yet, we're confident that the added stores and the DICK's House of Sport on the north side will greatly enhance traffic. Furthermore, since the opening of House of Sport in Freehold, it has accounted for about 18% of mall traffic. We're excited about the strong start to January compared to previous years. As we continue to add new anchors, concepts, and remerchandising efforts, our customers are feeling positive about the retail landscape, which benefits our leasing efforts.

And the next question will come from Haendel St. Juste with Mizuho.

Two quick ones from me here. First, I guess I appreciate the color on the asset sales to date and the discussions you have underway. It looks like you have, I think, $60 million of the remaining $400 million to $500 million remaining disposals under some level of discussion. But it also seems like we've been plus or minus at the same levels for a little while now, a couple of quarters. So I'm curious what's taking so long? And what's your expectations for some movement in the dispose left to be done over the next year?

Yes. Haendel, this is Dan. I'll start and then Jack can chime in. I appreciate the question. On the malls, we've got $200 million to $300 million of remaining asset sales. And the time line of that is, in some part, a function of the maturities. So we have some coming up this year, and there's some others coming up later in the year. On the outparcel and land side, recall that we have said in the past, from the beginning, we said that the sales in this bucket was going to be weighted towards '26 versus 2025. And that's primarily because many of these assets have some encumbrances, whether they're part of a loan collateral, so we have to work with the lender to kind of unencumber them from that. On the land, in some instances, there's some zoning and entitlements that are in the final stages that from a maximizing value to the company and shareholders, we'd rather wait a quarter or 2 to get to maximize that value with entitlement in hand. So there's kind of a story to a lot of these outparcels. They're not just sitting there ready to sell. It's just us working the process and continuing to execute on getting as many of those sold or under contract by the end of this year. There is no impact that we're seeing whatsoever as it relates to pricing or appetite in the market for these assets. It's just time to work through the sales.

I appreciate that. I have one more question. It seems like you're shifting your focus more towards external factors. I'm curious about the infrastructure and resources of your platform. With your progress in leasing and disposal, you're now looking to be opportunistic, as your platform can operate more efficiently with a larger number of assets. Could you share more about the size and efficiency of the platform? Also, how are you considering AI in relation to your business and the potential efficiencies you could achieve from it?

Thank you, Haendel. Regarding new opportunities, the market is reopening, which is expanding the addressable market for mall opportunities compared to last year. We find this encouraging, especially given the yields we observe now. In terms of our platform, I've mentioned before how we've implemented process improvement committees, dashboards, and efficiencies to enhance our operating performance through better team communication and a new CRM system. I believe we can scale efficiently with more Gross Leasable Area (GLA). Currently, I’m focused on identifying opportunities that will boost our projected Funds From Operations (FFO) for 2028 while aligning with our internal strengths. I don’t anticipate pursuing heavy redevelopment for our next opportunity. Our expertise lies in leasing and maintaining strong relationships with retailers, as evidenced by our work at Crabtree. We will consider assets with deeper value adds very carefully to ensure they fit our strategy. In terms of the organization, we have made significant progress over the past year in technology, operations, processes, communication, and decision-making, relying on human effort and tools like Microsoft BI rather than AI. Regarding AI, I’ve inquired with our retailers about their perspectives. For instance, Walmart may leverage AI effectively due to their scale and volume. However, retailers focused on apparel and fashion are still figuring out how to harness AI for their systems. For us, it’s still early days, and I’m working on understanding how AI can impact our operations. Yet, there are many basic areas we can improve to add value before we explore AI further. In the next couple of years, we will examine how AI might assist us.

And our next question will come from Todd Thomas with KeyBanc Capital.

First question on the South Plains refi. I appreciate the detail there. And apologies if I missed it, but was there any consideration related to the decrease, the extension there and the decrease in the coupon from 7.97% to 4.22%? Or is that decrease pretty straightforward as far as the impact on the P&L and it will result in nearly 400 basis points of savings.

Yes. Todd, this is Dan. I would just clarify the higher rate that you're referring to represented the effective interest rate, right? So when we bought out our JV interest in South Plains, there was a debt mark-to-market. And so that kind of flowed through the effective interest rate, which was higher. The coupon remains the same at 4.2%. So going forward, what we wouldn't have is that debt mark-to-market amortization as an additional cost. It will just be kind of the coupon.

Okay. Got it. That's helpful. And then I just wanted to follow up on the outparcel and land sale opportunity. You previously talked about a 7% to 8% cap rate on those deals ex land. And I realize you mentioned some of those assets are collateral for loans and/or there are some other things that may need to happen for those outparcel and freestanding transactions to move forward and take place. But has the market changed at all in recent quarters around pricing? Is there any change to that 7% to 8% cap rate target?

No, we're still tracking towards that. We've had a number of these outparcels, some smaller deals that have been sub-7 cap. This most recent transaction with the retail strip center at Washington Square was done right in that 7% range. So if anything, we're probably tracking maybe slightly ahead, but generally expect to still be in that 7% to 8% range for the outparcel components of the program.

And our next question will come from Ronald Kamdem with Morgan Stanley.

Great. I have two quick questions. Looking at the Go-Forward portfolio NOI without lease termination income, that's about a 1.7% year-over-year increase. I'm curious if we can explore whether this is influenced by the closures we’ve experienced this year or if it’s due to proactively reclaiming space and converting it to better tenants. How significant do you think the impact of these factors is on the year-over-year figure, so we can better understand the potential growth rate as these issues are resolved?

Yes. Ronald, and again, '25 was a transitional year. As we've discussed, we had frictional downtime as we're executing on all of our tenant and strategy initiatives. Just to give you a flavor of how we were impacted by Forever 21 year-over-year, which had a high percentage rent contribution in the fourth quarter of 2024. Excluding Forever 21, that would have been 2.7% for the fourth quarter and closer to 2.5% for the year. So that just gives you a sense for 2025. And going forward, I know we've talked about this in the past, but I'll refer you back to our Path-Forward plan update that we put out last summer. In there, we had an NOI bridge that assumed a midpoint CAGR of 5.2% for the Go-Forward portfolio for the 4-year period of 2025 through 2028. Obviously, in 2025, you can see we landed at 1.8%. Obviously, that implies significant growth in the future. For '26, we think we'll be at least 3% back-end weighted. But when you look at that in the context of '27 and '28, you can see that, obviously, that implies a significant increase above that kind of 5.2% CAGR levels in those years.

Thank you for the helpful information. I appreciate that we will receive an update midyear and guidance for 2027. Could you elaborate on the inflection point you mentioned occurring midyear? I understand that much of this is associated with leasing, but are there other elements of the plan that you are waiting on for this inflection point, or is it exclusively linked to leasing?

No, I think we're just continuing with our usual business. We have focused on our lead acquisition efforts, which is something new that will create additional opportunities. I’m sure many will be busy as we evaluate different options. However, we are primarily focused on executing this leasing initiative.

And our next question will come from Craig Mailman with Citi.

I have a question regarding the equity and income. There was a significant increase sequentially, and it appears a lot of that is from other sources. Could you clarify what that is and whether it’s sustainable or mostly seasonal?

Yes. Craig, can you clarify which periods you are specifically referring to?

In the fourth quarter compared to the third quarter, you had $27.5 million versus $9.7 million last quarter, and other income was $25 million, showing a significant increase sequentially.

Okay. Yes, that's helpful. And to clarify, I just want to make sure I was addressing your question. It's really driven in the fourth quarter of this year, as I alluded to in my prepared remarks, we had a legal settlement income, which was about $16 million in the fourth quarter of 2025. So that's really driving the lion's share of that $20 million increase from the fourth quarter of 2024.

Great, sorry I missed that in your prepared remarks. For my second question, I know it’s a bit early, but Jack, do you have any early insights into how the Path-Forward plan might evolve in Version 3.0? What are the main items we should be anticipating?

Yes, when I review our focus areas, we are clearly prioritizing dispositions, and I plan to provide an update on that. I believe we'll have a significant update around mid-year regarding our leasing activities. One topic we haven't gone into detail on yet is rent commencement dates, which are a crucial aspect for us. This involves coordination with tenants, legal matters, and asset management, along with leasing to ensure that spaces are ready on time, tenants are in place, and rent begins as scheduled. This is a vital work stream that hasn't been highlighted much in our disclosures. Moving forward, I anticipate we will shift our discussions from new leasing to rent commencement dates, and this will likely be a key focus in mid-year. I expect we will refine our projections for 2028 and possibly start discussing 2029 as we continue to forecast future developments. Additionally, I will provide ongoing updates on our three development projects, with particular emphasis on rent commencement dates to offer more clarity in the middle of the year.

And our next question will come from Greg McGinniss with Scotiabank.

I just wanted to touch on a couple of remaining non-go-forward assets. With 29th Street not in that portfolio and in negotiations with lenders, is the expectation to hand that asset back? Or do you believe that there's kind of equity value to extract thereafter negotiations? And then what's the plan on Fashion Outlets in Niagara? Is that an expected handback?

Yes, I appreciate the question. I think at this point, I just gave you the sort of latest data play on 29th Street. Probably no additional commentary at this point. We'll obviously give you guys updates as we have relevant news to share.

Okay. And then on the development side, are Green Acres and Scottsdale projects fully leased? What percent of those tenants are expected to open in '26? And are those leases included in the SNO pipeline?

Yes. It's Brad. Yes, they are in the SNO pipeline. So roughly of the $107 million, roughly about $20 million comes from our development pipeline. And then, Doug, if you want to talk to the leasing aspects?

Yes. So Greg, regarding Scottsdale, I mentioned earlier that we are nearly finished, with 91% of the spaces committed and very few remaining. At Green Acres, we are around 75% committed. The majority of the exterior redevelopment is complete, and the current focus is on the interior. The good news is that we have attracted some strong tenants, including ShopRite, Grocery, Sephora, Cheesecake Factory, Shake Shack, Foot Locker, and JD Sports. This will significantly enhance the exterior and create a new grand entrance, with the plan for everything to lead into the interior, which is starting to take shape.

And the next question will come from Omotayo Okusanya with Deutsche Bank.

Could you discuss what you're observing regarding tenant credit in general, and as you consider 2026, whether that poses more or less of a risk for you?

Yes. Thanks for the question. Certainly, those issues are in the news. For us, I think the summary is we don't expect a meaningful impact from this group as it relates to 2026. And I don't think they're reflective of the overall strong retailer environment that we're seeing across the board that Doug alluded to at our centers. Our watch list remains at an all-time low. And none of those centers would impact kind of how we're thinking about our 2026 bad debt expectations for the portfolio.

And our next question will come from Alexander Goldfarb with Piper Sandler.

I have two questions. First, Jackson, I noticed you hired a CIO and have been working on the portfolio. Given the improvements in the debt markets and your approach to dispositions, do you believe that part of Macerich might be ready to start unencumbering wholly owned assets? Are you at that stage yet, or do you think the current efforts and market conditions aren't conducive to initiating asset sales and engaging with the capital markets?

I would say that if you consider Crabtree, we have pursued a term loan, but it's not a...

Yes. Alex, I would just say we paid off the debt on FlatIron. Crabtree, it's got a term loan that's highly flexible. It gives us some maturity, but it gives us an ability to prepay it. So I don't think it's an immediate near-term priority, but maybe more medium term to aspirational to start to increase our wholly owned assets more unencumbered.

Okay. And then as far as the legal settlement goes, can you give a little bit more color on what drove it? And is this like a one-off? Or is there a potential that there are other of these one-time benefits that you guys may be able to harvest?

Sure. I appreciate the question. Yes, it relates to a former development project that we're no longer pursuing that resulted in a favorable settlement outcome. It's a nonrecurring item in other income, as I mentioned, and it's not part of the go-forward portfolio.

And our next question will come from Michael Mueller with JPMorgan.

Can you comment on what rent spreads have been on the 2026 leases that you've addressed so far? And for the second question, are you seeing any uplift in shop leasing escalators compared to a couple of years ago?

On the rent spreads, we've mentioned before that the 6% figure for this group isn't directly tied to the success of our Path-Forward plan. Our focus is on a specific number of new spaces with market rents and PA assumptions. Achieving more rent with less PA is beneficial as it leads to increased permanent occupancy and productivity. However, I feel that this measure doesn't accurately reflect our goals and might give the wrong impression. We are processing a significant number of renewals, and I don't think this metric truly aligns with our objectives. Therefore, we are looking for a better way to evaluate it.

And Michael, it's Doug. I think you asked about escalators. There really has been no change. We've been consistent over the years, and we remain consistent. The escalators when you blend the escalators for fixed minimum rent and CAM, you're somewhere in that 3% to 4% range.

And our last question will come from Caitlin Burrows with Goldman Sachs.

Maybe 2 more on the occupancy front. As a follow-up to Floris' SNO question from earlier, I guess maybe phrasing it a different way, you guys reported the 94.9% lease rate. Could you tell us what your economic occupancy is for the Go-Forward portfolio?

Caitlin, it's Brad Miller here. Yes, so we're at 94.9% on the leased occupancy. Our physical occupancy is closer to 91%.

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

Thank you, operator. Thanks again for your participation today. We look forward to seeing many of you at the conferences and property tours in the coming weeks. Thank you.

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