Conference Transcript - MAC 2026-03-02

Craig Allen Mailman, Analyst — Citi Research

All right. Welcome to Citi's 2026 Global Property CEO Conference. I'm Craig Mailman with Citi Research, and we're pleased to have with us Maestrich and CEO Jack Shea. This session is for Citi clients only, and disclosures have been made available at the Corporate Access Desk. To ask a question, you can raise your hand or go to liveqa.com and enter code gpc26 to submit questions. jack will turn over you to introduce your company and team provide any opening remarks tell the audience the top reasons that investors should buy your stock today then we'll get into q a great thank you first uh quick introductions dan swanstrom to my left is uh senior executive vice president cfo of the company to my right is brad miller hit the red button Thanks.

Jack Shea, CEO

Good afternoon. Quick introductions. To my left is Stan Swanstrom, he's a Senior Executive Vice President, our CFO. To my right is Brad Miller, he's a Senior Vice President, Asset Management. And my far left is our Vice President of Finance, Alexandra Johnstone, and she also handles our IR. I'm going to start off with some quick prepared remarks and then we'll open it up for Q&A. Thanks for having us. I'll give you a quick summary of where we are today and why I think investors should own the stock, then we can open it up for questions. 2025 was a pivotal year for Mace Rich. We entered the year with clear objectives under our Path Forward plan, which was simplify the business, drive operational performance, and reduce leverage. The message today is straightforward. forward. We have delivered against each of these pillars. As we enter 2026, I have tremendous confidence in our progress to date and direction and future. Leasing is the single best indicator of whether our plan is on track. We are ahead of plan on the leasing and the numbers speak for themselves. In 2025, we signed 7.1 million square feet of new and renewal leases on a comparable center basis. This is an 85 percent increase over 2024 and a new company record. Our leasing speedometer, which tracks revenue completion percentage for all new leasing activity required to achieve our five-year plan, is at 76 percent, year, well ahead of our 70% year-end target. We are on track for 85% by mid-2026, at which point the new leasing component of our plan will be effectively complete. Importantly, we are achieving our target market rent assumptions in the plan. Our sign-not-open pipeline hit $107 million, exceeding our $100 million year-end target, against the total cumulative snow opportunity of $140 million in excess of the revenue generated in 2024. The way to think about the snow phasing is approximately $30 million of incremental contribution in 2026, $40 to $45 million in 2027, and $45 to $50 million in 2028. That's a clear, visible path to drive incremental growth. We targeted 30 anchor and big box replacements in our plan, and all 30 are now committed. 2.9 million square feet expected to generate over $750 million in annual tenant sales. These anchors are catalysts. They drive traffic, extend dwell time, and unlock in-line leasing across entire wings of our centers. For instance, Dick's House of Sport at Freehold had one of the best openings in their 35 store House of Sport chain. Since opening, 18% of mall traffic now flows through that wing, a wing that was essentially dead before. We have nine House of Sports locations committed, with Crabtree opening this fall, Tyson's Corner in Washington Square following in 2027, and Valley River opening in early 2028. Portfolio sales hit $921 per square foot in the Go Forward portfolio, a new company high going back to our IPO in 1994. before, and we posted 17 quarters of positive leasing spreads. The retailer environment and tenant demand remain strong. The retailers showing up in our pipeline are the strongest brands in the business, including Zara, Aritzia, Lululemon, Alloyoga, Abercrombie, and many others. Demand is broad-based across traditional retail, international brands, food and beverage, entertainment, development and digitally native concepts. As our head of leasing commented recently, never has the depth and breadth of retailer demand been what it is today. This speaks to the strength of our industry and is a clear testament to our high-quality portfolio of pure-play Class A retail centers. So why own a Mace Rich? I condense it down to three main things. First, execution credibility. Every major milestone we set out in our Path Forward plan, we've either met or exceeded. Leasing is ahead of schedule. All 30 acres are committed. $1.3 billion in dispositions is completed with a clear path to $2 billion. Leverage is down a full turn. We also consolidated the PPRT-JV, which enabled us to drive Washington Square and Los Cerritos forward and sell Lakewood Center. Second, visible NOI growth trajectory. Our snow pipeline provides a clear multi-year growth driver with approximately 80% flow through to NOI. We expect at least 3% NOI growth for the go-forward portfolio in 2026, back-end weighted to the second half as permanent tenants build out and begin paying rent. That ramp accelerates meaningfully in 2027 and 2028 as NOI growth from the new leasing activity, major development projects, and other redevelopment, including anchors, come online. Third, we own irreplaceable real estate. Approximately 92% of our go-forward NOI comes from A-minus or higher tier properties in affluent, supply-constrained markets. These are community destinations where the best retailers in the world want to be. When you combine that with asset quality, with the operational platform we've built, You get a company that is well positioned as the logical buyer when an attractive asset comes to market. Crabtree is proof of that concept. We have already secured 18 new leases and 31 renewals since we acquired the property last June, including a flagship belt consolidation and an entertainment anchor for the second men's belts box. Looking ahead, 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 committed lease expirations and continuing to get ahead of 2027 expirations, three, getting tenants into 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. The heavy lifting of de-risking the path forward plan is substantially complete. We're now in the execution and conversion phase and I'm very confident in where we're headed. And with that, Greg, I'll open it up for questions.

Craig Allen Mailman, Analyst — Citi Research

That was great. I think you summed it up for all of us. We can just go home now. No, I appreciate the in-depth commentary. I think, you know, as we talked about on the call, as the path forward plan, as you guys have made significant progress on it, one of the things that you talked a little bit about more was going on the offensive, right? and Crabtree was kind of a first step towards it and there's still work you guys are are working on right it's not a done deal with the path forward but you've de-risked it as you said so talk a little bit about the how how aggressive you want to be on the external front while making sure that you deliver on everything you've signed that you're getting tenants in on time you have the

Jack Shea, CEO

capital for it right talk a little about the the toggling back and forth of priorities our strategic path forward plan you know achieving our results in 2028 are the highest priority for the company because it's highest for the following reason our core portfolio with over 1.2 billion at our share going into the portfolio and that's in tenant allowance capital projects and development is going to well position this company to drive releasing spreads as we move forward into 29, 30, 31. The acquisitions are really, I would say, more opportunistic if they kind of fit within that 2028 lens. Crabtree was perfect in a way because the prior owner had secured a Dick's House of Sport lease. It's obviously under construction. It's going to open later this year. And we're going to be able to really inflect the NOI growth within that 2028 calendar time So as we're looking at other opportunities, you're going to see us look for similar types of characteristics good trade area more leasing value add type of opportunity but more importantly be able to accomplish our 2028 objectives so you're not going to see us do deep deep value add opportunities between now and 2028 let's say you can do could you do one a year maybe put two to four hundred million to work is there enough of a crabtree-esque opportunity set out there that's going to hit the market that you could continue this while kind of delivering on the path forward ma'am but i hate to put numbers down and get locked in because you know we we have we have a lot of priorities but most importantly the 2028 plan um i did bring on david keen recently who is going to be the phenomenal addition to the team he's already shown me a pipeline which wasn't even close to what we were looking at before so I think for a lot of it for us is just going to be just making sure that we don't put our current path forward at risk is it's because it's really you know pretty much in the bag at this point and then just selectively add property where we think it makes sense for us, you know, locationally, the amount of leasing that's required, the amount of capital that's required, and making sure that we get the right adequate return on our capital, especially given our current cost of capital.

Daniel Swanstrom, CFO

I would just add a key criteria on that is relative to the 2028 path forward targets and, you know, acquisition opportunities being creative to those.

Craig Allen Mailman, Analyst — Citi Research

And Dan, I mean, as you look at the sources and uses over the next two years to get through the path forward how much excess cash flow and capacity you have today because you guys are in a deleveraging stage as well like realistically how much excess capacity is there to pursue some of these versus having it earmarked for construction dollars to open you know the 30 anchors and the inline guys just walk us through that maybe.

Daniel Swanstrom, CFO

Yeah and a lot of our development and anchor activity is front-end loaded over the next three years so fortunately we have sufficient liquidity. You know we had the time of our call two weeks ago almost a billion dollars. We had a 650 million dollar credit facility so that you know applies about 300 million plus of cash on hand. We did actually just last week also announced that we were able to amend and restate our credit facility, which gives us incremental capacity up to $900 million at a lower cost, extended the maturity on that. So we feel like that was a really great execution by the team on that. But the punchline over the sources and uses is between cash on hand and some of the dispositions and out parcels that we have identified remaining, we have sufficient capital to fund, plus free cash flow from the business after dividend we have sufficient capital to fund the development and redevelopment and anchor activities and then once we get past that there's excess capital from the disposition program to go towards some of the remaining D leveraging the big part of the remaining D leveraging comes from the NOI from the snow pipeline coming online over the next two and a half years so that enables us to get from where we are now down to the low to mid six times debt to EBITDA so taking a step back with acquisitions similar to Crabtree given where the donor yields were when we looked at it you know really only pushed leverage up a small amount so we remained within that debt to EBITDA range and then we subsequently used the ATM to make that leverage neutral so it's a long way of saying we've got sources and uses to fund our needs in the path forward plan and then an acquisitions we'll look at it opportunistically if it's a creative to 2028 and look at the funding sources to keep it within our leverage parameters you bring up the the point right if you can find something at an 11 plus percent yield you can finance it with a decent amount of equity right because it's

Craig Allen Mailman, Analyst — Citi Research

still a creative relative to that I mean how much appetite would you guys have from the equity issuance perspective versus wanting to kind of build up the debt deep but not capacity maybe partially fund with cheaper debt as spreads kind of tightened for the real estate folks yeah I mean look I think it just goes back to that criteria of it's got to be accreted to 28 from an FFO perspective but we don't want to blow past the high end of our leverage range so within there you know we'll look at what makes the most sense you know opportunistically and economically from that perspective and then jack you kind of hinted by nary summer nary right you guys are going to have the next iteration of the path forward and one of the things that you did talk about that could be part of that is talking a little bit more about commencement and i'm assuming that means commencement timing what could you go into a little more detail about without giving away the the surprise for for June but some of what that could uncover at least from from an investor standpoint that increased clarity how you feel that would be the next iteration yeah I mean one of the one of

Jack Shea, CEO

the key components of you that in this plan is leasing right we talked about that ad nauseum and we've talked about this opportunity to lease 1,000 new tenants in our portfolio so that includes anchor and inline. To give you some sense, that's roughly almost 25% that represents of the entire space available, unit space in our portfolio. So think about it as almost 25% of our portfolio is literally delivering over the next two and a half years. The timing of that is very critical, and so we monitor it. We're all over that right now in terms of our tenant real estate services effort. And I think we're going to – we talked about a speedometer that relates to leasing. I think we're going to try to share some of that speedometer that we have on rent commencement because that's something that we focus on actually quite a bit internally.

Craig Allen Mailman, Analyst — Citi Research

I think it would be helpful for people to understand that. and as you look at sort of the success on maybe what was in the lease from a deadline from a commencement timing perspective versus where the team has actually been able to deliver it is there sort of an average delta between that like are you guys outperforming by a week a day are you have you ever kind of missed that commencement date just give us a sense of how the team is operating at this point um given the workload that they have with all this leasing that you're you're working on yeah i mean i would say we we started preparing

Jack Shea, CEO

for this um frankly last year you know middle of last year realigning how these teams communicate and the systems that we had so if you were to drop into one of our bi-weekly calls you know rent commencement discussions are critical and they talk about it. And then we actually have weekly meetings on the east and west for the largest rent deals that are going through the system to make sure that, you know, our tenant coordinators, our asset managers, our leasing team, our mall management staff are fully aligned with what is exactly happening. You know, in general I would say it's hard to outperform timing you know we want to make sure we make timing and so you know that's that's really staying on top of the tenant to make sure they're permitting getting their permits done and then once they get physical control of the space you know my mall managers walking by every day hey there's no construction crew there for the last week guess what immediately a call goes into x y and z tenant from from our business side to figure out what's what's happening or not happening because it's a it's a it's it's a big effort so but I'd say we have the systems in place to ensure that we're going to get the best possible outcome and you know I

Craig Allen Mailman, Analyst — Citi Research

think you had mentioned to some of us that when you came in right the budgeting internally was like a year out right things are being done at Excel what what have you done from a technology process standpoint maybe from of software, however, to really track this other than the biweekly meetings, right, what is there so that on a daily basis a project manager could go in there and say, we should be here, we're only here, let's catch up and make some phone calls?

Jack Shea, CEO

Yeah, I would give a lot of credit to our, you know, process improvement committee, you know, in terms of different initiatives that they've put forward and our technology team internally um you know we rely on yardy as the backbone of our sort of accounting system and tracking system and yardy's done a great job you know continue to do a great job building apertures that sort of support all the things that we're doing um you know the argus models are done independent of that but you know the yardy's yardy's done a great job working in partnership with us trying to get you know just more communication more ability to track and monitor and we're getting the most out of it right now.

Craig Allen Mailman, Analyst — Citi Research

Do you think this leasing success would have been possible under the old systems that you guys had in place?

Jack Shea, CEO

It just wouldn't have been, no. You wouldn't have been able to understand what you were leasing and how it impacted the model and being able to make decisions real time as to is this the right lease versus as that. And then once, you know, trying to get tenant rent commencements moving forward, the old system was really pretty inefficient. So, you know, we were really able to kind of move through and proof of the pudding would be something like Crabtree, which we literally were able to drop into our infrastructure and, you know, when we eventually start to share what we've done there, people would be really impressed with not only just the progress but just how efficiently we were able to absorb that asset in and quickly kind of bring it into our system and if we if we dive deeper right the speedometer you guys are ahead of pace with what you have left were you guys just successful at getting some of the better space lease quicker and then you

Daniel Swanstrom, CFO

have tougher space left or how does the remaining inventory kind of break out between your ABC spaces to kind of inform right that does it get the speedometer speed up or is it slow as we get closer to a hundred yeah that's a great question Craig if you look at it in the context of our snow right so our total opportunity is 140 the latest update is we've got 107 of that committed so the new leasing activity in the teams really focused on that remaining 33 million of snow one way to look at it is you know when when we did our artist models we went through and ranked all the spaces ABCDEF 90% of the remaining snow is located in a B or C spaces so that gives us as leadership and the team a lot of confidence that we'll be able to deliver on that space another way to look at it is about two-thirds of that 33 million is that are fortress or fortress potential properties so again it's some of the better quality properties so we think that is another you know stat that should give everyone confidence as it gives us confidence that we'll be able to kind of complete the remaining new leases and the snow and that opportunity set is about 1.6 million square feet as we talked about and you know we're two months into the year in terms of us going through lease approvals you know

Craig Allen Mailman, Analyst — Citi Research

through our ELC process your meetings and we're basically at the same you know pace as of the last last year so you know there's really good momentum the teams know what they need to do and we're just getting after it and just given the success on on the leasing front for the remaining space how how are you got do you go about it differently from a curation standpoint of you know well we may have taken this tenant two years ago but today we can hold out for x y or z tenant who we feel fits better do you just have more flexibility in or more optionality and being

Jack Shea, CEO

able to pick the tenant versus maybe just having a little bit more urgency to get the space filled i mean there's always a balance um you know at any given time if you can imagine 300 spaces our marketing teams are constantly touring and taking different tenants through. You know, they could be an existing tenant at that mall, relocating or they could be, you know, wanting more space or it could be a different concept altogether. And we're always going to try to put the best tenant and get the most rent. But sometimes, you know, the best tenant is not ready to move on our timing so we're going to default to number two, the second best option. um the best way to describe what we've done internally is you know i've basically frozen the floor plans so you've got 300 spaces get after it right now let's finish let's get ahead of our renewals try to de-risk that and the reason for that is we want to execute our 2028 plan when we start to talk about where we'll be next year late next year we're probably not going to push escalation you know renewals as quickly you know we're going to be delivering a very very strong vibrant portfolio of tenants you know all these

Craig Allen Mailman, Analyst — Citi Research

wings will be full so I think that'll give us a better chance to really work on incremental merchandising moves when we get into 2028 29 going forward I mean have you seen the realization among tenants especially ones that are throughout the portfolio versus maybe a guy with two or three leases with you where they understand what you guys are doing to the portfolio. They understand where you are as a company, that they're trying to come to you today to pull forward those renewals to get a potentially better deal than as you get closer to next year, mid to late next year, where they know they're going to have a weaker bargaining stand.

Jack Shea, CEO

To be honest with you, I don't think there's been really change in that sort of decision You know, one of the things that we're not doing is subsidizing weaker properties. Obviously, I talked about that early in the launch of this plan. So we've got really good real estate. We're trying to make really good decisions quickly. I would say that one thing that I've seen directly, you know, meeting with a lot of different tenants I mean they really appreciate our clarity they really appreciate the amount of capital that's going into these projects and the speed of our decision-making I think that's a big difference than maybe in the past we have very clear we're very clear visibility on what happens if we do X Y and Z at this rent per square foot with this TA package and I don't think that we necessarily had that ability before because, you know, how can you make a three-year commitment on a major space and, you know, you don't really have the analytics to really support what that does to you. So I think there was probably less, you know, our decision-making is very quick. So I think tenants appreciate that. And they also see the investment going into the centers. So they have the confidence that they can invest.

Craig Allen Mailman, Analyst — Citi Research

One of the things we've been trying to get a read on more through the conferences is ai which is not a surprise as the topic with everything going on but um i know you kind of touched on it on the call that it may not be your primary focus but just as you to the extent that you guys are using it internally you guys obviously have a yardie argus right are you utilizing any of the the ai add-ons that those vendors are are offering or working with them to build something in kind of where are you on the AI evolution I would say we we're working a partnership if we're doing some beta

Jack Shea, CEO

testing with Yardi right now on some application we've done third-party application like when we acquired Crabtree all those leases were scraped with an AI capability we separated with two different vendors so we're now looking at you know just for our own lease intelligence information trying to figure out how to to try to move that into that kind of aperture um you know energy efficiency that's already linked to ai now so we're already we've already got that application um it's it's um on the margin that the teams are executing you know to make more efficiency and more and better reporting more insight i don't think that there's i haven't seen anything sort of earth shattering yet in terms of really moving the needle i do think that there is an opportunity if you if you look at what we've been doing you know we've been we've been dropping anchors and all this space and great tendency that drive traffic and we've had third-party consultants sort of doing market analysis and sales traffic analysis and sales analysis, I do believe that there'll be an AI function at some point that can really dictate if we put an Eataly, a Ding Typhoon, a Dick's House of Sport in this center, how can it shape competition? How can it pull from different trade area consolidation like what we've seen with the Shields opening up in Chandler? That to me would be kind of an interesting opportunity i know the um there's just a lot of data and particularly i'm really focused on with these dollars going in how can it shape trade or a consolidation at our property and and effect and that could be a great marketing tool for us when we go pitch a retailer here's here's our analytics on if you come in based on x y and z also coming into the center this is what's going to happen you know for new tenants real estate's obviously critical co-tenancy is huge right they want to understand co-tenancy within a mall itself and so and it feeds on itself and i think that right now from there there hasn't been a real ai application for that but i think to me that would be a really interesting one and so that's that's one that's high on my list right now to see if there's that opportunity.

Craig Allen Mailman, Analyst — Citi Research

And I guess, you know, having your background also be in the triple net space, which is much less operationally intensive versus coming to Maysearch, which is more operationally intensive. Do you feel like AI has more opportunities in a company like this with the operational aspect of it?

Jack Shea, CEO

Or do you feel like if you're just an underwriter and credit, right, you're underwriting that, is there more efficiencies to be had in that environment or is it just as easy to get it in the operating environment for sure operations for us you know at the end of the day we're doing all this effort on the top line to create snow and all this thousand new leases you know us controlling expense creep is critical right so so i think that that certainly ai will help us in that regard just trying to be more efficient you know so like from a mechanical standpoint hvac and electricity like how much of that is smart metered today or at least more controllable versus tenants have access to temperatures in their side their stores versus you guys doing that we definitely i can't be expert but i can tell you we already have good functionality to try to create more efficiency Because, you know, some of that expense creep is on us, especially if there's vacancy in there. So we want to maximize utility expense. You know, it's a big expense, right? So we've already had that capability, and it's going to only get better as we get fully occupied, too. So we have all the CAM and all the tax reimbursements coming through the P&L.

Craig Allen Mailman, Analyst — Citi Research

Does anyone have any questions before I hit rapid fires? All right. We'll go to rapid fire because I feel like I may run out of time if I ask you another question. So same sort of wide growth for the retail sector in 2027.

Jack Shea, CEO

Yeah, I think it's going to continue to be positive in the same direction, and that's a function of great productivity, great omni-channel, and no supply.

Craig Allen Mailman, Analyst — Citi Research

If you had to put a number on it.

Jack Shea, CEO

Probably, I don't want to guess on a number, but I would say it would be very comparable to the last 12 months in the recent batch.

Craig Allen Mailman, Analyst — Citi Research

And then from an M&A standpoint, will your property sector have more or fewer of the same amount of companies this time next year? Same. Perfect.

Jack Shea, CEO

I will give you one last thing. So just so you all know, I took my LTIP 100% performance shares, again, like I did last year. So those are all relative TSR-based and absolute. So I'm trying to drive long-term shareholder value here.

Craig Allen Mailman, Analyst — Citi Research

Do those vest on change of control? I'm joking, I'm joking. Just a joke. Well, thank you guys very much. I hope everyone enjoys the rest of the conference.