Macerich's CEO Present At Citi Global Property CEO Conference (Transcript)

Macerich Co. ( MAC)

Citi Global Property CEO Conference Transcript

March 13, 2012 4:55 PM ET

Executives

Art Coppola – Chairman and CEO

Ed Coppola – President

Tom O'Hern – Chief Financial Officer

Analysts

Michael Bilerman – Citi

Presentation

Michael Bilerman – Citi

Well, we’re here at the 4:55 session at Citi Groups Global Property CEO Conference. We have saved, as I said the best for last. And we are very please to have with us Macerich, Art; and Ed Coppola; and Tom O'Hern.

Art, I’ll turn it over to you for some introductory remarks and then we’ll have some Q&A.

Art Coppola

Thank you. Can you hear me? Hello. Okay. All right. Thank you. All right Thank you for having us. We appreciate it. We are in a very good position today with our business and our company. I think that judging from the schedule many of you have already heard the presentation of several other mall companies. I would say that amongst Class A mall operators, our fundamentals are relatively the same.

They are very strong. The one difference would be that we have a large concentration in Arizona and Arizona in particular has been very strong, the last year and half. We have five regional grouping for our company. Southern California is our large concentration, Northern California, the Pacific Northwest to another one, Arizona is a third one, Midwest is another one and then the East Coast. And Arizona as a region has led our sales comps for five of the last six quarters.

And the Phoenix marketplace is beginning to experience signs of job growth, where our several major corporation’s that are looking to locate corporate headquarters or expansions into the Phoenix marketplace.

And a big part of the driver of that is the things that have caused Phoenix to be a leading growth market for the last six decades. But in addition to that, Phoenix now has affordable housing because the housing prices in Phoenix today are about half of what they were five years ago.

So entry level housing per employees a $600,000 house, four bedrooms, 4,000 feet and a nice gated suburban community, that was $600,000 five years ago, today it might be $300,000. So, it’s a big difference. And so there is that opportunity and it’s really helped to foster some very nice healthy growth for us.

Our leasing fundamental are very strong throughout the country. We just had an opening of a new Neiman Marcus Department Store at our Broadway Plaza Center in Walnut Creek in Northern California. That’s the center that we have targeted as our next quote Santa Monica Place. We were asked after we shutdown and reopen Santa Monica Place, do you have another projects, a withdrawing more that would be of the scale in terms of the transformation of it.

And we thought about it and that actually challenge this and we said, the one that really have the possibility for that kind of a dramatic change is Walnut Creek, because it’s a great center. We already have the right department stores. We have Nordstrom, one of the top Nordstrom’s in the U.S., great Macy’s, we now have this new Neiman, but we only have a small number of specialty stores.

So we’re actually talking to the city right now, Walnut Creek. We have our anchor approvals, where we’re looking to basically expand the specialty store offering at that center by little over 200,000 square feet. We’re pretty bullish on that opportunity.

That actually brings me into my discussion that I would like to share with you, which is a question that a lot of people have asked the last two days, which is, how big is your embedded or your development pipeline?

Our pipeline for the next two years is very clears. Its $600 million is our pro rata share of our development pipeline and it’s comprised of three projects. One is a new outlet center that we are building in Rosemont which is right near the O’Hare Airport, Chicago, Fashion Outlets of Chicago. It is our share of the project once our final investment is in we will be about $200 million. We do have a construction loan that will help to fund that over $140 million.

And it’s a project that is under construction. It opens in August of next year. We have a loan that’s been led I think by Wells Fargo. The center is currently has full documented leases, approaching 50% adding in letters of intent that are in lease negotiations, leasing statuses closer to 90% and the retailers are extremely bullish about that opportunity as we are.

We also are currently in pre-leasing stages of a second project that’s in our pipeline, which is at our newly acquired, Fashion Outlets of Niagara, in Niagara Falls. That is a 200,000 square foot expansion and we are in the pre-leasing phase of that.

We do anticipate that we will go forward. Delivery on that project will likely be two years from now, calendar 2014. The size of that project we have not decided on the ultimate scoop, but as a placeholder for this purpose let use a number of $100 million.

We are under construction on the infrastructure at the third major component of our development pipeline, which is Tysons Corner and our pro rata share of that is half of a $600 million projects, so our share is $300 million.

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