The Macerich Company (NYSE:MAC) Q4 2018 Earnings Conference Call Transcript

Feb 07, 2019 • 01:00 pm ET

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The Macerich Company (NYSE:MAC) Q4 2018 Earnings Conference Call Transcript

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Presentation
Operator
Operator

Good day, and welcome to the Macerich Company Fourth Quarter 2018 Earnings Conference Call. Today's conference is being recorded. At this time, I'd like to turn the conference over to Jean Wood, Vice President of Investor Relations. Please go ahead.

Executive
Jean Wood

Thank you for joining us today on our fourth quarter 2018 earnings call. During the course of this call, we will be making certain statements that may be deemed forward-looking within the meaning of the safe harbor of the Private Securities Litigation Reform Act of 1995. Actual results may differ materially due to a variety of risks, uncertainties and other factors. We refer you to today's press release and SEC filings for a detailed discussion of forward-looking statements. Reconciliations of non-GAAP financial measures to the most directly comparable GAAP measures are included in the earnings release and supplemental filed on Form 8-K with the SEC, which are posted in the Investors section of the Company's website at macerich.com.

Joining us today are Tom O'Hern; CEO; Scott Kingsmore; Executive Vice President and Chief Financial Officer; and Doug Healey, Executive Vice President, Leasing.

With that, I would like to turn the call over to Scott.

Executive
Scott Kingsmore

Thanks, Jean. Excuse me, the fourth quarter reflected generally good operating results, as evidenced by the strength of most of our portfolios key operating metrics, and an improvement in same-center net operating income growth. As we've mentioned numerous times on our last few earnings calls, the bankruptcies and early terminations in 2017 tempered growth in the first half of '18, as we work through releasing of that space. As predicted, we realized stronger operating growth in the second half of 2018.

Here are some highlights for the quarter. FFO per share was $1.90 per share, which beat our guidance and met consensus estimates. Annual FFO per share was $3.85, excluding $0.13 for activism related costs incurred earlier during 2018. This was in line with our guidance of $3.82 to $3.87 per share.

Year-end occupancy was 95.4%, up 40 basis points from year-end '17 and up 30 basis points from September 30, 2018. Half of this gain of 40 basis points was temporary occupancy. Same-center growth net operating income, excluding lease termination revenue was up 4.2% for the quarter were 2.4% increase when including lease term revenue. During the quarter, we did realize a favorable multi-year tax appeal at one of our wholly owned assets, which equates to roughly 150 basis point improvement to quarterly growth.

For the second half of 2018, we experienced 4% growth versus the second half of 2017, when excluding lease termination revenue and 3.4% growth including lease termination revenue. The property operating margins for 2018 improved by 60 basis points to 70.0% up from 69.4% for 2017. And REIT G&A and Management Company expenses collectively showed about a $2.3 million improvement or reduction during the quarter.

Now onto 2019 guidance. While we have provided detailed operating guidance this morning, we thought it would be useful to share a reconciliation of major components from actual