Macerich Could Get Partner

Coppola commented on what he called "a lot of speculation about whether we're going to be bringing in a joint venture partner at an entity level" in connection with the Wilmorite deal. If Macerich does take on such a partner, it will be months away, Coppola indicated.

"We have extremely strong interest from an existing partner to come into that transaction (Wilmorite) at an entity level," Coppola said, but he said "nothing is imminent" in terms of such a partnership. The Macerich president said the REIT is going to "take complete inventory of everything at Wilmorite" and then make the decision on whether to bring in a partner at the entity level "over the months to come." Since such a transaction would amount to about $1.2 billion, Coppola said, "We are going to treat that decision like any very major corporate finance decision." Macerich also will review its portfolio to with an eye toward selling some properties to reducing its debt, "just as we did when we bought Westcor three years ago," Coppola said, a reference to the REIT's 2002 purchase of the 27-property Westcor portfolio for nearly $1.5 billion.

The Wilmorite acquisition provided Macerich with a 50% stake in the two-million-sf Tysons Corner Center in McLean, VA that is "probably the most exciting expansion and redevelopment that's under way right now" in the Santa Monica-based REIT's development pipeline, according to Coppola. A 365,000-sf, $130M redevelopment of Tyson's Corner, anticipated to be open by Oct. 1, is already under way with AMC Theatres as 100,000-sf key anchor. Macerich's share of the budget is $65 million.

The REIT's funds from operations for the first quarter rose 10% to 99 cents per share, compared to 90 cents per share for the comparable period in 2004. Total FFO for the quarter rose to $73.6 million, compared with $66.4 million, while net income totaled $18.1 million, or 30 cents per share, compared with first quarter 2004 net income that was also $18.1 million but worked out to 31 cents per share last year. Revenue totaled $68.4 million versus $61.4 million in 2004's first quarter, with same center tenant sales for the quarter up 5.8% compared to the first quarter of 2004. The REIT's portfolio remained 92.2% occupied, up about four-tenths of a percentage point since a year ago.

In reviewing Macerich's leasing for the quarter, CFO Thomas E. O'Hern noted that 53% of the company's leases now include rent increases based upon the Consumer Price Index. "We made the move to CPI a number of years ago and it's giving us a built-in inflation hedge that is unique to Macerich," O'Hern said. He said most of the company's competitors still use fixed rent increases rather than CPI-based rent increases, but at Macerich, "We continue to write about 95% of our new leases and renewals with these CPI increases included."