Macerich's Earnings Drop 21%

The Santa Monica, CA-based company said earnings on common shares dropped to $23.6 million, or 39 cents per share, from $30 million, or 51 cents per share, for the fourth quarter of 2004 due to higher costs, including a sharp jump in interest expenses, which rose to $74.3 million from $40.8 million, cutting into the firm's sales growth figures.

The quarterly earnings decline was largely due to a drop in gains the company realized from the sale of real estate assets compared with the previous year's quarter. Earnings were also hurt by a $1.17 million prepayment penalty incurred on the refinancing of a mortgage on one of its mall properties.

Despite the earnings decline, funds from operations grew to $105.9 million, or $1.32 per share, while revenue increased to $226.9 million from $166.8 million from the prior year's figures. The funds from operations results were slightly below analysts estimates of $1.34 per share for the quarter.

"The quarter was highlighted by another quarter of double-digit growth in FFO per share," Arthur Coppola, the firm's president and chief executive officer said in a statement announcing the company's fourth quarter results. "We continue to see very strong fundamentals in our business with high occupancy levels and solid leasing activity," For the year, funds from operations increased to $4.35 per share from $3.90 per share, earning the company $52.6 million, or 88 cents per share.

Also, construction will begin in the first quarter of 2006 on the SanTan Village regional shopping center in Gilbert, Arizona. The center is an outdoor open air streetscape project planned to contain in excess of 1.2 million sf on 120 acres. The center will be anchored by Dillard's, Harkins Theatres and will contain a lifestyle shopping district featuring retail, office, residential and restaurants. It is also anticipated that an additional department store will also anchor this center. The project is scheduled to open in phases starting in fall 2007 with all phases completed by 2008.

Macerich said it expects 2006 funds from operations to be $4.50 to $4.60 per share and earnings of $1.24 to $1.34 per share. Analysts predicted slightly higher funds from operations of $4.68 per share.The REIT holds an interest in 75 regional malls totaling 76 million sf of retail space, primarily in the western portion of the United States.