Macerich Stays Focused On Developments

Macerich is spending $330 million this year on its development and redevelopment pipeline, $500 million next year and $700 million in 2009. A majority of the new projects are in the Phoenix area, where it just opened the 1.2 million-sf San Tan Village, in Gilbert. The company recently received local government approval to open its next new center, the regional Estrella Falls, in Surprise, in 2009. Redevelopments are taking place across its national portfolio as well.

When asked during the company's third-quarter conference call if a slowing housing market could impact its plans to build five regional centers around Phoenix, Arthur Coppola, the company's chief executive officer and president, said he is confident in the market. "We are pursuing development in trade areas that are already populated," he said. "We're not relying on any future job or population growth."

In fact, Coppola says, the housing downturn could ironically help the company combat the high construction costs that have plagued the industry as a whole by freeing up the labor pool. It could even moderate or drop overall costs.

Meanwhile, management does not seem concerned about a possible slowdown in retailers' expansion plans or potential bankruptcies and store closures. "There's no retailer we can see on a national basis, other than Bombay, that's keeping me up at night," says Tony Grossi, executive vice president and chief operating officer, speaking of the Bombay Co.'s plans to shut all of its US stores.

During its third quarter, which ended Sept. 30, Macerich's FFO rose 17% year over year, hitting $110 million, while occupancy rose 0.5%, to 93.5%. Net income for the 73-mall owner fell from $47 million to $17.3 million due to the sale of assets during last year's third quarter, giving that period a boost.