Urbanization And Experiential Retail Will Redefine Mixed-Use Assets

Key Takeaways

• Strong leasing momentum, tech-driven operations, and exposure to affluent markets position Macerich for outperformance in occupancy, rent growth, and resilient earnings.
  
• Strategic redevelopment, industry consolidation, and diversification of income streams support higher margins, pricing power, and long-term growth stability.
  
• Reliance on redeveloping mall assets amid e-commerce growth, high debt, tenant risk, and slow-growth markets threatens long-term occupancy, earning potential, and financial flexibility.

Catalysts

Macerich is a fully integrated, self-managed, self-administered real estate investment trust (REIT).

• Analyst consensus argues for occupancy gains and higher rents from new leases, but the pace and scale of recent leasing outperformance suggests Macerich could surpass its 2028 occupancy target ahead of schedule, driving net operating income growth in excess of current projections given accelerating foot traffic and tenant demand.
  
• While analysts acknowledge reduced leasing downtime and increased efficiency from new management systems, Macerich's technology-driven, highly aligned operating model is enabling faster decision-making and rapid integration of acquisitions like Crabtree Mall, pointing to structurally higher future EBITDA margins than consensus anticipates.
  
• Macerich's exposure to high-growth, affluent metro areas is likely to drive sustained revenue and rent growth above peers, as urbanization, demographic shifts toward younger, wealthier shoppers, and experiential retail demand reinforce premium rent per square foot and stable long-term occupancy.
  
• Through active redevelopment and densification of prime locations-including remerchandising former anchor spaces for experiential, entertainment, and omni-channel tenants-Macerich is poised to accelerate mixed-use income streams and diversify NOI, boosting earnings growth resilience well beyond that of traditional retail REITs.
  
• Macerich is benefiting from industry consolidation and rationalization, with closures of weaker malls in key trade areas driving both higher tenant demand and increased pricing power for its premier assets, supporting outsized leasing spreads, lower credit risk, and multi-year margin expansion.

Macerich Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more optimistic perspective on Macerich compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts.
• The bullish analysts are assuming Macerich's revenue will decrease by 2.8% annually over the next 3 years.
• Even the bullish analysts are not forecasting that Macerich will become profitable in next 3 years. To represent the Analyst Price Target as a Future PE Valuation we will estimate Macerich's profit margin will increase from -37.3% to the average US Retail REITs industry of 20.2% in 3 years.
• If Macerich's profit margin were to converge on the industry average, you could expect earnings to reach $204.7 million (and earnings per share of $0.64) by about August 2028, up from $-411.3 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bullish analyst cohort, the company would need to trade at a PE ratio of 49.3x on those 2028 earnings, up from -10.7x today. This future PE is greater than the current PE for the US Retail REITs industry at 25.6x.
• Analysts expect the number of shares outstanding to grow by 7.0% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 9.29%, as per the Simply Wall St company report.

Macerich Future Earnings Per Share Growth

Risks

• The continued shift of consumer spending toward e-commerce and digital retail, combined with changing preferences favoring experiences over physical goods, may erode long-term demand for Macerich's mall spaces, putting sustained pressure on occupancy rates and future rental revenues.
  
• Macerich's business model relies on large-scale capital expenditures for redeveloping and modernizing properties, especially to backfill anchor spaces and remerchandise malls; ongoing renovation needs, as noted for new acquisitions like Crabtree Mall, will consume significant cash flow and may limit future earnings and dividend growth.
  
• High leverage, evidenced by net debt to EBITDA of 7.9 times and sizable near-term debt maturities, exposes the company to rising interest rates and refinancing risk, which could increase interest expense, constraining net margins and hampering financial flexibility for further investment or acquisitions.
  
• The portfolio's legacy exposure to struggling or bankrupt tenants, as well as ongoing consolidation in the retail sector, creates revenue risk due to potential store closures and re-leasing uncertainty, increasing the likelihood of future income disruptions and impairments.
  
• Macerich's focus on repositioning assets in saturated or slow-growth markets leaves it vulnerable to long-term declines in property values and rental rates, especially in the face of structural retail oversupply in the U.S., which may depress both earnings and property valuations over time.

Valuation

• The assumed bullish price target for Macerich is $24.01, which represents two standard deviations above the consensus price target of $19.0. This valuation is based on what can be assumed as the expectations of Macerich's future earnings growth, profit margins and other risk factors from analysts on the bullish end of the spectrum.
  
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $25.0, and the most bearish reporting a price target of just $15.0.
  
• In order for you to agree with the bullish analysts, you'd need to believe that by 2028, revenues will be $1.0 billion, earnings will come to $204.7 million, and it would be trading on a PE ratio of 49.3x, assuming you use a discount rate of 9.3%.
  
• Given the current share price of $17.39, the bullish analyst price target of $24.01 is 27.6% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.