The Macerich Company Price & Performance (MAC)

And with us in the room, we have Brad Miller, SVP of Portfolio Management.

With that, I turn the call over to Jack. Thank you, Samantha, and good afternoon. Over the last year since joining Mace Ridge, I have become increasingly confident in our mission to operate and own thriving retail centers that bring our communities together and create long term value for our shareholders, partners and customers. We launched MaceReach's Path Forward early in my tenure and I'm pleased with our steady progress This clear executable plan is designed to accomplish three key objectives over its five year horizon. One, simplify the business improve operational performance and three, reduce leverage. During 2024, were successful in simplifying our business through selectively consolidating joint venture interests at Arrowhead Town Center South Plains, Los Cerritos, Washington Square and Lakewood Our equity offering in late twenty twenty four derisked that portion of our plan and the refinancing of The Centre is well below our target refinancing rate. We're well underway on loan givebacks and mall sales and are now focused on outparcel land and select open air retail sale opportunities around our shopping centers. A big focus of mine has been to improve internal processes and restructure many aspects of our approach to asset management Leasing property management, portfolio management and development.

Which will best position the company to drive improved operational performance and to deliver long term value creation. I'm pleased with the progress on several key initiatives to date Our process improvement committee has been successful in implementing a new leasing dashboard tool whereby leasing asset management, legal tenant coordination, construction and senior leadership all collaborate seamlessly together. Which has vastly improved our visibility and efficiency around leasing and tenant coordination. Our asset management and portfolio management teams are now a standalone group whose mission is to be the asset owner at The. Responsible for driving cash flow and long term value through operations Utilizing our leasing, development, and property operations teams, Our asset and portfolio management teams led the effort to create five year Argus business plans for each asset which is now a bedrock tool that we use to evaluate leasing, and capital decisions. [indiscernible] The permanent specialty and department store leasing teams are all now under one leadership and reporting structure. Property operations marketing and development are also under a new leadership structure. [indiscernible] Working collectively with our asset management, portfolio management and leasing teams, we have ranked all 10 spaces throughout our portfolio with an A through F grade and determine market rents for each particular space.

An important aspect of our path forward plan is to take advantage of driving more incremental revenue out of our portfolio through leasing vacant Temporary leased and under market A and B and C rated spaces within our portfolio. Each of these organizational process analytical and technological enhancements provide our team with the strategic roadmap and tools to drive leasing, and NOI over a multi year horizon. With respect to the NOI component, our leasing team is hyper focused on what needs to get done To help frame the leasing initiative, in 2023 and 2024, we averaged approximately three point seven million three point seven five million square feet of annual lease volume We are targeting an average of 4,000,000 square feet of leasing in 2025 and 2026, and focusing on creating a higher percentage of new lease deals versus renewals in our annual mix of business. New deals contribute vastly to our releasing spreads and incremental rental revenue. The effect of this shift in mix is new deals typically involve more rental revenue downtime in the range of twelve to eighteen months. 2024, we achieved 8.8% base rent releasing spreads for permanent tenants under 10,000 square feet, New leases signed during this period were 17.6% higher base rent versus the prior period permanent rent Including vacant and temporary lease space to the aforementioned group of spaces, the re leasing base rent percentage increase was over 50%.

Our current physical permanent occupancy for our go forward portfolio is 84%, We are targeting an 89% physical permanent occupancy rate by 2028 Approximately 50% of this increase is already accounted for by our current snow pipeline of $66,000,000 Having the ability to forecast the longer term impact of this [indiscernible] in leasing mix coupled with continued strong leasing demand, is an excellent setup for us to achieve our incremental NOI goals for 2028. We are being very intentional in our decisions to optimizing lease outcomes and rental revenue uplift within our portfolio that aligns with our [indiscernible] financial objectives for 2028 under the Path Forward Plan, This is a massive change in mindset and operations for the company, which has historically been more focused on managing the business to annual near term FFO targets. There is a compelling opportunity to get after under market and vacant A, B and C rated spaces in our centers maximizing each space and their total revenue potential over the long term will result in a higher volume of tenant remerchandising space movements and temporary downtime in rental revenue. To recap, I feel very good about how things are progressing on our path forward plan.

We've made substantial progress to date We have a clear roadmap with tools, and new processes for leasing The the next eighteen to twenty four months and beyond. Which will drive incremental rental revenue and a more improved and resilient permanently occupied portfolio. We are currently 39% complete in our leasing goals towards our plan. Our asset [indiscernible] to lenders will play out over the next two years as loan maturity dates trigger on any properties, we have an identified group of outparcel, land and malls that the team are executing sale transactions.

Which will continue over the next three years And we are currently funding our development pipeline which will contribute NOI in 2026 through 2028, With that, I'll turn the call over to Don.

Thanks, Jack. We had another solid quarter and year for that matter both in terms of leasing volumes and metrics. Sales per square foot at the end of the fourth quarter were $837 and this is up $3 compared to the last quarter. Sales per square foot excluding our Eddy properties were $915 Comparative sales for the fourth quarter and for the year were basically flat. When compared to the same period in 2023. As I've stated in the past, we have yet to see a correlation between sales and retailer demand as evidenced by our deal flow, both in terms of number of deals and square footage, compared to the same period last year. And I'll get into this more in a moment. Traffic for the year was up almost two The traffic is back to our pre COVID levels. Occupancy in the fourth quarter was 94.1%. This is up 40 basis points from the third quarter and up 60 basis points Portfolio occupancy excluding our 95.8%. In the fourth quarter, we opened five thirty thousand square feet of new stores. Brings our total for 2024 to 1,500,000 square feet of new store openings which is just about on par with where we ended up in 2023.

Now let's take a look at the new and renewal leases that we signed. In the fourth quarter. In the fourth quarter, we signed two twenty three leases for 1,100,000 square feet.

For the full year 2024, we signed leases for 3,700,000 square which is just about where we ended up in 2023, And let's keep in mind 2023 was a record leasing year for us dating back thirty years when Maestrich first became a public company. 2024 was also another year of newness [indiscernible] Once again bringing new, unique and emerging brands was a major initiative for our leasing team. And a way for us to really reimagine and differentiate our shopping centers from our competition. To that end, in 2024, we ended up with commitments on nearly 430,000 square feet of new to Maesrich brands. Examples include Helly Hansen, Princess Polly, Majorie, Carhartt, Seafood City, Akira, Rivian, Buck Mason, Celine, Pop Mart and Mendocino Farms, just to name a few. So once again, a very solid volume of leases I like to focus on the future in our current leasing velocity. And as I've said before, at Maestrich, we review deals every two weeks And year to date in 2025, we've reviewed 55% more deals we did during the same period last year. But most importantly, we reviewed three times the new deals and over five times the new deal square footage than we did during the same period last year.

Once these deals are reviewed and approved, they go to lease get signed and eventually become part of our sign not open pipeline. I realize it's early in the year, but these statistics are very encouraging and indicative of the healthy retailer environment that exists today. So far neither sales nor the macroeconomic environment seem to have had any effect on retailer demand. I also believe this is a testament to Masridge's must have portfolio. Turning to our lease expirations. To date, we have commitments on 63% of our twenty twenty five expiring square footage that is expected to renew and not close. With another 21% in the letter of intent stage. So between commitments and LOIs, we're just about 84% done, which our twenty twenty five lease expirations. In the fourth quarter, we had only four tenants in our portfolio file bankruptcy. In all of 2024, we had just 13 tenants in our portfolio filed totaling only 54 stores. 26 of which were the express bankruptcy. And of the 26 express stores that we had in our portfolio, only nine closed and of that nine, we have commitments or are negotiating LOIs on 75% of that closed square footage.

Turning to our signed not open pipeline. At the end The the quarter, fourth quarter had 104 leases signed for 1,200,000 square feet of new stores which we expect to open between now and into early twenty twenty eight. In addition to these signed leases, we're currently negotiating leases for stores totaling just under 875,000 square feet, which will also open during the remainder of 2025 and into 2026, 2027, early twenty twenty eight. So in total, that's over 2,000,000 square feet of new store openings throughout the remainder of this year and beyond. And this pipeline of new store openings now accounts for $66,000,000 of incremental rent of which $27,000,000 will be realized in 2025 and into early twenty twenty eight. And with that, I'll turn the call over to Dan, to go through our fourth quarter and year end financial results. Thanks, Doug, and good afternoon. I'm pleased to be participating in my first earnings call with the Maerserich team. I'll start with a review of fourth quarter financial results. FFO excluding financing expense in connection with Chandler Freehold gain on extinguishment of debt, accrued default interest expense and loss on non real estate investments was approximately $117000000.0.47 dollars per share during the fourth quarter of twenty twenty four as compared to approximately 128,000,000 or $0.57 per share for the fourth quarter of twenty twenty three.

The primary drivers of the $11,000,000 and then the severance expense incurred in the fourth quarter of twenty twenty four. $7,000,000 of the increase in interest expense relates to the amortization of debt mark to market resulting from our various JV interest acquisitions This non cash expense is included in interest expense on our P and L. Severance expense for the quarter was approximately $5,000,000 and is included in management company's operating expenses on our P and L. I would note that as it relates to the amortization of the debt mark to market resulting from the JV buyouts, We expect this to have an incremental $0.09 per share reduction to twenty twenty five FFO adjusted as compared to 2024, all else equal, This reflects a full year impact in 2025 versus the partial year impact in 2024 when we acquired these JV interests. As a reminder, these are non cash interest expense items and they roll off the P and L by 2027 as the various loans mature. Same center NOI excluding lease termination income decreased 0.4% in the fourth quarter of twenty twenty four compared to the fourth quarter of twenty twenty three. And for the full year ended 2024, same center NOI excluding lease termination increased 0.2% compared Adjusted for the negative impact of the express bankruptcy, same center NOI growth would be about 1% year over year Excluding Eddie assets, this adjusted 1% growth would increase to 2.1% for the year.

Turning to the balance sheet, made considerable progress in 2024 managing our debt maturities.

We closed on seven transactions for over $1,300,000,000 of loans $1,100,000,000 at our share. During the fourth quarter, we closed on a five year refinance at Queen's Center at an attractive fixed interest rate of 5.4%, We just recently paid down the approximately $15,000,000 MES loan or about $7,500,000 in our share on Flatiron Crossing that carried a high interest rate of SOFR plus 12.25%. For the balance of 2025, we have less than hundred million dollars net share of maturing loans and we've already started to address our 2026 debt maturities with the repayment of two loans Washington Square and The Oaks.

We'll provide further updates on our debt and securities as we move through 2025.

Currently have approximately $683,000,000 of liquidity including $540,000,000 of capacity on our line of credit.

From a leverage perspective, I'm pleased to report that debt to EBITDA at year end 2024 was slightly below eight times. Which is almost a full turn lower than one year ago. And we've outlined our strategy to further reduce leverage The the low to mid 6x range over the next several years. We continue to make significant progress in executing the path forward plan. In October, as previously announced, we closed on the acquisition of our partners 40% interest in the PPRT portfolio, The net acquisition price was $122,000,000 and we assumed our partner share of debt outstanding. We now own 100% of Los Cerritos, Washington Square and Lakewood. This transaction is consistent with our stated objective to proactively consolidate select joint ventures and to simplify the business. In November, the company priced an underwritten public offering 23,000,000 shares of common stock at a price to the public of $19.75 per share. For gross proceeds of approximately 454,000,000 We used the net proceeds from this upsized offering together with cash on hand to repay the $478,000,000 Washington Square mortgage loan that has an interest rate of SOFR plus 400 bps that had a 2026 maturity.

This transaction is consistent with our stated multi pronged strategy to reduce leverage In December, we closed on the sale of the Oaks $157,000,000 We used the net proceeds from this sale to repay the $148,000,000 loan on this property that had an effective interest rate of approximately 7.75% and that had a 2026 maturity.

We also closed on the sale of Southbridge for net proceeds of 4,000,000 and we are currently under contract to sell welding wall for $25,000,000 which is expected to close in the first half of twenty twenty five subject to customary closing conditions. This asset is unencumbered. These sales transactions are consistent with our stated disposition plan to improve the balance sheet and refine our portfolio. To recap on the Top Forward Plan's significant progress to date, on our three key pillars to reduce leverage, One, Jack provided commentary on the NOI growth component. And the roadmap for the team over the next two years to execute on this prong of the leverage reduction [indiscernible] Two, we have achieved the equity issuance component of the plan. And three, we have made substantial progress on the sales and givebacks component of and have identified a clear path to achieving our $2,000,000,000 disposition target. To date, we have completed almost $800,000,000 The includes Country Club Plaza, Biltmore, The Oaks and Southbridge, which are closed, Santa Monica Place, in which the loan encumbering this property is in default, Wilton, which is under contract and Atlas Park, which is currently being marketed for sale.

And then we have identified internally four assets totaling about $315,000,000 to $400,000,000 for sale or giveback over the next one to two years.

That brings us to almost 60% of our $2,000,000,000 target The remaining 40% of the plan includes the planned sale of one enclosed mall over the next year and the sale of $500,000,000 of outparcels freestanding retail, non enclosed mall assets, On the $500,000,000 we expect to close $100,000,000 to $150,000,000 of sales in 2025 which we anticipate will be more weighted towards the second half of the year And then we expect the balance of the $500,000,000 in sales to close in 2026 into the first half of twenty twenty seven. We'll provide further updates on these sales as we progress through the year. With that, we'll turn the call back over to the operator The.

Thank you. As a reminder, task And the first question will come from Floris Van Ditcham with Compass Point. Your line is open.

Hey, thanks, guys. So a couple of questions. Let me start with same store NOI. I know you haven't given any guidance, but if I look at the S and O that's going to hit in 2025, Dan, I think it's around $27,000,000 of the 66 existing pipeline that you've outlined. That would appear to be 3% growth I guess it depends a little bit on the timing of that. But again, with the fixed rent bumps, etcetera, It seems like your same store NOI growth in 2020 in 2025 is going to be significantly improved over '24. Am I missing something? Hey, Floris, this is Jackson. I'll take this first. So tried to give reference around the totality of new leasing that's happening and the frictional downtime when we either take out a temporary or a lease permanent and revise upwards for a better tenant is going to pay more rent. That's basically a loss of rental revenue. Now that's offset by renewals and the timing of these snow pipeline coming through, The way we've modeled this it's going to be candidly more flat. For the next couple of years The then stair step up in 2027 and 2028.

Given the profile of how this is all going to model out, So when I look at same store NOI and candidly FFO over the next couple of years, that's not going to give you the real answer on our progress. And what really will start to show progress is I mentioned 39% of our of our leasing goals that relate to cost of occupancy or rent are achieved we'll give updates as we move along, but as that percentage goes up, you should have confidence that all that rent will start to come online as it churns through [indiscernible] temporary leased and what I call low performing permanent tenants that we have targeted to take out of the portfolio. So Jack, let The just clarify. I think you've indicated that you've got about 17% or 18% spreads on your new leases. And your presumably, does that also mean that if you're assigning those new leases at similar occupancy cost ratios as your existing rents, that sales on those new leases are going to be call it 18% to 20% than your existing portfolio issue, we start to see some of that filtered through in your in improved sales numbers in the portfolio?

I think you'll see it. Well, first of all, too, I referenced that 50% number So that includes for tenants under 10,000 square feet where there's obviously a big opportunity for leasing. If you include vacant, temp tenants and perm through 2024 that releasing spread was over 50%. We have a meaningful amount of vacant and temp A, B and C class rated space in our portfolio.

You're probably asking like how do we get The? Well, if you're running a company based on annual budgeting targets, and not looking out on how leasing impacts forward future performance that's how you get there. You'll get you'll bump along at 3% to 4% You're going to keep your temporary tenant percentage will not go down. Because you want to keep that rent in place. You'll probably keep tenants that are less desirable permanent tenants in place And we've got opportunity in our better centers just to to kind of redo that. And that's where I talk about this higher percentage of mix Now The net result of that you may see some quarters where it goes up but it also may go down and for this portion of the plan, it's It's almost like we're treating it like we're a private company because there's a big opportunity to capture a meaningful spread of rental revenue if we do The, We haven't provided the details of it, which we plan to [indiscernible] later this year in this NOI bridge, but it's a pretty compelling opportunity and that's the result of it is going to be more noisy store NOI and probably FFO [indiscernible] Let me ask my second question, if you don't mind.

As I'm looking at obviously, you still have some expensive debt in particular, South Plains at almost 8%. I don't know whether you're going to keep that one or not, but you've got a a really attractive development pipeline, Green Acres with I think 13% returns, that's $130,000,000 if I'm not mistaken. And then Scottsdale, 17% returns on The. Wouldn't it make sense to fund all of that with with equity, including the debt pay down simply because it's accretive relative to the 7.1% implied cap rate you're trading on. Or how do you think about that? Or are there other opportunities that you see where that might make sense?

I mean, you could choose to do that and it's obviously mathematically accretive. To issue equity to fund The, but at this point, our concept on issuing equity is if the opportunity rises where we can consolidate a JV, or there's some other accretive use The could be paying down development pipeline with equity buying a property, something like The. So but outside something like that, we feel like we've got the equity needs in place We've got enough free cash flow to execute the plan. After dividends and interest. So Yes, but you're right. It would be mathematically accretive to use equity to finance the developer pipeline.

And the next question will come from Craig Mailman with Citi. Your line is open.

Hey, good afternoon. Jack, you just touched on the new dashboard and having five year Argus runs now. Kind of the process put in place. Is there any [indiscernible] kind of quantification of how that's helping you from the more efficient process turning into [indiscernible] legal or quicker gestation periods kind of anything around The? That would be helpful to give some tangible Okay. Hey, thanks, Craig. Well, some of The the comments that Doug talked about, what we've seen year to date, I think that's partially the environment. But it's partially us having the tools to know what space to go after and how to do it. When I first got here, a year ago, when I went to review a lot of properties, did on-site visits, one of the consistent themes that I had heard from our leasing team every time I went to a new property, met with the leasing team, asset management, development, on-site manager, kept hearing it time and time again the leasing team spent so much time In the re budgeting process that this company did, which was typically three times a year. With three re budgeting forecasts throughout the year and the amount of time that it took for them to stop what they were doing, reforecast, their pipeline apply new market rents to different spaces they were focused on The second thing that took up a lot of time was there was no system at the company to communicate the current status discussions with tenants which kind of shocked me.

So everyone had their own spreadsheet, their own lists, and we've there were hours and hours spent by people on conference calls trying to update National tenants across our regions where people are located in terms of leasing team. And so when you couple like the reforecasting coupled with the lack of visibility [indiscernible] of man hours at Maseridge were spent on things that were not driving future revenue opportunity. If you fast forward today, this leasing dashboard is effectively a CRM for us.

And so at any given time, Doug, myself, Brad can pull up or an asset manager can find out a space that's designated to a leasing rep Where that last conversation was, what the target rent was, and that tenant can be seen by everyone in that conversation, everyone in the The. Whether it's tenant coordination, asset management, [indiscernible] And we've got a quarterly review process now where it's really driven by asset management. Where they can basically go through a leasing plan And so look at Space C10, the last comment on that was like three months ago. That's really not going to be very effective. If we're targeting C10 to be leased, on prime over the next two years.

So the result of all this is I think there's tremendous efficiency It's creating more opportunity for boots on the ground to achieve these targets that we're looking for.

And I mean, Brad, you've been here for a long time, but Houston portfolio you're the architect of a lot of the old process, Pete, tell me what you think. [indiscernible] So, right, going from an annual budget process of having annual lease goals and [indiscernible] to now having a five year plan where we get visibility into the progress really on a daily basis and the shifting of resources it is producing results. I mean, as Doug mentioned, it's early innings this year, but We're seeing good progress and we know exactly where we need to be and the 39% The is to us on track to hit our goals. That's helpful. Then maybe the follow-up you guys are effectively raising your annual leasing goal by about 250,000 square feet. How much of that is your capacity kind of improvement now The you have some of these processes in place versus just the amount of demand that you're seeing and the ability to get some of that through the door? Hey, Greg, it's Doug. I'll take that one. Yes, we're obviously benefiting from a health retailer environment that is persisted really over the last couple of years and we don't see any change to The.

In the near future. So that's a huge tailwind for us. But in terms of the processes that Jack and Brad were just talking about, we have a very clear path to where we need to be at the end of twenty twenty eight. And in my world, we need to be by the end of probably twenty twenty seven to get that or 2026, excuse me, to get all that revenue online by 2028. So So we've done a few things internally and I won't get into the nitty gritty, but Jack did a loop allude to it. We brought all anchor store leasing and all specialty leasing under one roof. So whereas before The were sort of silos set up, now all revenue is coming under me by permanent leasing people are working with our specialty leasing people are working with our department store people to make sure we get to that and end goal in 2028. And I think one of the most important things we've done and Jack talked a little bit about this is we have a we're laser focused on permanent leasing, not to say not focused on specialty leasing, we can't let that go.

But we've got a bunch of specialty leasing people on-site that do nothing but fill space temporarily. So the fact that they're now in our world, they're acting more like permanently people. So while their focus is still on specialty, in their mind, they're aligned with permanent leasing goals, which means where we need to be by 2028. So it's those little things that we've done internally I think account for this velocity The I alluded to earlier in my opening remarks.

Great. Thank you. Thanks, Craig.

And the next question comes from Linda Tsai with Jefferies. Your line is open. Hi. Thanks for taking my question. Jack, appreciate the systematic rigor you're proliferating at May The. I know you introduced the same types of processes at Spirit The. My question is, SNO is a percentage of NOI, how should we think about the growth rate in '25 versus '24 and '26 versus '25?

Hi, Linda, it's Dan. We had in terms of total SNL for 2025 is of The again taking a step back The the $66,000,000 of snow in 2025 would be $27,000,000 of that 26,000,000 or sorry, the $66,000,000 And what was the second part of your question in comparison to what?

I was just trying to think about it [indiscernible] SNO as a percentage of NOI and what those growth rates could look like? How much that grew in 2024 versus '23, '25 versus '24, '26 versus '25.

I mean, I would say Linda, The how I think about it rather than give you a percentage Important part, I'd mentioned to you like this mix of more new versus renewal. If you looked at our historical five year average of tenants under 10,000 square feet [indiscernible] Typically The ratio is about 34% new New leases versus renewals. Over that five year period In 2025 and 2026, we're targeting 45% new tenants in our game plan, So that's going to automatically obviously increase the snow pipeline substantially if we're able to accomplish this. Which we believe we are. So I don't think it's going The have it's going to be quite different than historical. Because it's very intentional about attacking vacant I'll call it non productive A tenants that can be upgraded some undermarket some temp There was a surprising amount of opportunity within within our 20 yard lines.

Of the main mall, it's just like why do we keep these tenants here? Why are they here? Well, we're focused on annual FFO targets and budgets and reforecasting, we can't kick them out. The wrong thing to do for the center. And we can get and make more money. So you think about what we're trying to solve for, 2028, If we do what we say, we're going to end up with a much more resilient permanently occupied portfolio with strong vibrant tenants. That's the result of this.

And we can have better merchandising mix, which will drive traffic We can get rid of some of the legacy tenants that are currently not performing well or at risk which is something that was harder to do under the way we used to do things, which were The the annual period. So to answer your question, the snow is going to go up. It's just as we kind of crank through this, we can already see it.

Maybe as a follow-up.

Actually, especially with the twelve to eighteen months downtime, that will come in on time. For our purpose. 2028.

Thanks. And then what's the spread difference between the new rents and the So for under for under 10,000 square foot, it's That 8.8% versus 2017. So I think The The would be the The? 8%? 7%. 5.8%. 5.8%, sorry.

Thanks. But once again, once again mix has a huge variance for these numbers, the mix. And we'll start to disclose going forward much more detail about leasing mix because you obviously need it. If I just give you 8.8, that doesn't really tell you too much. So we'll start to give give you more details as we move forward at the end of the first quarter. On the mix that we're talking about, I think it would be helpful for you.

Thanks. Just one last follow-up.

Related to that. In leasing up the A, B and C space, that you didn't focus on previously, what's the weighting of those spaces like percentage of A versus B and C? And then are you able to turn C spaces into Bs and B spaces into A's? It's less about let you go, Brad.

Sure. I mean, like in our plan and our go forward plan, 90% of our leasing activity is on A, B and C spaces. So we're still it's still strong spaces where The tenant demand leases open on plan.

Thanks.

And the next question will come from Jefferies Spector with Bank of America Securities. Your line is open.

Hi.

This is Andrew Reel on for Jeff.

Thanks for taking our questions.

Just on the consumer, last quarter you pointed to this shift in discretionary spend away from goods and more into services. Just wondering if you've seen any capitulation back towards goods oriented spend and what your overall thoughts are on the outlook for discretionary retail in 2025?

Yes. Hey, Andrew, it's Doug. It's a great question. I did talk about that. Coming out of COVID, everybody was buying things. I mean, they're remodeling their homes, they were buying shoes, they were buying apparel, all stuff that they couldn't do for eighteen months. And that's why we saw huge comp sales across our portfolio over the last two point five years. But you're right, I did talk about the fact that consumer behavior was changing and it was. It was people for the first time felt more comfortable to socialize. They felt more comfortable to go on vacation, to go on cruises, to go to concerts. And we're still seeing that. But now you think about it, this has probably been going on for the last eighteen months eighteen months say. Now it's time for replacement. So I think the key word on a go forward basis is replacement and replacing those products that were bought coming out of COVID. And that's what we saw in the fourth quarter. For sure. In November and December, that's The we started comping up. I think that's sort of the buzzword around the industry right now is replacement. So I think you guys see that all cycle back to a little bit more of normality.

Okay. Thanks. And then just a quick follow-up Of the 2025 expirations, I think you said in your remarks 84% of those spaces are now committed or under LOI. Just curious, how does that compare to this time last year? Thanks.

Just a little bit ahead of where we were last year.

Okay. Thank you.

And the next question will come from Steve Sakwa with Evercore. Your line is open. Thanks. This is Manas on for Steve.

It looks like you're making some really good progress on all fronts for the The forward. Are there any areas, Jack, that you feel like are slower than what you would have expected now that we sit here and from the point of being in February? [indiscernible] And maybe if you could touch on what you believe maybe is the biggest risk going into 2025 The could impact the execution of the path forward as the first question?

Yes.

I mean, I'd say we're very comfortable with the range debt to EBITDA and the earnings ranges we put out. Last year for the plan after going through the detailed business plans, I think one of the things that came out of the Argus exercise was that the Anticipated landlord work and TA costs were higher given the percentage new tenants we are focused on. So that was one area that was probably more of a negative surprise for us. We've obviously had a lot of positive surprise as well The equity, the refinancings and some of the sales The other is One area that could a negative for us or a headwind is if there's any delay in our development pipeline, So at Green Acres, we're on track Nordstrom's is on track. There is some delay at Flatiron, so we're trying to move continue to move forward in that project as quickly as we can. But Absent that, we have a very clear idea of what we need to accomplish And we feel like we've The management reorganization and people reorientation with the systems It's quite staggering how big of an impact this is having around selling it, so The the past.

So I'm confident in what what we can do and just going to get it we're just getting after it.

That's perfect. I appreciate that. It's actually properly translating into my second question. Which was going to be on CapEx. You just mentioned that based out of these Argus run exercise, it looks like that is maybe trending higher. So I just wanted to clarify is that maybe now essentially translating in CapEx for 25 as a percentage of NOI or however you want to base it off. Potentially trending higher than previously anticipated or higher compared to 24 Any color there would be super helpful.

I mean, hopefully, we can beat those assumptions because they're just assumptions right now. But if we're able to achieve the level of velocity that we talked about 4,000,000 square feet, 45% new under 10,000 square foot tenants. That's going to incur theoretically more capital costs in 2025 and 2026 versus historical. Because we're running at higher volumes and new and percentage of new tenants versus renewals.

Yes. I would just add relative to the initial plan to Jack Point. It's a little bit more near term $0.25 and $0.26 but then it levels off in 728%. Versus more of a smooth spend over the four years.

Perfect. That's Sumit. Thank you.

The next question comes from Vince Tybone with Green Street. Your line is open.

Hi, thanks for taking my question. For the $400,000,000 of planned lender malls that Dan mentioned weighted average debt yield on those assets just to help from an FFO?

Perspective? And then also on the $500,000,000 of potential dispositions, how should we think about the quality potentially cap rates on those more selective dispositions? Is The fair to it's going to be more Eddie properties in addition to some freestanding as you mentioned, but any color there to help FFO modeling would be helpful.

And Vince, on the second part, you're asking specifically about the 500,000,000 Yes. That's what I was referencing, yes. Yes. So those are more outparcels freestanding retail, land parcels.

And not enclosed malls. So as we looked at the plan at the beginning, we had said we thought we could accomplish the dispositions about weighted average 8% cap rate.

If you look at the profile of these types of assets, we think those are sub-eight percent cap rate.

Transactions.

But again, that piece of it is sort of sub-eight and then it counters off the rest of the sales to kind of get to a weighted average of around eight.

As it relates to kind of the overall assumptions on the dispositions. On the first part of your question, On debt yields, those are typically what we're looking at. Sort of like high single digit debt yields For the the three or four assets that we've identified. No, that's really helpful and I appreciate the clarification on the $500,000,000 When you said non enclosed malls, I thought open air centers potentially. So I'm glad I clarified that. And then maybe just changing gears a little bit. Could you give an update on The potential densification at Los Cerritos now that it is wholly owned.

Is that something you could potentially break ground on in the next year or two and just curious how you're thinking about the structure of that project, whether you do it on balance sheet, use a joint venture partner, just love to get your latest thoughts there.

So Los Cerritos is now an amazing that we control it. You know that that center continues to perform extremely well. I mean, we have options from a very good [indiscernible] tenant that wants to take the Sears location, which obviously would we did that, impede some of our ability to to put residential out in that Sears field. I think at this point, what we're trying to do is Maximize the entitlement opportunity for high for residential density And more than likely, we're going to sell that land end titles Obviously, we could sell today, partial entitlements but we think there's a lot more value in getting the entitlements And I'd say that for us to pursue the development ourselves, it would just be once again, sort of understanding The the returns relative to other capital allocation opportunities within our portfolio. But it's a great site. It's a great center. It's only getting better. And we believe there's a lot of demand for that. For that parcel, the Sears parcel And we're just going for a maximum entitlement opportunity and then we'll decide what to do.

Great. Thank you.

Thank you.

The next question comes from Alexander Goldfarb with Piper Sandler. Your line is open.

Good morning out there and yes, I mean, you guys have certainly achieved a lot in a short period of time. So two questions here, Jack.

First is just looking at your cash balance, I think it's about $135,000,000 right now.

Yes, there's certainly a lot that you're doing especially around CapEx leasing. So just want to understand, is there a minimum cash level that you guys think about as you're executing your plan?

And then how do you balance having cash on the books versus debt paydown [indiscernible] Yes.

This is Dan.

I'll take that.

Where we're at now from The cash balance is generally where we would be sort of comfortable operating within that range.

I think holistically as we look at our sort of sources and uses We have free cash flow from the business, about $300,000,000 after funds available for addition funds available for distribution after our operating CapEx and TAs. If you look at 2024, Most of that will obviously The run rate on the dividend and then what's left [indiscernible] And to the extent our cash balance is dip down a little bit from a timing perspective, We could use our line of credit to temporarily fund some of that or we're also looking at refinancing right now, which would provide some excess proceeds in the near term. Then as I mentioned earlier, once we get through 2025 and 2026, then the free cash flow of the business starts to produce more and then we have more optionality at that point in time to pay down debt. So right now, it's kind of funding the PAs for the leasing and the development in the near term. And then as we build cash balances out in the out years, we have more optionality to pay down debt.

Okay. And then the second question is, there's a lot that's going on as you improve the tenancy. So Jack, you mentioned occupancy probably going to come down as you pull out legacy tenants, replace them with better performers.

At the same time, there are some dispositions planned Is there some sort of framework that you can provide in terms of the FFO or NOI hit that's going to occur say this year, next year before it obviously rebounds? Just I know you're not giving guidance, but still it sounds like a lot of moving parts And just is there a sort of an aggregate number that we can think about impact this year and next that would help us think about this transition phase that you're going through?

It's hard to give you a precise answer to that because if we dispose of an asset faster The makes an effect Leasing [indiscernible] current leasing plan impacts this I mean The best way I can describe it is I think Our same store NOI is going to be roughly flat slightly up, maybe slightly down, but generally in this flat area for the next couple of years. And then it's going to start to dramatically start to [indiscernible] And as we're increasing we'll be shedding the residual remaining Eddie assets The our loan givebacks and we'll be monetizing a lot of that $500,000,000 outparcel and land that will be used to pay down debt and then you sort of square up on Getting into that zone, we talked about mid-6s, low-6s, [indiscernible] Dollar 80 plus or minus And then is there Jack, is there like percent of same store NOI as we think about it What percent is that of the total NOI right now? Is that like 80% of total NOI? Like obviously you got some assets that are going to be moving on I'm not sure. It's a I've been a I'm not sure that's the way you want to look at this to be honest with you.

There's kind of too many moving pieces going through, if you will try to precisely model it. And that's why I can't really we're not really focused on it. I can tell you I'm not focused on it. Same store NOI, over the next twelve to twenty four months, because if we accomplish what we're going to accomplish, the uplift is more significant. And it's something we'll try to present when we put out these materials that we talked about The bridge. I think that will be more helpful to see what we're shooting for.

Okay.

Thank you.

Thanks.

And the next question will come from Handel St. Juste with Mizuho. Your line is open.

The there. So I wanted to follow-up on some earlier comments. Talking a lot about the strong leasing demand. I'm curious how that's showing up in your leasing negotiations? Are you getting more term, better bumps? And I'm also curious what you might be hearing from your tenants in regards to the potential impact of tariffs as you're having The leasing conversations? So I'll take the first question first The.

Leasing demand and I talked about this a little bit earlier. Mean we've got a great tailwind right now. We've got a very healthy retailer environment. And we have a must have portfolio. Even with everything that's going on in the world, if you think about it, the majority of tenants that releasing to are very sophisticated national retailers. That can see past six months or see past twelve months. They're signing leases for seven to ten years. I would say as our occupancy continues to increase, that will naturally by definition help our revenue structure So I would say the lease terms are similar to way they've always been. But I think cost of occupancy cost of occupancy potential will certainly increase as occupancy increases. I was going to say one thing too is on renewals. I think in the past, Renewals tended to be much shorter, one to two year renewals because there wasn't a clear direction on what needed to happen in that mall because they didn't want to suffer the downtime. So they sort of The the can.

Now on renewals were tenants that we we want in the centers, we're going for longer renewals. Is a different approach I'd also say like if you look at some of the retailers that are announcing earnings and giving guidance were '25 I mean, it's not a heroic guidance, but it's also also not tariff based guidance. So look, I'm sure people think about it, talk about it, but it's not sort of what we've seen so far, not embedded in retailers' 2025 earnings and guidance estimates. And so and let the a lot of our retailers have already come up with strategies to deal with China and some of the other affected areas If you're dealing with lumber coming from Canada or you're dealing with fruit coming from Mexico, Obviously, those type of retailers rely on The. Getting much more sensitive The any kind of direct tariff impact.

That's helpful. I appreciate that. And maybe some commentary some color some insight into the tenant watch list here.

And maybe what level of bad debt reserves you might be using in your budgeting?

So, Annalude, our watch list right now and I'll let Dan comment after I do, but our watch list is significantly lower than it's ever been. I mean, if you compare our watch list to 2019, have about 60% fewer tenants on it and 45% less square footage.

We which makes a lot of sense. One, we have a very healthy retailer environment right now, but two, and we've talked a ton about The, all the failing retailers, they're struggling pre COVID, they didn't make it out of COVID. So that diminished our watch list exponentially And Dan, do you want to take the financial end of it? Yes, Haindell, it's about 75 to 100 bps Got it. Got it. Thank you, guys.

That is all the time that we have for questions. I would now like to turn the call back over to Jack Shea for closing remarks.

Thank you. We're pleased to report our progress on the The strategic initiatives within our path forward plan and we look forward to seeing of you at the upcoming Citi Conference in Florida The. So thank you very much for your time this afternoon.

This does conclude today's conference call. Thank you for participating. [indiscernible]