Keefe, Bruyette & Woods Initiates Coverage of The Macerich Company (MAC) with a Market Perform

December 1, 2009 4:34 PM EST

Keefe, Bruyette & Woods initiates coverage of The Macerich Company (NYSE: MAC) with a Market Perform rating and a 12-month price target of $30.00.

Keefe analyst says, "Macerich, the second-largest U.S. mall REIT by total market capitalization, owns a mall portfolio that generates the third-highest sales productivity in the sector. In an effort to reduce leverage, Macerich sold four malls into joint ventures this year. Yet, repairing the balance sheet comes at the expense of portfolio quality and future growth. MAC shares trade at a discount to its comparable peers, which is warranted given the declining portfolio quality and still-shaky balance sheet."

Despite increasing landlord cooperation, effectively maintaining occupancy at the expense of rents, continued weakness in sales will lead to additional store closures. To offset rising vacancy levels, some mall owners have begun entertaining non-traditional mall tenants (e.g., fitness centers, health clinics, dry cleaners, churches and schools) or anchors that may have been unwelcome at malls in the past (e.g., Big Lots, Kohl's and TJ Maxx). Macerich has not indicated a willingness to "open the gates" just yet. However, the February 2009 opening of Costco at Lakewood Mall (roughly 20 miles south of Los Angeles) suggests a willingness to be creative in keeping its malls vibrant and relevant...While Macerich's modestly negative SS NOI growth expectation for 2009 is better than average, it is unclear how much longer management can hold back the floodgates if sales continue to deteriorate."

To see all the upgrades/downgrades on shares of MAC, visit our Analyst Ratings page.

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