Santa Monica-based shopping center owner Macerich Co. on Friday said funds from operations rose in the third quarter on new acquisitions and higher rents from tenants in its malls.
Income from operations, a key measure of profitability for real estate investment trusts such as Macerich, rose 14.4%, to $72.9 million, or 95 cents a share, compared with $63.7 million, or 85 cents, a year earlier. The results beat Wall Street estimates by 2 cents.
Unlike most public companies, REITs must distribute 90% of their income to shareholders.
Profit for the three months ended Sept. 30 totaled $17.3 million, or 29 cents a share, compared with $39.7 million, or 69 cents, a year earlier. The prior-year results included a $23-million gain on the sale of assets. Revenue rose 9% to $128.4 million.
Part of that increase was fueled by the acquisition of malls in Victor Valley, San Bernardino, Santa Barbara and Phoenix, said Thomas O’Hern, chief financial officer.
Analyst Craig Silvers of Bricks & Mortar Capital, who doesn’t own the stock, said Macerich “is doing an excellent job of buying and developing the right properties. A good economy helps too.”
Ordinarily, the results would have been good enough to bump Macerich’s stock by several dollars, Silvers said. Instead, Macerich lost $3.65, or 6%, to $57.75 on the New York Stock Exchange as investors hammered REITs and the bond market because of higher-than-expected job gains in October and the potential for inflation.
A rise in interest rates increases the costs REITs face when they borrow to finance their operations, making them less competitive with other investments.