The Macerich Company (NYSE:MAC)

I am guessing I don’t need to spend a lot of time explaining this pick to the community, since it’s a mall REIT. I’ll take a few moments to type up some comments on this one, but probably won’t turn this into a long pitch, the way some of my others turn out. This probably won’t be my only down thumb on a mall REIT in the next few weeks, so I am warning you now that there may be others that I put on my red thumb list that are similar to this one. I am not sure how much I will comment on those, but I will try to put a few words on each, if I have the time.

It should be obvious to most that the retail mall model is dying a long, slow death. Companies, such as Amazon, are absolutely slaughtering the brick and mortars. Even the stalwarts with a loyal fan base, such as Kohl’s, are starting to feel the pinch of the “e-tailers.” I am a little late to this party, but I certainly don’t think the party’s over given that Macy’s, Sears and JCP are all announcing abysmal results. There are several things I really dislike about the mall REIT model which I’ll list below, some specific to this firm:

- These REIT’s oftentimes carry huge levels of debt in order to acquire properties.
- REIT’s must pay out a large portion of their earnings to shareholders in the form of dividends. Some may like this, but I don’t. It constrains the company in times when they can use the money in better fashion, such as to shore up their balance sheet.
- Their current tenant rates are near historic highs. MAC is included. This might seem great, but I think they have a long way to fall from these highs.
- This firm has exposure to Sears and other distressed retailers.
- The dividends paid are often well above GAAP earnings putting additional capital strain on the company.
- Their quarterly revenue is steadily declining. While the stock price has dropped accordingly to reflect this, I don’t think it’s come down nearly as much as it needs to.

I am not calling bankruptcy on this one, but I think it’s at least 50% overpriced at this current level. I have patience to wait for this to fall further this year, but I really don’t think I’ll have to wait for long. If you are going short here, make sure to do your own research.