Good day, and welcome to The Macerich Company First Quarter 2022 Earnings Call. Today's conference is being recorded. At this time, I'd like to turn the conference over to Ms. Samantha Greening, Director of Investor Relations. Please go ahead.

Thank you for joining us on our first quarter 2022 earnings call. During the course of this call, we'll be making certain statements that may be deemed forward-looking within the meaning of the safe harbor of the Private Securities Litigation Reform Act of 1995, including statements regarding projections, plans or future expectations. Actual results may differ materially due to a variety of risks and uncertainties set forth in today's press release and our SEC filings, including the adverse impact of the novel coronavirus COVID-19 on the U.S., regional and global economies and the financial condition and results of the operations of the company and its tenants. Reconciliations of non-GAAP financial measures to the most directly comparable GAAP measures are included in the earnings release and supplemental filed on Form 8-K with the SEC, which are posted on the Investors section of the company's website at macerich.com. Joining us today are Tom O'Hern, Chief Executive Officer; Scott Kingsmore, Senior Executive Vice President and Chief Financial Officer; and Doug Healey, Senior Executive Vice President of Leasing. With that, I turn the call over to Tom.

Thank you, Samantha, and thanks to all of you for joining us today. We are pleased to report another outstanding quarter, with virtually all our operating metrics trending very positively. After a strong second half of 2021, the first quarter of '22 was even better, which is a tribute to our team and the quality of our portfolio. We continue to see robust and accelerating retailer demand. The resiliency of the American consumer is once again on display. Shoppers have come roaring back to our centers to shop with a purpose. We continue to see a high conversion rate, higher than pre-COVID as traffic is about 95% of 2019 traffic levels, but tenant sales are exceeding pre-pandemic levels, with the first quarter of '22 sales up 11.5% over the first quarter of 2019 and exceeding the first quarter of '21 sales by 14.5%. That is the fourth quarter in a row with double-digit tenant sales gains versus the pre-pandemic quarters in 2019. Retailer demand is at a level we have not seen since 2015. All sales categories, but one, which was flat, were up in the first quarter. Tenant sales per square foot for the trailing 12 months ended March 31 of '22, came in at an all-time high of $843 per square foot. Some of the quarterly highlights included occupancy at quarter end of 91.3%. That's a 280-basis-point improvement from a year ago. Although there was a modest 20 basis point decline from year-end, that is very normal due to seasonality. Actually, over the course of the past 20 years, that decline in the first quarter versus the prior fourth quarter occupancy has been in the range of 30 basis points to 100 basis points. So we were on the better end of that historic range. We continue to…

Thank you, Tom. Now on to the highlights of the quarterly financial results. This morning, we posted extremely strong operating results for the first quarter. Same-center NOI increased 25% versus the first quarter of 2021, excluding lease termination income, and increased 30%, including lease termination income. While we expected a strong first quarter given the pandemic-affected first quarter results of last year in 2021, NOI growth surpassed our expectations. Funds from operations for the first quarter of 2022 were $37 million or 49% higher than the first quarter of 2021. FFO per share for the quarter was $0.50. This was $0.05 or nearly 13% higher than the first quarter of 2021 at $0.45 per share, and represents a $0.04 increase over consensus FFO estimates of $0.46 per share for the quarter. This was obviously a very strong earnings quarter. Primary factors contributing to these quarterly NOI and FFO gains are as follows; one, the quarter included a $15 million increase in minimum rents, resulting largely from the elimination of pandemic-driven abated rents, which were heavy during the first quarter of 2021. This was offset by reduced minimum rents from our 2021 asset dispositions; two, an $11 million increase in common area income. As traffic has returned to pre-COVID levels, demand for our various common area business lines has followed. This revenue source continues to be extremely resilient and exceeds our expectations. We anticipate that our 2022 common area income results will surpass pre-pandemic levels as we previously reported to you; three, an $11 million of savings and interest resulting primarily from the dramatic debt reduction in 2021, during which we reduced our debt by $1.7 billion or 20%; four, a $9 million increase in lease termination income, driven by a few large termination settlement within the quarter. It is worth…

Thanks, Scott. As we discussed on our last call, 2021 was an outstanding year in terms of leasing. Actually, 2021 was our most productive year since 2015, with leasing volumes nearly reaching an all-time historic high for the company. And in fact, the first quarter of 2022 continued in the same fashion. I'm going to run through some various metrics and statistics, some of which Tom and Scott may have already mentioned in their remarks. But in doing so, I'll try to provide a bit more detail and color. First quarter sales were up 14.5% over first quarter 2021, and up 11.5% when compared to first quarter 2019. All categories in the first quarter, except for shoes, which was flat, showed double-digit increases compared with first quarter 2021. Sales per square foot as of March 31, 2022, were $843 and this represents an all-time high for the company. It's interesting to note that on a national level, March was the first month since the pandemic hit that online sales declined from the same period a year ago, while in-store sales actually rose. Occupancy at the end of the first quarter was 91.3%. That's an increase of 280 basis points relative to the 88.5% at the end of the first quarter of 2021. And we remain confident given the healthier retail environment that exists today, coupled with our strong leasing pipeline, that occupancy will continue to increase throughout 2022 and 2023. There was only 1 bankruptcy in our portfolio in the first quarter, and it consisted of one 3,000 square foot tenant at Scottsdale Fashion Square. In fact, this was the only lease that was subject to a bankruptcy filing in the past 2 quarters, given there were no filings in the fourth quarter of 2021. Now juxtapose this with 2020…

[Operator Instructions] We'll go first to Derek Johnston with Deutsche Bank.

I guess sticking with leasing, yes, definitely a strong 2021 continuing this quarter. Positive comments on the pipeline certainly well heard. But I guess what's the difference with leasing demand here in 2022 versus a strong last year? And then just the second part of that question would be, what kind of rent opportunity are you seeing in signed, not occupied pipeline?

Yes. Derek, it's Doug. I think the answer to your first question really is, I think 2022 is really a carryover from 2021. That's when we really started to see the strong leasing. And really, I attribute it, and I think I've talked about this before, but I attribute it to all the new uses that are out there. I mean yes, there's legacy retailers are out there and they're still very, very important to our portfolio. But you start layering in the digitally native brands, the F&B, the fitness, grocery, home furnishings, home furnishings, the electric vehicles, there's just so much out there to choose from. And I think that's the biggest difference between '21 and '22 in years in the past, especially pre-pandemic.

Derek, would you repeat the second part of your question?

Yes. I was just wondering the rent opportunity that you're seeing in the side not occupied pipeline, what that could look like and translate into his stores open?

Derek, I think what we're seeing right now is we've got our occupancy to sort of an inflection point where we've taken enough supply off the table, that -- and we started this really in the fourth quarter of last year that we can really focus on driving rent and driving rate. And for the first time in quite some time, especially in our top tier centers, we're starting to see competition for space, which we haven't seen since pre-pandemic. And I think that alone is going to help to drive rental rates in the future, '22 and '23.

Okay. Great. And then last question. It looks like the total cost of occupancy is a couple of percentage points lower, around 11% to 11.5% versus pre-pandemic levels of 13% ,14%. So I was just wondering and thank you for sharing this metric. How should we read into this? Should we expect this to return to the historical levels? Or perhaps is this the new standard? And does that lower number perhaps imply there is a little more room to push rents?

Derek, this is Scott. Yes, this is the first quarter that we've reported it. Now we've got a trailing 12-month sales figure that we can actually rely on post-pandemic. And I think it's really a function of just the accelerated sales that we saw in '21 and so far in '22, that's driving that metric lower, which then leads you to believe that, yes, I do think there is an opportunity to push rents. I'm not going to suggest we're going to get back to a 13% occupancy cost anytime soon. But given the elevated levels of sales that the tenants continue to achieve, I do think there's an opportunity to push rent and kind of further supporting what Doug just mentioned.

We'll go next to Craig Schmidt with Bank of America.

Doug, listening to some of your comments, I'm just wondering is there any evidence that the retailers and their above-average leasing activity could be impacted by inflation or the thought about of possible recession in 2023?

Craig, we're not seeing that at all. Look, these retailers are pretty sophisticated. Many of them have been through cycles like this, and they know this too will end, but they're long term in nature. I mean you're talking about leases 5-, 7-, 10-year leases. So they're taking a much longer view of it rather than just looking at what's going on today. So, no, we're not seeing at all in our deal flow.

Great. And then just do you have any idea who you might be putting into Nordstrom's place at Country Club Plaza?

We're still evaluating that, Craig. There's a number of pretty good opportunities for us, but it's too early to disclose what those are.

We'll go next to Samir Khanal with Evercore.

I guess, Tom, can you remind us what you're assuming for sales growth in your guidance at this point? I mean just trying to get an idea of percentage rents, I know it's a little bit above what we were forecasting in the quarter, but just trying to get your view for the year.

Yes, Samir. So we did take a look at certain tenants that had extraordinarily high sales volumes in 2021, and we've adjusted those kind of on an individual basis. For the balance of the tenancy, we have assumed relatively flat sales. So that means '21 versus where we're anticipating '22 to end up in terms of percentage rents that we still are forecasting a decline, combination of tenants converting to -- from variable rents to fixed rent. It's a combination of certain high flying tenants in producing more moderated sales levels in '22, but we still aren't forecasting a decline though, in '22. And that's 1 reason that our NOI range is still relatively wide. We've got 9 more months of sales experience to figure out.

Got it. And I guess my second question is around occupancy. When I look at your JV properties, I mean they were actually up sequentially, right? Which is great to see. I mean, you own some of the best assets in that bucket of probably $1,000 a foot. I'm just curious, when you look at that bucket, $1,000 a foot mall and then the on the consolidated side, which is around $700, are you seeing any differences in sort of discussions at this point, whether it's deal flow, kind of discussion with tenant, anything different in terms of pricing power?

Well, I mean the tenants at the top doing $1,000 a foot are always going to be in demand -- excuse me, the centers doing $1,000 are always going to have significant tenant demand. And I think Doug would admit it's a little bit easier, at least in those locations than in the locations that are doing $700 or $800. Although the demand has been good across the board in every single category, so obviously, the ones at the top do a bit better. But I think, throughout our portfolio, we're seeing pretty significant demand, in many cases, better than we've ever seen. And I think that does give us pricing power. As Doug said, we hit a friction point late last year where all of a sudden, we were back at 91-plus percent occupied and there was less space available, and we became more sensitive to rate. And I think we're going to see that as we continue through the year with pricing power shifting back in our direction a bit.

And Samir, it's worth also just highlighting the quality that is not only at the top of the portfolio, but throughout the portfolio. If you look at our top 20 assets, those generate about 70% of our NOI and the average sales performance is over $1,100 a foot at the end of the quarter. And if you look at our top 30, that's about 86% of our NOI, with an average sales performance of about $960 a foot. So the quality really does spread throughout the portfolio. So we really aren't talking about the top 5, top 10. It's a very high-quality portfolio all the way down through 30, and that represents the lion's share of our NOI, and we are seeing great demand all the way through that top 30.

And then just last one, if I may. I mean, certainly, all positive sort of comments here on the leasing side, on occupancy. So I would just kind of curious, was there something holding you back -- what kind of held you back from not raising sort of the high end of guidance here?

Well, I mean we still have a relatively uncertain interest rate environment, Samir, which is a big question mark as we move through the year. So we'll address it quarter-by-quarter. We -- obviously, the operating metrics have been great. And, to some extent, something we control interest rates are a different matter. And we felt it prudent to narrow the range as much as we did. As Scott said, we still have some variability as it relates to percentage rent, and we believe -- I believe we're relatively conservative in our guidance as it related to that compared to last year where we had record-setting percentage rent, a lot of that driven by the luxury tenants.

Well the next few Floris Van Dijkum Compass Point.

Just obviously, solid reports, it appears that you're starting to push rents, which is an encouraging thing. Maybe just following up, the signed not open pipeline or you're -- basically your spread between leased and occupied. Can you give that in terms of either percentage of space or in terms of a dollar number?

Yes, the difference between physical and economic or leased occupancy is roughly about 2%. But bear in mind, a big portion of our pipeline is big box and anchor-oriented space, which takes a long time to get permitted, to get developed and ultimately to start paying rent. It's about, on average, a 12- to 18-month period between lease signing and getting those spaces open. So as we speak about occupancy, that's really the smaller shops, but we do have some very large rent paying tenants that should start to generate significant cash flow in '23 and into '24 from those big anchor spots.

Thanks, Scott. And maybe the other question I have is, again, the investment community has been very skittish or careful on your ability to refinance your loans at your malls? And obviously, you've managed to extend or get new loans on a number of malls, and you have a couple more in the pipeline as you suggest. Maybe you can talk a little bit about the environment, how the discussions are going, is there greater demand on the lending side for your types of assets? And how do you see that evolving even though rates clearly are trending higher?

Yes. So yes, we've made great progress. Just alone, year-to-date, we've either closed on or transacting on about $600 million worth of financing business. That ranges from a quality of center in Ventura, which is roughly $500 per square foot, Ventura, California to the Oaks Mall, which is doing between $750 to $800 a foot. So we're transacting in a pretty wide quality spectrum, and we're still seeing an opportunity to refinance and/or extend assets. When we think about whether to refinance or extend, it's really a matter of where the business plan is at on a given asset. We obviously came through a pandemic, and, in some cases, certain assets it makes more sense to extend rather than do a 5- or 10-year refinance because we need the business plan to further mature. So you’ll continue to see us to kind of take an individuated approach between doing longer-term financings and extending for a 2- to 3-year period. Just to kind of recount where we're at right now in the cycle. Since fall of '20, about $8 billion, $8 billion in CMBS business has been done on -- in the mall space. Most recently, a transaction in Ala Moana, a transaction in a property owned by Taubman in Florida were accomplished. And sequentially, if we look at where things were in the fall of '20 to where they are now, we've seen reduced debt yields. We've seen more of an inclination from the lending community to loan more than the outstanding balance of the loan. So there's excess over borrowers. All that said, today, it's a pretty tumultuous environment given the Fed's actions to tamper inflation. So yes, rates are gapping out, but we're still seeing an opportunity to get things done. I would say that, generally, the market is pretty choppy today, and it's frankly not just for retail, it's across the board. But we still have a view that we'll be successful at getting our refinancings accomplished. And you can see what we've done just in about 4 months alone.

Thanks, Scott. So maybe just 1 slight follow-up here. In terms of the $350 million to $400 million of excess proceeds that you might be able to pull out of some of your flagship assets, what would you do with that? Would you use -- are those proceeds to be used for redevelopment? Or are they going to be used to retire debt on single assets to create more flexibility in your balance sheet going forward?

Yes, our focus is going to continue to be reducing debt. So I would see us using the lion's share of those proceeds to pay down debt.

We'll go next to Connor Mitchell with Piper Sandler.

So kind of just sticking with the interest rate environment, and with rates already up and expectations for further rate hikes. Could you just provide a little bit more color in your thought process on the guidance provided and the updated guidance this quarter compared to the end of prior year?

Sure. Happy to comment on that. Only about 11% of our debt is floating. We've got a very small percentage of our debt that's floating, it's about $682 million. We also have a nicely layered maturity schedule that stretches out over the next 9 years, roughly 10% to 15% of the debt per year matures. And certainly, we've got some uncertainty as to what the Fed will do and how that will affect the 10-year. Really, it's the first time since 2018 that we've seen the 10-year get above 3%. That being said, in near term, to offset some of those interest expense increases, we've got a significant same-center NOI growth expectation as we get back to our pre-COVID occupancy levels, picking up 150 basis points to 200 basis points of occupancy this year and the same next year. And Also, as Doug mentioned, and Scott, we've got a very robust leasing pipeline where we've already signed and executed the leases, the buildouts underway, but we don't have the benefit of rent commencing yet. So we're able to manage it and it really didn't have too much of a bearing on our guidance adjustments, it did have a bearing on keeping the range at $0.15 or so because of those uncertainties as it relates to rate.

Okay. That's helpful. And then just 1 more question. Regarding the FlatIron refinancing, is there an expectation that it might be sold soon? Or just as it was refinanced for 3 years and move to floating rate from previously fixed?

Yes. Right now, it's sitting on a bank balance sheet. That's the near-term expectation.

We'll go next to Linda Tsai with Jefferies.

Once it's completed, would you ever look to monetize your 25% ownership of One Westside to help further reduce leverage?

Linda, yes, good question. And that kind of would be a natural outcome for that. It's a good asset with a great tenant, but that's certainly a possibility sometime in the not-so-distant future, I would think. No immediate plans for that, but it's certainly a possibility.

Got it. And then just 1 follow-up. The open-air shopping centers have discussed hybrid work resulting in lower dwell time, but more trips to the shopping center. Has hybrid work changed patterns at your centers? And does it vary at all according to quality?

No, I don't think we've really seen it very much according to quality. I mean, an argument could be made that some of the business is shifting away from urban centers to suburban. And we have a fair amount of both, but that's probably the biggest impact we've seen as a result of hybrid working, working from home, less commuting, things of that nature.

Yes. As I look back pre-pandemic, and we look at our traffic, not only is traffic, just about back to pre-pandemic levels, but we're seeing it across our portfolio, across our properties, about the same as it was pre pandemic. So I don't think the real argument that it's changed dramatically, if at all.

We'll go next to Mike Mueller with JPMorgan.

Just 2 quick ones. First, was there anything in particular that drove the trailing 12-month rent spread to contract a little from 5% last quarter to 1% this quarter? And also the prior expectation of about $20 million of land sale gains in 2022. Does that still hold?

So Mike, as it relates to rent spreads, I mean, that can vary quarter-to-quarter depending on where our lease expirations are. It's kind of a blended number. So to have it moved from 4% as it was in the fourth quarter to 1%, I don't think is indicative of much. And I don't think it's a predictor of what we'll see the balance of the year. I think in general, we have a lot more pricing power than we did 2 or 3 quarters ago or even in the fourth quarter, frankly. First quarter tends to be a little bit slow. That's when most retailers have their natural fiscal year-end. And we typically see more deal activity in the second and third quarter. And so I think I would say that I wouldn't draw too many conclusions from that 1%. I think we'll do better over the course of the year. Scott, do you want to comment on land sales?

Yes, sure. So on the last call, I mentioned that we expected land sale gains to continue to remain elevated in 2022, and that was -- I said they'd be consistent with what they were in '21. Recall, in '21, we had about, I think, $20 million of FFO benefit from land sale transactions. I still think that number holds today. We did anticipate a relatively high volume of closings in the first quarter, which is what we saw. The number was consistent with our guidance in terms of the cadence, and we saw $11 million of benefit in the first quarter. So I think that same guidance holds today.

We will go next to Ki Bin Kam with Truist.

Just want to go back to a couple of prior questions. On the occupancy cost, it was good to see that tick down to 11.3%. But I'm curious, given the labor situation, what is the total all-in occupancy cost to a retailer, including wages? And I'm curious if that's actually ticked up versus just the real estate occupancy costs would just tick down?

It's going to vary depending on the retailer. And what we have heard from a number of retailers is they ended up with slightly less staffing than they were pre-COVID. And even though the hourly rate may be up, the overall labor cost is flat to down. So we're actually hearing more about improving margins and shrinking margins. So I don't know how that factors into their occupancy cost, but that's certainly something we've heard fairly often from the retailers.

Okay. And it was good to see a lot of improvement in various metrics this quarter, and you talked about the strength in leasing demand. But I want to take a look at your stock, it's trading at close to 8% implied cap rate. I'm just curious if that has spurred additional conversations with the Board, and what we could expect or what you're thinking about going forward to possibly upclose that gap?

Well, as you can imagine, Ki Bin, we don't comment on earnings calls about what the conversations are in the boardroom. So I can't really comment on that other than to tell you that, at today's current trading price of a multiple of less than 7x FFO, it's illogical. Obviously, you can tell from the tone of our conversations and comments here that we feel very positive about the business. So I think what that really represents is a tremendous buying opportunity today.

Is it -- or additional asset sales, you still have a couple of dozen that are on. Is that in the cards at all into possibly selling a portion of that to your JV partner?

Well, we're always open to disposing of noncore assets. As Scott mentioned, the vast majority of our NOI comes from our top 20. We like our top 30 assets. Anything beyond that, opportunistically, we would be potentially a seller, but we have to see what the market dynamics are. We've been -- we sold a couple of assets last year. Those are one-off deals. I don't think the debt market is necessarily back for assets in the $500 a foot range. But once we get to a stronger debt market, certainly a possibility and something you've seen us do in the past. Between 2011, 2016, we sold 25 malls that averaged about $325 a foot in sales. So we believe in recycling our capital. And you will see us do that. It's just a question of when is the market willing.

We will go next to Richard Hill with Morgan Stanley.

I wanted to come back to some of the questioning that Floris was asking. I was a little bit surprised by the amount of proceeds that maybe could be pulled out from some of your higher-quality malls, undeniably very high-quality malls. But if I'm looking at something like Green Acres Mall, I guess the 2013 appraisal from the CMBS deal was really attractive. Can you maybe walk us through the dynamics of being able to pull out more proceeds on a mall that was financed, let's call it, 10 years ago or so?

Rich, keep in mind that we did in between our acquisition, and, today, we did add a brand-new power center. So that's a component of it. You look at Green Acres overall, and the exciting thing about that campus is, is it generates an aggregate $1 billion. It is an absolute retail hub within that area of Long Island. So when we looked at the 2023 pipeline, and we provided estimates with bracketed outcome of $350 million to $400 million, those are based on relatively conservative debt yields to what we're seeing happen today. Based on my comments, when I was talking about the broader debt markets, we've seen debt yield shift into the high single-digit range for the best assets. And of course, Scottsdale Fashion Square ranks among the best assets in the United States. And so I've put some pretty conservative debt yields, and I'm not even saying I've driven them to high single digits to get to that outcome. Scottsdale is an asset where we put in a lot of capital, built a brand-new luxury wing, which has been highly successful restaurants. We're adding Caesars, as Tom mentioned. Life Time is coming soon, brand-new flagship Apple, there's all kinds of great things going on. So those 3 assets, including Tysons, we do feel like we will be able to generate liquidity out of those 3 deals.

Got it. Your comments are well taken on the debt yield because I do recognize the debt yield on Green Acres on just what's in place is all in the double digits, so a point well taken. One follow-up question, and this isn't a Macerich specific comment. We're actually getting a fair amount of questions across retail real estate, generally speaking. But obviously, inflation is higher than it was a year ago. Can you maybe talk about your ability to offset inflationary pressures on expenses relative to NOI? And are you in a position where NOI is actually inflecting enough between occupancy gains and rental increases that inflationary pressures, while always a concern, maybe not -- could potentially be mitigated by -- on the revenue side?

Yes, Rich, good and timely question. I mean historically, the mall -- A quality mall sector has done okay during inflationary times because we have been able to keep pace. That granted, most companies have moved to a fixed CAM component, but that accelerates pretty aggressively over the terms of a lease. Our typical fixed CAM bump would be 5% a year. So no longer triple net per se, but still a great escalator. And in any given year, it's possible inflation could be higher than that over the course of the term of the lease, say, 5 or 7 years. It seems like we're always going to be ahead with those 5% bump. So we think we're pretty well positioned to absorb the impact of inflation, at least as it relates to expense recoveries.

We'll go next to Michael Bilerman with Citi.

Tom, I was wondering maybe you can just step back on sources and uses because you've been able to pull out a lot of sort of positive drivers in terms of the free cash flow, the refinancing. You talked about some of these assets you're going to pull out money from. But maybe you can just step back because I think there's a lot of uses of cash, and you talked about some of these redevelopment and development opportunities, whether it's Santa Monica, at Tysons, at Washington Square, Los Cerritos, FlatIron and Kierland, they're all going to need money, and obviously, you're going to spend money to generate a return. You have $2 billion of your share of mortgages coming due the rest of this year, '23 and '24. You have the free cash flow of $200 million. Just how do you bridge yourself between all of these sources of capital -- all these use of capital, and where you're going to source them all from at the end of the day?

Michael, we have a variety of ways we can structure our deals. As you mentioned, we've got a significant amount of cash flow after dividends, probably more than we've ever had in our history. Scott mentioned, we have a pretty good expectation next year of having refi excess proceeds. This year is about neutral next year should be positive. But we also have latitude as to how we structure deals. And a good example was something I mentioned earlier today, and that was a Caesars Republic Hotel, and that deal is a ground lease. So very little capital from our standpoint, small amount of money to prepare the pad. That's about it. In the case of the redevelopment of the Sears boxes at Los Cerritos and Washington Square, similarly, we can do multifamily. And in multifamily, we can just toss the land at land value and stay in as a partner. If we choose to source capital, we can do that and increase our ownership percentage. But you'll see us evaluate all those potential structures. Obviously, our cost of capital is pretty high today. Given we're trading at a 7 multiple, we'd have to be very careful with our capital decisions. So you see us do some structuring to reduce the amount of capital that we need to use beyond -- above and beyond what we generate from free cash flow from operations.

And then, remind me what you're going to do in Santa Monica and Washington Square in terms of those loans coming due this year? Are those just going to be a short-term extension until your business plans can be put in place? Is that the assumption there? And just at a higher rate sort of like what you've done in these other loans?

I'd say that's a pretty good guesstimate. Both have great merits. Both have business plans that have been impacted by COVID. And so my prior statements where I said, you'll see us extend in some instances, I would expect that to be the case probably for both of those.

Okay. And then just finally, I guess, is there a plan at all, Tom, to -- with all these moving pieces and knowing that this is where The Street is very focused on, on maybe putting out a more in-depth sources and uses sort of spreadsheet where you can sort of detail out a lot of these elements to sort of ease The Street in their views. Because I feel like there's a lot of these little pieces of information but doesn't take into totality of the organization and company that's running.

It's possible, Michael. I mean, I think we probably put out as much or more than most. It's also, to some extent, dependent upon -- keep in mind, during COVID, we shut off the redevelopment pipeline. We're turning that spigot back on, but we haven't necessarily in some of the bigger projects concluded how we're going to structure those things. So that would be a critical part of the equation. And once we have that, we'll probably include a more robust redevelopment pipeline, which will include some of those pieces.

We'll go next to Caitlin Burrows with Goldman Sachs.

Maybe just on the common area income, you mentioned that you expected could surpass pre-pandemic levels, which makes sense. But wondering if you could quantify how much potential there is on this line item and maybe the timing or cadence from here?

Yes, sure. I expect that we will be able to surpass pre-COVID levels order of magnitude, call it, 2% to 5%. We've got -- a lot of that stuff is very sensitive in terms of like short-term contracts, advertising, things like that. So it's hard to say exactly where the year is going to end up. So there is still some uncertainty with some of those shorter-term high-dollar contracts. But I think we're going to exceed it. I think it definitely exceeds our expectations. During COVID, things like advertising dollars, things like contracts with local merchants, that business completely dried up. Local merchants that aren't well heeled certainly weren't in the business of opening up new stores, and large advertising contracts were not really relevant when traffic was so heavily impacted from the closure. So we're very excited to be able to say with surpassing our expectations. It seems to be the case each and every quarter. So I think we're going to beat it. And I think it's going to be a relatively healthy beat. And that's -- part of it is why we still got a wide range in terms of our same center NOI because we still have some work to accomplish there, Caitlin.

Got it. Oaky. And then maybe just on the financing theme. Again, I know it's brought up a number of times. But just given that rates are up a lot. I was wondering if you could comment on how your outlook or plans have just generally evolved over the last 2 or 3 months. And for the deals you're working to or have already gotten through how the terms like rate or amount or length or comparing to your expectations? It seems like you're saying no change, but then also seems surprising versus what we've heard from some other REITs.

Well, we've certainly seen an increase in rate. Given the environment, benchmark rates 10-year, 5-year, have gone up, SOFR and LIBOR have gone up, and they will continue to go up with the Fed's continued actions to dampen inflation. And we've seen spreads gap out as well, and that's, frankly, not just a retail thing. So -- but in terms of term, I think it's pretty consistent. We actually, I believe, accomplished the first 10-year mall deal post-COVID, which was done in late April. So I don't think there's been a huge change other than really rates have ticked up.

At this time, there are no further questions. I'll turn the call back to Tom O'Hern for additional or closing remarks.

Great. Thank you, operator. Thanks for joining us today. I know it's been a long busy -- long earnings season for all of you. So you're probably a little bit on the tired side. Glad you joined us. We enjoyed a very solid start to this year. We're excited about the balance of the year. And we hope we see many of you at ICSC and NAREIT in the upcoming weeks. Thanks.

This does conclude today's conference. We thank you for your participation.