Good day, ladies and gentlemen. Thank you for standing by. Welcome to the Second Quarter 2023 Macerich Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. [Operator instructions] Again, please be advised that today’s conference is being recorded. I would now like to hand the conference over to your speaker today, Samantha Greening, Director of Investor Relations. Please go ahead.

Thank you for joining us on our second quarter 2023 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 coronavirus on the U.S. regional and global economies and the financial conditions and results of 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 in 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. And with that, I turn the call over to Tom. Tom O’Hern: Thank you, Samantha. It was yet again another strong quarter for us. Leasing volumes continued at a record level. We had an 80 basis-point gain in occupancy compared to a year ago and 40 basis-point gain compared to last quarter. We had a 5.6% growth in same center net operating income, and we had double-digit positive releasing spreads. The U.S. consumer continues to be incredibly resilient in the face of the challenging macroeconomic climate we’re facing today with higher interest rates and the threat of recession. And we are seeing that at our centers. Consumers are shopping, eating out, and traveling at pre-pandemic levels. Those trends bode well for A-quality malls. Our key operating metrics continue to…

Thank you, Tom. This morning, we reported very strong core operating results for the second quarter. Same center NOI increased 5.6% versus the second quarter of 2022, excluding lease termination income. Year to date, same center NOI growth is at 5.2%. As a reminder, this follows strong reported NOI growth averaging 7.4% for the two-year period 2021 through 2022. FFO per share for the second quarter was $0.40, which was $0.06 less than FFO during the second quarter of 2022, which was $0.46 per share. Primary major factors contributing to this quarterly FFO per share change are as follows. We had a 15 million or $0.07 increase in interest expense due to rising rates. We had $9 million or $0.04 decrease in lease termination income, which was primarily due to a major lease termination settlement during the second quarter of last year in 2022. Offsetting these positive factors were a $10 million or $0.05 improvement in rental revenues that was driven by a $10 million increase in top-line base rent, $3 million increase in expense recovery revenue, and those were offset by $3 million decline in percentage rent. Generally, these trends were due to improvements in occupancy and from continued conversion of selected leases from variable to fixed rent structures with full base rent and CAM and tax recovery charges. This is consistent with what we reported in prior quarters. We are very pleased with our core NOI growth during the first half of 2023. As we disclosed this morning, we are narrowing the range, but we are maintaining the midpoint of our guidance for 2023 funds from operations, which is now estimated in the range of $1.77 to $1.83 per share. Our 2023 outlook continues to be anchored by strong operating cash flow generation, which we estimate will be…

Thanks Scott. We had another very strong quarter with all metrics increasing with the exception of sales, which, by the way, had no negative effect on leasing or our leasing volumes. Sales were down 1.6% on a rolling 12-month basis, and this doesn’t come as a big surprise given the gains we saw in 2021 and 2022. Trailing 12-month leasing spreads were 11.3% as of June 30, 2023. That’s an increase of 470 basis points from last quarter and an increase of just over 1,000 basis points when compared to June 30, 2022. In the second quarter, we opened 263,000 square feet of new stores, which is about 20% more square footage than we opened in the second quarter of 2022. This brings our year-to-date total to just over 450,000 square feet, which exceeds where we were at this time last year. On May 19, 2023, Apple relocated and opened an expanded and incredibly reimagined store at Tysons Corner Center. It’s the first of its type anywhere in the world. I specifically call out the date because this new opening occurred exactly 22 years to the day after Steve Jobs opened the first-ever Apple Store at Tysons Corner Center back in 2001. We also opened a 50,000 square foot Primark at Green Acres Mall, Long Island. This marks our fifth opening with Primark in addition to Kings Plaza, Danbury Fair, Freehold Raceway, and Fashion District Philadelphia. When you include their stores at Tysons Corner in Queens Center, which will open in 2024, we remain Primark’s largest landlord in the United States. Other notable openings in the second quarter include Louis Vuitton at Broadway Plaza, two stores of Lululemon at Arrowhead and Los Cerritos, Panerai and Oliver Smith Jeweler at Scottsdale Fashion Square, Kendra Scott at Tysons Corner, Barnes & Noble…

[Operator instructions] The first question comes from Greg McGinnis with Scotiabank. Your line is open.

Hello, this is Viktor Fediv here on with Greg McGinnis. I would ask – we want to ask about your non-core dispositions. Do you have any additional non-core dispositions in negotiations now? And how would you characterize current market conditions, given that we are most likely near the peak of interest rate expansion? Tom O’Hern: No, we don’t have any factored into our guidance for the balance of the year. We’re an opportunistic seller. But typically, the sales flow more frequently when the debt markets are stronger than they are today. So, I wouldn’t expect anything further this year.

Got it. And as a follow-up, some of your noncore assets are owned in JVs. And are your partners open to selling, or are you able to just sell your stake? How does it work in your case? Tom O’Hern: Well, each joint venture is unique, and they’ve got different provisions, and we’re not going to try to elaborate each and every one. But generally, our partners are happy. They’ve done well in these assets, generally speaking. And to my knowledge, nobody has an interest in selling, but I can’t speak for them.

I’m going to add, Tom, I think most of our noncore assets actually are holding up. So we don’t have those control issues.

Good. And on the land sales part, do you still expect it to be 40% to 50% over the 2022 level?

Yes, I think that’s an accurate estimate, Viktor. Obviously, things – transaction could spill into one quarter versus another. But I’d say about a 50% reduction over last year’s levels. As you saw in the third quarter, and this could have been the reason why some of the consensus estimates were off, we had zero land sales triggered in the second quarter.

Got it, thank you very much.

Yes.

[Operator Instructions] The next question comes from Craig Schmidt with Bank of America Securities. Your line is open.

Hi, this is actually Lizzy Doykan on for Craig. So, a few days ago, we did see an 8-K filing just in connection with a mixed shelf security offering for OP unit holders. Just curious if you could provide more detail on the reasoning for this announced program. And we did notice in guidance, this doesn’t assume the sale of common equity. So, just wanted to get your latest thoughts on issuing equity or capital raising going forward. Thanks. Tom O’Hern: Yes, that was just the renewal of a kitchen sink shelf that virtually every public company has available. They have a finite life, and it just was about to expire so we renewed it. It doesn’t really speak to any intentions we have or don’t have regarding using that shelf. It’s just a standard tool that everyone has, and it was time for us to renew it. And I don’t believe we do have any equity issuance in our guidance.

Okay. Thanks for confirming.

[Operator Instructions] The next question comes from Sanket Agrawal with Evercore. Your line is open.

Hey, thanks for taking my question. We saw that other income line was up 40% year on year for the first half of the year. So, we just wanted some color of what is driving that and also how should we think about that for the second half and into ‘24?

Yes, sure. This is Scott. I’ll go ahead and take that one. Other income could, get a little bit lumpy periodically if I look at the second quarter, other income at, in our share across JVs, as well as wholly owned assets. We had a favorable change in evaluation adjustments and some of our retail investments that totaled about $4 million. We also realized some rebates for some sustainability initiatives, some fuel cell programs that we put in place in the past. That was consistent with our expectation. And then, we also had increased interest income relative to the second quarter. So, those are really the primary driving factors. Interest you should continue to see is elevated. The other factors are somewhat hard to predict. Certainly, the change in investment valuations are hard to predict. But that’s the reason for the change.

Sounds good. And also, like your tenant recovery during the first half of this year has been better than what you have done in the past year. And as you continue to build up on the occupancy, how do you think about that for the second half and ‘24?

It’s a good observation. We saw the same trends last quarter. Year to date, our recovery rates are actually up almost 5%. And I think you’ll see that trend continue. And again, this is a concerted effort of us to take a selected portion of leases that were more heavily vulnerable, rent-oriented, and convert those to a more traditional fixed lease structure, which includes fixed CAM and a recovery of our property taxes. So, you’ll consider – you’ll continue to see that trend where recovery rates increase. That’s our expectation for the next few quarters.

Thank you. I really appreciate that.

[Operator Instructions] Our next question comes from Floris van Dijkum with Compass Point. Your line is open.

Hi, good afternoon, or good morning for you guys out on the West Coast. Wanted to just go through – I mean, the leasing is clearly – continues to be very positive and robust. And you’ve touched on some of, the key factors, particularly leasing spreads, large SNO pipeline. So, the SNO pipeline has essentially, did I hear correctly, increased by 3 million from 64 million. I think last time you disclosed this was 67 million. Does that include the additional 500,000 square feet of LOI properties in there? And maybe if you can talk about, is there a change in rent spreads between renewals versus new leases? Some more details would be helpful.

Good afternoon, Floris. Yes, 66 million is the new number. That’s up about 3 million or so from what we disclosed last quarter. In fact, we started quantifying this a year ago. And at that point in time, our SNO pipeline, signed but not open pipeline, was $53 million. So, it’s increased about 25% over the last 12 months. which is indicative of exactly what we’ve been talking to over the last four quarters, which is a very robust leasing environment. That pipeline includes both signed, as well as leases that are in documentation. So, Floris, it would include the 500,000 square feet that we’re currently documenting. And then, you asked about spreads and the relative change between renewal and new. We’re not disclosing that level of detail. I would say that on balance, though, our new lease spreads are healthier and more robust as we turn spaces over to new and more productive retailers than our renewal spreads. But our renewal spreads are still positive.

And maybe if you could also – just to follow-up on my first question, you talked about the temp to perm opportunity. And obviously, that’s very attractive. Your NOI essentially doubles from that. How much more temp do you have today and maybe provide what it’s historically been? And getting back to those levels, you also mentioned, obviously, that it impacts your recovery ratios. Are there other things that we should be thinking about?

Yes, our temp is still over 8%, which, on a relative basis, is elevated for us. That’s fine. We’ve found a very healthy local and regional merchant environment. And I don’t think we’re unique in that regard, so temp remains elevated, which is a great opportunity for us in terms of internal growth drivers to continue to convert those spaces to permanent. It’s a slow-moving ship, so that doesn’t happen overnight. But we do think that, especially in the better spaces that are being backfilled on an interim basis, that there’s a really tremendous opportunity to find some very good rent growth by converting temporary to permanent uses.

Great. And maybe my second question has to do with anchor boxes. Obviously, you did the deal with Seritage. You bought the incremental boxes. Maybe – you talked about the amount, which is a lot less, I think, than the original purchase price, if I’m not mistaken. But talk about the IOR expectations. And maybe also touch upon what happened to the JCPenney box at Queens. I believe Copper, which is the company that got that in the spin from JCPenney no longer owns that. Is there any color you can provide?

Sure. I’ll touch on those. Just to look at anchor leasing, we recently looked at this. And since 2021, we’ve leased a 1.5 million square feet of anchor space. We have another 400,000 square feet of anchor space that is committed and in documentation. So, it’s nearly 2 million square feet of anchor space. And you can expect with each one of those deals, significantly higher sales volume than the prior uses. And I’m talking about multiples, not just times two. Much larger rents, and those are all embedded within our assigned but not open pipeline. And then, significantly boosted traffic and energy as a result of those uses. And most of those uses have yet to come online. They’re going to start coming online in the fourth quarter this year and over the next 18 months thereafter. So, we’re very excited about that anchor leasing activity. Again, nearly 2 million square feet of leasing production. You asked about – I think I missed one part of your question. I’ll come back to it. But you asked about Penney at Queens. We do not own that box. It is owned by a third party, as we understand, that acquired that from – out of the Penney bankruptcy. We do understand that they’re going through remerchandising, but we have yet to understand exactly what the plans are. We do believe there’ll be some very diverse uses that will be coming to the campus that may result also in retaining Penney into a smaller footprint. So, more to come, but we’re excited about the opportunity. Just as we’re doing to bring new and diverse uses to Queens.

Yes, so, Scott, the question I had was in the IOR expectation for the Seritage JV buyout. And presumably it differs between your leased properties or your stabilized properties and the properties that have yet to be redeveloped.

Healthy returns, we would expect from those Sears boxes. Some of the ones that are in entitlement, we’re still working through. But in terms of the ones that are leased, I would say low- to mid-teens type of returns. Tom O’Hern: I mean, they’re great locations, Floris, including Los Cerritos and Washington Square, where we’ve got the ability to – once we get through the entitlement process, in all likelihood, we’ll have the ability to add multifamily, as well as diversified additional retail. So, they’re great opportunities, and it’s nice to be free to redevelop them as we deem most appropriate.

And I apologize, I sort of spun on my follow-up question here a little bit. But you have partners in a couple of those assets. Will partners want to partner with you on these boxes, or will you do that separately, or will you offer them a chance to do it pro rata based on the ownership in the malls? Tom O’Hern: Well, we’ve got great relationships with our partners, and time will tell whether they are interested in coming in or not. I mean, we’re quite comfortable doing it on our own, but I’m sure have an open mind should our partners wish to be part of that expanded part of our projects.

Great. Thanks, guys.

[Operator Instructions] The next question comes from Linda Tsai with Jefferies. Your line is open.

Hi. In terms of capital allocation, where does the repositioning of the five anchor parcels fit? Tom O’Hern: Well, it fits close to the top of the list, Linda, because the returns are very good. The expected returns are very good. But also, it’s consistent with our desire to densify and diversify our assets, bring in more traffic, more energy, different uses. And particularly, in the cases of Washington Square and Los Cerritos, it’s really going to give us a chance to change the character of the asset. In both locations, we’ve got a significant amount of retail space already. So, there’s really more advantage to diversifying those with hotel, with multifamily, and with other nontraditional retail uses.

And then, as you head into next year, do you expect lease term fees to trend down further? And would it become a tailwind to earnings off easier comps?

It’s a good question, Linda. It’s always a little bit of guesswork. I would say at the guided level of 7 million, historically, that’s a low point. And so, that certainly could become a tailwind. Oftentimes, a retailer will be churning through a brand and focusing the reference on different types of brands, and they will come to us and proactively seek a buyout. And sometimes, you could fill half of that $7 million order with one termination deal. So, we don’t have anything imminent, but I would say that that’s probably a trough point relative to history.

And then, just last one, can you discuss general traffic trends in the quarter and, what it’s looked like since 1Q? Tom O’Hern: Yes, we’re – I mean, we’ve been trending pretty consistently between 90% and 100% of pre-pandemic levels, and that’s where we were in the second quarter as well, fairly consistent with the first quarter.

Thanks.

[Operator Instructions] Next question comes from Alexander Goldfarb with Piper Sandler. Your line is open.

Hey, good morning out there. So, two questions. The first is, you guys had a pretty strong jump in your cash same store NOI expectations, but the full year FFO range was just tightened. So, where are the offsets that the jump in the same store cash expectations are, offset such that FFO range is just tightened, not increased?

Good afternoon out there, Alex. This is Scott. I’ll just refer back to my opening remarks. Same story NOI resulted about a $0.05 improvement. Cutting the other direction, we had the first quarter swing in investment valuations. That was about $0.025 decline in FFO. And there were a couple other factors, including increased interest expense and reduced lease termination income that accounted for the other FFO offsets.

Okay. And then, the second question is Danbury Fair Mall. Forgive me for my focus on it, but I drive past it all the time. The parking lot is packed, it’s a great asset. And yet, in your release, it only had a 1-year extension. The interest rate went up from 6 up to like 7.5. So, hardly think it’s an over-levered asset. But can you just tell us a little bit more about that asset, why it only got the 1-year extension, why the higher interest expense? And then, also, versus Deptford, that one at least had a 3-year extension, was able to keep the same, sub-four interest coupon. If you can give a little bit more perspective, Scott, on what you’re seeing in the debt markets and why we’re seeing this disparity because, the Danbury one just really stands out, or maybe my expectations of that mall are more than the actual productivity.

Sure, Alex. I guess, first and foremost, I’m disappointed, you weren’t stopping and shopping. Instead you’re just driving by looking at the full parking lot. But if you need a better parking spot, just let us know. We’ll accommodate you. But good questions. To give you a little overview of what’s going on in the financing markets, I mean, we do see them improving. Year to date, as a frame of reference, over $3 billion of mall deals have been financed. We’ve accounted for about a third of that. During the quarter, as you noted, we did execute on a couple extensions. Those were on average in the mid-fives. Extensions are very strategic for us. They allow us to get to a better time to refinance, a better, more stable climate. If you think about the second quarter, Alex, we’re on the heels of a regional banking crisis where credit spreads were gapping out. And there’s still a lot of volatility. So, with the pending and looming maturity of July 1st, it made all sense in the world for us to buy an extra year. We’re actually active on Danbury. I agree with you. It’s really a great asset. We’ve spoken to many of the things that are going on there, backfilling anchor boxes. I just talked about Target and Primark occupying Sears, and that’s just only one of the few positive events there. So, I do think the asset is very financeable. Like I said, we’re very active. Hope to report more in the next quarter or so. It’s very strategic for us to secure those extensions and buy some time, get to a better climate. And the second quarter just was not the right timeframe for us.

Okay, and if I could just slip one more in, the lower sales productivity for the portfolio overall, is that just purely driven by the lower EV sales that you referenced at the start? Or is there something else that’s driving the dip in sales productivity? Tom O’Hern: No, I mean it was a pretty modest drop, Alex. I think it was $2 or $3 per foot on a base of $8.53. It’s not a very high percentage. But a lot of that, the biggest category down was EV sales, and they were just very strong in the 12 months into the second quarter of 2022 and it was down a little bit in ‘23. But that ebbs and flows. So, that’s in essence the cause for the number being less than last year.

Okay. Thank you very much, Tom.

Please stand by for the next question. The next question comes from Hongliang Zhang with JPMorgan. Your line is open.

Yes. Hey guys. Just to piggyback off of Alex’s question, if I look at your near-term maturities, I see Tysons Corner and Fashion Outlets of Niagara, could you talk a little bit about your – what you intend to do with the debt and which could potentially extend or refinance the debt at? Tom O’Hern: Sure. I mean we are in the middle of transactions, so it’s probably not appropriate for me to speak in detail. But again, the financing climate is improving. And for instance, Tysons Corner will show extremely well. There have been several large mall transactions that have been done and you are probably aware of those. I would say in the last six weeks, give or take about a $1.5 billion of mall deals have been able to be transacted. So, liquidity is generally being restored into the market. And it’s really a function of the Fed getting to the end of its rate hiking cycle, whether or not they have another quarter left, and we will see. But liquidity is certainly coming back. So, the environment is improving, and we are actively transacting on a few different fronts right now.

Got it. And correct me if I am wrong, but I seem to remember you in the past when you were talking about taking additional equity from Tysons Corner, is that right, or am I misremembering? Tom O’Hern: Yes. I think it’s very possible. It’s going to be a function. We are always looking at things at multiple leverage points, multiple loan levels. And it’s really a function of what that incremental cost of capital is, if that makes sense. But I do think based on today’s underwriting criteria, and where the asset is performing today, it’s very possible to pull some excess capital out, yes.

Alright. Thank you.

Please stand by for our next question. The next question comes from Ki Bin Kim with Truist. Your line is open.

Thanks. Good morning. Just a couple quick follow-ups here. Your 11.3% spread that you reported, at least for the renewable segment of it, I would presume that as somebody’s older leases that had a bigger percentage rent component to it, as you know, there is maybe positive aging of tenant sales. As those gets renewed at these higher base rents, I am curious about the net economics, as some of those higher percentage rents get converted to base rent? Is the net economics up 11.3%, or is there some loss as the leases get signed? Tom O’Hern: It’s very good question. I mean when we are approving deals every other week, Ki Bin, good afternoon by the way, we are looking at things on an aggregate rent basis, we are not looking at different components isolated in base rent versus percentage. So, as we look at those deals, generally, I would say we have got positive spreads. We are not reporting on a gross rent basis. But I would say on balance, most of our deals see positive rent growth across the board on a total rent basis.

Okay. Thank you for that. And just a quick one on the Sears-Seritage deal, just what is that going in cap rate? Tom O’Hern: We have got an NDA on that one. So, we are not free to disclose the cap rate.

Okay. Thank you again.

Please standby for the next question. The next question comes from Haendel St. Juste with Mizuho. Your line is open.

Hi, this is Ravi Vaidya on the line for Haendel. Hope you guys are doing well. We noticed that net debt to EBITDA came down about half a turn from last quarter. Can you please provide us with an updated leverage target for year-end ‘24 and whether or not that target includes any speculative equity issuance?

Yes. This is Scott. Our target remains around 8x by the time it gets to the end of next year, the end of 2024. That does not include the assumption of any issued equity. It was really driven by this very, very strong and robust pipeline and growth in EBITDA. So, that’s what we are seeing today.

Perfect. Just one more here, can you please disclose the cap rate for the two power centers in Arizona that were sold? Tom O’Hern: Yes, similarly, we are under NDA on those unfortunately. But attractive given where the markets were at and where the assets were positioned. We just can’t comment on the cap rate, Ravi. I will say that on a FFO basis, they were neutral.

Got it. Thank you.

Please stand by for the next question. The next question comes from Caitlin Burrows with Goldman Sachs. Your line is open.

Hi. Good morning, there. May be somewhat of a follow-up to one of the previous ones on percentage trends, they are meaningfully higher than they were pre-COVID. Within specifically at the first half of ‘23 versus first half of ‘19, but even second half of ‘22 versus second half of ‘19. So, maybe could you go through what’s driving this? Is it temporary tenants? Is it a change to the lease structure or a combination? And then just wondering going forward, should we expect it to come down to kind of what it was and get transferred into base rents, or whether there could be some kind of leakage or not?

Yes, you are right, Caitlin, and this is Scott. Percentage rents are certainly elevated to where they were pre-pandemic. I would break that down into a couple of camps. One, just frankly, a more robust sales environment, I think the luxury category that’s certainly driving percentage rents up. And I think that will have a lasting effect on percentage rents as a whole. But we have certainly seen those and we have predicted they would continue to decrease in 2023, relative to last year. We are certainly seeing a decrease. And that’s really, again, just a function of promoting more traditional leases with fixed rents, with the fixed CAM, full recoveries, stronger recovery rates. So, we will continue to see percentage rents tick down, not only this year, but next year, but I do think they will be at an elevated level, relative to pre-pandemic and 2019.

Okay. And then just back to the topic of adding mixed use at some of the centers, definitely makes sense, given the high potential returns there. I was just wondering, if you could give any sense of what the kind of level of dollar spend could be. And when it is time for that to spend, kind of how you plan on funding it? Tom O’Hern: Well, it really is just going to depend on case-by-case, what the returns are, Caitlin. In some cases, we might like the added use. We might like the diversification. But we might not like the return, in which case we can potentially sell the land to the developer. We can throw in our land for a smaller piece of the deal less than 50-50. There is a lot of ways to structure these depending on what the economics are ultimately. So, order of magnitude on the spends probably 50 to 150, depending on how we do it. But we haven’t yet determined whether we are going to ground lease, whether we are going to sell, whether we are going to partner. In some cases, we have determined that, for example, at Kierland, we are going to partner with a residential developer. We will probably ultimately end up keeping along with our partner 50% of the total project. But that’s a relatively small capital spend under $20 million.

Got it. And then maybe one quick one, you guys mentioned the World of Barbie that opened at Santa Monica. I was just wondering, is that a permanent tenant or temporary and if it’s like more of a regular lease versus sales based, given the hype recently? Tom O’Hern: There is a lot of hype around and I will tell you.

And a lot of pink. Tom O’Hern: It is a lot of pink. It’s very exciting. That is a temporary use to be determined as to how long, but we do expect them to continue for the remainder of this year. Those temporary entertainment oriented gated attractions have been extremely exciting. We opened up a couple in this quarter that being one of them. We opened up the Dr. Seuss Experience in Tysons which was super cool, super exciting, especially if you are a parent of young kids, because we are hopping all over the place at the east wing of Tysons Corner recently. And then we opened up the Friends Experience in Lakewood. Each one of these generates a fair amount of traffic and a good amount of sales for that retailer. You asked about the lease structures, they do pay a very good, fixed rent and then oftentimes they come up with a percentage rent structure where we get the upside. I can’t speak to any specific one, but generally they are fixed rent with some percentage rent element to it.

Got it. Okay. Thanks. Tom O’Hern: Yes.

Please stand by for our next question. The next question comes from Craig Mailman with Citi. Your line is open.

Hey, guys. I just wanted to go back to the debt markets and I don’t want to dwell on Danbury. But just kind of curious, you guys said strategically, the extension there, is that just because you guys haven’t or Seritage hadn’t come in yet. You need to control that asked to kind of get the LTV you need to be able to refinance that long-term. And I guess just more generally, kind of what our LTV is that lenders are looking for today debt service coverage, kind of what’s the underwriting today versus maybe 6 months to 12 months ago?

Sure, I will take both of those. This is Scott. Good afternoon Craig. Danbury, so the, the theater box was completely outside that collateral. So, again, the regional banking crisis cropped up around mid-March. And with the looming July 1, maturity, it behooved us to secure an additional year of term to get to a less volatile environment. And to get to an environment, frankly, where there was a better view into when the Fed may potentially be increasing or pausing on their rate increases. And so that’s really what drove that. Very simply, it was just to get to a better and less volatile credit environment. And so we are approaching that environment, like I said, we are actively sourcing financing there. Second part of your question in terms of underwriting, I would say today, it’s less focused on loan-to-value because values are a little bit more obscure with a lack of trades in A-quality town center mall space. Really, it’s more focused on debt yield. And prevailing debt yields dependent upon their desire leverage level of the developer or borrower, are generally in the low teens range. But sometimes they may range up into the high teens if somebody wants to limit the leverage and produce the most efficient cost of capital. So, we have seen them trend all the way down to 11% over the last, I would say two months worth of mall executions.

That’s helpful. And then just on the $66 million, could you just talk about kind of the capital needs to be spent there relative to what’s in the redevelopment pipeline and then maybe what has to be spent on. So , we are trying to get sense of kind of current liquidity relative to your inflation, or your current capital needs relative to in-place liquidity to get SNO pipeline fully up and running and kind of what that leaves you for future deployments and just kind of from a liquidity standpoint, where you guys want to be?

So, Craig, I would say and I think this is consistent with what we had mentioned previously, in regard to [ph] development spin will range between 150 and 175 over the next few years. It will start to ramp up as we get into more of the mixed use projects. But to Tom’s point, a lot of those mixed use projects will be financed through our land position. So, our equity outlay will be relatively minimal in those.

Thank you.

Please stand by for our next question. The next question comes from Ronald Kamdem with Morgan Stanley. Your line is open.

Hey, just two quick ones, staying on the balance sheet. Apologies if I missed this. Have you touched on the Fashion Outlets of Niagara and Tysons Corner sort of those refinancings are coming along and what indications are looking like? Thanks.

Sure. Yes, that was – somebody had mentioned that previously. We are not going to speak in detail about each transaction, but I will say that we are actively working on both. We are actively working on more transactions than just those two. And it’s really a function of the environment is getting a little bit better. Liquidity is coming back into the market. Deals are getting done. We see, unfortunately, treasury yields have gapped out a little bit, but credit spreads have come back in. So, more and more mall deals are getting done. I would say over the last two months, we have seen probably $1.5 billion or so of those deals. And so it’s getting much more beneficial to transact in today’s environment, which again was a function of us getting extensions to get to a better environment. So, I can’t get into details specifically. One question was asked on Tysons as to whether or not we could borrow excess capital, and I have said it’s very possible, given the conditions of that asset. But that’s where we stand on that.

Great. And then, just the last one on the guidance. Number one, just anything for ‘23 that’s non-recurring that we should be thinking about as we are looking at ‘24. And then number two, is there a way to just quantify how much the benefits for better NOI was offset by either interest costs or anything else for ‘23 would be helpful. Thanks.

Yes, there is always one-off things in any given year. That’s just a constant in our business and probably most businesses. If I was to think top of mind, Linda asked about termination fees. And certainly, we are probably not going to hit that $10 million mark, which is why we have guided down to $10 million. And that seems like a relatively low point, and so that could certainly change next year. I think of our investment valuations, and that was one of the reasons for the decline in FFO this year. Those are hard to predict, but it’s certainly a headwind we are facing this year that could flip and become positive in 2024. Like I have said, though, Ron, I mean there is – every year there is something that you could say is non-recurring. That’s a constant in our business.

Helpful. That’s it for me. Thanks so much.

Please stand by for the next question. The next question comes from Greg McGinnis with Scotiabank. Your line is open.

Hey. Thanks for taking the second question. Just had two quick ones. First is on the $2.3 million of signed-not-open occupancy. First question on that is, is that net new space that’s currently unoccupied? And two, is there an average rent or NOI that we can attribute to that pipeline?

Yes. Greg, so we do provide a disclosure each and every quarter within our investor deck, and it shows you the timing of when we expect that space to come online. So, I would refer back to the first quarter disclosure, which in aggregate was $63 million. That represents incremental rent over and above the existing uses if there are any in the spaces that those new stores will open in. And so the space could be vacant or the space could be – have an existing use, and that measures the incremental rent each year. So, I would refer back to that. We will certainly update the disclosure to factor in the few million dollars of additional growth in the pipeline. But look back at the first quarter. It can give you a sense for how that’s coming online.

Alright. Great. And then, I was just hoping to touch on other property revenue again. Given the strength of leasing, the high occupancy of many of your centers, what do you view as the opportunity to leverage that success and extract additional revenue from common spaces, whether that’s more kiosks, advertising, partnerships, etcetera? Tom O’Hern: We see an ever-growing demand, for example, from digital signage. And a lot of the advertisers see the traffic. They see the energy. They see the new tenants that we are bringing in. So, we have got an ever-growing demand on the digital advertising side of our business. The biggest challenge there is getting the entitlements from the various cities to do it. But for example, if you came out and walked Santa Monica place, you would see there is quite a bit of digital signage, and we are trying to get more. So, that’s probably the biggest growing area where we benefit from the great traffic and great quality of our centers. But there is others. I mean certainly, our ability to attract some of these gated attractions, like the Friends exhibit and the Barbie exhibit, is a function of our great real estate.

Sorry, and the entitlement is necessary for – you are talking about exterior signage? Tom O’Hern: Yes.

I just want to understand. Tom O’Hern: Yes, external, exactly.

Okay. Thank you.

I show no further questions at this time. I would now like to turn the call back to Tom for closing remarks. Tom O’Hern: Well, thank you everyone for your time today. We are pleased to report continued strength in our leasing fundamentals, as well as strong core NOI growth during the first half of the year and we look forward to reporting to you for the balance of the year. Thanks for joining us today.

This concludes today’s conference call. Thank you for participating. You may now disconnect.