Macerich Co

NYSE:MAC

Earnings Call Transcript 2018-Q1

[Operator]

Good day, and welcome to the Macerich First Quarter 2018 Earnings Call. Today's conference is being recorded. At this time, I'd like to turn the conference over to Jean Wood, Vice President of Investor Relations. Please go ahead.

[Jean Wood, executive]

Thank you, everyone, for joining us today on our first quarter 2018 earnings call. During the course of this call, management may make certain statements that may be deemed forward-looking within the meaning of the safe harbor of the Private Securities Litigation Reform Act of 1995. Actual results may differ materially due to a variety of risks, uncertainties and other factors. We refer you to today's press release and our SEC filings for a detailed discussion of forward-looking statements.

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 Art Coppola, CEO; Tom O'Hern, Senior Executive Vice President and Chief Financial Officer; and Scott Kingsmore, Senior Vice President, Finance. With that, I will turn the call over to Tom.

[Thomas O'Hern, executive]

Thanks, Jean. Welcome, everyone, to this, our 100th earnings call as a public company. The first quarter reflected generally solid operating results as evidenced by the strength of most of our key operating metrics. As we mentioned on our last earnings call, the bankruptcies and early terminations in 2017 continue to temper growth in the first half of 2018, as we expected, as we work out -- work through the lease up of that space that we've gotten back from the bankruptcies.

That being said, the 2018 year started on solid footing with good retailers' sales, far fewer bankruptcies and a more balanced tone from the retailer community. FFO per share was $0.82, and that was adversely impacted by $12.8 million of severance cost in the quarter related to our first quarter reduction in workforce. Going forward, we expect to see $1 million per month expense savings as a result of that.

Occupancy was 94% at the end of the quarter. That was down 30 basis points from a year ago. The decline versus a year ago is a result of the record number of bankruptcies we saw in 2017. Same-center growth was flat for the quarter. This was again primarily caused by the occupancy loss versus a year ago. We expect the second half of the year to be strong, and we are comfortable with our same center NOI growth guidance for the full year 2018 of 2% to 2.5%. Lease termination fees were $2.9 million for the quarter, up slightly from $2.7 million in the first quarter of 2017. Bad debt expense at $1.7 million was essentially flat with the year ago. At March 31, 2018, our average interest rate in the portfolio was up 22 basis points to 3.79%. We expect this trend to continue.

The balance sheet continues to be in good shape. At quarter end, our debt-to-market cap was 47%, our average debt maturity is 5.9 years, and we only have $9 million remaining in 2018 maturities.

On March 29, we closed on a $450 million, 12-year fixed rate loan on the recently expanded and renovated Broadway Plaza. The fixed interest rate is 4.18%. This is a great long-term loan with 2 of our strong relationship life insurance companies, MetLife and Northwestern Mutual.

At the time of the financing, Broadway Plaza was not encumbered, so we took our share of the proceeds, $225 million and paid down our line of credit. In the earnings release of yesterday, we reaffirmed our estimate of diluted FFO per share guidance of $3.92 to $4.02. And as I mentioned previously, we remain comfortable with our same-center NOI growth range in 2% to 2.5%.

Looking at the leasing environment. The first quarter performance reflected good leasing volumes, whereas 2017 began with a high degree of uncertainty regarding specialty store bankruptcies, retail sales trends and department store closures. The 2018 year started on more solid footing, with good retailers’ sales, far fewer bankruptcies and a more balanced tone.

Trailing 12-month leasing spreads were positive 14.7%. The average rent for leases signed during the trailing 12-month period was 59.12 per square foot, and that's 14% higher than the previous year. So clearly, this is a sign of strength in the leasing environment.

The average base rent in the portfolio rose to $58.44, which was a 3.8% increase over the prior year. During the quarter, a total of 614,000 square feet of leases were signed, it included Lifetime Athletic at Broadway Plaza, True Food and Shake Shack at Country Club Plaza, H&M at North Park, HomeGoods at SanTan, Johnny Was at La Cantera, Broadway and Kierland.

During the first quarter, of 2018, the square footage of nonacreage space for tenants in our portfolio filing bankruptcy was only 112,000 square feet, and we only expect 14,000 square feet of that space to result in rejected leases. That compares to lease rejections of 154,000 square feet due to the first quarter '17 bankruptcies, a significant improvement there.

Portfolio sales ended the quarter at $686 per square foot, a 7.4% increase on a year-over-year basis. Economic sales per foot were $800 per foot for the 12 months ended March 31, 2018, and that compared to $741 for the 12 months ended March 31, 2017, and that's an 8% increase.

During the quarter, Nordstrom announced their planned relocation to Country Club Plaza in Kansas City with an opening in 2021. The addition of Nordstrom to this iconic asset advances the vision that Macerich and Taubman share to further Country Club Plaza's position as the premier center in that region.

Many of you have asked if we would replace Bob Perlmutter, so I'm going to take a moment to comment on our senior leadership group and leasing and operations. Today, as it's been for the last several years, leasing is handled and run by Executive Vice President of Leasing, Doug Healey. Doug is a very experienced and respected leasing executive with 13 years at Macerich and 14 years at Wilmorite before that. Asset management is headed today by 2 senior executives and Dave Short, who has 31 years of mall experience and Cory Scott, who has 10 years of experience with Macerich and 9 years with 3 other mall companies before that.

Marketing and business development will continue to be run by Ken Volk who is the Senior Vice President. Ken has 11 years with Macerich plus 18 years with 2 other mall companies. Portfolio operations is led by Olivia Leigh. She is Senior Vice President and has 13 years of experience with Macerich and 13 years before that in related fields.

So you can see, we have a very talented and experienced team running leasing operations and asset management. For the past 25 years, much of the time we have operated without a COO and, in fact, that was the case before we promoted Bob Perlmutter to that position 2 years ago. And with that, I'll turn it over to Art.

[Arthur Coppola, executive]

Thank you, Tom. As Tom was talking about our people, I'd like to comment on that. Look, we obviously are a real estate company and we have a terrific platform of properties. But as I think about what really makes Macerich special, it's our people, and that's really our biggest asset.

And as we think about that asset, we're certainly blessed to have a very deep bench with long tenure. A lot of these people, frankly, have never worked at other mall companies, and they've been trained by us over long periods of time and they are very well positioned to take us into the future. Certainly, 2 of our greatest people assets are Scott Kingsmore, who will succeed Tom O'Hern at the end of this year as our CFO. Many of you will get to know Scott and you'll find that he is extremely knowledgeable about all aspects of our business.

And our greatest people asset at this moment in time is Tom O'Hern. With this terrific team that we have here, the key question in terms of succession for me was, who is the right leader for this group of talented people. And I congratulate our Board of Directors in selecting Tom to succeed me. He is absolutely the right person to lead our team.

Looking at our business. It feels to me like we are at an inflection point in terms of the retail cycle. It feels to me that retail sentiment is definitely on the uptick. Retailers are making a lot more money because of the tax cuts, and it's hard to ignore the coincidence of that tax cut and extremely strong comp sales over the last 6 months. The sales trends that started in Thanksgiving through December have continued through the first quarter and they're really across the board. As we look at our top tenants in terms of their sales performance on a comp basis in the first quarter, names like Vans that were up 47%, Hollister is up 30%, American Eagle is up 15% comp, Gucci up 52%, Restoration up 56%, Apple and Tesla up 30% and 15%, respectively, and even PacSun is up 24%.

So the sales trends are really across the board, not only with the legacy retailers, but also with the new digital retailers and new concepts that are coming to our centers. As a lot of the sell-side analysts attended Shoptalk this year. They were made -- they began to see our vision that the digitally native, vertically integrated brands are going to comprise a growing share of our merchandising opportunities within our centers. They all aspired to open stores with us and they are going to be, in my view, the superstars of the next 3 to 5 years.

Another inflection point that I see is that we see stores reinvesting into their fleets. One of our top department stores by size, and I'm not referring to Nordstrom, you can probably guess who it is, has recently announced that they're going to be reinvesting in growth initiatives at their top 50 stores, of which we have a disproportionate share. As we think about the inflection point, leasing activity remains strong. Our ABRs are up significantly and we're getting new concepts in our malls.

Looking to our portfolio now and just commenting on key things that are occurring across the board. As Tom mentioned, we have -- Nordstrom has announced they're coming to the Plaza in Kansas City. That's a terrific, terrific opportunity for that asset. We're wrapping up the remerchandising of Kings Plaza Sears Box with JCPenney and Primark scheduled to open roughly over the Memorial Day weekend. We have signed a new deal with Lifetime Athletics to join us at Broadway Plaza. We talked about them on the last call and they're going to be terrific. And we continue to bring new experiential retailers to our centers.

We recently opened during this past quarter Candytopia at Santa Monica Place. They're in 15,000 square feet. They opened in March. They sell -- it's basically an Instagramable moment, all about candy, it's similar to the Museum of Ice Cream that some of you may have heard of. It brings people from the entire region to the center. They're selling, on average, 2,000 tickets a day at a price of $30 to come and see this exhibit. I attended over the weekend the kickoff for the new Children's Museum that's coming to Santa Monica Place, which also is going to be a terrific experiential retailer.

Other new -- other key developments that I want to just touch upon. In our supplement, you'll see a new reference to Westside Pavilion. What I would note about that is that we wanted to mirror our disclosure with our partners, Hudson Pacific's disclosure. So even though it shows up in the supplement, including their acquisition price, the contributed value of the asset, when you look at the net incremental spend of $260 million, give or take, the net cash spend from our side is fairly nominal. It's $15 million to $20 million, give or take. And we believe that they are absolutely the right partner for us there. We have significant demand for the conversion of that creative office, and we see that alliance, as I mentioned on our last call, expanding to other properties and other opportunities, particularly in gateway cities. You also would have noted in the supplement that Fashion Outlets of San Francisco dropped off of the supplement for now. That project is being completely rethought, given the delays that occurred during the entitlement by the master developer as to size, scope, timing, dollars and even the certainty of the execution on the project. So we just felt it was best to go ahead and take it off of the supplement.

And one topic that I know is of great interest to all of you and then we'll open up to questions. As we talked about in our last call, our partner had -- it was marketed their position in Broadway Plaza, in Walnut Creek over the past couple of months. Demand was very strong. Even though given the structure of the deal being a 50-50 deal, the sovereign wealth funds were not able to bid on it because it would have triggered a complete Prop 13 reassessment. So it's really just the domestics. And I'm not going to put out a cap rate because, frankly, I'm not a party to the transaction, but I am an observer. And what I would guide you to is that the cap rate on forward NOI, and forward really means next year's NOI, is much, much closer to a 4% cap rate than would it be, say, a 4.5%. Some people think of the cap rate as looking a lot like the interest rate on the loan, which was 4.18%.

With that, I'd like to open it up for questions.

[Operator]

[Operator Instructions] We'll go first to Jim Sullivan with BTIG.

[James Sullivan, analyst]

A quick question for you on Broadway Plaza. I know that, that was this included in the sales results for last year and a very robust number of 1,300 a foot. And I just want an update. I didn't think, or my understanding was that there were a couple of pieces that had not been completed there in terms of the leasing. And I wondered if you could just give us an update on leases signed or tenants pending that are going in and where that center should be going over the next 6 to 9 months after what's been a pretty strong sales recovery in '17 with most of the project completed.

[Arthur Coppola, executive]

Leasing, most -- every inch of the small shop space is spoken for. There will be because of some very significant investments that retailers are making in the building out their stores, those who'd be still opening up over the next 18 months. The most significant piece that isn't finished and hasn't even started construction is the addition of Lifetime Athletics to the project and that's anticipated, and my guess is to open 18 months from now, give or take, and there's significant income attached to that also.

[Operator]

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

[Craig Schmidt, analyst]

First, Art, congratulations on your impending retirement. And then, Tom, on gaining the CEO role.

[Arthur Coppola, executive]

Thank you.

[Thomas O'Hern, executive]

Thanks.

[Craig Schmidt, analyst]

There have been a number of changes in the senior executive suite, and I just wondered if there was anything that was responsible for bringing about these events. And are there any changes that the new management wants to take with Macerich that may differ from the past path?

[Arthur Coppola, executive]

I'll let Tom go ahead and address that.

[Thomas O'Hern, executive]

Well, Craig, as you saw from the various press releases, Art has been running Macerich for well over 30 years. He's put in a tremendous effort and built quite a company. So I think he's entirely entitled to retire when he chooses to. So it's understandable. I've got big shoes to fill, and I'm happy to get the opportunity. As I mentioned in my prepared remarks, we have a great team of people here, a lot of experience and I don't consider them as the bench, they're starters. They've been in the game for a long time, and you've met some of them. But they're tremendously talented and we're glad to have them, and we think we've got the talent we need to run this company.

[Operator]

And we'll go next to Alexander Goldfarb with Sandler O'Neill.

[Alexander Goldfarb, analyst]

And again, I'd echo best in retirement, Art, and Tom, I guess now you get the fun of having full control. So just a question on that. One of the people you didn't talk about was the retirement of Randy on the development side. And obviously, you spoke about pulling back on Fashion Outlets. So maybe you could just give a perspective on where you guys are thinking about development, redevelopment? Certainly, Simon seems to be ramping up their redevelopment activity, and I'm just thinking about where you guys see that, and especially with Randy's retirement, who's taking over on that front?

[Arthur Coppola, executive]

We have a very deep bench in every area of our company. Randy made that decision well over a year ago, and we've broken up that area into an East and a West. The people that are running each of the East and the West have each been with us for well close to 20 years. They've been in the business for a long, long time. And as you take a look at the actual development pipeline, we're winding down on Kings Plaza. We're going to be finishing up Philly. We've potentially taken San Francisco off the table. Westside Pavilion is going to be handled by our partner. So we're, at the moment in time, frankly, we're really in terms of just the -- some caution to also thinking about things and also thinking about allocation of capital that our development pipeline in terms of what's about to go in the ground or what is in the ground is fairly modest. The next leg up on development will be on the recycling of the Sears Boxes, and we have plans that have been developed that are very specific and are ready to go as soon as we get access to the Sears Box. We have said that we don't believe in proactively going and buying Sears out, because we believe that there'll be a day we get those back anyway. So when those boxes are ready to be densified, we're ready to go, and we're appropriately staffed.

[Operator]

We'll go next to Todd Thomas with KeyBanc Capital Markets.

[Todd Thomas, analyst]

I just wanted to follow up on Craig's question about the personnel changes and the Macerich platform more broadly. There has been a lot of change recently with the overhead cuts and, Art, your retirement, Bob's departure. And I know that the company has sold assets and the platform shrunk a bit, but it seems like a lot of volatility from our perspective. Should we expect to see more change or should we expect to see some level of stabilization now?

[Arthur Coppola, executive]

I certainly empathize with you on your view around volatility. But look, this was all well thought out, well-orchestrated. It will be extremely well transitioned, and we're extremely well positioned in terms of the talent that we have on board to take us where we need to go. But I understand, and I empathize with you that it does seem a lot for you to absorb right now. It's not a lot for us to absorb because, look, we all saw this coming.

[Operator]

We'll go next to Christy McElroy with Citi.

[Michael Bilerman, analyst]

Hey, it's Michael Bilerman here for Christie. But Christie is here, too. She can say hello.

[Christy McElroy, analyst]

Hello.

[Arthur Coppola, executive]

Always nice to have you both.

[Michael Bilerman, analyst]

Well, there you go. But we'll only ask one question, so I don't know if have to say one word and she has to say one word. I don't know how we'll do this. But...

[Arthur Coppola, executive]

I think you can probably do whatever you want to do, Mike.

[Michael Bilerman, analyst]

Yes. So it tends to happen and certainly 42 years, I'm sure has felt like 8 decades, instead of 4 decades, so congratulations on your well-deserved retirement. I was wondering if you can spend some time just talking about the corporate governance, and things that are happening. The company still hasn't filed its proxy statement. You did hit the 120-day window this week where you had to put out some of the historical proxy comp information. Clearly, there's Starboard Value that's out there talking publicly about the company. We've talked about some of the management changes that have occurred. You had Fred Hubbell come off the board recently and put a new director on. Ontario Teachers had submitted in January that they're not running for reelection. Can you talk a little bit about what's holding up the proxy this year and not setting an annual date and how investors should think about that and maybe just provide some insights to what's going on from a corporate governance perspective?

[Thomas O'Hern, executive]

Well, actually, that was about 7 questions embedded in there, but I'll take -- try to take them one at a time if I can. And Art, jump in as well. In terms of governance changes, you may have noticed that we added a new director to our board in the first quarter, Peggy Alford. Peggy comes to us with experience from eBay and PayPal, both places as a CFO, and she's currently the CFO of the Chan Zuckerberg Initiative. Very accomplished. Has a lot of experience in the digital world and a great addition to our board. She replaces Fred Hubbell who stepped up the board, so he can focus on his run for governor of Iowa. Also, what was announced in the various press releases over the last couple of weeks is that we're decoupling the CEO and Chairman role, which should be viewed as a positive in governance circle. So those changes have happened. There may be a number of other things that we're considering that we haven't discussed or not at liberty to discuss today. And in terms of details regarding directors standing for election in the proxy, that will be included in the proxy statement, which will be filed with the SEC and available to you all within the next few weeks.

[Operator]

We'll go next to Mike Mueller with JPMorgan.

[Michael Mueller, analyst]

And I echo the congratulations sentiment as well. In terms of guidance, you have no dispositions in there, but you sold the Philly office assets, and I think you have a couple of other assets under contract for sale as well. Are they just not meaningful or how should we be thinking about that?

[Thomas O'Hern, executive]

Mike, we'll probably address that at the next call and with the next guidance. We don't know whether those assets under contract will sell, so we don't want to get ahead of ourselves there. The Philly office is a minor number. We'll also have some timing from the sell-down of our position in Westside Pavilion, but we'll address all that midyear.

[Operator]

We'll go next to Floris van Dijkum with Boenning.

[Floris van Dijkum, analyst]

Actually, my question was actually -- also related to the asset sales, but as we think about asset sales or as we should think about asset sales, are these further pruning of some of your lower quality malls? Or is this JV-ing certain assets? Or are you not at liberty to talk about that right now?

[Thomas O'Hern, executive]

Well, the activity so far in the year is a little bit of both. The joint venture that we entered into with Hudson Pacific is relatively unique. The other assets we're talking about are noncore assets. They're not malls, but they're noncore to us, and that's a type of asset we would continue to dispose of as the opportunity presents itself. But they're not -- not any of the assets listed in our top 30 malls. These are noncore.

[Operator]

We'll go next to Jeremy Metz with BMO Capital Markets.

[Robert Metz, analyst]

Art, I was hoping you could maybe just give a little more color on your decision to step away from the board. I think most of us would understand the desire to step back from the day to day, but you've been obviously an integral part of building Macerich from the start. You're only in your mid-60s, so you're still young. You mentioned the industry being at an inflection point. So it seemed like a natural progression would be to stay on as Chairman and help shepherd in the next phase, especially just given a significant amount of time you personally spent curating a long shadow pipeline of digitally native tenants.

[Arthur Coppola, executive]

Well, we just think it's good governance to have as many independent directors as possible and given that I will not be an employee of the company as CEO at the end of this year, I would be taking up a board seat. If the nominating committee would have nominated me, I would have been taking up a board seat, and it would have been still considered to be a nonindependent board seat. We just think it's a good idea to have as many seats on the board be independent board seats as possible, and that's why that all happened.

[Operator]

We'll go next to Jeff Donnelly with Wells Fargo.

[Jeffrey Donnelly, analyst]

Maybe in regard to a similar topic. I was just curious on succession. Did the board make an effort to contact external prospects for CEO? Or maybe look to Eddie or Bobby? Or was the situation because of continuity, they went straight to Tom?

[Arthur Coppola, executive]

Well, I'll answer that, I think -- and Tom, feel free to jump in. But look, on a regular basis, we meet with the nominating and governance committee, and we talk about succession, not only for the CEO role, but for the top, probably 10 or 12 positions in the company. And certainly, as we have talked about that for the CEO role, we were blessed to have internal candidates and the nominating governance committee as well as the board, they were aware of those conversations for the past couple of years. They're also very aware of what other individuals are out there in the industry that would -- that could be considered. And as I said in my remarks, I applaud the board for picking a great leader. The key attribute to me of a CEO is being able to lead and the key asset that this company has is our people. And there is 0 question in my mind that Tom O'Hern is, by far, the most qualified person to lead our team. He's extremely -- the team is extremely loyal to him. He's very loyal to them. They will follow him. And I think that the team will perform extremely well under his leadership. And so I really applaud the board. Look, I'm a big investor in this company, I have a lot at stake, and I support their decision 1,000%.

[Operator]

We'll go next to Ki Bin Kim with SunTrust.

[Ki Bin Kim, analyst]

Congratulations, Tom and Art. Can we talk about operations for a second? Your same-store NOI basically flat, occupancy down a little bit, but with the kind of built-in escalators and the lease spread that you've been posting for past several years, I would have thought the numbers would have just been better. So there's obviously some gives -- puts and takes in this number. Can you just talk about what was going in and out?

[Thomas O'Hern, executive]

Sure, I'd be happy to. I think the first point I'd like to make is to send you back to the transcript for the fourth quarter. I think we've talked at length about the fact that we would have tempered growth in the first half of this year as a result of filling the bankruptcies last year. It was a record year last year. And unlike a typical year, a lot of those bankruptcies came in the second half of the year. So we were optimistic about the second half of '18 going into '19, and that was factored into our guidance. So I thought we're fairly clear on that, but perhaps not. And the real issue here is occupancy. The occupancy level is 94% versus 94.3% a year ago, but also the temporary occupancy has gone up to about 6.4%, that's up about 100 basis points from 5.3% a year ago. So that's lower quality occupancy, that's opportunity for us. Obviously, when you get a lot of space back, quickly, you want to fill that space even if it's with temporary tenants. So yes, the releasing spreads are good. That typically impacts 8% to 10% of your tenants in any given year, are rolling and you're getting that pickup. Built-in rent increases get straight-lined and typically they don't end up being more than, on average, 1.5% to 2% in a given year. So that versus the offset by the occupancy has kind of taken us to flat same-center NOI in the first quarter. But obviously, we feel that's going to accelerate in the third and fourth quarter or we would not have left our guidance where it is at 2% to 2.5%. The first quarter was pretty much as expected, Ki Bin.

[Operator]

We'll go to Caitlin Burrows with Goldman Sachs.

[Caitlin Burrows, analyst]

I guess just similarly on the guidance, I guess on the FFO side, I know you guys mentioned last quarter that the first quarter was expected to be about 20%, but it seems like at the midpoint, you're a little above that. So I was just wondering if, indeed, you are trending stronger than you were expecting or have the quarterly splits shifted or maybe just the lack of moving FFO guidance has to do with some of the dispositions we talked about earlier and that will be assessed later in the year.

[Thomas O'Hern, executive]

No, I think with the splits we gave, obviously, there's some rounding in there and there's a range in there. So the first quarter ended up coming in at 21% of the annual. I think originally we said roughly 20%. Just some timing differences in there. I would still say the second quarter is probably 24% of the full year, 25% in the third quarter and the balance in the fourth quarter. And we'll reassess the assumptions in the guidance in next quarter's call as well to factor in what dispositions may or may not have happened.

[Operator]

We'll go next to Vincent Chao with Deutsche Bank.

[Vincent Chao, analyst]

Just a question on the same-store NOI. So you talked about sort of what happened in the first quarter being expected. But at this point, I know a lot of the leasing for the year is done already. So I guess, there is going to be some amount of commencements that need to happen to hit your back half numbers, and I was just curious how much visibility you do have on that at this point based on the leases already signed.

[Thomas O'Hern, executive]

Yes. We think we're going to see the acceleration in the third and fourth quarter, Vin. We've got about 65% of the bankruptcy space that we've got back has been permanently leased and will push through the balance of that, hopefully, in the second quarter and we'll see the real pickup in the third and fourth quarter this year, which we feel pretty good about.

[Operator]

We'll go next to Rich Hill with Morgan Stanley.

[Richard Hill, analyst]

Just a question about maybe the financing side of the equation. One of the things that we focused on given the move up in LIBOR is maybe some of your floating rate debt. I'm curious how you're thinking about that. Are you, Tom, thinking about -- trying to term some of that? Or are you comfortable with the amount of floating rate debt at this point?

[Thomas O'Hern, executive]

Yes. Rich, we've got about, I think, 16% or 17% of our debt is floating rate debt, the bulk of that is on our line of credit. We have one small loan that's floating that comes up later this year that we may fix out. But when we gave our guidance this year, we based it on the forward LIBOR curve. I think our preference is always to go long-term fixed-rate financing, even Broadway Plaza, which was in the rising interest rate environment, we've got a fairly effective coupon on that, and we saw the spread compresses, rates went up. So we've got a little bit of benefit there. So it's always our preference. I don't see a big change for us this year because we don't have a lot of maturities coming due. But it's always our preference when any of the floating rate debt does come due to put in fixed rate. So we keep an eye on it, but I think we're comfortable with the level of floating rate debt we have right now.

[Operator]

That does conclude today's question-and-answer session. I'd like to turn the conference back to Art Coppola with closing or additional remarks.

[Arthur Coppola, executive]

Right. Thank you very much for joining us. We look forward to talking to you and meeting with you again soon. Thank you.

[Operator]

That does conclude today's call. Thank you for your participation. You may now disconnect.