Macerich Co

NYSE:MAC

Earnings Call Transcript 2020-Q4

[Operator]

Good day, and welcome to the Macerich Company Fourth Quarter 2020 Earnings Conference. Call. Today's conference is being recorded.

And at this time, I'd like to turn the conference over to Jean Wood, Vice President of Investor Relations. Please go ahead.

[Jean Wood, Vice President, Investor Relations]

Thank you for joining us on our fourth quarter 2020 earnings call. During the course of this call, we will 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 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 would like to turn the call over to Tom.

[Tom O'Hern, Chief Executive Officer]

Thank you, Jean. And thank all of you for joining us today as we continue to navigate through these challenging times. 2020 was an extraordinarily tough year in so many ways for all of us. Once COVID stormed the U.S. in mid-March, all of our centers closed and our tenants quit payment. We quickly adopted significant measures to conserve liquidity, much as we had done during the great financial crisis.

We persevered through those dark days in the second quarter. We got most of our centers opened by mid-summer and all of our centers opened by early October with no further closures. It was a herculean effort by the Macerich team, and I'm very proud of their efforts. There were not a lot of good days, but we battled through it. Rent collections, for example, during April and May were 35%, that grew to 80% in the third quarter. And as of today, the fourth quarter rent collections were at 92% and rising by the week.

2020 was a year of crisis, but we made it through the year, and things are improving by the week. The COVID daily infection cases are down significantly throughout our markets. The positivity rate is dropping, and hospitalizations are down significantly compared to a month ago. We now have two vaccines in distribution with third on the way. Currently 10% of the U.S. population has had at least one dose of the vaccine, and distribution is accelerating.

Now that the COVID battle is over, but it is much, much better than it was even three months ago, some level of normalcies returning, including restaurant dining and going to the mall. Our shoppers have returned. In fact, December sales were approaching 85% of pre-COVID levels even in the midst of a surge in COVID cases. Gradually, restrictions on capacity and indoor dining are being lifted and that will help both our traffic and our sales.

COVID, among any other things, had the impact of accelerating bankruptcies of dozens of retailers that otherwise likely would have gone into bankruptcy over the next several years. But instead, we're accelerated into 2020. The result is our occupancy level is at 90%, which is the lowest since the Great Financial Crisis. However, within two years post-GFC, we were back to full occupancy. We expect a similar recovery post-COVID.

We have worked through most of the bankruptcies from 2020. And fortunately, the vast majority of those have been reorganizations, not liquidations. The biggest bankruptcy of the year was JCPenney. Of our 27 JCPenney locations, only two locations closed, Green Acres and Kings Plaza, both in New York. I'm happy to report that we have leases out for signature on both of those locations and should be able to make announcements in the very near future.

As you say goodbye to 2020 and gladly watching in the rearview mirror, we are very optimistic about 2021 and the recovery of our business. Although '21 is going to be a transitional year, it will be much better than 2020 in almost every respect. Most of the tenant COVID workout agreements will have some impact on us in '21, both in terms of rent relief as well as higher than normal vacancy rates.

That being said, we expect to see occupancy gains in the second half of the year in a gradually improving leasing environment. Rent collections have improved significantly up from a September collection rate of 77% and are now above 90% in the fourth quarter. January is also trending above 90%. We have come to agreement on COVID workouts with over 93% of our top 200 tenants.

Leasing activity picked up significantly in the fourth quarter. Volumes, in fact, were 90% of pre-COVID levels of the fourth quarter of 2019. We even have a variety of dated attractions that are planning to open this year, including, model and the museum of ice cream. Many of our replacement tenants in the former Sears locations will also open in 2021.

Our 2021 lease expirations are 60% leased today, with the majority of the balance in the letter of intent stage. Looking at the balance sheet, most of our 2021 loan maturities have been successfully extended, and negotiations are well underway to renew our line of credit, which matures in the third quarter.

Retailer traffic and sales continue to pick up with traffic at 80% of pre-COVID traffic. And sales, on average, 85% of pre-COVID levels. We expect improvements in both traffic and sales as we progress through 2021. The cost reductions and cost containment measures we adopted when COVID hit will be continued into 2021.

And the final point for me, once again, we have been recognized as a leader in sustainability and have achieved the number one Global Real Estate Sustainability Benchmark ranking in the North American retail sector. That makes six straight years for that honor.

And with that, I'll turn it over to Scott.

[Scott Kingsmore]

Thank you, Tom. Highlights of the financial results for the quarter are as follows: funds from operations for the fourth quarter was $0.45, and it's down from the fourth quarter of 2019 at $0.98 per share. Same-center net operating income for the quarter was down 33% and year-to-date is down 22%. As you will see, these results are unchanged relative to what was filed last week on February 1.

Changes between the fourth quarter of 2020 versus the fourth quarter of 2019 were driven primarily by the continuing impact of COVID-19 and are as follows: and the figures I'm citing are at the Company's pro rata share. One, $38 million decline from COVID-related rent abatements across permanent and temporary leasing revenue line items. Fourth quarter abatements were elevated relative to the third quarter abatements of $28 million and this was largely due to the protracted summer closures of several large properties in New York and in California. This resulted in delayed negotiations with tenants at those properties. Cumulatively for the year, in 2020, we granted $56 million of abatements.

Number two, $19 million of COVID-related decline in common area and ancillary revenues including specialty leasing and temporary tenant revenue, percentage rent revenue, business development revenue and parking revenue. These declines were generally a continuation of what we experienced in the second and third quarters what were exacerbated in the fourth quarter given the seasonal nature of these types of income. However, looking forward into '21, we do anticipate growth in each of these more transient income line items, assuming conditions at our properties improve as we do expect. In total, for all of 2020, these line items were down $43 million.

Number three, general top line revenue decrease is totaling approximately $12 million, driven primarily by COVID-related occupancy decreases.

Number four, $6 million bad debt expense in the form of reversals of lease revenue for tenants on a cash basis pursuant to GAAP, that was about $5 million and then bad debt expenses of about $1 million. As a result of the COVID-related disruption to our business, the bad debt expense line item was significantly elevated in 2020 at $62 million. This was a $52 million increase versus $10 million of bad debt expense in 2019.

Number five, there was an $8 million decrease from loss or gain on undepreciated asset sales or write-downs on consolidated assets. This included a $5 million impairment charge in the fourth quarter of 2020 for undeveloped land that is currently under contract for sale and is expected to close in 2021.

And lastly, offsetting these items, straight-line of rent increased $19 million in the fourth quarter. This was driven by applying straight-line rent averaging to all rental assistance lease amendments executed during the fourth quarter.

So to summarize some of the major impacts of COVID that impacted real estate NOI in 2020, and again, all these figures are at the Company's share, we highlight the following.

Number one, $56 million of onetime retroactive abatements of rent, these concessions were granted to local business owners and entrepreneurs to restaurants and other food uses and then selected cases to national tenants in order to secure near-term lease expirations and to achieve other landlord favorable concessions.

Number two, of $43 million of decline in commonary and ancillary revenues, percentage rent and temporary -- or excuse me, and parking revenues. Again, these are transient line items, and we would expect those to bounce back.

And number three, we wrote-off an extra $52 million of bad debt expense relative to 2019. Plus, in addition, we had another $11 million of rent that was reversed for tenants that are accounted for on a cash basis.

So when you add all that up collectively, it's roughly $162 million of pandemic-driven NOI decline just among those three categories.

This morning, we provided 2021 earnings guidance, and we do direct you to the Company's Form 8-K supplemental financial information for more details of the Company's guidance assumptions. 2021 FFO is estimated in the range of $2.05 per share to $2.25 per share. While certain guidance assumptions are provided within our supplemental filing.

I'd like to provide some further details. This guidance range assumes no further government-mandated shutdowns of our retail properties. We are not providing same-center NOI guidance at this time, given continued expected impacts of COVID-19 and early 2021. But we do anticipate growth in the same-center NOI starting in the third quarter of '21.

And in fact, at this time, we expect strong double-digit growth in the second half of 2021. Anticipated progress on vaccination efforts continued fiscal stimulus from the federal government, significant pent-up demand from our market consumers and softer comparables in the last half of the year informed this thinking for ramped up growth later in 2021.

In terms of FFO by quarter, we estimate the following cadence: 21% in the first quarter, 24% in 2Q, 25% in 3Q and the balance 30% in the last quarter. We view 2021 as a transitional year as we pivot away from the disruption in widespread closures caused by COVID during 2020. We do expect that the first quarter '21 will include lingering effects of COVID, including from retroactive rent adjustments relating to 2020.

While we are certainly not giving forward-looking guidance into 2022 and future years, we are, however, optimistic about the financial tailwinds that may ensue as our country heals from the pandemic. Trough occupancy appears to have been contained to roughly 88%, which we estimate to be at the end of the first quarter.

And we do believe there's an opportunity to grow occupancy later part in the year and certainly over the coming years, which should fuel future operating growth. Again, more details of the guidance assumptions are included in the Company's Form 8-K supplemental financial information.

Now on to the balance sheet, as addressed in detail within our recent filings, over the last few months, we have successfully extended four secured mortgage loans, totaling over $660 million for extension terms ranging up to three years. Those loans included mortgages on Danbury Fair, Fashion Allies of Niagara, FlatIron Crossing and Green Acres Mall. We do anticipate securing similar extensions on remaining mortgages that mature in 2021, including from Green Acres commons, for which we are currently working on a two-year extension.

In November, the Company financed the previously unencumbered Tysons VITA. This is the residential tower at Tysons Corner. The loan is a $95 million mortgage loan, bearing fixed interest at 3.3% for 10 years. At closing, this generated $45 million of incremental liquidity to the Company, and there is some incremental funding capacity remaining under this line item.

As mentioned in our recent filings, we continue to make progress on the renewal of our line of credit. Cash on hand at year-end was $555 million. As Tom previously noted, collection efforts are now over 90%. This improved collection environment is a direct byproduct of the extensive efforts by a vast many within the Company to negotiate thousands of agreements with our retailers. I can tell you, we are extremely proud of those efforts, as Tom has already noted.

As a result, we do anticipate further improvement in collections into 2021. And in addition, we estimate the collections of both contractually deferred and delayed rent collections in 2021 that relate to 2020 build rents in the approximate range of $60 million to $75 million.

During 2021, we expect to generate over $200 million of cash flow from operations, and this is after recurring operating and leasing capital expenditures and after dividend. This assumption does not include any potential capital generated from dispositions, refinancings or issuances of common equity.

This operating cash flow surplus will be used to delever the balance sheet as well as to fund our development pipeline. And as for development, we expect to spend less than $100 million in 2021, excluding further development expenditures on One Westside, which recall, is independently funded by a construction loan facility.

With that, I will now turn it over to Doug to discuss the leasing environment.

[Doug Healey, Senior Executive Vice President, Leasing]

Thanks, Scott. In the fourth quarter, much of our focus, again, was working with retailers to secure rental payments and improve our collection rates.

Looking at our top 200 rent paying national retailers, we now have commitments with 176, which is up considerably from last quarter. But more importantly, we now have received payments or we've worked out deals, totaling 93% of the total rent, these top 200 pay. And as a result, our collections continue to improve. As of today, collection rates increased to 89% in the third quarter and 92% in the fourth quarter of 2020.

Occupancy at the end of the third quarter was 89.7%, that's down 110 basis points from last quarter and down 4.3% from a year ago. This is primarily due to store closures from the unprecedented amount of bankruptcies and early abandonments that occurred throughout 2020. Temporary occupancy was 5.9%, and that's down 50 basis points from this time last year.

Trailing 12-month leasing spreads were a negative 3.6%, and that's down from 4.9% last quarter and down from 4.7% in 2019. Average rent for the portfolio was $61.87 as of December 31, 2020, and this represents a 1.3% increase compared to $61.06 as of December 31, 2019, and a 0.7% decrease compared to $62.29 at September 30, 2020.

2021 lease expirations continue to be an important focal point. And to date, we have commitments on 60% of our expiring square footage, with another 40% or the balance in the letter of intent stage, disregarding tenants who have closed or have indicated they intend to close.

In the fourth quarter, we signed 217 leases for 900,000 square feet. This represents 80% more leases and 1.5x a square footage when compared to the third quarter of 2020. This also represents 90% of the square footage that we signed in the fourth quarter of 2019. Noteworthy leases signed in the fourth quarter include Catalana at Danbury Fair, Louis Vuitton at Scottsdale Fashion Square, Swarovski at La Encantada and Los Cerritos, Madison Reed at San Tan, four renewals with Sephora at Eastland, FlatIron Crossing, Vintage Bar and Pacific View as well as a five store package with Charming Charlie's at Green Acres, FlatIron, Fresno, La Encantada and Pacific View.

Turning to openings in the fourth quarter. We opened 59 new tenants in 236,000 square feet, resulting in a total annual rent of over $10 million. Notable openings in the fourth quarter include Bulgari and Rolex at Scottsdale, Free People at La Encantada, Rush at Los Cerritos, TecoVas at Kierland Commons and J.A. Henckels at Fashion Outlets of Chicago. In the international arena, we opened another three stores with Lovisa at Deptford Mall, Queens Center and Kings Plaza, along with Quay Australia at Los Cerritos.

In the large-format category, we opened DICK's Sporting Goods at Vintage and Round One at Deptford Mall, both in former Sears' locations. The digitally native and emerging brands continue to hopefully bricks-and-mortar stores. In the fourth quarter, we opened Amazon Forestar in Madison, 29th Street, Amazon Books at Los Cerritos and Purple at Tysons Corner.

Now let's move to 2021 and our pipeline. Our pipeline remains strong, vibrant and exciting. We already have signed leases totaling approximately 494,000 square feet, all scheduled to open in 2021, and this list continues to grow. Later this year, we look forward to opening an amazing two level, 11,000 square foot flagship Dior store at Scottsdale Fashion Square, the first and only Dior in all of Arizona. And joining Dior will be Louis Vuitton, Madden. Further marketing Scottsdale Fashion Square is the one and only true luxury destination in the market and the state for that matter.

Our prime market is well under construction and will open its highly anticipated 50,000 square foot store at Fashion District Philadelphia in September of this year. Other impactful openings to look forward to this year include Dave & Buster's at Vintage Faire, Kids Empire and Madison Reed at San Tan, Tyra Banks' Modelland at Santa Monica Place, Exelate or Fresno Fashion Fair, San Bernardino County offices at Inland Center, Bourbon and Bones at San Tan Village, Coopers Hawk Winery at Boulevard Shops, Shake Shack at 29th Street, Uncle Julio's at South Plains and Verity Village of Corte Madera, Lucid Motors at Tysons Corner and Scottsdale Fashion Square, and Marine Layer at Broadway Plaza. And that's just to name a few.

And when we look at deals still in lease negotiation, we have yet another 435,000 square feet to open in 2021, and this number grows daily. Lastly, I'm often asked during this unprecedented time of bankruptcies and store closures. Who's left to fill this space? What we need to remember is this pandemic only accelerated the demise of those retailers who are already struggling pre-pandemic.

What's not talked about are those retailers who were strong going into the pandemic has actually came out stronger on the other end. Perhaps it's because they had great product and offered great value or perhaps is because they had strong omni-channel business and use their online strategy to actually increase customer awareness and acquisition. Think Lululemon, Dick's Sporting Goods, Target, Peloton and Blue Nile, and there are so many others or how about the strong traditional retailers with significant open to buys looking to capitalize on some great new available space in some of the best centers in the country?

I'm talking about retailers such as Aerie, Madewell, Free People, Levi's, Sephora, Our House, Aritzia, Old Navy, Athleta, just to name a few. For brand extensions such as off-line by American Eagle. Gilly Hicks, by Abercrombie and Fitch or DICK's sporting Goods grew experiential concept, or new and emerging brands like L Yoga, Ferdi, Psycho Bunny and Turnau; or new electric car manufacturers, such as Lou Fusz, Polestar and VinFast, and we're deep in discussions with all these retailers and many, many more.

However, we know our shoppers want more than just traditional retail. And that's why we continue to focus on bringing alternative uses to our campuses and not just retail. Uses like office, residential, hospitality, medical, wellness, education, fitness, grocery, service and even storage, and that's why we continue to refer to our properties as town centers because that's what they're becoming. They're transformational and will be something for everyone. And they have to be because that's what our modern-day shopper wants.

And now I'll turn it over to the operator to open up the call for Q&A.

[Operator]

Thank you. [Operator Instructions] We will now take the first question from Samir Khanal from Evercore. Please go ahead.

[Samir Khanal, Evercore]

So Scott, thank you for the color on when occupancy will trough. I think you mentioned 88%. But I guess, how should we think about the pickup or the ramp-up in occupancy maybe into '22 from a modeling perspective with all the leasing you're doing?

[Scott Kingsmore]

Samir, well, again, we're not giving guidance into 2022. But just I think Doug provided a pretty good sense for the return of leasing demand. We have almost 500,000 square feet that is already executed due to open in '21. We have well over 400,000 square feet that, I'll say, is in our shadow pipeline, deals in documentation, deals in negotiation. That's going to spill into '21 as well as '22. And I think we've been pretty clear on this in the past, we've got some pretty high-quality space that has not been on the market for quite some time given the decline in occupancy. And I think these brands that are both legacy as well as new and emerging are very interested in taking high quality space and high quality markets. So I think we'll see some decent pickup.

[Tom O'Hern, Chief Executive Officer]

Samir, to give you a frame of reference, the last time we had an occupancy level this low was the end of 2009 going into 2010 after the Great Financial Crisis. And it was about two years before we bounce back to the 94%, 95% occupancy level. And Samir, it seems very similar and that it will take a couple of years to get fully recovered and have that space absorbed. We've got good demand. There's a lot of new retail categories, less apparel, more experiential, but it's going to take a few quarters for sure.

[Samir Khanal, Evercore]

Got it. And I guess as a follow-up. And Scott, when I look at your receivables, it's about $240 million on the balance sheet. And look, I understand there's -- that's been built up over the last few quarters. And there's always sort of a normal strength of receivables you carry on the balance sheet even before COVID. But that bad debt expense you're guiding, there was only about $10 million. So I'm just wondering, what are you seeing in terms of health of the retail to give you confidence that, that number is the appropriate amount for the year? Just trying to make sure I'm not missing anything here?

[Scott Kingsmore]

Sure. Well, we do have a view into the economies recovering and our centers are opening. If anything, over the last two months, we have not seen any further restrictions. In fact, we've seen a loosening of the mandated closures and mandated occupancy restrictions, including by use, like with restaurants. So, we do see a healthier environment, which is going to certainly pick up traffic and ultimately pick up sales.

So within our guidance, not only is our bad debt, but we're also carrying a fair amount of reserves for uncertainty. And I'll just -- I'm not going to specify the number, but I'll certainly say that we're carrying more than what we typically would carry. For instance, what we carried into 2020 without a view in the COVID. So, we're carrying some provisions in addition to bad debt expense as we should be given the environment today.

[Operator]

[Operator Instructions] We'll now take the next question from Floris Van Dijkum at Compass Point. Please go ahead.

[Floris Van Dijkum, Compass Point]

Great. Thank you for taking my question. I saw and I might -- I know that Samir was a little bit more explicit in terms of talking about its NOI in '21 growing. Is there any color you can give us, Scott or Tom, in terms of what your expectations are for NOI? How much of a bounce back should people expect in '21, given some of the headwinds you're talking about?

[Tom O'Hern, Chief Executive Officer]

Floris, yes, it's really going to be two halves of the year that look fairly significantly different. First quarter of '21, we're still having the impact of some COVID concessions and abatements, et cetera, and that compares with a pretty healthy first quarter of 2020. So, we expect the first half of the year to be down in terms of same center. But as Scott said, the second half of the year, we think will be very strong, and we'll probably be putting up close to double-digit same-center growth.

[Floris Van Dijkum, Compass Point]

In terms of rather than looking at it on the same-center, I guess everything is the same-center in some ways. But -- so are we talking about 3% to 4% overall NOI growth for the year? Or what sort of range are you looking at?

[Scott Kingsmore]

Yes, Floris, we're not getting specificity for the entire year. I certainly hope to be in a position to do that as the year progresses, but we don't think at this point in time that we -- it's the right thing to do. As Tom mentioned, the first quarter is going to have a fair amount of volatility in it. As we lap COVID over the coming weeks, the first quarter is going to be a difficult comp to the first quarter of '19. I think once we get clear of that, we should hopefully be in a position to provide more concrete same-center guidance or NOI guidance for the balance of the year.

[Floris Van Dijkum, Compass Point]

Great. And then maybe if you could also walk us through -- you mentioned your discussions on the refinancing of the line. Obviously, we talked a little bit about that offline as well. But if you can maybe talk about what people should expect you -- how that's going to look? And whether that's going to require you pledging some additional unencumbered assets or how much flexibility do you have in those discussions? And how much of a cost impact potentially could that have? And presumably, that's already in your guidance as well. In fact, you might be paying a higher interest cost for the second half on that amount?

[Tom O'Hern, Chief Executive Officer]

Floris, we're in deep negotiations with our lending group. These are lenders that we've done business with for the last 25 years. So, we're in negotiations with them, and it's at cross purposes to share with you the specifics of those and a premature to do that. But we're making great progress with them. I think you saw from the 8-K filing we put out 1.5 weeks ago that we may end up securing a line previously or currently, it's unsecured, but we do have quite a few unencumbered assets. So that's a possibility going forward. But other than that, we're not going to give any more color than that because we're in the midst of negotiations. I'm sure you can understand that.

[Operator]

We will now take the next question from Mike Mueller from JP Morgan. Please go ahead.

[Mike Mueller, JP Morgan]

Two quick ones here. First, can you give us a sense of what the rent spreads are on your '21 leasing activity and how they compare to last year's down 4%? And second question is on straight-line rental income. What's some more normalized go-forward run rate?

[Tom O'Hern, Chief Executive Officer]

Doug, do you want to take the first part of that?

[Doug Healey, Senior Executive Vice President, Leasing]

Yes, sure. Sure, Tom. With regard to the lease executions, I talked about in my prepared remarks. I don't believe that the spreads have been commuted. I would suggest that in the short term, there's going to continue to be pressure on spreads as we focus on occupancy, we've talked about that. Last quarter and this quarter, occupancy is paramount. And once we take the supply off the table and demand comes back, I think we'll start to see the spreads increase. But for the short term, there will be some compression.

[Scott Kingsmore]

And Mike, on a straight-line of rent question, it's going to be elevated in the first part of the year, consistent with the rental concession agreements that we continue to execute with our tenants. We cannot recognize those rental concessions until we actually book the arrangement -- or excuse me, until we actually signed the deal. When we signed that deal, then that has an inverse impact on straight-line of rent.

So we're going to see straight-line rent continue to be elevated for the first part of the year. We're, again, similar to what not providing same-center guidance. We're not providing straight-line guidance just given the uncertainties about the flow of those deals. But we'll see it elevated in the first part of the year, and then we'll see a return to normal. So I would say in '22, we'll be in the $10 million to $15 million range, which would be a relatively normal run rate for us, but it will be elevated in '21.

[Operator]

We'll now take the next question from Todd Thomas at KeyBanc Capital Markets. Please go ahead.

[Ravi Vaidya, KeyBanc Capital Markets]

This is Ravi Vaidya on the line for Todd Thomas. The stock has been a bit volatile over the last couple of weeks. With regards to the ATM program being recently filed, how should we think about your desire to issue equity at current stock levels?

[Tom O'Hern, Chief Executive Officer]

Well, yes, we did file for an ATM. And if we use the ATM, we'll report on that quarterly in our 10-Qs, and that's just a periodic decision that the Company and the Board will make. It's just a tool to have available. Should we be in position to see a stock price that we like, we would consider it. But again, it's just a shelf because we're putting it out there doesn't necessarily mean they're going to use it, and we'll report quarterly if we use it and how much.

[Ravi Vaidya, KeyBanc Capital Markets]

Okay. And just one more here. How do you think about dispositions as a source of capital? Is there interest in selling one of your larger assets to raise capital to delever? And what's the market for that, like I say, we haven't seen a lot of trades for individual assets yet?

[Tom O'Hern, Chief Executive Officer]

You're right. There haven't been a lot of trades. That being said, there's always -- there's a fair amount of capital out there, and there's a fair amount of interest. So I wouldn't be surprised to see us transact a little bit this year. We don't have any of that in our guidance, and we can't count on it too checks in the bank, but it's certainly a possibility this year.

[Operator]

We'll now take the next question from Caitlin Burrows from Goldman Sachs. Please go ahead.

[Caitlin Burrows, Goldman Sachs]

Just following up on some of the previous questions. So like you mentioned, you disclosed earlier in the month that negotiations are ongoing for recasting the credit facility. And it could include a lower lending commitment and required securities. So I guess to the extent that you need to reduce your borrowings to recast it, how do you plan to fund that pay down given where the line of credit is today?

[Scott Kingsmore]

Well, Caitlin, we've got about $550 million of cash on the balance sheet. So I don't think reducing that line a bit is going to be an issue at all. We've got plenty of liquidity for that.

[Caitlin Burrows, Goldman Sachs]

Okay. And then just thinking about -- I think maybe you just touched on this in the previous question, but thinking about where leverage is today and where the EBITDA growth outlook is for 2021. I guess, what is your kind of interest in urgency and reducing leverage in 2021? And how would you go back doing that?

[Tom O'Hern, Chief Executive Officer]

Well, I don't think you can really look at debt-to-EBITDA today, given what's happened with EBITDA. I think you've got to look forward a little bit to say, where do you think that's going to go? And what's it going to grow to? And we're going to generate a significant amount of cash after debt service and the dividend. And my expectation is we'd probably use most of that excess cash to reduce our leverage.

[Operator]

We'll now take the next question from Alexander Goldfarb at Piper Sandler. Please go ahead.

[Alexander Goldfarb, Piper Sandler]

So just bringing around some Caitlin's questions. So two things for me. First off, on the mortgages that you guys are extending and renegotiating. Are there any cash restrictions, whereby the lenders, the owners of those mortgages are saying that any excess cash above the CapEx you need to go to debt pay down before it can do anything else? So are there any cash flow restrictions by maybe those mortgage extensions or refinancings?

[Tom O'Hern, Chief Executive Officer]

It would be pretty atypical for us. In some cases, there are very minor restrictions, but we've generally been able to execute these extensions, Alex, from one to three years with no change to rates and with very little to no remargin at closing, it'd be pretty atypical to have those situations.

[Alexander Goldfarb, Piper Sandler]

Okay. And then the second question is, it sounds from your comments on the ATM, but you haven't used it, and you're -- it sounds like you're pretty guarded on issuing equity. So if that's the case, and if we use last year's -- the last two quarters of the dividend taxable requirements, it seems like the dividend, again, is a big source of cash flow for you guys, assuming that, that the same third and fourth quarter holds true. So wouldn't paring the dividend to the bare minimum and it would save maybe $90 million, $80 million, whatever the math is, would that also be an additional source to help you guys right size? And again, if you're not sort of planning equity in the near term, then it would seem like that's a good source of capital to help the Company as you guys refinance the maturities?

[Tom O'Hern, Chief Executive Officer]

Yes, Alex, I'm not sure you got a clear view on the tax side. It's a good point, and we cut to basically the tax requirement this year. And our expectation it would be similar. It's a Board decision. So we're not giving guidance on the dividend here per se. But from a tax standpoint, we don't expect a big change. And we cut this year to the minimum in the second half of the year. And that's probably something we'll consider in 2021 as well.

[Alexander Goldfarb, Piper Sandler]

I mean, Tom, I was just going off of the tax declaration that you guys had were $0.01 was taxable and the other $0.14 was not? That’s what I was basing it on.

[Tom O'Hern, Chief Executive Officer]

Yes, but you've got to look at the full year you can just look at one quarter.

[Alexander Goldfarb, Piper Sandler]

Right, I was looking at the full year, and I was looking at each of those columns. Okay, cool. Listen, thank you.

[Tom O'Hern, Chief Executive Officer]

So, we'll have a tax session offline. How about that?

[Operator]

We'll now take the next question from Michael Bilerman at Citi. Please go ahead.

[Michael Bilerman, Citi]

Tom or Scott, what is the current unencumbered asset pool, either by underappreciated book value or maybe just an annualized NOI? Just for us to get a sense of what that borrowing -- unencumbered borrowing base could be?

[Tom O'Hern, Chief Executive Officer]

I think we've got about 25 assets, various sizes, Michael, that are unencumbered. I don't have the NOI on that specifically, and we probably wouldn't disclose it anyway, but there's a significant number of unencumbered assets. And you can look down our debt schedule and match that up against the property schedule. And at least as it relates to the malls, there are some other assets that are single assets and one-off buildings here and there that may not show up on the property list, but there's about 25 assets or so in total. It's a fairly big number.

[Michael Bilerman, Citi]

Yes, I'm just trying to get a sense of. I mean, assets for all size and type and quality, I'm just trying to get a rough goalpost, just to try to better understand a borrowing basis, whether it's $1 billion, $2 billion, $1.5 billion under, just some way of guiding us in terms of some mortgage value for those assets?

[Tom O'Hern, Chief Executive Officer]

Well, it's hard to say mortgage value. I'll tell you that, that unencumbered pool is significant enough to support our existing line of credit at $1.5 billion.

[Michael Bilerman, Citi]

Okay. And then just relate to the ATM. Just walk through a little bit. It's not a tool that you had put in place previously. I guess, what had held you back before from having an ATM in your toolkit? Because I would assume that Wednesday, when your stock had doubled, probably would have been something that if you had in your toolkit at that point may have been a decision you may have pulled out, I'm not sure. But can you just talk about the decision of that having it before and now putting it in place?

[Tom O'Hern, Chief Executive Officer]

Well, we've had it before, Michael. For the last time when the ATM expired, we didn't like where our share price was. And as a result, didn't renew it at that point in time. It's a fairly quick process. You can get one put in place within four or five days. Certainly, I don't think we anticipated the spike related to GameStop, maybe perhaps you did, but we did not, and if it wasn't...

[Michael Bilerman, Citi]

I did not participate in that, unfortunately.

[Tom O'Hern, Chief Executive Officer]

Okay. And keep in mind, in any given day, you can only do about 10% of the volume on your ATM. So it was about a two-day spike there, and it got us thinking about it and said, hey, it's a good tool. We might as well have it back on the shelf. And so that's why we renewed it.

[Operator]

We'll now take the next question from Greg McGinniss from Scotiabank. Please go ahead.

[Greg McGinniss, Scotiabank]

Well, Scott, I appreciate clarity on the Q4 rent abatements and why they were higher than Q3. But I was just hoping -- could you tell us how much actually applied to Q4 as we try to create like a go-forward billable run rate to model off?

[Scott Kingsmore]

I would say probably less than 3% to 5%. This really relates to retroactive periods, primarily the second quarter. In some cases, again, for those California, New York properties, the abatement extended for a longer period because in, our retailers weren't able to trade for six months, but very, very little of that pertains to the fourth quarter.

[Greg McGinniss, Scotiabank]

Okay, and then for the second question. On the leasing volumes, I appreciate the potential for the 800,000 square feet plus of -- here at this point. Just hoping you get a little more context to help us understand the financial benefit from those leases. So could you potentially provide kind of the total Macerich-owned GLA? And then how much of that demand has been reconsolidated versus unconsolidated centers?

[Scott Kingsmore]

We don't have a breakdown of that between consolidated and unconsolidated. I think you know what our GLA is. It's roughly -- on a small shop basis, it's about $21 million, $22 million or so. So that $800,000, if all of it were to come to fruition, it's 350 to 400 basis points of occupancy. Doug quoted a couple of numbers. He quoted just under 500,000 square feet that we expect to come online at its new deals coming online in '21. And then the rest of it, a little over 400,000 square feet was, we'll call it, shadow, would be things that pop online later this year and into 2022.

[Operator]

[Operator Instructions] We'll now take the next question from Floris Van Dijkum, Compass Point. Please go ahead.

[Floris Van Dijkum, Compass Point]

A follow-up question, but I think one of the fears, I guess, of some investors, I know that you have an ATM in place, is that you will be tapping the market at the current share price. And I believe -- I don't believe that's what you've done. Certainly, I know it doesn't appear like you've used it so far. And can you give maybe -- I was trying to get a sense of at what level will you think to use that ATM? And if it's not at the current share price, and where -- so in other words, where do you think your NAV is? Or what the range is? And how far off is consensus from that in your view? And maybe also talk about your, the discussion you had, if any, with Ontario teachers, when they stepped out at over $20 a share?

[Tom O'Hern, Chief Executive Officer]

So Floris, look, we're not going to comment on the ATM activity, if any. If we use the ATM, we'll report on it at the end of the quarter, just like all the other companies that use their ATMs do, but it's not in our best interest to comment on it along the way. So we're not planning on doing that. And we do not publish an NAV. So that's not available either. So, it's just another deal in the toolkit, and we will periodically decide if and when to use it.

[Floris Van Dijkum, Compass Point]

Right. But presumably, you must have an idea of -- because you presumably share that with your Board, what your NAV is or with the range of NAV is. Maybe if you can -- I think, I guess the thing what I'm trying to get is, is the current share price, something where you will consider doing that? Or the fear that investors have is that you capped at such low share prices that you dilute the value of the Company. You've proven in the past that you're willing to wait until the share price recovers to a more appropriate level.

Obviously, we saw the squeeze that happens similar to what happened in GameStop. Unfortunately, you didn't have the ATM in place. But now that you do have that, presumably, you will be more reticent to use it at the current levels, but if it gets above a certain level, presumably, you will be much more willing to use that. Is there any sort of indications you can give to the market or at least to pacify investors that you're not going to issue it at $13 or $14, but you might consider doing it at $16 or $18?

[Tom O'Hern, Chief Executive Officer]

No, Floris, as I said, we're not going to tip our hand as to if and when we're going to use it as to what price level. It depends on the facts and circumstances at the time, market conditions, liquidity, et cetera. Again, we have had an equity shelf available for years now, and it's there, and we use it when it's appropriate. We haven't used it for a while. We're just supplementing that with an ATM shelf as well, as simple as that.

[Floris Van Dijkum, Compass Point]

And is there any light you can shed on any conversations you've had with Ontario Teachers prior to them stepping out?

[Tom O'Hern, Chief Executive Officer]

Floris, our conversations with our shareholders are confidential, as I'm sure you can imagine.

[Operator]

We'll now take the next question from Michael Bilerman at Citi. Please go ahead.

[Michael Bilerman, Citi]

Just a follow-up, as we think about the recovery of occupancy, and Doug, it was really helpful for you to go through all the categories of retailers that were expanding before COVID had hit. How should investors think about regaining in back towards that prior occupancy of 94% to 95% in terms of the total NOI, potential? How it will cost you in CapEx? And we're just really thinking, not as much on the cadence of it because it's going to take some time to build up, but really the return on that capital and how it compares to where it would have been, i.e., are we going to get to 80% of the NOI level as we've moved back to that 600 basis points, 600 to 700 basis points of occupancy in terms of what it was before. And how much money would you have to spend to reduce those tenants to come in? Just thinking about the return and that NOI stream over the next few years, given your expectations of going back to those peak occupancy levels?

[Tom O'Hern, Chief Executive Officer]

Michael, I'll jump in and then Doug, you can give some color, Scott, as well. So we're talking about roughly 5% to pick up from where we are today. We dropped that 88% occupancy, as Scott said, to get back to full occupancy, you're talking about roughly 1.2 million square feet or so, and Doug kind of gave the cadence for this year.

And in terms of CapEx, we can choose whether we want to pay a big tenant allowance or go for a deal. That's got a lower tenant allowance or no tenant allowance at all. I mean, we were fairly stingy with the tenant allowances coming out of the financial crisis. So we have been through this before. And I would imagine we will be very sensitive to the creditworthiness of the tenants that we do deals with and who we give tenant allowances to.

So it's really hard to say at this point how much capital we'll be involved with that. Just to give an example, I mean we converted One Sears Box to a medical facility. I think we're getting roughly $1 million a year in rent. And I think that total landlord work was only $500,000. So there are deals like that to be done. Other deals are more expensive. It's just going to take some time to sort those deals out, but taking a very critical look at who we get $10 tenant allowance dollars to these days.

[Operator]

That concludes today's questions-and-answer session. Mr. Tom O'Hern, I'd like to turn the conference back to you, sir.

[Tom O'Hern, Chief Executive Officer]

Katherine, thank you. Thank you all for joining us today. Be well, stay positive, test negative. Hope to see you soon.

[Operator]

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