Please ensure Javascript is enabled for purposes of website accessibility

Why The Macerich Company Stock Dropped 14% in September

By Reuben Gregg Brewer – Updated Oct 6, 2020 at 12:22PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Shares of the mall owner headed lower again last month; not great news, but not surprising, either. Here's what's going on.

What happened

Shares of real estate investment trust (REIT) The Macerich Company (MAC) fell 14% in September, according to data from S&P Global Market Intelligence. That leaves the stock off by around 75% through the first nine months of 2020. That's better than the lows witnessed during the early-year bear market, but it's hard to suggest that a 75% decline is in any way good.

So what

Macerich is one of the largest publicly traded owners of indoor malls in the United States. Although its portfolio of 47 properties is highly concentrated in desirable locations, that hasn't meant much during the global coronavirus pandemic. The government effort to slow the spread of COVID-19 involved shutting nonessential businesses and asking people to practice social distancing. That left Macerich's malls shut down. In fact, at the end of September, it still hadn't reopened all of its malls, with three remaining shut by government mandate in California.   

A mother and a daughter at a mall

Image source: Getty images.

Not surprisingly, Macerich has had difficulty collecting rent from tenants that are themselves struggling to muddle through this difficult period. Unfortunately, not all retailers are doing a good job, with a number of high-profile names falling into bankruptcy. That's going to make it even more difficult for Macerich.

With COVID-19 cases picking up again, investors are worried that the REIT's malls will continue to struggle. But there's more to worry about here than just tenants paying rent, since a mall's ultimate value is its ability to attract consumers. Social distancing has made that very difficult, and it is likely to take time before foot traffic picks up materially again. The pullback in September is really just a recognition of the still-material headwinds that Macerich faces.  

Now what

Macerich owns very good properties, but that doesn't matter much if customers stay home and retailers continue to struggle. The mall sector has started to see some signs of life, but it's nowhere near pre-pandemic norms. On top of this, Macerich is carrying a relatively heavy debt load compared with more conservative peers. This is not a good choice for conservative income investors, who would probably be better off with a REIT that has shown more resilience during these trying times, like W.P. Carey.   

Reuben Gregg Brewer owns shares of W. P. Carey. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

The Macerich Company Stock Quote
The Macerich Company
$8.62 (%)

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 10/07/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.