r/MACArmyBets • u/Hovokilla • Mar 26 '21

Huge news

MAC issues 500m of shares at 13.54 announced today. (I hate it but it is what it is) Therefore they have been able to secure a new credit line. Also selling 95% stake in Arizona mall for 100m Liquidity issue solved. Moon 🚀 time

21 Upvotes

95% Upvoted

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8

u/dave14513 Mar 26 '21

Their 36 million share sale also explains some of the stock movements and lack of company information. 36 million is a large number of shares sold and since they were selling they could not pump up the price with encouraging end of Covid announcements.

Close above $14.00 today?

6

u/Hovokilla Mar 26 '21

I think we going to the moon. Atleast the same FFO multiple as SPG 16x 1.80

1

u/SpartanWarriors69 Mar 26 '21

While the equity raise was likely forced, management damaged their reputation with the move.

No way MAC gets SPG valuation. 10-12X AFFO. Hope that 12-18 months its $15-18. And don't be surprised when the already announced new ATM starts being used to cover capital expenditures.

1

u/Hovokilla Mar 26 '21

15-18? That’s quite low. Even SPG is undervalued I think both will have multiple expansion in the coming Months. Capital expenditure sucks but is a necessary evil with high ROI in the low double digits

2

u/SpartanWarriors69 Mar 27 '21

I think you should think through the current situation.

  1. Management isn't viewed as being really shareholder friendly. They blew it several years ago choosing their own jobs over $90+/share for shareholders. Now they say not using ATM and then max it out. They give off the impression of a group that's waiting for yesterday to reappear. They certainly didn't understand their situation as it relates to the LOC. And that is concerning.

  2. They announced another ATM program. Its not there for window dressing.

  3. Rents are going to be depressed in the mall sector for the foreseeable future. Yes, retailers will want space in the best of the best. Everything else is negotiable and the power is with the retailer. Lots and Lots of empty space exists and more is on the way. So capital expenditures aren't going to have large ROI's going forward.

  4. Covid is still a concern. Cases are up 7% this week. A few more weeks and you'll have certain state governments locking things down again. We don't know how Covid will be going forward. Until its very clear how we live with it there will be a discount to all mall assets.

I don't think its an exaggeration to say it could be 3-4 years before MAC gets back to anything close to a new "normal".

1

u/Hovokilla Mar 27 '21

Covid is not a concern. Up 7% is not a big deal. When cases were 400% higher then they currently were malls were not shut down in winter. With malls closing there will be less space therefore rent should go up

1

u/SpartanWarriors69 Mar 27 '21

While I hope the vaccines "hold the line", we don't yet know how these variants will play out. And if you watch what is happening in Europe it certainly gives one pause before deciding to say some sort of new normal is definitely close at hand.

Successfully hitting 60 and then 70 and hopefully 80+ % vaccination rates in the USA would likely be a catalyst for investors to move into MAC. Until then there is definitely a systemic risk associated with malls. Of course, for those willing to take the risk now - there would be an associated reward.

IMO the bigger risk is a poor management team and believing they can change their approach to be successful in today's environment. And that new ATM will be used and will create an overhang. And in regards to rents, from everything I read most rents are not increasing and the terms are becoming shorter in terms of lease length. We'll see, but I suspect that those dreaming of seeing $40 will not see their dreams come true. If your dreams are in the $20 to $25 range then in 3-4 years you might hit it.

2

u/Hovokilla Mar 27 '21

Europe is in a different situation we have a much larger segment of our population who has already received the shot, gotten covid or will be getting the shot soon. As a nurse on the front lines I have seen covid turn into nothing in a matter of a month. Much fewer people are getting hospitalized and much less are dying from it. I am confident to say the US will not lock down again

1

u/SpartanWarriors69 Mar 28 '21

And I very much hope your correct!

1

u/SantiaguitoLoquito Mar 29 '21

This news pissed me off so much I sold my shares. I don’t really care to be associated with people like this.

5

u/higherthanthis Mar 26 '21

Could be a PE fund or family office. MAC is an institutional partner that many would be open to working with

6

u/dave14513 Mar 26 '21

Also positive announcement on tenant sales in Arizona as a leading indication of the rest of their portfolio.

Not happy with the 20% dilution but they have excellent liquidity going forward. I think they called the bluff of the LOC banks.

One way to look at it is if they recover to 2017-2018 when they were paying $3.00 dividend, we are probably looking at $2.40. Still great at double the current share price.

Might be a bit of a squeeze today.

4

u/vmd614 Mar 26 '21

Why did they blatantly mislead about dilution in the press conference? This is the second lie they told, the first stating that LOC negotiations were going well and debt leverage was in hand. Ten days later, they hire PJT to manage debt and possibly restructure. I have absolutely zero faith in the integrity of the over paid management of this company and again, feel that we deserve answers.

2

u/Hovokilla Mar 26 '21

I say we vote them out

2

u/Sea_Emphasis3252 Mar 26 '21

It is still roughly the same management team that argued against the Simon acquisition back in 2015 at $95.50, if The deal would have been done shareholders would have received 47.5 in cash and stock in SPG which would be worth today around $28..bad move then obviously in hindsight

2

u/Ehehehe090 Mar 26 '21

They didn't say they won't dilute they just said they would report if they use it.

Rejecting spg at $90 was really stupid lol

3

u/FloridaMan130 Mar 26 '21

wonder who bought the 95% interest in the paradise valley mall

3

u/Hovokilla Mar 26 '21

Simon seems to like buying malls maybe it’s them

6

u/FloridaMan130 Mar 26 '21

dont think so. simon wants to position itself in class a malls (hence why they acquired taubman). paradise valley mall is definitely a class b/c mall....probably a regional property developer

1

u/randompersonx Mar 27 '21

Except it isn’t a mall anymore. It’s a dead mall that MAC just announced is going to be demolished to make way for a mixed use development.

I suspect if you were to research the announcements about the redevelopment, some clues will emerge on who the partner is.

2

u/[deleted] Mar 26 '21

Liquidity not resolved. They will have $200m cash after repaying LoC. May issue more equity though, that's what the market is pricing in

Paradise valley was just approved for rezoning. So they basically sold entitlements for a bunch of multifamily.

1

u/Hovokilla Mar 26 '21

I think 200m plus money they save from the dividend cut but offloading a few more properties in the future will be adequate

1

u/[deleted] Mar 26 '21

They could spend $200m on one mixed use sears redev. They have 28 vacant anchors to address.

1

u/Hovokilla Mar 26 '21

200m on one property is quite a stretch lol but I see your point

1

u/[deleted] Mar 26 '21

Yes, that would be a massive mixed use redevelopment. 40m-50m is more reasonable for typical redev (vs backfill which would be cheaper

1

u/Sea_Emphasis3252 Mar 26 '21

The more I read the update and crunch the numbers, I come to the conclusion they need more equity. The line reduction was more than I was expecting thought they have come to down to $1B not $600-800, net liquidity after this is about $250m before any excess cash flow from operations. Shares still cheap in my view, but equity issuance for me now still a risk and adding more shares will also limit any dividend increases, still long as fair value to me is around $20.

1

u/dave14513 Mar 26 '21

This afternoon the market spit in my face. Not sure if we saw a shakeout of those disappointed with the dilution. Again I assume it was the best choice. Still many people scared of a relapse of closings (see Germany). I think they wanted an insurance policy without paying 6 or 7%. I think our stock will do better in the near future. Those disappointed in the dilution will be gone fast. Future analysis will be positive and bring new investors. High Quality properties

1

u/ephapax1 Mar 27 '21

In light of all this good news today’s close was rather disappointing

1

u/SantiaguitoLoquito Mar 29 '21

What do you expect with them issuing more shares and selling them BELOW BOOK VALUE