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Macerich(NYSE: MAC)
Q4 2023 Earnings Call
Feb 07, 2024, 1:00 p.m. ET
Contents:
- Prepared Remarks
- Questions and Answers
- Call Participants
Prepared Remarks:
Operator
Ladies and gentlemen, thank you for standing by. Welcome to Q4 2023 Macerich earnings conference call. [Operator instructions] 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.
Samantha Greening -- Director, Investor Relations
Thank you for joining us on our fourth-quarter 2023 earnings call. During the course of this call, we'll be making certain statements that may be made 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. 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'd turn the call over to Tom.
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Tom O'Hern -- Chief Executive Officer
Thank you, Samantha. By now, it's old news, but on Monday, we announced my pending retirement after 31 years at Macerich. Today is my 118th Macerich earnings call and my last. I will miss all of you, I would like to say I'll miss all of you, but I'm not so sure about that.
When I joined Macerich 31 years ago, it was to help Mace Siegel and Ed Coppola to take the Company public. We did that in March of '94. Our total market cap was a modest $650 million. Today, our market cap is $11 billion.
We went from having a portfolio of malls in the mid-markets, doing about $350 a foot in sales, to a portfolio in major coastal markets doing $836 per foot in tenant sales. There's been a dramatic improvement in the quality of the portfolio to say the lease. We joined Macerich in 1993. No way and hell did I think could be here 31 years later.
Nothing in my Iron Man background prepared me for a run of veteran. I will be forever thankful to my Macerich colleagues and friends for our collective accomplishments. Today, Macerich is extremely well-positioned for the future as I pass the baton of leadership over to a man most of you know, Jackson Hsieh. He's the right person to take the Company forward and to continue to execute on our strategy of densifying and diversifying our portfolio of top-quality town centers.
Regarding the upcoming leadership change, there is a detailed press release and 8-K on the topic, so I will refer you there. So the remainder of this call, we will be focused on the quarterly results and the guidance and outlook for 2024. So now to focus on the quarter, I'm very happy to be leaving on extremely positive news. We had a strong fourth quarter, which included same-center NOI of 3% for the quarter and 4.5% for the year.
Occupancy is now up to 93.5%. That's a 90 basis point improvement over the end of 2022. We had a total shareholder return of 46% for 2023. That's a top-10 finish among all REITs.
We posted positive releasing spreads of 17.2% for the year. We had quarterly EBITDA margin improvement of over 100 basis points versus the fourth quarter of last year. Our partnerships sold a One Westside office building to UCLA for a pro-rata share of $175 million to Macerich. We did over $890 million of financings that was closed or committed in the fourth quarter.
More on that from Scott in a minute. We signed over 4 million square feet of leases during 2023. That's an all-time Macerich record, and that's on the heels of the prior record, which was set in 2022. Portfolio average sales per foot was $836, down slightly from last year, but nonetheless a top-quality sale activity.
Bankruptcies continued to be at a record low. We continue to expect gains in occupancy and net operating income as we progress through 2024 and into '25. Also, keep in mind, as a result of the very strong leasing activity in '22 and '23, we have a very large and healthy leasing pipeline with nearly 2.2 million square feet of leases that have been signed but are not open yet. Once those 10 tenants open, it is going to fuel our NOI growth in '24 and '25.
And now, I'd like to turn it over to Scott to discuss in more detail the financial results, earnings guidance, and the significant financing activity we had in the past few months.
Scott Kingsmore -- Senior Executive Vice President, Chief Financial Officer
Thank you, Tom. This morning, we're extremely pleased to report a strong finish to the year. As Tom noted, same-center NOI increased 3% during the fourth quarter of 2023 relative to the fourth quarter of '22. When excluding lease termination income for the year 2024 same-center NOI growth, excluding lease termination income was a positive 4.5%.
FFO per share for the fourth quarter was $0.56 and was $1.80 per share for 2023 for the year. The quarterly result was $0.03 or 5.7% more than FFO during the fourth quarter of 2022 at $0.53 a share and was in line with consensus estimates for the quarter. FFO for the year was in line with our most recently issued guidance, which was a midpoint of $1.80 per share. Primary major factors contributing to the quarterly FFO per share increase are as follows.
One, an $11 million increase in rental renews, which included a $13 million increase in top-line minimum rent, $2 million increase in recovery revenue, which were offset by a $4 million decline in percentage rent. These trends are consistent with what's been reported over prior quarters, they're driven by improved occupancy growth and rental rate as well as a continued conversion from variable to fixed rent structures with CAM and tax recovery charges. Secondly, we had a $9 million increase in termination income. This was primarily driven by a single lease termination deal, which was a very strategic transaction that we expect will facilitate a major future redevelopment opportunity.
These positive factors were offset by the following: one, an $11 million unfavorable increase in interest expense due to rising rates. This figure excludes accrued default interest, which is consistent with our reporting over the prior quarter. And then secondly, a $4 million decline in noncash straight-line rental revenue, primarily from the conversion of GAAP to cash rents for the lease with Google at One Westside, which Tom mentioned we've disposed of as of year-end. To recap, as we have emerged from the 2020 pandemic same-center NOI growth, generated by our high-quality Class A portfolio has been tremendous, with NOI growth averaging 7.4% in both '21 and '22, followed by 4.5% same-center NOI growth in 2023.
We are extremely pleased with our resilient core NOI growth during the past three years. This morning, we issued our initial guidance for 2024 funds from operations. 2024 FFO is estimated in the range of $1.76 to $1.86 per share or $1.81 per share at the midpoint. Here are several details underlying this earnings guidance.
The FFO range includes an estimated same-center NOI growth in the range of 2.25% to 3.25%. In terms of quarterly cadence for our 2024 estimated FFO guidance, we expect approximately 21% in the first quarter, approximately 24% in both the second and third quarters and the remaining approximately 31% within the fourth quarter of 2024. Primary major factors that result in a reconciliation between 2023 actual funds from operations and 2024 estimated FFO are as follows: Same-center NOI is estimated to contribute roughly $0.10 of FFO this year. We had roughly $0.03 of FFO estimated from a relative improvement in valuation adjustments pertaining to our investment in direct investment in retailers.
And we had roughly a $0.015 year-over-year increase from the acquisition of our partner's interest in Freehold Raceway Mall transaction, which closed in the latter part of 2023. These positive factors will be substantively offset by the following: one, a $0.07 increase in interest expense when viewed on a same-center basis, two, an anticipated $0.04 decline in land sale gains. We've spoken about this in the past. This decline is due to the robust disposition activity from our land sale program that we've undertaken since 2021 which is significantly depleted our undeveloped land inventory that remains.
And then lastly, about a $0.015 per share dilutive impact from increased share count which is primarily driven from the Company's various share-based compensation plans. To emphasize, consistent with 2023, our 2024 outlook continues to reflect healthy operating cash flow generation of approximately $300 million after recurring capital expenditures and leasing costs, but before payment of dividends. More details regarding our guidance assumptions can be found on Page 15 of the Company's Form 8-K supplemental that was filed early this morning. On to the balance sheet.
Over the past few months, we have made considerable progress addressing our debt maturities. In December, we closed a $710 million five-year CMBS refinance of the $666 million loan on Tysons Corner Center. The new loan bears interest at a fixed rate of 6.6% and is interest only for the entire loan term. Also in December, our joint venture sold One Westside, as Tom alluded to, to UCLA for $700 million.
The existing $325 million loan on the property was repaid and approximately $78 million of net proceeds were generated at our 25% ownership share. In January, we closed a $24 million five-year bank loan refinance of the existing $23 million loan on Chandler Boulevard Shops. The new loan bears variable interest at SOFR plus 2.5%. And is interest only for the entire duration of the long term.
In January also, we repaid the majority of the loan on Fashion District in Philadelphia, roughly $8 million remains, and that matures in April and is anticipated to be repaid at that time. In January, we closed $155 million 10-year CMBS refinance of the existing $117 million loan on Danbury Fair. The new loan bears interest at a fixed rate of 6.39% and is interest only during of the 10-year loan term. We are currently working with the loan servicer on a multiyear extension of the $86 million loan on Fashion Outlets of Niagara and we do expect this transaction to close later this month.
Once closed on that Niagara extension, we will have a very manageable $400 million of maturities remaining in 2024 and across three separate loans. To recap the year, we've been extremely active in the debt capital markets during 2023, and year to date so far in 2024 across eight transactions, including Niagara, we will have refinanced or extended eight loans totaling $2.9 billion or $2.1 billion at our ownership share. This activity included a four-and-a-half-year renewal and upsizing of our $650 million revolving corporate credit facility during the third quarter of last year and let's remind ourselves that closing was amid the regional banking crisis within the United States. So we're very pleased with our activity throughout last year and to start this year.
A year ago, we anticipated improvement in the debt capital markets during the latter portion of 2023 given that the Federal Reserve was expected to be then near the end of its historic rate hiking cycle. And in fact, that expectation has proven true. We're now finding significant opportunities to finance our assets within the sustained strong performance of our Class A retail. We also believe that we are benefiting from a rotation of financing capital away from the office sector and into the Class A retail real estate sector.
Our recent transactional activity supports that thesis. In mid-November, we acquired our partner's half share in Freehold Raceway Mall for $5.6 million and the assumption of our partner share of debt. We now own 100% of Freehold Raceway Mall. We currently have approximately $657 million of available liquidity, which includes $490 million of capacity on our corporate credit facility.
And with that, I'll turn it over to Doug to discuss the leasing and operating environment.
Doug Healey -- Senior Executive Vice President, Leasing
Thanks, Scott. We closed out 2023 with very strong leasing metrics and leasing volumes. In fact, 2023 was a historic and record leasing year for Macerich, dating back 30 years as a public company. Year-end 2023 sales were down 1.8% from year-end 2022 and after a post-pandemic spike in spending across all retail categories, 2023 was clouded with increasing interest rates, inflation, and the constant threat of a recession.
In addition, we've definitely seen a change in spending habits with consumers now focusing on travel, dining out, entertainment, and other various services. This doesn't come as a surprise, and we expect 2024 to once again normalize and ultimately reflect more traditional consumer spending habits. Sales per square foot as of December 31st, 2023 were $836. That's down slightly from $847 at the end of the third quarter, and that's primarily due to a decline in the sales of electric vehicles.
Trailing fall leasing spreads were a very healthy 17%. As of December 31st, 2023, that's up 660 basis points from the third quarter and up over 13% when compared to December 31st, 2022. In the fourth quarter, we opened 391,000 square feet of new stores. For the full year 2023, we opened almost 1.6 million square feet of new stores, which is 80% more square footage than we opened during the same period in 2022.
Notable openings in the fourth quarter include an expanded and newly reimagined American Eagle flagship at Tysons Corner Center; Five Below at Valley Mall, Levi's at Los Cerritos, Pandora at Stonewood and North Face at Broadway Plaza and FlatIron Crossing. In the digitally native and emerging brands category, we opened Beyond Yoga at Broadway Plaza, Purple at Los Cerritos, Warby Parker at Chandler, and YETI at Washington Square. In the international category, we opened Aritzia and Intimissimi, Corte Madera, Lululemon at Freehold Raceway Mall; UNIQLO at Green Acres, Zimmerman at Scottsdale Fashion Square, and Zara at Queens Center. Lastly, in the experiential category, we opened Camp at Tysons Corner and Round1 Spo-cha at Arrowhead Town Center.
Now let's take a look at the new and renewal leases we signed in the fourth quarter. In the fourth quarter, we signed 186 leases for 1.1 million square feet. For the full year 2023, we signed leases for 4.2 million square feet, and that's up from 3.8 million square feet or 12% when compared to the same period in 2022. And as I mentioned earlier, 2023 was a record leasing year for Macerich over the past three decades.
Notable new lease signings in the fourth quarter include Buck Mason, Kate Spade, Mango, Maggiano's, and Level 99 at Tysons Corner, Round1 at Chandler, Dave and Busters at Freehold, launch in ShopRite at Green Acres, a second office lease with San Bernardino County at Inland Center, Arterex at Washington Square, True Food Kitchen at 29th Street and BOSS at Scottsdale Fashion Square. As always, our focus in the fourth quarter was in large part addressing our lease expirations, finalizing 2023, and getting a head start in 2024. In doing so, in the third quarter, we signed over 130 renewal leases with 84 brands totaling 475,000 square feet. With that, we're basically done with 2023 and now have commitments on 44% of our 2024 expiring square footage with another 34% in the letter of intent stage.
2023 was another year of newness for us. Once again, bringing new unique, and emerging brands was a major initiative for our leasing team and a way for us to really reimagine and differentiate our town center from our competition. To that end in 2023, we signed leases with over 80 new Macerich brands, totaling just over 600,000 square feet. Examples include Beyond Yoga, YETI, Club Studio, Shoprite, Level 99, and Maggiano's, Elephante, and Ketch, just to name a few.
Turning to our leasing pipeline. At the end of the fourth quarter, we had 126 signed leases for 2.2 million square feet of new stores, which we expect to open in 2024, 2025, and 2026. In addition to these signed leases, we're currently negotiating other 80 leases for new stores totaling almost 600,000 square feet, which will also open in '24, 2025, and 2026. So in total, that's over 2.8 million square feet of new store openings throughout the remainder of this year and into 2026.
And I want to emphasize, these are new leases with retailers not yet open and not yet paying rent, and these numbers do not include renewals. And I can tell you that this leasing pipeline of new store opening accounts for $64 million of incremental rent, which represents roughly 8% of our current net operating income and this incremental rent will continue to grow as we approve new deals and sign new leases. So to conclude, our leasing and operating metrics were very solid in 2023. There was only one bankruptcy in our portfolio in the fourth quarter and only 10% for all of 2023.
The bankruptcies overall in both 2022 and 2023 were at their lowest levels since 2013, which is consistent with our significantly reduced tenant watch list. Leasing volumes were at record levels. The result of which is a very strong, vibrant and exciting pipeline of tenants slated to open this year and into 2026. And as I've said in the past, and it remains the case, while there's still uncertainty in the macroeconomic environment, to date, we continue to see a little pullback from the retailers.
And I think this is a result of the very healthy retailer environment that exists today as well as a testament to our best-in-class portfolio of super regional town centers. So given this and everything Tom and Scott discussed, we remain optimistic as we look to 2024 and beyond. And now, I'll turn the call over to the operator to open it up for Q&A.
Questions & Answers:
Operator
Thank you. [Operator instructions] The first question comes from Jeffrey Spector with Bank of America Securities. Your line is open.
Jeff Spector -- Bank of America Merrill Lynch -- Analyst
Great. Thank you. And first, congratulations to Tom and Ed, I wish you the best in retirement. I guess probably appropriate first question would be for Jackson on the fact that Tom said.
You're the right person to take things forward, you talked about densification efforts, tremendous leasing is Jackson, what are you -- I know you just started, but could you provide some of your initial thoughts? Like should we expect any strategy changes at this -- do you have in mind?
Tom O'Hern -- Chief Executive Officer
Hey, Jeff. It's Tom. Jackson is actually not with us here. He's enjoyed so much-deserved time off.
He starts March 1st, so I'll just ask you to hang on to that question until then, Jeff.
Jeff Spector -- Bank of America Merrill Lynch -- Analyst
OK. Sorry about that, if I miss that. If I could then ask Doug, and congratulations, Doug, on a great '23 in terms of leasing. I appreciate all the stats you provided, including where you stand today on '24.
I think you said 80% commitments, square footage, 44% in LOI stage, I guess would you be able to compare that to where you stood a year ago as you entered '23, which turned out to be a record year? Like how do you feel today versus one: year ago?
Doug Healey -- Senior Executive Vice President, Leasing
Well, there's two parts to that question, Jeff. I think the first part, you were referring to our lease expirations. We're basically done with all of our expiring square footage in 2023, and we have commitments on 44% of our 2024 expiring square footage and another 34% in the letter of intent stage. So we're about 77% there with 2024 expiring square footage.
I think the other part of the question really referenced more of our leasing pipeline in which we said we had 126 leases signed for 2.2 million square feet. That's just about, Jeff, where we were at this time last year, give or take, just a little bit.
Jeff Spector -- Bank of America Merrill Lynch -- Analyst
And then if I can then ask a second question. What are you assuming in terms of bad debt lease termination income in '24? And how does that compare, let's say, to '23 or maybe versus historical?
Scott Kingsmore -- Senior Executive Vice President, Chief Financial Officer
Jeff, I'll take that. This is Scott. Bad debts, we're assuming those to start to normalize a little bit more relative to 2023. I would say that's about a $0.02 headwind in 2024 against our same center.
I don't expect those to be significant in the fullness of time, but I do expect them to be a little bit larger than they were in '23, which frankly was a net reversal, and that was just a continuation of recovering some of those latent fully reserved receivables in '23. I expect most of that to be out of the pipeline now, and it will be trending a little bit more normal. Lastly, termination income, we did provide line item guidance for that, which is $10 million, and that was down about $3 million or so, give or take, versus where we finished in 2023.
Jeff Spector -- Bank of America Merrill Lynch -- Analyst
Great. Thanks, Scott.
Scott Kingsmore -- Senior Executive Vice President, Chief Financial Officer
Sure.
Operator
One moment for the next question. The next question comes from Greg McGinniss with Scotiabank. Your line is open.
Viktor Fediv -- Scotiabank -- Analyst
Hello. This is Viktor Fediv here on with Greg McGinniss. I wanted to follow up on this lease termination income in Q4. I know probably that you cannot provide some specific details.
But overall, what type of tenant was that? And you mentioned that it opened some strategic opportunity for you to redevelop that center. So when you kind of provide some more details on that?
Scott Kingsmore -- Senior Executive Vice President, Chief Financial Officer
Yes. The -- yes, you're right, I can't speak to the specific tenant or the asset, frankly, other than to say, like I mentioned at the onset, that the lion's share of that termination fee, pretty much all but roughly $1 million, $1.5 million of that was from that single transaction. That transaction was an anchor location in terms of the type of space, but we do expect that to open up a really significant redevelopment opportunity. We are working on predevelopment and preplanning of that right now as well as entitlement.
Once we narrow down the scope and the exact cost and returns, which we expect to be, the returns to be in the low double-digit realm, we will disclose that in our pipeline. But it is a good opportunity. We're very glad to get that transaction completed.
Viktor Fediv -- Scotiabank -- Analyst
And then the second question, probably on leasing demand part. So given that department stores sales were weaker versus broad retail sales in 2023, do you expect more optimization to occur within that space? And have you had any conversations with your tenants about that already?
Scott Kingsmore -- Senior Executive Vice President, Chief Financial Officer
So I'm not quite sure I caught all of that question. I would say this, though, and this is probably a good thing. As we look into 2024, I would not expect us to put up the same type of volume that we did in 2023 because in all candor, we're running out of large-format inventory running out of boxes, big anchor locations. Over the last few years since 2021, we've leased about 2 million square feet and over 20 anchor locations.
So it's been very productive.
Tom O'Hern -- Chief Executive Officer
Yes, I think you're going to continue to see the shift away from department stores and into other big box uses. You saw us open Shields Sporting Goods for example, in a former department store space. You'll see us open Art Museum in the former art-like theater space. We're going to continue to see different types of uses, diversified uses, taking the department store space and converting that into other uses that frankly drive more sales and traffic.
That's a trend we've seen accelerating over the last five years, and that is going to continue as we go forward.
Viktor Fediv -- Scotiabank -- Analyst
It makes sense. Thank you.
Operator
Our next question comes from Samir Khanal with Evercore. Your line is now open.
Samir Khanal -- Evercore ISI -- Analyst
Hi, everybody. Tom, congratulations on your retirement. We will miss you. So Scott, just on same-store NOI guidance here.
Certainly, leasing is very strong. The pipeline looks great in the '24. But I just want to kind of dive into the same-store NOI growth that is moderating in '24. Maybe help us think through the drivers of that lower growth in '24 at this time.
Scott Kingsmore -- Senior Executive Vice President, Chief Financial Officer
Sure, Samir. I'll walk through it. Obviously, great growth over the last three years, as I highlighted in my opening remarks. So for starters, we are dealing with some more challenging comps.
In addition, I would say operating expenses do remain relatively elevated when you think of things like insurance costs, security labor, I mentioned bad debts, those are all contributing to some headwind in same center that I would quantify it roughly 150 basis points or so, headwind in same center. We are -- given the robust leasing environment and remerchandising our space, we are taking space offline, so there is an element of downtime within that same center guidance. And I would estimate that kind of bracket a roughly 1% headwind in the same center. That's all positive, though, because we're taking underperforming merchants offline.
We're putting in much more attractive merchants, much more diversified uses that will draw traffic and better sales volumes at better rent levels. So that is what you typically see in a robust leasing environment. So those are really some of the major moving pieces. And then, of course, as we do with each and every year, we do embed some reserves for the unanticipated in our guide.
Samir Khanal -- Evercore ISI -- Analyst
And just from a modeling perspective, help us think through G&A for the year and also percentage rents?
Scott Kingsmore -- Senior Executive Vice President, Chief Financial Officer
Sure. G&A, I think if I were to point you to a run rate, we look at 2023, and I would expect maybe a marginal decline versus 2023 and 2024 across management company expenses, net revenues, rate expenses.
Tom O'Hern -- Chief Executive Officer
One other thing to keep in mind on the G&A line, Samir, if you take a look at our proxy -- last proxy, Page 50, you'll see the combined compensation for Ed Coppola, Tom O'Hern, and from the 8-K, you'll be able to ascertain the compensation for Jackson. So that will be a fairly significant reduction in G&A just as a result of the CEO and president change.
Scott Kingsmore -- Senior Executive Vice President, Chief Financial Officer
And then, Samir, you also asked about percentage rents. If my memory is right, about 12 months ago, I said we do expect roughly a 15% to 20% decline in percentage rents into 2023 from 2022. And in fact, that played out. If you look at our percentage rents on a pro-rata basis, they were down about 16% in '23 versus '22.
And again, largely, that was a function of conversion of variable rent to fixed rent type structures. I think we worked through the vast majority of those at this point, Doug. I don't expect a lot more of that. As we look into 2024, and we're looking at percentage rent trends versus '23, I expect those to continue to tick down, but not nearly as significantly as they did in 2023.
We're estimating roughly about a mid-single-digit decline in percentage rents and some of that is just as you get escalations and base rents, you get an increase in breakpoint. So there's a natural transition of variable rent to fixed rent on that basis. But I don't expect the type of leasing activity converting variable to fixed rent that we had in 2023 at all.
Samir Khanal -- Evercore ISI -- Analyst
Thank you.
Operator
Please stand by for the next question. The next question comes from Floris Van Dijkum with Compass Point. Your line is open.
Floris van Dijkum -- Compass Point Research and Trading -- Analyst
Great. Thanks, guys. Can you hear me?
Tom O'Hern -- Chief Executive Officer
We can hear you, Floris. Loud and clear.
Floris van Dijkum -- Compass Point Research and Trading -- Analyst
Great. Tom, congrats on the retirement. Good luck in your next venture, whatever you wind up doing.
Tom O'Hern -- Chief Executive Officer
Thank you, Floris. I remember you when you were 25 and fresh out of UVA, and we're going to visit malls in Northern California.
Floris van Dijkum -- Compass Point Research and Trading -- Analyst
I remember that that was -- and by the way, that was one of my lowlights actually, as some of you might have heard -- I don't know I won't share that on this call, but -- but yes, I do remember that. That was a memorable time. I had, I guess, two questions for you. Number one, if you can -- one of the issues, I guess, with the mall sector, and you're not unique.
I think some of your peers have had to grapple with this as well. But is the people don't think there's going to be much growth in the center. Can you maybe touch on -- obviously, the underlying growth was very strong last year, you're expecting a little bit of a slowdown this year, probably with some conservatism baked in, I would imagine. But maybe talk a little bit about some of the key drivers for growth.
Obviously, you touched upon the S&O pipeline. Maybe can you give a little bit more color on what percentage of that S&O pipeline, for example, is luxury tenants? I know there's a big win coming online at Scottsdale. How much of a driver of growth is that potentially for you going forward?
Tom O'Hern -- Chief Executive Officer
Well, I'll let Doug talk about luxury in a second, Floris. But as for people saying they don't see the growth in the mall sector, then they're clearly ignoring the facts. All you have to do is look at record leasing volumes in '22 and '23 and then drill down a little deeper and look at the types of tenants that are coming in, replacing traditional retail. This isn't apparel retail.
This isn't footwear. These are new uses, new and creative food and beverage like Pinstripes, Lifetime Fitness, for example, very actively coming in, and they can generate an additional 5,000 to the center. We just that one tenant alone, adding our 10 museum, they expect to have 1 million visitors per year coming to the top level of Santa Monica place. So there are a lot of exciting new uses that, frankly, we didn't have 10 years ago.
So I think whoever said they didn't see the growth driving to the mall business, the A-quality mall business was sadly mistaken because all these new uses are driving traffic, they're driving sales, they're driving productivity. They're driving rent and they're going to drive NOI.
Doug Healey -- Senior Executive Vice President, Leasing
Floris, it's Doug. With regard to your specific questions about luxury, as you know, a few years back, we finished the luxury wing at Scottsdale Fashion Square and the Neiman Marcus wing. And late last year, early this year, we're now focusing on bringing luxury -- global luxury to the Nordstrom Wing. I think a few calls ago, we announced Hermes, which is the bellwether tenant for that property, and we'll be announcing more over the next several months.
But to Tom's point, I talked about the leasing pipeline all the time. And it's 2.2 million square feet. It's going to open over the next two and a half years. Those are phenomenal numbers.
But the thing that really excites me is the uses we're going to be bringing. So that just all new uses, new exciting uses, you think about Din Tai Fung and you think about Elephante, True Food Kitchen, Vuori, H&M, Primark, Dave, and Buster's, Kiln, Lifetime Fitness, Tom mentioned Pinstripes, Target, Level 99. I mean, that's really the beauty of this pipeline, not just the metrics, but the depth and breadth of uses that we're bringing to our town centers over the next two, two and a half years.
Floris van Dijkum -- Compass Point Research and Trading -- Analyst
Great. Maybe a follow-up with Scott. I know you mentioned that Niagara is going to get refinanced, and that might surprise some people myself included, who thought that might transition back. I know you probably can't say a whole lot, but does this mean that you will be investing leasing capital in this asset on a going forward basis? And what do you think that can do to the operations for this property going forward as well?
Scott Kingsmore -- Senior Executive Vice President, Chief Financial Officer
Sure. Floris, you're right. I can't speak in too much detail because the transaction is still in process. We do expect to secure a multiyear extension of that.
The asset still does generate some FFO. It certainly has its challenges given its market positioning with north of the border in Canada and the local market. There still is some opportunities for that asset, and we'll continue to -- continue to capitalize on those opportunities. But the bottom line is it's a negotiation that's still in process.
It's earnings accretive to retain that asset, and we'll report back once we close.
Floris van Dijkum -- Compass Point Research and Trading -- Analyst
Thanks, Scott.
Scott Kingsmore -- Senior Executive Vice President, Chief Financial Officer
Sure.
Operator
One moment for our next question. The next question comes from Todd Thomas with KeyBanc Capital Markets.
Todd Thomas -- KeyBanc Capital Markets -- Analyst
Hi. Thanks. First, Tom, Ed, congrats on your run, best of luck in retirement. Let me -- first, I just wanted to take a stab at asking a prior question.
I realize Jackson has not started yet. But Tom, maybe, Scott, I'm just curious if you can talk a little bit about where you think there might be opportunity for Jackson to have an impact as you think about the organization today and look ahead?
Tom O'Hern -- Chief Executive Officer
I'm not going to speak for Jackson. He'll be starting soon, and you can ask him directly, but I know he does like our strategy of densifying and diversifying our high-quality town centers and he found that very interesting and appealing. Other things he may be considering I will leave to him and let him articulate directly to you and others on this call.
Todd Thomas -- KeyBanc Capital Markets -- Analyst
OK. And Tom, you're staying on for a few months as an advisor, what kind of time line would you expect for Jackson to get sort of fully situated with the platform, touring assets, markets meeting with key retailers? What's the process like for him really stepping into the CEO role?
Tom O'Hern -- Chief Executive Officer
Well, many of you on call know him. I mean, he's going to hit the ground running. I can guarantee you that. So I think there'll be a lot of travel visiting our offices, visiting our people getting going.
Ed and I are still on the board through our current term, which runs through May. So people have access to both of us and I imagine he's going to be a very quick study and hit the ground running. So I think that will all happen very, very quickly. And he's already fairly familiar with the Company, did his due diligence and I can almost give to you, he will get it faster.
Todd Thomas -- KeyBanc Capital Markets -- Analyst
OK. That's helpful. And if I could just get one in for Doug. I appreciate the detail around the S&O pipeline and the lease signings and LOIs that you've executed around the '24 expirations.
Can you talk about your expectation for tenant retention during the year and maybe discuss any known move-outs or post-holiday season -- seasonality that you're expecting this year relative to the last few years where there's been a lot less seasonality than traditionally is?
Doug Healey -- Senior Executive Vice President, Leasing
Todd, it's Doug. Thank you. I think -- and Scott jump in here. But I think in 2024, our expectation is between 90% and 95% tenant retention.
Meaning our expirations -- our 2024 expirations between 90% and 95%, we believe, will retain.
Scott Kingsmore -- Senior Executive Vice President, Chief Financial Officer
I think the second part of your question was regarding any unanticipated or just fall out following the holiday. And I won't say there -- I don't think there's anything out of the ordinary. If we looked at, say, the 2016 through 2019 period, we had some precursor certainly in the fall of tenants that were likely to close, and they were closing in fairly significant routes. We have not had that for the last few years at all.
And I can't think of any retailer that said, look, we're going to shut down five or six stores following the holiday season. Doug?
Doug Healey -- Senior Executive Vice President, Leasing
Yes. Todd, we've talked about this a lot. I mean many of the retailers that were suffering pre-pandemic just didn't make it through pandemic. And those that came through, came through in a very healthy way.
And as I mentioned in my prepared remarks, there's a very, very healthy retailer environment out there with very strong balance sheets. I think the retailers -- I know the retailers in 2023 and into 2024 already speaking about managing the inventory levels, which is hugely important for the profitability and for the margins which actually makes them stronger. So we're not seeing really any pullback and our watch list is as low as it's ever been in 20 years. So I don't anticipate anything, anything unusual in 2024, if you will.
Todd Thomas -- KeyBanc Capital Markets -- Analyst
OK. Great. Thank you.
Doug Healey -- Senior Executive Vice President, Leasing
Thanks, Todd.
Operator
One moment for our next question. The next question comes from Michael Mueller with J.P. Morgan. Your line is open.
Mike Mueller -- JPMorgan Chase and Company -- Analyst
Hey. Tom, congratulations. It's been great working with you over the years.
Tom O'Hern -- Chief Executive Officer
Likewise.
Mike Mueller -- JPMorgan Chase and Company -- Analyst
And I just have one quick one for Scott. Just curious, what's embedded in the 2024 guidance for NOI margin improvement relative to what you had in 2023?
Scott Kingsmore -- Senior Executive Vice President, Chief Financial Officer
Yes, Mike, I think we'll see continued margin improvement. We've got improvement in rental rate. We've got growth in occupancy. Obviously, the pipeline will start to add more and more as we get toward the latter half of the year.
It's still a pretty thick pipeline. In fact, I think the pipeline yields roughly $64 million, $65 million of incremental rent over existing uses. So that will be heavy in the second half. Conversely, like I said, we've got operating expenses continue to be somewhat of a drag, not a huge drag, but somewhat of a drag.
So -- but I do think by the time we get to the end of the year, you'll see continued margin improvement year over year.
Mike Mueller -- JPMorgan Chase and Company -- Analyst
OK. Thank you.
Operator
The next question comes from Ki Bin Kim with Truist. Your line is open.
Ki Bin Kim -- Truist Securities -- Analyst
Thank you and congrats, Tom. And going back to some of the debt execution that you've done in 2023 and what you have in 2024. Are there some trade-offs that don't show up in the interest rates to solve things like capex reserve requirements or other clauses that might be a little bit more restrictive?
Scott Kingsmore -- Senior Executive Vice President, Chief Financial Officer
Yes. I'd say we're always leaning into our underwriting to make sure that we're getting full credit for the pipeline. And given the depth of the pipeline, any one of these deals we're approaching, whether it's Tysons or Danbury. To the extent we have a tenant that's not yet come online, we do have to set aside that capital.
It's effectively -- I guess, when you think about it, it's prefunding that capital and then we drop back down over the next 6 to 12 months. And so for instance, for Tysons, I think there was an incremental $40 million, give or take, of liquidity. But a lot of that liquidity was soaked up in capex reserves for a lot of restaurant uses. We've recently discussed Level 99, which is a new entertainment use on the east side of the center.
So we did have to set aside the anticipated leasing capital to bring that use to opening and paying rent. But other than that, no, I'd say that the environment is pretty normalized. And we're getting deals done again, liquidity is back open. I'm happy to say that we probably accounted for roughly 25% of the volume that occurred in CMBS, which was about a little over $7 billion of transactions in 2023.
So, the markets are open and functional and as you can see from the rates somewhere in the mid-6s is where we've been transacting.
Ki Bin Kim -- Truist Securities -- Analyst
And what is like a broad refinance rate that we should assume for 2024 refinancing?
Scott Kingsmore -- Senior Executive Vice President, Chief Financial Officer
I'd say we've been transacting in the mid-6s, and that's probably representative of where we'll be this year. We'll have to see what the Fed has in store for us for the next 12 months. But based on where we see the forward curve, that's probably a reasonable expectation.
Ki Bin Kim -- Truist Securities -- Analyst
OK. Thank you.
Operator
The next question comes from Haendel St. Juste with Mizuho. Your line is open.
Ravi Vaidya -- Mizuho Securities -- Analyst
Hi, guys. This is Ravi Vaidya on the line for Haendel. I hope you guys are doing well. Just had one or two questions here.
Regarding leverage, can you please provide a full year -- end of year '24 target? And would you consider issuing equity at current prices? I believe at the Investor Day, you referenced that you were in -- you weren't looking to issue equity until the previous target, which is around $18 a share, and we're getting close to that at this point. So I just wanted to follow up on that.
Tom O'Hern -- Chief Executive Officer
Ravi, I'll take the second half of that question. We always reserve the right to issue equity. So I'm not going to give you a hard and fast rule in terms of a dollar amount. You've seen us in the past, judiciously use our ATM, and we have an ATM in place today, and that's another tool in the capital toolkit that we would keep available to us.
So it's certainly possible. And look, we're very focused on delevering over time. That can happen in a few ways, one of which is to drive same-center NOI up, which we fully plan to do. And the other way to effectively reduce debt-to-EBITDA is via equity leases.
So we wouldn't preclude ourselves from doing that. We do not have any of that in the guidance, but that's consistent with past practice as well. Scott, do you want to comment on leverage?
Scott Kingsmore -- Senior Executive Vice President, Chief Financial Officer
Yes. Sure, Ravi. To your first part of your question, I think we could see 40 to 50 basis points of improvement in leverage by the time we get to the end of the year. Roughly 8.2 times is kind of where we're triangulating based on the business plan today.
Ravi Vaidya -- Mizuho Securities -- Analyst
Got it. Thank you.
Scott Kingsmore -- Senior Executive Vice President, Chief Financial Officer
Sure.
Operator
One moment for the next question. The next question comes from Caitlin Burrows with Goldman Sachs. Your line is open.
Caitlin Burrows -- Goldman Sachs -- Analyst
Hi. Good morning there and congrats, Tom, on your retirement. Maybe starting with Santa Monica Place in Scottsdale Fashion Square, I feel like the expected openings are getting closer on those. And I think combined, they're supposed to have an incremental NOI of around $50 million at your share.
So I'm just wondering if you can give some further detail on the timing of recognizing that NOI? Like could it start in the first half of this year? Or any other details you can give?
Scott Kingsmore -- Senior Executive Vice President, Chief Financial Officer
Yes. Caitlin, both of those projects are going to start to open in late '24, early '25. So, I would say you'll see a full -- for the most part, you'll see a full impact in 2025, maybe a little bit of bleed into '26. But looking at those individually, Scottsdale, will start to open up a lot of those uses in fall, the renovation for that project.
I think most of the scaffolding will be down and the physical work will be done by the time we get to the end of the quarter. But the -- in terms of new tenants coming online, it will start to come online in the fourth quarter, and we'll see kind of the full year effect in '25. Santa Monica, we've got some exciting uses coming first level, Club Studio, which is high end fitness, third level, Arte, both of those are going to be done in the first half of 2025. So, you'll see some bleed into 2026 there.
Din Tai Fung will also be a use that we hope to get online either at the end of this year, beginning of next year. So, all those are very accretive leases that we expect to be on board, certainly by second quarter of 2025.
Caitlin Burrows -- Goldman Sachs -- Analyst
Got it. And maybe you guys talked earlier in the call about how percent rents were down in '23 because more was being shifted to base rents, which makes sense. I was wondering if you could go through any details on how much that kind of phenomenon impacted leasing spreads like that the expiring ABR might have been lower and related kind of the level of leasing spreads that you reported in 4Q of almost 20%. Do you think that's sustainable?
Scott Kingsmore -- Senior Executive Vice President, Chief Financial Officer
Sure. Great question. Yes. Certainly, if you look at our expiring rents in 2023, they were a lot lower than what we expected in 2024.
And that was really driven again by all those shorter-term deals that we did during COVID, which had more variable rent and we're accessing those throughout 2023 and renewing those on a longer term more typical fixed rent structure. So as we reported trailing 12%, 17% spreads at the end of the year, and I would expect those base rent spreads to be roughly 50% of that level in 2024. Really, again, just a function of a relatively artificially low base rent expiring in '23 and a more normalized level of base rent expiring in 2024.
Caitlin Burrows -- Goldman Sachs -- Analyst
Got it. Thanks.
Scott Kingsmore -- Senior Executive Vice President, Chief Financial Officer
Sure.
Operator
One moment for the next question. The next question comes from Nick Joseph with Citi. Your line is open.
Nick Joseph -- Citi -- Analyst
Thank you. Just hoping you could walk through the capital needs and the funding plan for leasing-related capex and any incremental redevelopment in 2024.
Scott Kingsmore -- Senior Executive Vice President, Chief Financial Officer
Sure. I did mentioned in my opening remarks, Nick, good afternoon -- that we do expect after recurring capex and leasing costs to still have generated roughly $300 million of operating cash flow before payment of dividend. As I look at '24, '25, '26 development pipeline, I think, will range between $150 million to $200 million over those three years, and we're probably somewhere around that midpoint of that for 2024. We are -- we've got probably eight to nine -- 10 anchor boxes that we continue to work on that will largely be retenanted and completed by the end of the year but will also be set in the table for some larger-scale redevelopments, potentially Green Acres, potentially FlatIron for 2025 and 2026.
So that will give you an idea of some of the character of what we're spending on.
Nick Joseph -- Citi -- Analyst
Thank you very much.
Operator
One moment for the next question. The next question comes from Alexander Goldfarb with Piper Sandler. Your line is open.
Alexander Goldfarb -- Piper Sandler -- Analyst
I guess it's still good morning out there. Tom and Eddie certainly for two decades of working with you guys in REIT land. It's been awesome and we'll miss our NAREIT interaction. So I wish you guys the best in your next endeavor.
So I have two questions. The first question is, Scott, on the Danbury mall loan, you know how much I like that mall. Can you just help us walk through and interpret the $155 million new loan relative to the value of that mall? Just given the sales that it does and the dominance in that northern region would think that the loan is under-levered relative to the value of the asset. Obviously, the market today is a tough market to do debt.
So maybe just some perspective around how we should interpret the loan balance relative to where the market value of that asset would be sort of in normal times, obviously, not right now when people are skittish.
Scott Kingsmore -- Senior Executive Vice President, Chief Financial Officer
Sure. Yes, it's a great asset. It's virtually 100% occupied. I think there's one or two available storefronts.
So very happy to get a 10-year deal on it, stagger out that maturity, etc., etc., especially at a very attractive rate. The loan to value, if I recall correctly, was in the low 40s based on appraisal. We typically, as you know, from following us many years, we typically finance in the 55% realm. So yes, there's a little bit of liquidity on the table, but it's the state of the market today.
And I think it was a great execution hitting a window. And recall, we've been trying to finance that thing through a difficult capital market environment for almost two years. So it was really nice to be able to window and execute well at a good rate.
Alexander Goldfarb -- Piper Sandler -- Analyst
OK. And then the second question is on the JV, the Freehold and Chandler JV, you bought out Freehold, but Chandler still seems to be a JV. So maybe you could just talk a little bit about what drove the JV to sort of cleave off the asset? I think you guys said $5.6 million that you used to acquire that. What was unique about that at it versus Chandler that still is in JV? Or should we expect something to happen in the near future on Chandler as well?
Tom O'Hern -- Chief Executive Officer
Alex, really, we can't comment on what motivated or didn't motivate our partner in that case. It was really their decision. But when given the opportunity, we like the economics, we like the asset. We had a chance to do that on Chandler, but that was really driven by them and their preference.
Alexander Goldfarb -- Piper Sandler -- Analyst
OK. Thank you, Tom.
Operator
One minute for the next question. The next question comes from Ronald Kamdem with Morgan Stanley. Your line is open.
Ronald Kamdem -- Morgan Stanley -- Analyst
Hey. Congrats Tom and Ed. Just two quick ones for me. Just on -- going back to the management addition, obviously, can't comment for Jackson.
But just about the process. The question really is, is there any sort of specific skill set or experience that you guys are looking for? And can you just comment on why we're sort of now the right time for this transition? Just trying to get a little bit more color around sort of the process that you guys are looking for?
Tom O'Hern -- Chief Executive Officer
Yes, Ron, I'll refer you to the press release and the 8-K. We did an exhaustive search. We used Ferguson Partners, very well-known firm that specializes in executive recruitment and we considered a lot of candidates. Those of you that know Jackson know he's very qualified and very capable, and I think we've got an outstanding replacement.
In terms of the timing, every CEO should really go out when their company is in a good spot and when they have their health. So that's why it's good timing. Macerich is in great shape and I've got my health. So this is the perfect time for me to move on to all those things that I put on the back burner for the last 30 years.
Ronald Kamdem -- Morgan Stanley -- Analyst
Understood. And then one on -- so I saw the Green Acres Mall redevelopment announcement, I think, earlier this, I guess, last week or earlier this January, but I didn't see it in the supplemental. Is there -- is that going to be a large project? Like how should we think about the economics and returns on that? Or should we just wait for that to be at it?
Scott Kingsmore -- Senior Executive Vice President, Chief Financial Officer
Yes, it's a wait. I think you'll see it hitting the pipeline. We are in predevelopment and entitlement mode right now. It's going to be a very attractive project.
Frankly, that's a gem from the two assets that we acquired back in the 2012, 2013 time frame. Green Acres has performed extremely well. We added a power center. We've been able to retenant the mall.
In total, the entire property, the entire campus generates over $1 billion of sales and we're really, really excited to bring this next phase, but we're studying it, and it will hit the pipeline over the next few quarters.
Ronald Kamdem -- Morgan Stanley -- Analyst
All right. That's it for me. Thank you.
Operator
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 -- Chief Executive Officer
Thank you, Michelle. Thank all of you for joining us today. All kidding aside, I would like to say that it's been my pleasure to work with you, and I will miss all of you. As I approach retirement, I'm highly confident in the future of the company under the leadership of Jackson, our board of directors, and the balance of our incredibly talented leadership team here at Macerich.
I wish you all the best.
Operator
[Operator signoff]
Duration: 0 minutes
Call participants:
Samantha Greening -- Director, Investor Relations
Tom O'Hern -- Chief Executive Officer
Scott Kingsmore -- Senior Executive Vice President, Chief Financial Officer
Doug Healey -- Senior Executive Vice President, Leasing
Jeff Spector -- Bank of America Merrill Lynch -- Analyst
Viktor Fediv -- Scotiabank -- Analyst
Samir Khanal -- Evercore ISI -- Analyst
Floris van Dijkum -- Compass Point Research and Trading -- Analyst
Todd Thomas -- KeyBanc Capital Markets -- Analyst
Mike Mueller -- JPMorgan Chase and Company -- Analyst
Ki Bin Kim -- Truist Securities -- Analyst
Ravi Vaidya -- Mizuho Securities -- Analyst
Caitlin Burrows -- Goldman Sachs -- Analyst
Nick Joseph -- Citi -- Analyst
Alexander Goldfarb -- Piper Sandler -- Analyst
Ronald Kamdem -- Morgan Stanley -- Analyst
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