...Our next roundtable session with the Macerich team. Thanks for joining us today, and we want to make this as interactive as possible. Just a reminder, so if you have questions, please raise your hand or shout out. To my right is Jack Hsieh-
Hsieh.
CEO Hsieh. Sorry, Jack Hsieh. Scott Kingsmore, CFO, and Doug Healey, EVP of Leasing. Again, thank you all for coming today. Appreciate the time. Given I just was saying to Jack, it's a fairly broad group of investors in the room. We'll first start with some opening remarks about Macerich and where we stand today. Jack, you started how many months ago now
This is beginning of month seven.
Month seven. Okay. So, you know, Jack is our new CEO. Scott and Doug have been at the company for many years, so that's, that has stayed steady. But Jack can introduce the company today and his vision, the plan.
Great. Welcome. Nice to meet all of you, and I hope you had a chance, if you know the company well, you've probably seen our path forward, listened to some of our recent earnings calls. I'm still very excited about what we're doing at the company right now. The board's very excited. We've got a really great plan, building, rebuilding the corporate culture. We've got a number of different tactical and strategic initiatives that are underway that address balance sheet and operations.
But at the end of the day, we have a what will become a great collection of enclosed and open-air shopping centers that we're operating that are really performing well and will continue to improve. I would say, if you are a student of our path forward, this year, obviously, we were focused on trying to execute three potential asset sales. We've completed one already. We've executed a purchase and sale contract on a second one, which we're working through.
And the third one, we're probably not gonna end up executing on, and we'll kind of refocus on another group of assets that will kind of be next in line. And that next group actually will be a number of outparcels that we have. We have a very large collection of credit and different types of tenancy around some of our best centers that we're in the process of kind of evaluating and trying to position to sell over the next 18 months, 20 months as we move forward. That's not an insignificant bucket, which we can talk about later. As you know, we worked through the debt reduction exercise with Country Club Plaza and Santa Monica Place.
We'll be moving forward on two more properties before year-end, as we kind of work to have discussions with lenders on those two properties. And I think if you listen to my earnings call on the last quarter, you know, we expect to have visibility around $1 billion-$1.4 billion of debt reduction by year-end, so we'll be able to tell you which properties and when. So that, I think, will be helpful. As it relates to another leg of the stool, NOI growth, Doug will spend more time on this, but leasing is obviously a critical component of NOI growth.
Doug will spend more time on this, but leasing is obviously a critical component of what we're doing, and the momentum really continues to be strong and stronger, in spite of some of the flattening sales reports you might see from some of the retailers that are out there. So, you know, the best centers are still getting a lot of strong demand from a leasing standpoint, so we're working through that. And then finally, just corporately, internally, you know, we've initiated a couple new processes that I think I'm really excited about.
One is on the leasing side, and so we presented this to our board at our last quarterly meeting. We've launched it within the company now, so we have kind of a new lease procurement process that's gonna really create a lot of efficiency from a man-hour standpoint at our company, and it's already showing good early adoption. And so that's, I'm really encouraged about that. We just finished the last property review. We did it as a company, kind of went through the entire portfolio of Steady Eddy and Fortress properties. Rolling forward, we'll have more quarterly reviews on assets.
That was something that the company didn't do in the past. I think that's gonna be extremely helpful for what we do. You know, we are initiating five-year models on all of our assets, and ultimately, we'll be able to provide some ability to shed some light on our NOI progress. You know, 'cause, you know, executing rent commencement dates, you know, in our sector, tend to be longer than other sectors. So part of what we've got to be able to demonstrate to you all is how to get that 100 point reduction in our leverage.
Through that NOI incremental leasing piece that we think is there, and we're seeing it. So more to come on that. Hopefully, later this year, we'll have some exhibits that begin to show our progress against that initiative. But if you're asking me how the state of Macerich, it's in great shape, and we're pretty excited about the direction we're going in, and can I, I'll stop right there and maybe open it up for questions.
Great. Thank you. Maybe we just start off, since you've been at the company now seven months, you know, what are you most pleasantly surprised to see that was executing well, you haven't touched, or maybe you've touched, but you're, you know, you feel like there's some areas of improvement?
I think the thing I've really been astounded by is, like, the people's willingness to accept change, you know. If you think about our corporate values, empowerment was one big one. And I would say coming in, you know, just there was a certain way that the company operated. I think people are willing to just...
There was a certain way that the company operated. I think people are willing to try different things, challenge each other, and like I said, like, this lease procurement process that we have, something very different, and it's gonna save a ton of time, man-hours that the company uses to kind of communicate across the platform, reduce spreadsheets and things like that. And that's just one easy thing. And we're using Yardi as the backbone of that process versus, like, Salesforce.
But, you know, people are really excited about the change, so, the company is obviously excellent at what it does, so it's really just trying to get everybody focused on the things that are really gonna matter and make a difference for us. I've been very pleasantly surprised about that.
Can you just, I guess in a couple or a minute or two, quickly explain the changes in at lease procurement, what was the company using, doing versus today, and where did you - where is thing doing versus today, and where did you, where does this... is anyone else using this system? Is it-
I'll let other people do it. Just, I would say, kind of coming in, probably, I spent the most time in Doug leasing meetings 'cause, I mean, that is the lifeblood and engine room for what we do. And, you know, sitting on the West Coast call, the East Coast calls, and the different ELC, you know, the executive leasing committee calls that come up. And what struck me was, we've got great tenant relationships. They're kind of housed within the company and different properties and different relationships. They're kind of housed within the company and different properties and different regional offices.
And, you know, a lot of emails, a lot of meetings, a lot of spreadsheets to try to keep everybody up to date on what was happening. Then you got asset management asking leasing, what's the latest and greatest? CFO and his team asking, what's the latest and greatest? Constant barrage of people on the leasing team spending time chasing down, you know, requests from internal. And I'm like, "That's not. Y our job needs to be selling more. Go meet more tenants. That's what I want you to do.
Don't do that stuff." So I was like, "Well, then we should just..." My first instinct was, I had a lot of success with Salesforce. Okay, we're gonna adopt Salesforce at our company. And the technology team, you know, thankfully, blocked me off that ledge, and we've found a different solution with Yardi, 'cause we're on the Yardi platform. And so we've built using Retail Manager, you know, in effect, a CRM through that. So, you know, client meetings are now documented in Yardi, everyone can see them.
So if you have a question about a tenant or a property, there should be commentary. If there's not, we have a process for that, too. You know, a compliance property, you know, a compliance process. But ultimately, like, this is still pretty new, but what that's supposed to do is, like, if Scott has a question on leasing or asset management, or property management has a question on a tenant or a location, you know, it's all in a system now, and that didn't exist prior to me.
Is there a specific goal on reducing the number of days it takes to get the lease contract finalized? Is it, you know, increasing the number of deals done per month? Like, is there something on the table?
All of that.
Okay.
I would say, like, I wanna shorten rent commencement dates. So there's clearly more efficient ways to streamline. The moment Doug's team says, "We have a deal, we've shaken hands," the time it takes to actually get that tenant to pay rent in the center. You basically have a deal, we've shaken hands, the time it takes to actually get that tenant to pay rent in the center. You'd be shocked of kind of what happens there. So we're trying to address that process, to try to make it more efficient.
One of the things that we can do in our control, some of it's tenant control, some of it's permitting, some of it's internal legal in our control, and some of it's tenant control, some of it's permitting, some of it's internal legal processing. So that's an easy piece to fix. But to me, the most important was, you know, I want Doug's team talking to tenants. I don't want him talking to people inside. To me, the most important was, you know, I want Doug's team talking to tenants. I don't want him talking to people inside the company. Simple as that. .
You know, the more time he spends with asset management, more time he spends having Scott kind of update our models, that's, that's time that we're not selling. You got to be selling. Always be closing.
Yep.
So that this technology is, it's not like rocket science, but it's just simplifying the way we're set up, the way these national accounts are set up, you know, in our platform. And I think it's, seems so far to be being. It's being adopted.
As you said, your relationships with your tenants, I mean, in the industry, it's known to be strong. How does that change then from your leasing team and their interaction with these various tenants? Did anything change from our team and their interaction with these various tenants? Did anything change from a responsibility standpoint?
I think it's too early to tell, but I think what Doug will be able to do and his leadership team is to be able to see who's calling on what. You know, how are we dealing with 25-26 lease expirations? Who actually called and logged in, and if not, why? And so that system didn't really exist before. It's not that we didn't do it, but if you just think about it, we have different regional offices, we have different relationships with different tenants, the same. There's a lot of communication that's more offline.
There's a lot of communication that's more offline happening. And so that part, you know, when I had gone out and spent time with people in the field, they would say, "Yeah, I spent a lot of time doing a lot of other stuff that candidly takes time away from me doing what you want me to be doing." So, okay, well, we'll fix that. So that's like an easy fix, I'd say. Easier one.
Jack, can you mention the way through?
Yep.
If I ask you about pricing power, like, what comes to mind? When you think about asset sense or geography or, you know, like...
I mean, like, I think, you know, our fortress properties, our Steady Eddy properties, those, especially the ones in those higher ranked buckets, you know, we don't have as much space, and so there's always demand for assets like that, at least, you know, tenant demand. But really, our job, if we're doing it properly, is to try to get the right tenant demand into the right merchandising mix. Doug and his team, they do a great job of that, you know, trying to...
You know, at the end of the day, like, you know, if we're doing our job right, we're driving more traffic to these centers. More traffic, more sales. Unfortunately, the department stores don't necessarily do that as much anymore, right? You can't rely on that.
So then you have to get a Dick's House of Sport in there, or you have to find, you know, a more leisure activity, you know, maybe a gym or a pickleball or some other kind of use, entertainment use, or you've got to stack a Target and a Primark and some other use in order to drive more traffic, more demand into these properties. And I would say that's probably the biggest opportunity that is within our portfolio.
You know, in a way, COVID, like, that is within our portfolio, you know, crushed the sector, right? In a way, just there's so much turbulence, you know, within our tenant roster. Not just us, but any landlord on the enclosed space. But it's also a great opportunity, right? You get a chance to reset your merchandise mix. How do you bring more Primarks into your center? How do you bring more, create more opportunity to create that traffic? So I'd say we're seeing really good, solid leasing momentum, not just signing deals, but what we see in our forward pipeline.
I mean, Doug, you might just comment on just this, a real important stat we look at internally.
Yeah. Thanks, Jack. So we've been touting for the last year, definitely, that we had a record leasing year, dating back thirty years to when we went public, in terms of square footage and leasing volumes. That's kind of in the rearview mirror. Those are leases that we've signed, but I can tell you, this year, year to date, we're on par with where we were last year.
What we like to look at now is we have a leasing committee that meets every two weeks. And to me, we look at deals, we approve deals, they go to lease, they get signed, they go into our pipeline. To me, that's much more forward-looking than the leases we signed. And I can tell you that year to date, we're 20% ahead of where we were last year. And again, this is. These are deals that we're approving, that go to lease, that go into our pipeline.
These are deals that we're approving, that go to lease, that go into our pipeline. So I think if that's any indication, and I think it is, the outlook's very good. And we have a very healthy retailer environment out there. We have for the last several years, and you know, there's been a lot of talk about sales. Sales are flat, and they are. They're flat in the industry. We're basically flat, but to date, there doesn't seem to be a correlation between retailer demand and what's going on with sales, what's going on with the macroeconomic environment, what's going on with the election. The demand's still out there.
Including luxury and is luxury still spreading out? You know, they, we saw them, you know, open up various different lines, men's, women's. I mean, still seeing?
Luxury's definitely slowed this year, but for two reasons, really. Up against very high comps, high double-digit comps the last two or three years. So that's tough to sustain. The Asian consumer has slowed, so that's tough to sustain, definitely. But again.
That we don't have a lot of luxury, I think 0.5% of our portfolio GLA is luxury, but given the slowdown in sales, we still haven't seen a decrease in luxury demand. For example, you all know that a few years ago, we redid the Neiman Marcus wing at Scottsdale Fashion Square, leased it to 100%. Sales productivity was off the charts, but so was the demand, and we couldn't accommodate all these luxury retailers.
So we, step two, went to the Nordstrom wing and did the exact same thing in the Nordstrom wing that we did in the Neiman Marcus wing, just to accommodate the demand. And we're now, I think, 90% committed, and there's not much space left. And you're talking about some of the major luxury guys like Hermès, like Céline. So, you know, again, we're still seeing the demand, not necessarily correlated with sales.
Okay. Going back to the path forward, initiatives and plan, Jack, you mentioned the goal this year was to dispose of three. Sounds like you said the third is not gonna happen. Can you share any more with us? Like, you know, why is that not gonna happen? Is there something specific with that property? Is something changed in the transaction market?
I would say, like, we when we came up with this plan, like I would say, we didn't have everything worked out, and we had a general idea of what our targets were. We had some really early wins with Biltmore. That was pretty immediate. And what we were really clear on was, we wanted to come up with a plan that had multiple ways of success, like multiple ways to kind of get done. Not say, I got to sell this, this or this, or I'll not succeed.
So we have a kind of an internal list, it's not broadly shared internally, of things that are really actionable. And, you know, we don't have to rush that portion of it. I would say, like, the thing we have to really focus on is which, you know, if we're gonna reduce debt, which are the givebacks that we're gonna do? And we're really clear on those and kind of mentioned to you, there's two more coming. Those will be big debt, you know, relief initiatives for us.
On the dispose, you know, cap rate is really important, you know, for it to make sense. And I'd say there's sort of two things that have changed since we put the initial plan out a few months ago. The first is, we're probably gonna exceed the refinancing rate of 6.6% that we have embedded into our forecast.
Not exceed, improved.
Improved. Like, in other words, lower embedded into our forecast.
Like, in other words, lower rate. We're seeing that. You know, we're experiencing that in Queens right now on that refi. We think that's gonna actually help us on these out parcels. There are more than we initially kind of thought were opportunities. It's a more robust portfolio, and we'll kind of benefit with lower interest rates in terms of our ability to get better cap rate.
On the mall side, in terms of dispose, the one that you know we're not gonna do, but what's interesting about it is, it's enclosed. It's big. It's got a really high growth rate, NOI growth rate. It's kind of embedded into it. If you were to ask me, what are our most liquid assets today? If I had to go raise money, like, really quickly, it's out parcels and open-air centers. Can raise them really fast and pretty good cap rates. I would say right now, we're not considering selling open-air centers. We did Biltmore. That was the first one. And, between our parcels and one other property, you know, we think that'll be enough to sort of satisfy our dispo bucket.
I guess, to conclude on this third, it sounds like the cap rate wasn't what you were looking for?
The kind of the pricing didn't make sense.
Yeah. Okay.
Relative-
And then on top-
Especially for the growth profile of that asset.
You don't feel the pressure to do it because of it?
No. Didn't feel the pressure.
Okay. And then you did mention also at the beginning, you talked about, the debt reductions. Can we talk about that a little bit more?
Yeah, I mean, I've- we haven't contacted the lender yet, so I can't tell you which one-
Okay
...is, right? Obviously. But, we think that more than likely, you know, we'll approach the lender and have discussion with them, and, you know, we'll see if there's an ability to restructure the loan. But just extending by itself, the loan, even at below market rates, that's not gonna be enough. You know, that's, there'll have to be a significant modification, because part of it is we believe those properties doesn't really help us just to kind of kick the can for three years, 'cause those assets need more capital, much more requirement in order to drive value.
We'll be able to get more color on that.
Okay.
After we've kind of have those discussions.
Yeah. For the most part, I think in virtually every instance, you know, Country Club Plaza was certainly that case. Santa Monica Place is a delevering event as well. I'd say for the most part, they're delevering events, or the asset is in a position where it's just been out positioned within the marketplace.
Mm-hmm.
It may have no NAV remaining.
Mm.
It may have no NAV remaining, it may have negative cash flows. There's a variety of different things, but I'd say in most instances, it's a delevering event.
T hey're delevering, and then kind of, unfortunately for us, or just, they're FFO dilutive for us. You know, 'cause these are, these will have very low coupon, so high FFO contribution. But to me, like, that's kind of fake news a little bit, right? That's a headwind for us. So whether we do it today or do it in the future, we kind of have to move it out. And so one of the challenge, you know, someone asked me a question on the call, put guidance out.
Like, I wanna have the flexibility to execute this plan, got lots of different ways. If I lock into an FFO guidance out, I limit my ability to move. And so we kind of understand what we have to do, which is get down on the low sixes, get you around $1.80 per share of FFO, and we could do better than that, actually. You know, there's a case for that. So we kind of understand what we need to do, and we feel like we're making really good progress at this point.
Taking a step back on the path forward plan, I believe you had said the goal was over a four-year period. Is that-
Yeah, over four years, yeah.
Four years, or am I correct?
Yeah, over four years, yeah.
Four years. Has that changed? And by the way, am I correct on that, the four years?
Yes.
Okay.
It's like three and a half to four years.
But I would say, like, as we get into the end of this year, into the middle of next year, you know, based on the materials we put out, it'll be really clear whether or not we're getting to that.
Okay.
'Cause, like I said, the debt piece put out, it'll be really clear whether or not we're getting to that.
Okay.
Which is, 'cause like I said, the debt piece, the debt reduction is really easy. The dispositions are pretty straightforward. I just have to kinda go through the next series, the next tranche properties. To me, what kinda , I would say, I'm looking at very carefully is the NOI growth piece, because that's all out of our control, right?
That's based on, like, that's certainly less predictable, because that's based on continuing to lease at the rate we're leasing at, which, like I said, we're ahead of schedule right now, and there doesn't seem to be any kind a headwinds against that. So we expect to continue to be able to maintain that momentum. The other thing is, like, you know, the other big opportunity is like that temp to perm conversion. You know, we do have an opportunity to continue to convert temporary tenants to permanent tenants.
The part of that is, you know, we've got some anchor resolution that we're going through. We're making progress on those initiatives at some of our select centers. So that's another piece of the puzzle between some of the development, some of the regular leasing, some of the temp to perm. That all kinda brings that NOI growth rate, you know, to 3%-4%.
On the recommendation date point, streamline that process, does that impact leases that have already been signed with the investment data center to streamline that process? Does that impact leases that have already been signed with investment data center sometime?
Yeah, we're doing everything we can to bring those forward. What I've told the team is, like, once we sign the lease, you know, we're short on the clock. Shot clock. That's a date. That's a day that we don't get the money. So that's how I think about it. Then the minute we've shook hands to when they sign the lease, that's money that we should be getting, right? So how do we figure out how to get them in faster? What is the, you know, and some of it's in our control, some of it's tenants. Tenants, a lot of tenants, they have their annual pipeline.
If you don't meet certain timelines, they kick it to the next year. So, like, we have to make sure we're at the front of the , you know, the front of the bus in terms of, you know, our tenants' pipelines as they manage their pipeline. But the way I think about it is that the minute we've signed, agreed on terms, that's a day of revenue that we're missing. I think about it. So how do we tighten? You know, and we've had our legal team, leasing team, ops team kinda evaluate how we do certain things and how we monitor if we're behind or ahead. And so I think we'll see some improvement there.
Doug, oh, please.
[audio distortion] leasing. How's the cash rent looking, you know, [audio distortion]
How is what looking?
Cash rents versus, you know, space that-
Spread trends?
Oh, our spreads have been positive for the last, what, Scott? Three or four quarters.
Yeah, longer than that. On the same space basis, our spreads are in the strong single digits, call it 8% or 9%. Looking at, you know, ignoring space variability, where you may be combining spaces or slicing them up. Total rent versus total rent, 8%-9% growth. We've seen strong spreads, I'd say, for about the last two years, and it really is a function of soaking up some of the excess occupancy, or should I say, the excess vacancy following the pandemic.
You really have to get to that critical tipping point where you've taken supply off the table, where you can actually start to push rate. I think as we continue to manage supply off the table, where you can actually start to push rate, I think as we continue to manicure this portfolio and prune it down, we'll see continuing growth in occupancy. In fact, if you looked at our core portfolio, our go-forward portfolio, it's about 95% occupied, which is really full occupancy. You see the level of temporary tenant occupancy go down.
You see the level of temporary tenant occupancy go down if you start to slice out that lower, I shouldn't say lower, that Steady Eddy grouping that may not be part of our portfolio. So you really do see improvement in metrics, and I think what you'll expect to see from us in eighteen to twenty-four months is extremely solid metrics supported by strong spreads.
[audio distortion] What's the percentage of the spread?
About eight to nine in terms of spread.
... total temp exposure.
Oh, total temp. Just over 8% today, but in our go forward portfolio, it's about 150 basis points less. So again, as we refine our portfolio, we'll find our leasing progress significantly enhanced.
[audio distortion]
In the fullness of time, call it 2014 , 2015 , about 5-5.5% temporary.
[audio distortion]
[audio distortion]
It's the question about-
Occupancy cost to sales, please.
Yeah, yeah. Today, it hovers around 12%, just a touch less. That's a hard one to move, 'cause you can only access so much space. We have room for growth for sure, with high-quality sales productivity, there's certainly room for growth. It's just, it's traditionally in our space, it's a difficult one to move very significantly, because sales are moving for the entire tenant population each and every year, which you can only really touch.
Because sales are moving for the entire tenant population each and every year, which you can only really touch about eight to 10, 12% of your leases. So it's kinda disproportionate. But there's definitely room for movement, especially in the higher quality.
In terms of the initial buckets that you created, the categories for the various malls. Doug, are you seeing any in terms of the strength in leasing, are you seeing anything surprising from a demand standpoint based on those buckets, that you may change your mind or move an asset from a bucket to another bucket?
I think there's that potential in the lower portion of the Steady Eddys, depending on a few things. There's a few that could go down. I also think there is a few at the top of the Steady Eddys that could become Fortress in the not so distant future, assuming some certain things happen. But no, what we're really seeing right now, especially in our better centers, and Scott alluded to this earlier, is for really the first time since the pandemic, we got pricing power. And if you think about Tysons or Scottsdale, we got pricing power.
If you think about Tysons or Scottsdale or Kierland or Broadway, you know, for the first time in a long time, we have competition for spaces. Almost by definition, when you have competition, rate goes up, and that's what we're starting to see. Really, for the first time since the pandemic, competition, rate goes up, and that's what we're starting to see. Really, for the first time since the pandemic, I think we've got enough supply off the table to make that happen.
You know, I was thinking just given the lack of vacancy across retail, that maybe there's some, you know, stronger demand for the Steady Eddies or your bottom bucket than expected, but it sounds like it's still-
The bottom bucket is harder. I mean, generally, if it's bottom bucket, it means the trade area is either more competitive or trade area is more rural. You know, tenants are really focused. They wanna be in the best properties, best centers, and that's only gonna, as a landlord, we're only gonna benefit from that dynamic. You know, the secondary properties are just more challenged, less pricing power, more incentive to drive occupancy, more incentives required. So to me, those are harder centers to deal with.
So to me, those are harder centers to deal with, and I think that's why we made a decision on, you know, the bottom end of our portfolio to come up with a kinda a time frame and a game plan to run those properties and ultimately monetize them, you know, because there is a meaningful amount of NAV actually, you know, in that portfolio.
From a leasing standpoint, a big turnover on the leasing team, right?
Well, we're actually the one piece that we haven't addressed, which we will time from an asset management standpoint, leasing standpoint. We haven't segregated that group out-
Okay.
which we will fairly soon, in terms of segregating how those properties are run.
Every property has to stand on its own at this point, or?
Yeah, pretty much.
Yeah.
Yeah, absolutely. Yeah, there's no subsidization anymore.
How are you guys thinking about managing kind of capital expenditures across the business, and sort of where are you kind of most focused on, and sort of where are you kind of most focused on kind of putting dollars toward?
It's a good question. So it starts with kind of a five-year plan on each asset and trying to evaluate, you know, the positioning of. Are we gonna get the right dollars for reinvestment out of the five-year plan? Some of it is gonna be defensive. Like, we absolutely have to spend and do what we've got to do. Others are more opportunistic. So like, to me, like, Green Acres is opportunistic. It's. That's gonna be a phenomenal project, more opportunistic.
You know, we can be making progress on all the necessary approvals to get ShopRite in there, and the leasing demand's been really good, great for that property. Some of the capital is gonna be defensive in some of these centers that we put in. Absolutely required to kind of stay relevant because at the end of the day, some of these Eddies that are leaving are because we didn't put that capital in. And over time, others that do kind of take advantage and then kind of miss that opportunity. But it's all gonna kind of be based on that five-year plan.
But it's all gonna kind of be based on that five-year plan, kind of, that this kind of quarterly review that we're doing that, you know, wasn't really happening here before. So we kind of get the real centralized decision-making on kind of strategic investments and decision-making around these properties.
Just to confirm, any update on Express Rue and the impact this year?
We had a handful of Rue stores, Rue21. Those are now closed. Very small tenant. Their footprints were 2,000-3,000 sq ft.
Yeah.
Didn't pay a lot of rent. Express, we finalized our terms with them. We had 26 stores, 10 of which vacated about 85,000 sq ft. And, Doug, I think at this point we have deal flow on, from a permanent standpoint, either in documentation or in LOI on the-
We have two signed leases and the remaining spaces are all. We're trading paper on it. You know, if there's a silver lining with Express i t's that, if you think about it. Back in the day, Express was the darling of the ball, and they got the best real estate and the best centers. The space we're leasing is center court space. It's forty-yard line space. We're not leasing space up against the vacant department stores. It's center court space, it's 40-yard line space. We're not leasing space up against the vacant department store, so that's been extremely helpful.
We fundamentally de-risk that out of our portfolio then.
Great. I know we're out of time. We do have three very quick questions, rapid fire. If you could respond with rapid, quick answers, that would be helpful.
Okay. First, do you expect real estate transactions to increase once the Fed starts to cut, yes or no?
Yes.
If yes, when-
Did anybody say no?
Not yet.
When do you expect them to pick up, fourth quarter of this year, first half 2025, or second half 2025?
I think for what we do, H1 of next year, we'll start to see a more dramatic increase.
Okay. Second, how would you characterize demand for space today? Improving, steady, or weakening?
I would say improving.
Yes, definitely.
Okay. Finally, how would you characterize your AI spending plans over the next year? Higher, flat, or lower?
Flat.
Great. Thank you to the Macerich team. Thanks, everyone.
Thank you.