And at the end of the day, we chose to change directions and put a Dick’s House sport in that end location. Candidly, I think it’s better for the center. I think it’s better for what we’re trying to do right now. There still be maybe densification opportunities on another quadrant within that property. But right now, our balance sheet is not where I want it to be. And so we’re going to use the capital we have to make the best decisions on making our fortress and steady Eddie properties as strong as they can in terms of thriving. And if there’s opportunities to monetize pieces of our development, for sure, we’ll do that. But that being said, [indiscernible], that’s a much more complex opportunity, which got great entitlements from the town and we will pursue a more vertical build on that location because it dictates it.
Unidentified Analyst: And then just another one on the balance sheet for me. I mean do you plan to unencumbered any assets in the near term just to improve the unencumbered pool and potentially allow for more unsecured borrowing options down the road?
Jackson Hsieh: I would say like the easy button would be we’ve got some renewals on properties, some of our better properties that are candidly at much higher rates than make me happy. So that would be kind of a great source of repayment right out of the gate. As it relates to looking at longer term — what the liability structure looks like, I think we’ll continue to evaluate it, if it makes sense. But until we get down into low 6x leverage levels, I think we’re just going to stay the course right now.
Unidentified Analyst: Make sense. Thank you.
Jackson Hsieh: Thank you.
Operator: One moment for the next question. The next question comes from Linda Tsai with Jefferies. Your line is open.
Linda Tsai: Hi, thanks for taking my question. Jackson, congrats on the new role. While giving guidance is on hold in addition to monitoring leverage, what other indicators would you point investors to assess the success of the earlier strategies you mentioned to right size the portfolio?
Jackson Hsieh: So, I mean, Linda. Thanks for taking that question — asking that question. Success for us would look like $1.80 in that area per share of FFO three to four years from now with a leverage level in the low 6x. And obviously, we’ve made certain interest rate assumptions and there’s a lot of different timing things that can happen. But to me, that success would look like that for us. One other aspect that I didn’t mention in our prepared remarks, but we talked about that 100 basis points of NOI improvement that can help us on the leverage front also it helps us on the FFO front as well, right? But one piece that I alerted — really spent time with the team on is if you look within our portfolio, the large majority of our portfolio has recovered from an NOI standpoint to pre-2019 levels, i.e., pre-COVID levels.
There are six properties on the Eastern Seaboard, which are behind. And they’re behind to the tune of about 39 million in NOI, six properties. I’ve talked to the team about it, and I think there are opportunities to close the gap. But that will be an initiative that’s very important for us as part of that NOI improvement to help us de-lever and drive our earnings. And I think there’s plans din place for each of those six to get there to 2019 levels or better within next three years.
Linda Tsai: To reach that 39 million do you have to invest a lot of CapEx?
Jackson Hsieh: I would say it’s not a major CapEx. It’s really repositioning of tenants. I just think in the East Coast, we just had more severe impact with COVID and just those centers were already performing very well. So some of it is repositioning different merchandise mix and tenancy, some of it is, like, for instance, in freehold, Tinhouse sport [ph] is going into the — for Norton Taylor location. That wing has been hard to lease. So that’s going to really activate that end of the quarter. So things like that, that we think will be able to help us get those six assets back where the rest of the portfolio is.
Linda Tsai: And then just one quick one for Doug. Besides Express, how would you characterize the tenant credit environment overall?
Doug Healey: Look at the watch list and say it has substantively changed. As a frame of reference, I mean, Express has been on our list for quite some time. frankly dating to prior to the pandemic. They did not travel the same path as many retailers did during the pandemic and held out to this point. So as I think about our list expressed by far, by far and away, was our most material watch list tenants. And I don’t see any substantive changes based on our prior commentary about the watch list.
Jackson Hsieh: No, I agree. And we’re ultra-conservative when we look at our — when we prepare our lots, meaning we’d rather overwatch than an under watch. And I would say to date, Scott, correct me if I’m wrong. But to date, our watch list is probably 30% of what it was pre-COVID 2019, both in terms of square footage and number of tenants.
Linda Tsai: Thanks.
Jackson Hsieh: Thank you.
Operator: One moment for the next question. The next question comes from Alexander Goldfarb with Piper Sandler. Your line is open.
Alexander Goldfarb: Hey, good afternoon or I guess still good morning out there. And Jackson, welcome aboard, Macerich. So two questions for you. The first question is clearly, you’ve studied the past history of Mace, over time. I think you were involved in the GGP restructuring. This company has done two different recaps and sort of tried to execute what you’ve outlined twice before, but it hasn’t worked. And I’m just wondering, the $2 billion of equity when we ran the numbers really wasn’t that dilutive on an FFO, but would certainly put you guys in a really strong position, especially with the energy that you bring to the platform and some of your ideas. So help — if you could just talk me through how, what you’re outlining now, which sounds like a repeat of what the prior team tried twice before, why this will work this time versus just doing the $2 billion getting the balance sheet where you want it sort of today and being able to execute in what is arguably one of the best retail environments that we’ve ever experienced as evidenced by your strong leasing results in the first quarter?
Jackson Hsieh: Hi, Alex. Thanks for the question. I guess the way I would describe it — look, I can’t describe what happened here before. I can only tell you where I see it today and have the confidence of executing in my prior opportunity job were I was at. It really starts with our re-ranking of our properties, which we’ve done. And the way I would think about it is, I have a third bucket of opportunities whereby if I raise equity in order to kind of right size the balance sheet, I’m kind of hurting myself because those are not going to be assets in the long-term that probably a part of the portfolio. They’re absolutely violent right now over the next three to four years as the cash flow from those properties are supporting a lot of the other initiatives within the fortress and steady Eddie category of assets to try to just only issue equity, I feel like what you’d be doing is over equitizing assets that don’t make sense for us strategically long term.
They’re not going to be thriving retail centers or they’ve. And when we think about how we rank assets, here at the company, and this is obviously new. We obviously look at NOI and FFO per share, look at what drives traffic and sales, sales per square foot traffic, obviously, sales but market position is really critical. The competitors strength of the center, tenant demand in the center, anchor strength, the physical quality. What’s happening in the trade area, what are the dynamic — market dynamics within the city itself, shrink, crime, are we aligned with our JV partner. And then there’s a lot of, what I call, unique factors in our ranking system that would rank a property down. Too much debt is on a ground lease, what could make it up, it go up is development potential.
So what I would tell you in that long kind of answer, Alex, is, of the 44 properties, there is a subset where they just don’t rank well for us. And so to raise equity to right size the corporate entity, we wouldn’t be putting dollars there anyway. So I hope that kind of answers the question. And that’s why I feel like the solution we have at hand is it’s going to be less dilutive. We’re going to get to the same place, and we’re going to actually put the dollars where they’re going to impact us and our shareholders the most.
Alexander Goldfarb: Look, Jackson, I understand and you covered this company for over 20 years and if it’s an emotional, like — there are a lot of what you guys do, I love. And I think that you guys have been leaders in certain areas. Certainly in executing on Phoenix back with Westcore. Just the balance sheet, just though is one of those issues where whatever, it’s been tackled multiple ways, and that’s why I keep focusing on the equity, and I’m glad your numbers sort of confirm our $2 billion. Separate question is, on the dividend. That’s been a source where the company has overpaid in the past. Clearly, you’re going to be selling stuff impairments that gives rise to tax, shields and other things that are going on. I would assume that the dividend is something that will be TBD over time? Or are you reaffirming that the dividend level as it stands now will not be changed?
Jackson Hsieh: I would basically — I think the dividend level where we stand makes sense. I don’t think we need to lower it. Obviously, not going to raise it aggressively, while we’re going through this initiative. But if I give you kind of the bracket, we’re going to end at $1.80 plus FFO share, low leverage. You can kind of do the math. There’s still good our payout ratio is reasonable relative to our current payout, right?
Alexander Goldfarb: But as far as cheapest capital, is it free cash flow the best?
Jackson Hsieh: It definitely is. But for us, we don’t — we think that the plan we put in place in terms of sequencing is very methodical and we’ve got adequate cash flow from assets that we think will leave the company over the next three to four years to help support us.
Alexander Goldfarb: Okay. Thank you.
Jackson Hsieh: Sure. Thanks, Alex.
Operator: One moment for the next question. Our next question comes from Michael Mueller with JPMorgan. Your line is open.
Michael Mueller: Thank you. Yes, two quick ones I believe. First of all, did the 10 assets, I think you referenced 10 assets that could be sold. Did that include the 4% to 6% assets that you may be giving back? Or is it a pool of assets and then 4% to 6% on top of it?
Scott Kingsmore: No, Mike, I chattered it. If that includes the 4% to 6% givebacks. So it’s roughly about 10%.
Michael Mueller: Got it. Okay. And then I guess, at the end of the three to four year period, do you see the NOI mix being, I don’t know, notably different than it is today, geographically?
Scott Kingsmore: I would say the largely pretty similar. That’s very similar. I mean I think the way we’ve analyzed it is like the go-forward portfolio will have much higher sales per square foot much higher permanent occupancy than we had today. Better growth profile, yes. It’s really kind of focusing on what I call super thriving centers. That’s what we can end up with.
Michael Mueller: Got it. Okay. Thank you.
Jackson Hsieh: I think we have time for one more question, operator.
Operator: Okay. One moment for the next question. The next question comes from Craig Mailman with Citi. Your line is open.
Unidentified Analyst: It’s actually Nick Joseph [ph] here with Craig. Just one quick one on G&A as you execute on these initiatives. What does the current plan look like in terms of the scalability of the current load versus any kind of efficiencies that you can see going forward?
Jackson Hsieh: Hey, Nick. It’s Jackson. Yes, I think right now, our plan is — as I said, we’re really trying to vision the company to be offensive, so we’re going through all this. So we’re not going to get there by shrinking G&A. So I think if we’re going to kind of regrow the business. And so I think where the efficiencies are going to happen on these process improvements that we’re looking at right now. I think there’s a lot of ways to make certain work streams more efficient, which in my opinion, helps people have more bandwidth to do things to improve the business overall versus get stuck with a lot of different processes and take a lot of time. So right now, that’s really the focus. It’s not a shrink to grow kind of idea. We’re just trying to — what we believe we’re doing is going to give us a competitive cost of capital to do things with this platform.
