Year-to-Date New Transactions Set Five Year Record
September Sales for Comparable Tenants Increase 17% over September 2019
Strong Total Core Mall Leased Space at 91.7%
Collections Continue to Improve to 92% During the Quarter
PREIT (NYSE: PEI) today reported results for the three and nine months ended September 30, 2021. A description of each non-GAAP financial measure and the related reconciliation to the comparable GAAP financial measure is provided in the tables accompanying this release.
“As we head into what is forecast to be a record-setting holiday season, our portfolio is generating tremendous momentum with impressive same store NOI growth, robust tenant sales and a strong leasing pipeline as a result of our unrelenting focus to create ever-evolving properties that generate success for our tenants,” said Joseph F. Coradino, Chairman and CEO of PREIT. “As our industry continues along a steep recovery slope, we expect to continue to deliver solid results and create value for our stakeholders.”
- Same Store NOI, excluding lease termination revenue, increased 36.0% for the three months ended September 30, 2021 compared to the three months ended September 30, 2020.
- For the quarter, results were driven by an increase in real estate revenue of $7.8 million primarily due to favorable percentage rent and a decrease in recognized credit losses for challenged tenants as compared to the three months ended September 30, 2020, partially offset by reduced rents from bankruptcies.
- Collections continued to be strong with cash collections of 119% of billings for the third quarter of 2021. We collected 92% of billed third quarter 2021 rents and momentum continued in October with 93% of billed rents collected.
- Our accounts receivable balance is down to $36.1 million as of September 30, 2021 compared to $54.5 million as of December 31, 2020.
- As a result of improved collections, net cash generated from operating activities totaled $38.2 million for the nine months ended September 30, 2021 compared to cash used in operating activities of $8.8 million in the nine months ended September 30, 2020.
- Robust leasing activity is driving increased occupancy with Mall Total Occupancy increasing by 100 basis points, sequentially, to 88.8%. Mall Non-anchor Occupancy increased 230 basis points, sequentially, to 86.6%.
- Total Core Mall leased space, at 91.7%, exceeds occupied space by 210 basis points, and total non-anchor leased space, at 90.2%, exceeds occupied space by 190 basis points when including executed new leases slated for future occupancy, demonstrating the rapid pace of leasing activity.
- For the rolling 12 month period ended September 30, 2021, core mall sales for comparable tenants grew by 6.1% on average compared to the rolling 12 month period ended September 30, 2019. Sales grew at over 80% of properties, with comparable tenants, meaning tenants that reported sales in both periods, reporting sales growth of 17% in September 2021 when compared to September of 2019.
- Average renewal spreads for the nine months ended September 30, 2021 declined by 1.1%. Sequentially, average renewal spreads for tenants less than 10,000 square feet improved from -13.5% for the quarter ended June 30, 2021 to -2.3% for the quarter ended September 30, 2021.
Leasing and Redevelopment
- 637,000 square feet of leases are signed for future openings, which is expected to contribute annual gross rent of $10.0 million.
- Leasing momentum continues to build with transactions executed for 1.2 million square feet of occupancy thus far in 2021.
- Tilt Studios replaced JC Penney in 104,000 square feet at Magnolia Mall in Florence, SC. The family-focused destination opened in October 2021.
- Aldi opened its first store in the portfolio in 21,000 square feet at Dartmouth Mall in Dartmouth, MA in September 2021.
- A lease has been executed with Turn 7 to occupy the former Lord & Taylor space at Moorestown Mall. Turn 7 will open this Fall selling ever-changing overstocked merchandise from online channels at a discount, in a fast-paced, fun atmosphere. The store is expected to open in November.
- A transaction has been executed with Cooper University Health Care for an outpatient location in the former Sears space at Moorestown Mall in Moorestown, NJ. The Company also executed a rezoning agreement to allow for the addition of up to 1,065 multifamily units and a hotel at Moorestown Mall.
- Construction is underway on a new self-storage facility in previously unused below grade space at Mall at Prince George’s in Hyattsville, MD with an anticipated opening in Q1 2022.
- A lease has been executed with Tilted 10 and Tilt Studio, an action-packed bi-level 104,000 square foot indoor family entertainment center to replace the former JC Penney at Willow Grove Park, adding family entertainment to this locally-loved destination shopping experience.
- Phoenix Theatres is under construction to bring a first-class movie experience to Woodland Mall in 47,000 square feet in Q1 2022.
Primary Factors Affecting Financial Results for the Three Months Ended September 30, 2021 and 2020
- Net loss attributable to PREIT common shareholders was $44.6 million (which takes into consideration the accrual of preferred dividends that accumulated during the quarter but have not been paid), or $0.56 per basic and diluted share for the three months ended September 30, 2021, compared to net loss attributable to PREIT common shareholders of $35.7 million, or $0.46 per basic and diluted share for the three months ended September 30, 2020.
- Same Store NOI, including lease terminations, increased by $10.8 million, or 30.4%. The increase is primarily due to tenant store closings and rent abatements and increased credit losses that occurred in the prior year, partially offset by a reduction in expense recoveries resulting from tenant restructuring transactions.
- Non-Same Store NOI increased by $0.4 million, primarily due to higher credit losses in the prior year.
- FFO for the three months ended September 30, 2021 was $(0.07) per diluted share and OP Unit compared to $0.12 per diluted share and OP Unit for the three months ended September 30, 2020. Adjustments to FFO in the third quarter of 2021 was primarily related to $(0.01) per share from gain on hedge ineffectiveness.
All NOI and FFO amounts referenced as primary factors affecting financial results above include our share of unconsolidated properties’ revenues and expenses. Additional information regarding changes in operating results for the three and nine months ended September 30, 2021 and 2020 is included on page 15.
Liquidity and Financing Activities
As of September 30, 2021, the Company had $75.2 million available under its First Lien Revolving Credit Facility. The Company’s corporate cash balances, when combined with available credit, provides total liquidity of $96.3 million.
Multifamily Land Parcels: The Company has executed agreements of sale for land parcels for anticipated multi-family development in the amount of $99.1 million. The agreements are with multiple buyers across six properties for over 2,500 units as part of the Company’s previously announced multi-family land sale plan. Closing on the transactions is subject to customary due diligence provisions and securing entitlements.
Hotel Parcels: The Company has an executed agreement of sale to convey a land parcel for anticipated hotel development in the amount of $2.5 million for approximately 125 rooms. Closing on the transaction is subject to customary due diligence provisions and securing entitlements.
Other Parcels: In August 2021, the Company closed on the sale of the strip center adjacent to Valley View Mall for $3.5 million. The Company expects to close on the sale of a remaining parcel at the previously disposed Monroe Power Center for $1.0 million in November and an anchor box at Valley View Mall in early 2022 for $2.8 million.
The Company is not issuing detailed guidance at this time.
Conference Call Information
Management has scheduled a conference call for 11:00 a.m. Eastern Time on Thursday
November 4, 2021, to review the Company’s results and future outlook. To listen to the call, please dial 1-844-885-9139 (domestic toll free), or 1-647-689-4441 (international), and request to join the PREIT call, Conference ID 3651629, at least fifteen minutes before the scheduled start time as callers could experience delays. Investors can also access the call in a “listen only” mode via the internet at the Company’s website, preit.com. Please allow extra time prior to the call to visit the site and download the necessary software to listen to the Internet broadcast. Financial and statistical information expected to be discussed on the call will also be available on the Company’s website.
For interested individuals unable to join the conference call, the online archive of the webcast will also be available for one year following the call.