PREIT Reports Third Quarter 2022 Results
Core Mall Total Occupancy Increased 480 Basis Points to 94.4%
Core Mall Sales Per Square Foot Were $592 in September, up 10.4% compared to 2019
Average Renewal Spreads were 8.7% for the Quarter Ended September 30
PREIT (NYSE: PEI) today reported results for the three and nine months ended September 30, 2022. 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.
“We continue to make meaningful quality improvements throughout the portfolio and capitalize on more opportunities to harvest value from the portfolio evidenced by compliance with our credit facility extension requirements and recent traction in raising capital through asset sales to pay down debt,” said Joseph F. Coradino, Chairman and CEO of PREIT. “The addition of new-to-portfolio tenants and experiences, significant occupancy gains driving revenue and NOI increases, and improving leasing spreads provide additional opportunities to raise capital, which remains our top priority as we aim to unlock value for all stakeholders.”
- Same Store NOI, excluding lease termination revenue, increased 3.3% and 3.5% for the three and nine months ended September 30, 2022 compared to the same periods ended September 30, 2021, respectively, driven by increased revenue from occupancy improvement.
- Robust leasing activity is driving increased occupancy with Core Mall Total Occupancy increasing by 480 basis points to 94.4% compared to the third quarter 2021 and improving 60 basis points compared to June 30,2022. Core Mall non-anchor Occupancy improved 310 basis points to 91.4% compared to the third quarter of 2021 and 90 basis points compared to June 30, 2022.
- Total Core Mall leased space, at 95.6%, exceeds occupied space by 120 basis points, and core mall non-anchor leased space, at 93.2%, is higher than occupied space by 180 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, 2022, core mall comparable sales grew to $592 per square foot, compared to $536 in 2019.
- When Cumberland Mall (sold following close of the quarter) is excluded, portfolio sales per square foot as of September 30, 2022 were $598.
- Average renewal spreads for the three and nine months ended September 30, 2022 were 8.7% and 4.2%, respectively.
- The Company made notable advances in its capital-raising efforts, including the sale of Cumberland Mall and several outparcels. As part of its debt reduction plan, the Company has applied asset sale proceeds and excess cash from operations to pay down debt by $148 million during the ten months ended October 31, 2022. The Company currently has approximately $130 million in purchase and sales agreements executed or in final stages of negotiation, and has several others in the pipeline for potential future sales.
Leasing and Redevelopment
- 300,000 square feet of leases are signed for future openings, which is expected to contribute annualized gross rent of $7.0 million.
- Construction has started on a new self-storage facility in previously unused below-grade space at Mall at Prince George’s in Hyattsville, MD.
- A lease has been executed with Tilted 10 and Tilt Studio, an action-packed bi-level 104,000 square foot indoor family entertainment center at Willow Grove Park, adding family entertainment to this locally-loved destination shopping experience, and is now expected to open in 2023.
- At Moorestown Mall, construction is underway for the new state-of-the-art Cooper University Healthcare facility and the 375-unit apartment development, following completion of the sale of land in the second quarter of 2022.
- Tenant work is underway for a new prototype, 32,000 square foot, LEGO® Discovery Center at Springfield Town Center with expected opening in third quarter 2023.
Primary Factors Affecting Financial Results for the Three Months Ended September 30, 2022 and 2021
- Net loss attributable to PREIT common shareholders was $77.2 million (which takes into consideration the accrual of preferred dividends that accumulated during the quarter but have not been paid), or $(14.52) per basic and diluted share for the three months ended September 30, 2022, compared to net loss attributable to PREIT common shareholders of $44.6 million, or $(8.44) per basic and diluted share for the three months ended September 30, 2021.
- Funds from Operations marginally decreased in the three months ended September 30, 2022 compared to the prior year period primarily due to lower NOI from Non-Same Store properties as a result of the sale of our interest in Gloucester Premium Outlets as well as higher interest expense partially offset by higher NOI from Same Store properties and lower general and administrative expenses.
- FFO for the three months ended September 30, 2022 was $(1.13) per diluted share and OP Unit compared to $(1.10) per diluted share and OP Unit for the three months ended September 30, 2021.
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, 2022 and 2021 is included on page 15.
Liquidity and Financing Activities
As of September 30, 2022, the Company had $103.9 million available under its First Lien Revolving Credit Facility. The Company’s corporate cash balances, when combined with available credit, provide total liquidity of $113.2 million.
During the quarter, the Company delivered to the Administrative Agent the Notices to Extend the Revolving Termination Date and the Term Loan Maturity Dates as defined in the Senior Credit Agreements. The Company has demonstrated compliance with the extension requirements, subject to a re-calculation of certain debt yield covenants and payment of certain extension fees as set forth in the Senior Credit Agreements.
Additionally, the Fashion District Philadelphia partnership funded the required paydown of the Fashion District Philadelphia mortgage.
During the quarter, the Company executed on the sale of six outparcels for total proceeds of $15.2 million. Subsequent to the close of the quarter, the Company executed on the sale of Cumberland Mall for $44.6 million in gross proceeds, enabling the repayment of the $39.0 million mortgage loan balance.
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 Tuesday November 8, 2022, to review the Company’s results and future outlook. To listen to the call, please dial 1(888) 330-2024 (domestic toll free), or 1(646) 960-0187 (international), and request to join the PREIT call, Conference ID 9326912, 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.