Pennsylvania Real Estate Investment Trust

PREIT reported third-quarter 2022 NAREIT FFO and FFO as adjusted of negative $1.13 per share; for the nine-month period, NAREIT FFO was $0.38 per share and FFO as adjusted was negative $0.30 per share. Same-store NOI excluding lease termination revenues increased 3.3% in the quarter and 3.5% year to date, while core mall sales were $598 per square foot, excluding Cumberland, versus $539 per square foot pre-pandemic. Core mall occupancy was 94.4% versus 89.6% a year earlier, core in-line occupancy was 91.4% versus 88.3% a year earlier, and total leased occupancy was 95.6%; renewal spreads were 8.7%. The company said it completed the sale of Cumberland Mall for $45 million, had over $110 million of asset sales completed, $130 million under contract, and was exploring an additional $125 million of capital. No formal 2024 guidance was given; management said they have not released guidance, but operating momentum remains strong and there is a pipeline of $7 million of annualized lease revenue signed but not yet open.

Joe Coradino framed the quarter as a meaningful improvement from the prior quarter, emphasizing portfolio quality, higher occupancy, stronger pricing power and a healthier tenant mix. He highlighted ongoing redevelopment at Moorestown, Springfield, Cherry Hill and Willow Grove, and said PREIT has transformed properties into mixed-use destinations with dining, entertainment, medical, grocery and other non-traditional retail uses. His tone was confident and defensive at the same time: upbeat about execution, but clear that the next year is about navigating a challenging financing environment and evaluating every strategic option available.

Mario Ventresca focused on operating metrics and balance-sheet progress. He said liquidity was $113 million, same-store NOI excluding lease terminations rose 3.3% in the quarter and 3.5% year to date, and leasing activity compared favorably with 2019, including 375,000 square feet signed in the quarter and a 300,000-square-foot pipeline representing about $7 million in annualized future rents. He also cited the main year-over-year drivers of the loss: G&A down $3.5 million, interest expense up $4.3 million from higher rates and higher loan balances, and a $1.8 million gain on sale from Moorestown partially offsetting other items.

Analysts and shareholders asked whether leasing remains strong, whether lease rates are holding up despite inflation, and what the outlook is for 2024. Management said leasing spreads were the highest in over four years and reiterated the $7 million of signed-but-not-yet-open revenue, but did not provide formal 2024 guidance. Questions also focused on dividend reinstatement and avoiding another restructuring; management said the credit facility currently prohibits dividends unless required to maintain REIT status and said the company will continue exploring refinancing, merger, sale, joint ventures and additional asset sales as the credit facility matures. On financing, management said the issue is broader than rates alone, citing tighter underwriting, valuation uncertainty and frozen credit markets.