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. Core mall sales were $598 per square foot, compared with pre-pandemic sales of $539 per square foot. Core mall occupancy was 94.4% versus 89.6% at the end of the third quarter of 2021, and core mall in-line occupancy was 91.4% versus 88.3% a year ago. Liquidity was $113 million. Management said it executed over $110 million of asset sales, paid down $148 million of debt, and completed the sale of Cumberland Mall for $45 million. Looking ahead, PREIT did not provide formal 2024 guidance, but said it has a pipeline of $130 million of assets under contract, about $7 million of annualized future rents from 300,000 square feet of signed but not yet open leases, and expects to keep exploring strategic alternatives as the credit facility matures.

Joe Coradino framed the quarter as a meaningful improvement versus last quarter, pointing to asset sales, debt reduction, and the credit facility extension as signs the company is executing its turnaround plan. He emphasized that PREIT has reshaped the portfolio toward higher-quality, mixed-use assets with dining, entertainment, medical, grocery, and off-price uses, and highlighted redevelopment projects at Moorestown, Springfield, Cherry Hill, and Willow Grove. His tone was confident but pragmatic: he acknowledged a difficult environment of higher rates, inflation, and constrained financing, while saying the company intends to evaluate all strategic options over the coming year.

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, leasing volume exceeded 2019 levels, and renewal spreads improved to 8.7%, which he said was the best quarter since the fourth quarter of 2017. He also cited core mall occupancy of 94.4%, core in-line occupancy of 91.4%, and discussed the main quarter-over-quarter variance drivers: G&A down $3.5 million, interest expense up $4.3 million, same-store NOI up $1.5 million, non-same-store NOI down $1.2 million, lease termination revenue down $700,000, and a $1.8 million gain on sale. He said the company had met the credit facility extension thresholds and would continue selling assets opportunistically to reduce debt and interest expense.

Analysts and shareholders asked whether leasing remained strong, how lease rates were holding up against inflation, and when dividend payments might be reinstated. Management said 300,000 square feet of leases were executed for future openings, representing about $7 million of annual revenue, and that this quarter’s leasing spreads were the highest in over four years. On dividends, Joe Coradino said the credit facility currently prohibits payments unless required to maintain REIT status. Questions about refinancing and the risk of a court-supervised restructuring were answered with a reminder that the company is pursuing its as-of-right credit facility extension effective December 10 and will evaluate refinancing, merger, sale, joint ventures, and other initiatives as the facility matures.