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. Third-quarter same-store NOI excluding lease termination revenues increased 3.3%, and year-to-date same-store NOI increased 3.5%. 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% a year ago; core mall in-line occupancy was 91.4% versus 88.3% a year ago. Total leased occupancy was 95.6%, and renewal spreads were 8.7%. Liquidity was $113 million. The company said it had executed new and renewal leases for 375,000 square feet in the quarter and had 300,000 square feet signed for future occupancy, representing about $7 million in annualized future rents. The company also said it sold Cumberland Mall for $45 million and completed over $110 million of asset sales while paying down $148 million of debt. Management did not provide formal guidance, but said operating momentum remained strong and pointed to the $7 million of signed-but-not-open rent pipeline.

Joe Coradino framed the quarter as a meaningful step forward versus last quarter, highlighting balance-sheet repair, improved operating performance, and a more differentiated mall portfolio. He pointed to asset dispositions, debt reduction, extension of the credit facility maturity, and the satisfaction of the Fashion District Philadelphia margin requirement as evidence that PREIT has handled multiple challenges, and said the company will spend the coming year exploring all strategic options as the credit facility matures. His tone was confident and resolute, with repeated emphasis on the company’s ability to adapt and improve.

Mario Ventresca emphasized that business fundamentals remained strong even as management monitored a tougher macro backdrop. He cited $113 million of liquidity, 3.3% same-store NOI growth excluding lease terminations, 28% more new lease square footage than in Q3 2019, 75% more renewal square footage than Q3 2019, and 375,000 square feet signed in the quarter. He also noted improved occupancy, 8.7% renewal spreads, and the $7 million annualized rent pipeline, while explaining year-over-year FFO pressure came from higher interest expense, partly offset by lower G&A, stronger same-store NOI, and a gain on sale. He said the company submitted notice for its credit facility extension and is focused on selling assets opportunistically to reduce debt and interest expense.

Analysts asked whether leasing demand remained strong and whether inflation was affecting lease rates; management said inquiries and signed leases continue to build, with 300,000 square feet executed for future openings and lease spreads at their highest in over four years. On 2024, management declined to give formal guidance but said operating momentum is strong and pointed again to the $7 million lease revenue pipeline. Questions about dividends were answered by noting the credit facility prohibits dividends unless needed to maintain REIT status. On financing and asset sales, management said rising rates, tighter underwriting, and valuation uncertainty have frozen credit markets, but they remain optimistic conditions may improve; they also disclosed the $45 million sale of Cumberland Mall and said $130 million of assets are under contract.