PHILADELPHIA, Nov. 1, 2017 /PRNewswire/ -- PREIT (NYSE:
PEI) today reported results for the quarter and nine months ended
September 30, 2017. A
description of each non-GAAP financial measure and the related
reconciliation to the comparable GAAP financial measure is located
in the tables accompanying this release.
|
Quarter Ended
September 30,
|
|
Nine Months
Ended
September 30,
|
(per share
amounts)
|
2017
|
|
2016
|
|
2017
|
|
2016
|
Net income (loss) per
share - basic and diluted
|
$0.05
|
|
$(0.02)
|
|
$(0.84)
|
|
$0.01
|
FFO per diluted share
and OP unit
|
$0.42
|
|
$0.49
|
|
$1.15
|
|
$1.32
|
|
|
|
|
|
|
|
|
FFO, as
adjusted
|
$0.42
|
|
$0.49
|
|
$1.16
|
|
$1.34
|
FFO from assets sold
in 2016 and 2017
|
$0.02
|
|
$0.06
|
|
$0.07
|
|
$0.22
|
FFO, as adjusted for
assets sold
|
$0.40
|
|
$0.43
|
|
$1.09
|
|
$1.12
|
- Same Store NOI, excluding lease termination income increased by
3.2% for wholly owned properties and 2.5% for the entire portfolio,
including joint venture properties, compared to prior year.
-
- Same Store NOI for the quarter was impacted by $1.3 million as a result of bankruptcies
- Sales per square foot reached $475, a 3.3% increase over the prior
year.
- Non-anchor leased space for malls was 93.9%, 190 basis points
over quarter end physical occupancy.
- Average renewal spreads for tenants under 10,000 square feet at
wholly owned properties were 4.6% for the quarter and are 5.3%
year-to-date through September 30,
2017.
- Leases executed for future occupancy exceed 712,000 square feet
and over $11 million in annual gross
revenue.
- Bank Leverage as of September 30,
2017 was just under 48.0%, a decrease from 49.1% last
quarter.
- Opened 578,000 square feet since the beginning of Q3, including
five new tenants in four reconfigured anchor boxes, two
H&M stores and a Zara.
- Raised $289 million in capital
transactions including: sale of low-productivity Logan Valley
Mall, our interest in downtown Philadelphia office condominium, execution of
a Series D Preferred Share issuance and refinancing of the mortgage
loan on Lehigh Valley Mall.
- Signed a key lease with Tilt Studios to replace Macy's at
Valley Mall.
- Signed 43,000 square feet with two new-to-market tenants in the
former Macy's space at Moorestown Mall.
"We are pleased with our results this quarter which are a
testament to our strategy of strengthening our portfolio by
recycling capital into high quality properties to diversify our
tenant roster. Our results demonstrate that we are
narrowing the gap between ourselves and the other high quality mall
REITs including sales performance, Same Store NOI growth,
sequential occupancy gains and anchor replacements at a
sector-leading pace," said Joseph F.
Coradino, CEO of PREIT. "We believe we have set the
stage for recovery as the market overreaction begins to abate."
Primary Factors Affecting Financial Results for the
Quarters Ended September 30, 2017 and
September 30, 2016:
- Net income attributable to PREIT common shareholders was
$3.5 million, or $0.05 per basic and diluted share, compared to
net loss attributable to PREIT common shareholders of $1.4 million, or $0.02 per basic and diluted share for the quarter
ended September 30, 2016.
- Gain on sale of interest in the office condominium at 801
Market Street in Philadelphia, PA
was $6.7 million in the quarter ended
September 30, 2017.
- Impairment of assets of $1.8
million was recognized on two land parcels being offered for
sale and Logan Valley Mall in the quarter ended September 30, 2017 compared to impairment of
assets of $9.9 million recognized on
Beaver Valley Mall in the quarter ended September 30, 2016.
- Same Store NOI excluding lease termination income increased by
2.5%, or $1.5 million, to
$60.0 million for the quarter ended
September 30, 2017 compared to
$58.5 million for the quarter ended
September 30, 2016.
- Lease termination income at same store properties was
$0.3 million in the quarter ended
September 30, 2017 compared to
$3.8 million in the quarter ended
September 30, 2016.
- Non Same Store NOI decreased $3.6
million primarily due to properties sold in 2017 and
2016.
- FFO, as adjusted, for the quarter was $0.42 per diluted share and OP Unit, compared to
$0.49 per diluted share and OP Unit
in the prior year. Net dilution from assets sold in 2017 and 2016
was approximately $0.02 per share and
$0.06 per share for the quarters
ended September 30, 2017 and 2016,
respectively.
- Interest expense decreased by $2.9
million primarily due to a decrease in our average debt
balance and lower average interest rates. The average debt balance
was reduced due to the application of cash proceeds from property
sales and our 2017 Series C and Series D Preferred Share Issuances.
Dividends payable to preferred shareholders increased by
$3.6 million.
Primary Factors Affecting Financial Results for the Nine
Months Ended September 30, 2017 and
September 30, 2016:
- Net loss attributable to PREIT common shareholders was
$57.8 million, or $0.84 per basic and diluted share, compared to
net income available to PREIT common shareholders of $0.6 million, or $0.01 per basic and diluted share for the nine
months ended September 30, 2016.
- Impairment of assets of $55.7
million was recognized on Logan Valley Mall, Valley View
Mall, and two land parcels in the nine months ended September 30, 2017 compared to impairment of
assets of $24.6 million recognized on
Washington Crown Center, Beaver Valley Mall and an office building
located at Voorhees Town Center in the nine months ended
September 30, 2016.
- Net gains on sales of interests in real estate were
$6.3 million in the nine months ended
September 30, 2017 compared to
$23.0 million in the nine months
ended September 30, 2016.
- Same Store NOI excluding lease termination income was
$173.5 million for the nine months
ended September 30, 2017 compared to
$173.9 million for the nine months
ended September 30, 2016.
- Lease termination income at same store properties was
$2.6 million in the nine months ended
September 30, 2017 compared to
$4.0 million in the nine months ended
September 30, 2016.
- Non Same Store NOI decreased $12.4
million primarily due to properties sold in 2017 and
2016.
- FFO, as adjusted, for the nine months was $1.16 per diluted share and OP Unit, compared to
$1.34 per diluted share and OP Unit
in the prior year. Net dilution from assets sold in 2017 and 2016
was approximately $0.07 per share and
$0.22 per share for the nine months
ended September 30, 2017 and 2016,
respectively.
- Interest expense decreased by $9.5
million primarily due to a decrease in our average debt
balance and lower average interest rates. The average debt balance
was reduced due to the application of cash proceeds from property
sales and our 2017 Series C and Series D Preferred Share Issuances.
Dividends payable to preferred shareholders increased by
$8.9 million.
All amounts referenced as primary factors affecting financial
results above include PREIT's proportionate share of partnership
revenues and expenses.
Acquisitions and Dispositions
In August 2017, the Company sold Logan Valley Mall
in Altoona, PA for $33.2 million.
In September 2017, a partnership
in which we hold a 50% ownership share sold its condominium
interest in 801 Market Street in Philadelphia, Pennsylvania for $61.5 million, our share of which was
$30.8 million.
Financing Activity
In August 2017, the mortgage loan secured by
Pavilion at Market East in Philadelphia,
Pennsylvania was extended to November 2017. We own a
40% partnership interest in Pavilion at Market East, which owns
land held for development.
In October 2017, our Lehigh Valley joint venture which owns Lehigh
Valley Mall, entered into a new $200.0
million mortgage loan. The mortgage loan has a fixed
interest rate of 4.06% and has a term of 10 years. In connection
with this new mortgage loan financing, the unconsolidated entity
repaid the previous $124.6 million
mortgage loan with a rate of 5.88% using proceeds from the new
mortgage loan. LVA distributed to us proceeds of $35.3 million related to this transaction.
The transaction will result in annual interest savings of
$1.1 million on the previous loan
balance.
In September and October, we issued 5,000,000 6.875% Series D
Perpetual Preferred Shares in a public offering at $25.00 per share, generating net proceeds of
$120.5 million. A portion of
the proceeds were used to redeem all of our outstanding 8.25%
Series A Preferred Shares on October
12th. This transaction will result in preferred dividend
savings of $1.6 million on the
previous outstanding preferred share balance.
Retail Operations
The following tables set
forth information regarding sales per square foot and occupancy in
the Company's mall portfolio, including unconsolidated
properties:
A reconciliation of portfolio sales per square foot
(1) can be found below:
Comp store sales for
the year ended September 30, 2016
|
$460
|
Organic sales
growth
|
3
|
Impact of asset
sales
|
12
|
Comp store sales
for the year ended September 30, 2017
|
$475
|
|
|
(1)
Based on reported sales by all comparable non-anchor tenants that
lease individual spaces of less than 10,000 square feet and have
occupied the space for at least 24 months.
|
|
Leased as
of:
|
Occupancy as
of:
|
|
September 30,
2017
|
September 30,
2017
|
September 30,
2016
|
Malls excluding
held for sale:
|
|
|
|
Total
including anchors(1)
|
95.5%
|
94.0%
|
94.6%
|
Total
excluding anchors(1)
|
93.9%
|
92.0%
|
92.2%
|
Total
Portfolio:
|
|
|
|
Total
including anchors(1)
|
95.1%
|
93.8%
|
93.6%
|
Total
excluding anchors(1)
|
93.4%
|
91.8%
|
92.3%
|
(1)
Includes both consolidated and unconsolidated properties. We own a
25% to 50% interest in each of our unconsolidated properties and do
not control such properties. Our percentage ownership is not
necessarily indicative of the legal and economic implications of
our ownership.
|
2017 Outlook
The Company is revising its
August 8, 2017 FFO and FFO as
adjusted guidance to give effect to $0.05 dilution from asset sales completed in the
third quarter, $0.05 per share
related to the redemption of its Series A Preferred Shares in
October, 2017 and a $0.02 per share
prepayment premium related to the early refinancing of the mortgage
loan on Lehigh Valley Mall in October 2017. Additionally, the
Company is revising its estimate of GAAP earnings to give effect to
these factors, the net gains on sale of real estate and impairment
charges recorded in the third quarter of 2017, among other factors.
For the year ended December 31,
2017 FFO as adjusted is expected to be between $1.62 and $1.67, FFO is expected to be between
$1.53 and $1.58 per diluted share,
while net loss is expected to be between $(0.90) and $(0.85). A reconciliation
between estimated GAAP net loss and estimated FFO and FFO as
adjusted follows:
Estimates Per
Diluted Share
|
Lower
End
|
Upper
End
|
Net loss attributable
to PREIT common shareholders
|
$(0.90)
|
|
$(0.85)
|
|
Depreciation and
amortization (includes the Company's proportionate share of
unconsolidated properties), non-controlling interest and other
adjustments
|
1.79
|
|
1.79
|
|
Impairments of
assets
|
0.72
|
|
0.72
|
|
Gains on sales of
real estate, net
|
(0.08)
|
|
(0.08)
|
|
FFO
|
1.53
|
|
1.58
|
|
Redemption of Series
A Preferred Shares
|
0.05
|
|
0.05
|
|
Prepayment premium on
mortgage loan
|
0.02
|
|
0.02
|
|
Employee separation
expenses
|
0.02
|
|
0.02
|
|
FFO, as
adjusted
|
$1.62
|
|
$1.67
|
|
Our 2017 guidance is based on our current assumptions and
expectations about market conditions, our projections regarding
occupancy, retail sales and rental rates, and planned capital
spending. Our guidance is forward-looking, and is subject to risks,
uncertainties and changes in circumstances that might cause future
events, achievements or results to differ materially from those
expressed or implied by the forward-looking statements. See
"Forward Looking Statements" below.
Conference Call Information
Management has
scheduled a conference call for 11:00 a.m.
Eastern Time on Thursday, November 2,
2017, to review the Company's results and future
outlook. To listen to the call, please dial 1-877-201-0168
(domestic toll free), or 1-647-788-4901 (international), and
request to join the PREIT call, Conference ID 49107107, at least
five minutes before the scheduled start time. 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 best results when
listening to the webcast, the Company recommends using Flash
Player.
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.
About PREIT
PREIT (NYSE:PEI) is a publicly
traded real estate investment trust that owns and manages quality
properties in compelling markets. PREIT's robust portfolio of
carefully curated retail and lifestyle offerings mixed with
destination dining and entertainment experiences are located
primarily in the densely populated eastern U.S. with concentrations
in the mid-Atlantic's top MSAs. Since 2012, the company
has driven a transformation guided by an emphasis on portfolio
quality and balance sheet strength driven by disciplined capital
expenditures. Additional information is available at
www.preit.com or on Twitter or LinkedIn.
Rounding
Certain summarized information in the tables above may not total
due to rounding.
Definitions of Non-GAAP Measures
Funds From Operations
The National Association of Real Estate Investment Trusts
("NAREIT") defines Funds From Operations ("FFO"), which is a
non-GAAP measure commonly used by REITs, as net income (computed in
accordance with GAAP) excluding gains and losses on sales of
operating properties, plus real estate depreciation and
amortization, and after adjustments for unconsolidated partnerships
and joint ventures to reflect funds from operations on the same
basis. We compute FFO in accordance with standards established by
NAREIT, which may not be comparable to FFO reported by other REITs
that do not define the term in accordance with the current NAREIT
definition, or that interpret the current NAREIT definition
differently than we do. NAREIT's established guidance provides that
excluding impairment write downs of depreciable real estate is
consistent with the NAREIT definition.
FFO is a commonly used measure of operating performance and
profitability among REITs. We use FFO and FFO per diluted
share and unit of limited partnership interest in our operating
partnership ("OP Unit") in measuring our performance against our
peers and as one of the performance measures for determining
incentive compensation amounts earned under certain of our
performance-based executive compensation programs.
FFO does not include gains and losses on sales of operating real
estate assets or impairment write downs of depreciable real estate,
which are included in the determination of net income in accordance
with GAAP. Accordingly, FFO is not a comprehensive measure of our
operating cash flows. In addition, since FFO does not include
depreciation on real estate assets, FFO may not be a useful
performance measure when comparing our operating performance to
that of other non-real estate commercial enterprises. We compensate
for these limitations by using FFO in conjunction with other GAAP
financial performance measures, such as net income and net cash
provided by operating activities, and other non-GAAP financial
performance measures, such as NOI. FFO does not represent cash
generated from operating activities in accordance with GAAP and
should not be considered to be an alternative to net income
(determined in accordance with GAAP) as an indication of our
financial performance or to be an alternative to cash flow from
operating activities (determined in accordance with GAAP) as a
measure of our liquidity, nor is it indicative of funds available
for our cash needs, including our ability to make cash
distributions. We believe that net income is the most directly
comparable GAAP measurement to FFO.
We also present Funds From Operations, as adjusted, and Funds
From Operations per diluted share and OP Unit, as adjusted, which
are non-GAAP measures, for the three and nine months ended
September 30, 2017 and 2016,
respectively, to show the effect of such items as provision for
employee separation expense and loss on hedge ineffectiveness,
which affected our results of operations, but are not, in our
opinion, indicative of our operating performance. We also
present FFO on a further adjusted basis to isolate the impact on
FFO caused by property dispositions.
We believe that FFO is helpful to management and investors as a
measure of operating performance because it excludes various items
included in net income that do not relate to or are not indicative
of operating performance, such as gains on sales of operating real
estate and depreciation and amortization of real estate, among
others. We believe that Funds From Operations, as adjusted, is
helpful to management and investors as a measure of operating
performance because it adjusts FFO to exclude items that management
does not believe are indicative of our operating performance, such
as provision for employee separation expense and loss on hedge
ineffectiveness.
Net Operating Income ("NOI")
NOI (a non-GAAP measure) is derived from real estate revenue
(determined in accordance with GAAP, including lease termination
revenue), minus property operating expenses (determined in
accordance with GAAP), plus our share of revenue and operating
expenses of our unconsolidated partnership investments. NOI does
not represent cash generated from operating activities in
accordance with GAAP and should not be considered to be an
alternative to net income (determined in accordance with GAAP) as
an indication of our financial performance or to be an alternative
to cash flow from operating activities (determined in accordance
with GAAP) as a measure of our liquidity. It is not indicative of
funds available for our cash needs, including our ability to make
cash distributions. We believe that NOI is helpful to
management and investors as a measure of operating performance
because it is an indicator of the return on property investment,
and provides a method of comparing property performance over time.
We believe that net income is the most directly comparable GAAP
measurement to NOI.
NOI excludes other income, general and administrative expenses,
provision for employee separation expenses, interest expense,
depreciation and amortization, gains on sale of interest in non
operating real estate, gain on sale interest in real estate,
impairment of assets, project costs and other expenses.
Same Store NOI is calculated using retail properties owned for
the full periods presented and excludes properties acquired or
disposed of or under redevelopment during the periods
presented. Non Same Store NOI is calculated using the retail
properties excluded from the calculation of Same Store NOI.
Financial Information of our Unconsolidated Properties
The non-GAAP financial measures of FFO and NOI presented in this
press release incorporate financial information attributable to our
share of unconsolidated properties. This proportionate financial
information is also non-GAAP financial information, but we believe
that it is helpful information because it reflects the
proportionate contribution from our unconsolidated properties that
are owned through investments accounted for under GAAP using the
equity method of accounting. Under such method, earnings from
these unconsolidated partnerships are recorded in our statements of
operations prepared in accordance with GAAP under the caption
entitled "Equity in income of partnerships."
To derive the proportionate financial information from our
unconsolidated properties, we multiplied the percentage of our
economic interest in each partnership on a property-by-property
basis by each line item. Under the partnership agreements
relating to our current unconsolidated partnerships with third
parties, we own a 25% to 50% economic interest in such
partnerships, and there are generally no provisions in such
partnership agreements relating to special non-proportionate
allocations of income or loss, and there are no preferred or
priority returns of capital or other similar provisions.
While this method approximates our indirect economic interest in
our pro rate share of the revenue and expenses of our
unconsolidated partnerships, we do not have a direct legal claim to
the assets, liabilities, revenues or expenses of the unconsolidated
partnerships beyond our rights as an equity owner in the event of
any liquidation of such entity. Our percentage ownership is
not necessarily indicative of the legal and economic implications
of our ownership interest. Accordingly, NOI and FFO results
based on our share of the results of unconsolidated partnerships do
not represent cash generated from our investments in these
partnerships.
Forward Looking Statements
This press release, together with other statements and
information publicly disseminated by us, contain certain
"forward-looking statements" within the meaning of the federal
securities laws. Forward-looking statements relate to expectations,
beliefs, projections, future plans, strategies, anticipated events,
trends and other matters that are not historical facts. When used,
the words "anticipate," "believe," "estimate," "target," "goal,"
"expect," "intend," "may," "plan," "project," "result," "should,"
"will," and similar expressions, which do not relate solely to
historical matters, are intended to identify forward looking
statements. We caution investors that any forward looking
statements presented in this presentation and the documents that we
may incorporate by reference into this document are based on
management's beliefs and assumptions made by, and currently
available to management. These forward-looking statements reflect
our current views about future events, achievements or results and
are subject to risks, uncertainties and changes in circumstances
that might cause future events, achievements or results to differ
materially from those expressed or implied by the forward-looking
statements. In particular, our business might be materially and
adversely affected by uncertainties affecting real estate
businesses generally as well as the following, among other factors:
changes in the retail and real estate industries, including
consolidation and store closings, particularly among anchor
tenants; our ability to maintain and increase property occupancy,
sales and rental rates, in light of the relatively high number of
leases that have expired or are expiring in the next two years;
increases in operating costs that cannot be passed on to
tenants; current economic conditions and the state of employment
growth and consumer confidence and spending, and the corresponding
effects on tenant business performance, prospects, solvency and
leasing decisions and on our cash flows, and the value and
potential impairment of our properties; the effects of online
shopping and other uses of technology on our retail tenants;
risks related to our development and redevelopment
activities; acts of violence at malls, including our properties, or
at other similar spaces, and the potential effect on traffic and
sales; our ability to identify and execute on suitable acquisition
opportunities and to integrate acquired properties into our
portfolio; our partnerships and joint ventures with third parties
to acquire or develop properties; concentration of our properties
in the Mid-Atlantic region; changes in local market conditions,
such as the supply of or demand for retail space, or other
competitive factors; changes to our corporate management team and
any resulting modifications to our business strategies; our ability
to sell properties that we seek to dispose of or our ability to
obtain prices we seek; potential losses on impairment of certain
long-lived assets, such as real estate, or of intangible assets,
such as goodwill, including such losses that we might be required
to record in connection with any dispositions of assets; our
substantial debt and liquidation preference of our preferred shares
and our high leverage ratio; constraining leverage, unencumbered
debt yield, interest and tangible net worth covenants under our
principal credit agreements; our ability to refinance our existing
indebtedness when it matures, on favorable terms or at all; our
ability to raise capital, including through joint ventures or other
partnerships, through sales of properties or interests in
properties, through the issuance of equity or equity-related
securities if market conditions are favorable, or through other
actions; our short- and long-term liquidity position; potential
dilution from any capital raising transactions or other equity
issuances; and general economic, financial and political
conditions, including credit and capital market conditions, changes
in interest rates or unemployment.
Additional factors that might cause future events, achievements
or results to differ materially from those expressed or implied by
our forward-looking statements include those discussed herein and
in our Annual Report on Form 10-K for the year ended
December 31, 2016 in the section entitled "Item 1A. Risk
Factors." We do not intend to update or revise any forward-looking
statements to reflect new information, future events or
otherwise.
** Quarterly
supplemental financial and operating
**
** information will be
available on www.preit.com **
STATEMENTS OF
OPERATIONS (Unaudited)
|
|
Quarter
Ended
|
|
Nine Months
Ended
|
(In
thousands)
|
|
September 30,
2017
|
|
September 30,
2016
|
|
September 30,
2017
|
|
September 30,
2016
|
|
|
|
|
|
|
|
|
|
REVENUE:
|
|
|
|
|
|
|
|
|
Real
estate revenue:
|
|
|
|
|
|
|
|
|
Base rent
|
|
$
|
56,874
|
|
|
$
|
60,188
|
|
|
$
|
171,078
|
|
|
$
|
188,424
|
|
Expense
reimbursements
|
|
26,900
|
|
|
29,059
|
|
|
81,981
|
|
|
89,063
|
|
Percentage
rent
|
|
593
|
|
|
825
|
|
|
1,223
|
|
|
1,661
|
|
Lease termination
revenue
|
|
7
|
|
|
3,012
|
|
|
2,279
|
|
|
3,263
|
|
Other real estate
revenue
|
|
2,345
|
|
|
3,176
|
|
|
6,992
|
|
|
8,044
|
|
Total real estate
revenue
|
|
86,719
|
|
|
96,260
|
|
|
263,553
|
|
|
290,455
|
|
Other
income
|
|
2,492
|
|
|
2,600
|
|
|
4,172
|
|
|
4,630
|
|
Total
revenue
|
|
89,211
|
|
|
98,860
|
|
|
267,725
|
|
|
295,085
|
|
EXPENSES:
|
|
|
|
|
|
|
|
|
Operating
expenses
|
|
|
|
|
|
|
|
|
Property operating
expenses:
|
|
|
|
|
|
|
|
|
CAM and real estate
taxes
|
|
(25,772)
|
|
|
(29,373)
|
|
|
(83,985)
|
|
|
(94,058)
|
|
Utilities
|
|
(4,444)
|
|
|
(4,753)
|
|
|
(12,407)
|
|
|
(13,216)
|
|
Other property
operating expenses
|
|
(3,087)
|
|
|
(3,123)
|
|
|
(9,117)
|
|
|
(10,618)
|
|
Total property
operating expenses
|
|
(33,303)
|
|
|
(37,249)
|
|
|
(105,509)
|
|
|
(117,892)
|
|
Depreciation and
amortization
|
|
(29,966)
|
|
|
(26,820)
|
|
|
(94,652)
|
|
|
(92,217)
|
|
General and
administrative expenses
|
|
(8,288)
|
|
|
(8,244)
|
|
|
(26,561)
|
|
|
(25,713)
|
|
Provision for
employee separation expense
|
|
—
|
|
|
(162)
|
|
|
(1,053)
|
|
|
(1,355)
|
|
Project costs and
other expenses
|
|
(150)
|
|
|
(1,080)
|
|
|
(547)
|
|
|
(1,374)
|
|
Total operating
expenses
|
|
(71,707)
|
|
|
(73,555)
|
|
|
(228,322)
|
|
|
(238,551)
|
|
Interest expense,
net
|
|
(14,342)
|
|
|
(17,198)
|
|
|
(44,098)
|
|
|
(53,611)
|
|
Impairment of
assets
|
|
(1,825)
|
|
|
(9,865)
|
|
|
(55,742)
|
|
|
(24,589)
|
|
Total
expenses
|
|
(87,874)
|
|
|
(100,618)
|
|
|
(328,162)
|
|
|
(316,751)
|
|
Income (loss) before
equity in income of
partnerships, gain on sale of real estate by equity
method investee, gains on sales of interests in non
operating real estate and (losses) gains on sales of
real estate
|
|
1,337
|
|
|
(1,758)
|
|
|
(60,437)
|
|
|
(21,666)
|
|
Equity in income of
partnerships
|
|
4,254
|
|
|
4,643
|
|
|
12,144
|
|
|
12,718
|
|
Gain on sale of real
estate by equity method
investee
|
|
6,718
|
|
|
—
|
|
|
6,718
|
|
|
—
|
|
(Losses) gains on
sales of interests in real estate,
net
|
|
(9)
|
|
|
31
|
|
|
(374)
|
|
|
22,953
|
|
Gains on sales of
interests in non operating real
estate
|
|
—
|
|
|
—
|
|
|
486
|
|
|
9
|
|
Net income
(loss)
|
|
12,300
|
|
|
2,916
|
|
|
(41,463)
|
|
|
14,014
|
|
Less: net (income
available) loss attributable
to noncontrolling interest
|
|
(1,305)
|
|
|
(312)
|
|
|
4,416
|
|
|
(1,502)
|
|
Net income available
(loss attributable) to PREIT
|
|
10,995
|
|
|
2,604
|
|
|
(37,047)
|
|
|
12,512
|
|
Less: preferred share
dividends
|
|
(7,525)
|
|
|
(3,962)
|
|
|
(20,797)
|
|
|
(11,886)
|
|
Net income available
(loss attributable) to PREIT
|
|
$
|
3,470
|
|
|
$
|
(1,358)
|
|
|
$
|
(57,844)
|
|
|
$
|
626
|
|
EARNINGS PER
SHARE (Unaudited)
|
Quarter
Ended
|
|
Nine Months
Ended
|
(in thousands of
dollars, except per share amounts)
|
September 30,
2017
|
|
September 30,
2016
|
|
September 30,
2017
|
|
September 30,
2016
|
Net income
(loss)
|
$
|
12,300
|
|
|
$
|
2,916
|
|
|
$
|
(41,463)
|
|
|
$
|
14,014
|
|
Noncontrolling
interest
|
(1,305)
|
|
|
(312)
|
|
|
4,416
|
|
|
(1,502)
|
|
Dividends on
preferred shares
|
(7,525)
|
|
|
(3,962)
|
|
|
(20,797)
|
|
|
(11,886)
|
|
Dividends on unvested
restricted shares
|
(87)
|
|
|
(81)
|
|
|
(272)
|
|
|
(241)
|
|
Net income (loss)
loss used to calculate loss per share—
basic and diluted
|
$
|
3,383
|
|
|
$
|
(1,439)
|
|
|
$
|
(58,116)
|
|
|
$
|
385
|
|
|
|
|
|
|
|
|
|
Basic and diluted
income (loss) per share:
|
$
|
0.05
|
|
|
$
|
(0.02)
|
|
|
$
|
(0.84)
|
|
|
$
|
0.01
|
|
|
|
|
|
|
|
|
|
(in thousands of
shares)
|
|
|
|
|
|
|
|
Weighted average
shares outstanding—basic
|
69,424
|
|
|
69,129
|
|
|
69,319
|
|
|
69,065
|
|
Effect of common
share equivalents (1)
|
—
|
|
|
—
|
|
|
—
|
|
|
386
|
|
Weighted average
shares outstanding—diluted
|
69,424
|
|
|
69,129
|
|
|
69,319
|
|
|
69,451
|
|
|
(1)There were no common share
equivalents for the three months ended September 30, 2017. The
company had net losses for the quarter ended September 30, 2016 and
nine months ended September 30, 2017, therefore, the effects
of common share equivalents are excluded from the calculation of
diluted loss per share for these periods because they would be
antidilutive.
|
OTHER
COMPREHENSIVE INCOME (LOSS) (Unaudited)
|
|
Quarter
Ended
|
|
Nine Months
Ended
|
|
|
September 30,
2017
|
|
September 30,
2016
|
|
September 30,
2017
|
|
September 30,
2016
|
(In
thousands)
|
|
|
|
|
|
|
|
|
Comprehensive income
(loss):
|
|
|
|
|
|
|
|
|
Net income
(loss)
|
|
$
|
12,300
|
|
|
$
|
2,916
|
|
|
$
|
(41,463)
|
|
|
$
|
14,014
|
|
Unrealized gain
(loss) on derivatives
|
|
266
|
|
|
3,823
|
|
|
1,544
|
|
|
(4,755)
|
|
Amortization of
losses on settled swaps, net of gains
|
|
259
|
|
|
123
|
|
|
597
|
|
|
375
|
|
Total comprehensive
income (loss)
|
|
12,825
|
|
|
6,862
|
|
|
(39,322)
|
|
|
9,634
|
|
Less: comprehensive
(income) loss attributable to
noncontrolling interest
|
|
(1,361)
|
|
|
(729)
|
|
|
4,187
|
|
|
(1,029)
|
|
Comprehensive income
(loss) PREIT
|
|
$
|
11,464
|
|
|
$
|
6,133
|
|
|
$
|
(35,135)
|
|
|
$
|
8,605
|
|
The following table presents a reconciliation of net income
(loss) determined in accordance with GAAP to FFO attributable to
common shareholders and OP Unit holders, FFO attributable to common
shareholders and OP Unit holders per diluted share and OP Unit,
FFO, as adjusted, attributable to common shareholders and OP Unit
holders , FFO, as adjusted, attributable to common shareholders and
OP Unit holders per diluted share and OP Unit, and FFO, as adjusted
for assets sold and FFO, as adjusted for assets sold per diluted
share and OP Unit holders for the quarters and nine months ended
September 30, 2017 and 2016:
|
Quarter Ended
September 30,
|
|
Nine Months
Ended
September 30,
|
(in thousands, except
per share amounts)
|
2017
|
|
2016
|
|
2017
|
|
2016
|
Net income
(loss)
|
$
|
12,300
|
|
|
$
|
2,916
|
|
|
$
|
(41,463)
|
|
|
$
|
14,014
|
|
Depreciation and amortization on real estate
|
|
|
|
|
|
|
|
Consolidated properties
|
29,589
|
|
|
26,448
|
|
|
93,529
|
|
|
91,109
|
|
PREIT's share of equity method investments
|
2,902
|
|
|
2,571
|
|
|
8,493
|
|
|
7,591
|
|
Gain on sale of real estate by equity method investee
|
(6,718)
|
|
|
—
|
|
|
(6,718)
|
|
|
—
|
|
Losses (gains) on sales of interests in real estate, net
|
9
|
|
|
(31)
|
|
|
374
|
|
|
(22,953)
|
|
Impairment of assets
|
1,825
|
|
|
9,865
|
|
|
55,742
|
|
|
24,589
|
|
Dividends on preferred shares
|
(7,525)
|
|
|
(3,962)
|
|
|
(20,797)
|
|
|
(11,886)
|
|
Funds from operations
attributable to common shareholders
and OP Unit holders
|
$
|
32,382
|
|
|
$
|
37,807
|
|
|
$
|
89,160
|
|
|
$
|
102,464
|
|
Provision for
employee separation expense
|
—
|
|
|
162
|
|
|
1,053
|
|
|
1,355
|
|
Loss on hedge
ineffectiveness
|
—
|
|
|
—
|
|
|
—
|
|
|
143
|
|
Funds from
operations, as adjusted, attributable to common
shareholders and OP Unit holders
|
$
|
32,382
|
|
|
$
|
37,969
|
|
|
$
|
90,213
|
|
|
$
|
103,962
|
|
Less: Funds from
operations from assets sold in 2017 and 2016
|
(1,382)
|
|
|
(4,394)
|
|
|
(5,779)
|
|
|
(16,969)
|
|
Funds from
operations, as adjusted for assets sold
|
$
|
31,000
|
|
|
$
|
33,575
|
|
|
$
|
84,434
|
|
|
$
|
86,993
|
|
|
|
|
|
|
|
|
|
Funds from operations
attributable to common shareholders
and OP Unit holders per diluted share and OP Unit
|
$
|
0.42
|
|
|
$
|
0.49
|
|
|
$
|
1.15
|
|
|
$
|
1.32
|
|
Funds from
operations, as adjusted, attributable to common
shareholders and OP Unit holders per diluted share and OP
Unit
|
$
|
0.42
|
|
|
$
|
0.49
|
|
|
$
|
1.16
|
|
|
$
|
1.34
|
|
Funds from
operations, as adjusted for assets sold per diluted
share and OP Unit
|
$
|
0.40
|
|
|
$
|
0.43
|
|
|
$
|
1.09
|
|
|
$
|
1.12
|
|
|
|
|
|
|
|
|
|
Weighted average
number of shares outstanding
|
69,424
|
|
|
69,129
|
|
|
69,319
|
|
|
69,065
|
|
Weighted average
effect of full conversion of OP Units
|
8,291
|
|
|
8,319
|
|
|
8,303
|
|
|
8,328
|
|
Effect of common
share equivalents
|
—
|
|
|
361
|
|
|
51
|
|
|
386
|
|
Total weighted
average shares outstanding, including OP Units
|
77,715
|
|
|
77,809
|
|
|
77,673
|
|
|
77,779
|
|
NOI for the quarters ended September 30, 2017 and 2016:
|
|
Same
Store
|
|
Non-Same
Store
|
|
Total
|
(In
thousands)
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
NOI from Consolidated
properties
|
|
$
|
52,676
|
|
|
$
|
53,982
|
|
|
$
|
740
|
|
|
$
|
5,029
|
|
|
$
|
53,416
|
|
|
$
|
59,011
|
|
NOI from equity
method investments at
ownership share
|
|
7,604
|
|
|
8,347
|
|
|
2,098
|
|
|
1,438
|
|
|
9,702
|
|
|
9,785
|
|
Total NOI
|
|
|
60,280
|
|
|
|
62,329
|
|
|
|
2,838
|
|
|
|
6,467
|
|
|
|
63,118
|
|
|
|
68,796
|
|
Less: lease
termination revenue
|
|
282
|
|
|
3,805
|
|
|
—
|
|
|
55
|
|
|
282
|
|
|
3,860
|
|
Total NOI - excluding
lease termination
revenue
|
|
$
|
59,998
|
|
|
$
|
58,524
|
|
|
$
|
2,838
|
|
|
$
|
6,412
|
|
|
$
|
62,836
|
|
|
$
|
64,936
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NOI for the nine months ended September
30, 2017 and 2016:
|
|
Same
Store
|
|
Non Same
Store
|
|
Total
|
(In
thousands)
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
NOI from consolidated
properties
|
|
$
|
153,740
|
|
|
$
|
154,391
|
|
|
$
|
4,304
|
|
|
$
|
18,172
|
|
|
$
|
158,044
|
|
|
$
|
172,563
|
|
NOI attributable to
equity method
investments, at ownership share
|
|
22,339
|
|
|
23,533
|
|
|
5,961
|
|
|
4,505
|
|
|
28,300
|
|
|
28,038
|
|
Total NOI
|
|
|
176,079
|
|
|
|
177,924
|
|
|
|
10,265
|
|
|
|
22,677
|
|
|
|
186,344
|
|
|
|
200,601
|
|
Less: lease
termination revenue
|
|
2,629
|
|
|
4,048
|
|
|
71
|
|
|
110
|
|
|
2,700
|
|
|
4,158
|
|
Total NOI - excluding
lease termination
revenue
|
|
$
|
173,450
|
|
|
$
|
173,876
|
|
|
$
|
10,194
|
|
|
$
|
22,567
|
|
|
$
|
183,644
|
|
|
$
|
196,443
|
|
The table below reconciles net income (loss) to NOI of our
consolidated properties for the quarters and nine months ended
September 30, 2017 and 2016.
|
Quarter Ended
September 30,
|
|
Nine Months
Ended
September 30,
|
(in
thousands)
|
2017
|
|
2016
|
|
2017
|
|
2016
|
Net income
(loss)
|
$
|
12,300
|
|
|
$
|
2,916
|
|
|
$
|
(41,463)
|
|
|
$
|
14,014
|
|
Other
income
|
(2,492)
|
|
|
(2,600)
|
|
|
(4,172)
|
|
|
(4,630)
|
|
Depreciation and
amortization
|
29,966
|
|
|
26,820
|
|
|
94,652
|
|
|
92,217
|
|
General and
administrative expenses
|
8,288
|
|
|
8,244
|
|
|
26,561
|
|
|
25,713
|
|
Employee separation
expenses
|
—
|
|
|
162
|
|
|
1,053
|
|
|
1,355
|
|
Project costs and
other expenses
|
150
|
|
|
1,080
|
|
|
547
|
|
|
1,374
|
|
Interest expense,
net
|
14,342
|
|
|
17,198
|
|
|
44,098
|
|
|
53,611
|
|
Impairment of
assets
|
1,825
|
|
|
9,865
|
|
|
55,742
|
|
|
24,589
|
|
Equity in income of
partnerships
|
(4,254)
|
|
|
(4,643)
|
|
|
(12,144)
|
|
|
(12,718)
|
|
Gain on sale of real
estate by equity method investee
|
(6,718)
|
|
|
—
|
|
|
(6,718)
|
|
|
—
|
|
Losses (gains) on
sales of interests in real estate, net
|
9
|
|
|
(31)
|
|
|
374
|
|
|
(22,953)
|
|
Gains on sales of non
operating real estate
|
—
|
|
|
—
|
|
|
(486)
|
|
|
(9)
|
|
NOI - consolidated
properties
|
53,416
|
|
|
59,011
|
|
|
|
158,044
|
|
|
|
172,563
|
|
Less: Non Same Store
NOI of consolidated properties
|
740
|
|
|
5,029
|
|
|
4,304
|
|
|
18,172
|
|
Same Store
NOI
|
52,676
|
|
|
53,982
|
|
|
153,740
|
|
|
154,391
|
|
Less: same store
lease termination revenue
|
7
|
|
|
2,957
|
|
|
2,208
|
|
|
3,153
|
|
Same Store NOI less
lease termination revenue
|
$
|
52,669
|
|
|
$
|
51,025
|
|
|
$
|
151,532
|
|
|
$
|
151,238
|
|
The table below reconciles equity in income of partnerships to
NOI of equity method investments at ownership share for the
quarters and nine months ended September 30, 2017 and
2016:
|
Quarter Ended
September 30,
|
|
Nine Months
Ended
September 30,
|
(in
thousands)
|
2017
|
|
2016
|
|
2017
|
|
2016
|
Equity in income of
partnerships
|
$
|
4,254
|
|
|
$
|
4,643
|
|
|
$
|
12,144
|
|
|
$
|
12,718
|
|
Other
income
|
(20)
|
|
|
—
|
|
|
(20)
|
|
|
—
|
|
Depreciation and
amortization
|
2,902
|
|
|
2,571
|
|
|
8,493
|
|
|
7,591
|
|
Interest and other
expenses
|
2,566
|
|
|
2,571
|
|
|
7,683
|
|
|
7,729
|
|
Net operating income
from equity method investments at
ownership share
|
9,702
|
|
|
9,785
|
|
|
|
28,300
|
|
|
|
28,038
|
|
Less: Non Same Store
NOI
|
2,098
|
|
|
1,438
|
|
|
5,961
|
|
|
4,505
|
|
Same Store NOI of
equity method investments
|
7,604
|
|
|
8,347
|
|
|
22,339
|
|
|
23,533
|
|
Less: lease
termination revenue
|
275
|
|
|
848
|
|
|
421
|
|
|
895
|
|
Same Store NOI from
equity method investments less lease
termination revenue at ownership share
|
$
|
7,329
|
|
|
$
|
7,499
|
|
|
$
|
21,918
|
|
|
$
|
22,638
|
|
CONSOLIDATED
BALANCE SHEETS
|
|
September 30,
2017
|
|
December 31,
2016
|
|
|
(Unaudited)
|
|
|
(In
thousands)
|
|
|
|
|
ASSETS:
|
|
|
|
|
INVESTMENTS IN REAL
ESTATE, at cost:
|
|
|
|
|
Operating
properties
|
|
$
|
3,084,759
|
|
|
$
|
3,196,529
|
|
Construction in
progress
|
|
129,614
|
|
|
97,575
|
|
Land held for
development
|
|
5,881
|
|
|
5,910
|
|
Total investments in
real estate
|
|
3,220,254
|
|
|
3,300,014
|
|
Accumulated
depreciation
|
|
(1,082,840)
|
|
|
(1,060,845)
|
|
Net investments in
real estate
|
|
2,137,414
|
|
|
2,239,169
|
|
INVESTMENTS IN
PARTNERSHIPS, at equity:
|
|
201,000
|
|
|
168,608
|
|
OTHER
ASSETS:
|
|
|
|
|
Cash and cash
equivalents
|
|
76,942
|
|
|
9,803
|
|
Tenant and other
receivables (net of allowance for doubtful
accounts of $6,599 and $6,236 at September 30, 2017 and
December 31, 2016, respectively)
|
|
34,745
|
|
|
39,026
|
|
Intangible assets
(net of accumulated amortization of $12,643
and $11,064 at September 30, 2017 and December 31, 2016,
respectively)
|
|
18,167
|
|
|
19,746
|
|
Deferred costs and
other assets, net
|
|
107,304
|
|
|
93,800
|
|
Assets held for
sale
|
|
49,074
|
|
|
46,680
|
|
Total
assets
|
|
$
|
2,624,646
|
|
|
$
|
2,616,832
|
|
LIABILITIES:
|
|
|
|
|
Mortgage loans
payable, net
|
|
$
|
1,032,578
|
|
|
$
|
1,222,859
|
|
Term Loans,
net
|
|
547,567
|
|
|
397,043
|
|
Revolving
Facility
|
|
—
|
|
|
147,000
|
|
Tenants' deposits and
deferred rent
|
|
12,234
|
|
|
13,262
|
|
Distributions in
excess of partnership investments
|
|
59,871
|
|
|
61,833
|
|
Fair value of
derivative liabilities
|
|
445
|
|
|
1,520
|
|
Liabilities related
to assets held for sale
|
|
32,295
|
|
|
2,658
|
|
Accrued expenses and
other liabilities
|
|
58,542
|
|
|
68,251
|
|
Total
liabilities
|
|
1,743,532
|
|
|
1,914,426
|
|
EQUITY:
|
|
881,114
|
|
|
702,406
|
|
Total liabilities and
equity
|
|
$
|
2,624,646
|
|
|
$
|
2,616,832
|
|
CONTACT: AT THE COMPANY
Robert McCadden
EVP & CFO
(215) 875-0735
Heather Crowell
SVP, Corporate Communications and Investor Relations
(215) 454-1241
heather.crowell@preit.com
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SOURCE PREIT