PHILADELPHIA, Oct. 30, 2018 /PRNewswire/ -- PREIT (NYSE:
PEI) today reported results for the quarter and nine months ended
September 30, 2018. A
description of each non-GAAP financial measure used in this release
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)
|
2018
|
|
2017
|
2018
|
2017
|
Net (loss) income -
basic and diluted
|
$(0.11)
|
|
$0.06
|
$(0.75)
|
$(0.81)
|
FFO
|
$0.34
|
|
$0.42
|
$1.00
|
$1.15
|
FFO, as
adjusted
|
$0.35
|
|
$0.42
|
$1.02
|
$1.16
|
FFO from assets sold
in 2017 and 2018
|
--
|
|
$(0.02)
|
--
|
$(0.08)
|
FFO, as adjusted for
assets sold
|
$0.35
|
|
$0.40
|
$1.02
|
$1.08
|
Highlights from the quarter include:
- Same Store NOI for wholly-owned malls, excluding six malls
undergoing anchor repositioning, was up 4.3% for the quarter,
compared to the prior year quarter.
- Core mall NOI-weighted sales per square foot reached an all
time high of $509.
- Non-Anchor occupancy at core malls increased 30 basis points
sequentially.
- Leasing activity remained strong with new transaction volume
more than doubling over Q3 2017 and up over 15% on a year-to-date
basis when excluding anchor transactions.
- Average renewal spreads during the quarter were 11.5% for
wholly-owned, under 10,000 square foot transactions.
- Including larger-format and unconsolidated transactions,
average renewal spreads were 6.9% for the quarter compared to
negative 1.9% during Q3 2017.
- Leases were executed for remaining anchor boxes with Dick's
Sporting Goods, Burlington, Edge
Fitness and Michael's at Plymouth
Meeting and Studio Movie Grill at Willow Grove Park.
- Year-to-date, PREIT has raised $960
million in proceeds through financing activity and asset
sales, underscoring its ability to creatively access capital
markets to fund redevelopment activity.
"Having made the difficult and sometimes unpopular decisions in
recent years to shed lower-productivity assets and take back
department stores proactively, we are in a unique position to grow
our core metrics in a rapidly-evolving retail environment as the
temporary impact from bankruptcies and co-tenancy wanes and the
remaining department store replacements take occupancy," said
Joseph F. Coradino, CEO of
PREIT. "With the bulk of this work behind us, we are ahead of
the curve in delivering the new mall model to our customers.
This work, coupled with a confident consumer, has led to strong
sales and occupancy growth and incremental renewal spread
improvement during the quarter which we expect will pave the way
for continued growth into the future."
Primary Factors Affecting Financial Results for the
Quarters Ended September 30, 2018
compared to September 30,
2017:
- Portfolio Same Store NOI of negative 2.0% was impacted by a
$1.8 million one-time benefit
received in 2017 from a multi-year tax appeal.
-
- Excluding the impact of this item, Same Store NOI was up
1.0%.
- Portfolio Same Store NOI was also impacted by the following
items:
-
- Lost revenue from tenants who filed for bankruptcy protection:
($0.5 million),
- Incremental co-tenancy compared to prior year quarter:
($0.3 million),
- Lost revenue from terminated tenants: ($0.5 million), and
- Increased revenue from anchor replacements and other leasing
activity: $2.0 million
- Same Store NOI for our wholly-owned mall portfolio, excluding
six malls undergoing anchor repositioning, was up 4.3% for the
quarter and 5.2% year to date.
- Same Store NOI at these six anchor replacement properties was
down 4.1% when excluding the one-time benefit of the multi-year tax
appeal in 2017.
- Previous asset sales contributed to a $1.7 million, or $0.02 per share, FFO decline.
- Increased interest expense contributed to a $1.4 million, or $0.02 per share, FFO decline, partially offset by
reduced preferred share dividend costs of $0.7 million, or $0.01 per share, FFO improvement.
- Amortization of historic tax credits of $0.8 million was lower than the prior year
quarter by $1.0 million, or
$0.01 per share, in FFO. This is the
final year of amortization of the historic tax credits.
A reconciliation of Funds From Operations between current
and prior year periods is included in the financial tables
accompanying this release.
Leasing and Redevelopment
- Excluding Fashion District Philadelphia, 771,000 square feet of
leases are signed for future openings.
- At Moorestown Mall, HomeSense and Five Below opened in the
former Macy's box. Sierra Trading Post will open in early
2019.
- At Willow Grove Park, the Company signed a lease with Studio
Movie Grill for 51,000 square feet. The twelve screen Studio Movie
Grill will be joined by other dining and entertainment tenants to
replace a former JC Penney store.
- At Valley Mall, Tilt Studio opened in 48,000 square feet of a
former Macy's space and will be joined later this year by Onelife
Fitness, which will occupy the remaining 70,000 square feet. Belk
also opened in 123,000 square feet replacing a former Bon-Ton that
was proactively recaptured prior to its bankruptcy filing.
Project costs and returns have been included in our Supplemental
Disclosure for Plymouth Meeting Mall and Willow Grove Park.
These projects previously were included in our capital spending
projections.
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 rolling 12 months ended 9/30/17
|
$475
|
Organic sales
growth
|
15
|
Impact of non-core
malls
|
4
|
Core mall comp
store sales for the rolling 12 months ended 9/30/18
|
$494
|
|
(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.
|
2018 Outlook
The Company is narrowing its
previously issued guidance for FFO and FFO, as adjusted, and
revising its estimate of GAAP earnings to give effect to operating
results for the first nine months of 2018 and expectations for the
fourth quarter. For the year ended December
31, 2018, FFO, as adjusted is expected to be between
$1.53 and $1.58, FFO is expected to be between $1.52 and $1.57 per
diluted share, while net loss attributable to common shareholders
is expected to be between $0.66 and
$0.61 per diluted share.
A reconciliation between GAAP net loss and FFO is as
follows:
|
2018 Guidance
Range
|
(Estimates per
diluted share)
|
Low
|
High
|
Net loss attributable
to common shareholders
|
$
(0.66)
|
$
(0.61)
|
Depreciation and
amortization, non-controlling interest and other
|
1.80
|
1.80
|
Impairment of
assets
|
0.44
|
0.44
|
Gain on sale of
operating property
|
(0.06)
|
(0.06)
|
FFO per
share
|
$1.52
|
$1.57
|
Employee separation
expenses and other
|
0.01
|
0.01
|
FFO per share, as
adjusted
|
$
1.53
|
$
1.58
|
Our guidance assumes full year 2018 Same Store NOI growth,
including termination fees, towards the lower end of our previous
issued guidance range of 1.25-2.25%. Our FFO per share
guidance also includes approximately $0.10 share from the previously announced sale of
a land parcel at Exton Square Mall to a multifamily developer.
Our 2018 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.
Conference Call Information
Management has
scheduled a conference call for 11:00 a.m.
Eastern Time on Wednesday, October 31, 2018, to review the
Company's results and future outlook. To listen to the call,
please dial 1-844-885-9139 (domestic toll free), or 1-647-689-4441
(international), and request to join the PREIT call, Conference ID
4196618, 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, 2018 and 2017,
respectively, to show the effect of such items as provision for
employee separation expense and accelerated amortization of
financing costs, which had a significant effect on 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 accelerated
amortization of financing costs.
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 pro rata share of revenue and
property 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, impairment of assets,
gains/adjustment to gains on sale of interest in non operating real
estate, gain on sale of interest in real estate by equity method
investee, gains/losses on sales of interests in real estate, net,
project costs and other expenses.
Same Store NOI is calculated using retail properties owned for
the full periods presented and excludes properties acquired,
disposed, under redevelopment or designated as non-core 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 contains certain forward-looking statements
that can be identified by the use of words such as "anticipate,"
"believe," "estimate," "expect," "project," "intend," "may" or
similar expressions. Forward-looking statements relate to
expectations, beliefs, projections, future plans, strategies,
anticipated events, trends and other matters that are not
historical facts. 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 the following:
- changes in the retail and real estate industries, including
consolidation and store closings, particularly among anchor
tenants;
- current economic conditions and the corresponding effects on
tenant business performance, prospects, solvency and leasing
decisions;
- our inability to collect rent due to the bankruptcy or
insolvency of tenants or otherwise;
- our ability to maintain and increase property occupancy, sales
and rental rates;
- increases in operating costs that cannot be passed on to
tenants;
- the effects of online shopping and other uses of technology on
our retail tenants;
- risks related to our development and redevelopment activities,
including delays, cost overruns and our inability to reach
projected occupancy or rental rates;
- acts of violence at malls, including our properties, or at
other similar spaces, and the potential effect on traffic and
sales;
- our ability to sell properties that we seek to dispose of or
our ability to obtain prices we seek;
- our substantial debt and the liquidation preference of our
preferred shares and our high leverage ratio;
- our ability to refinance our existing indebtedness when it
matures, on favorable terms or at all;
- our ability to raise capital, including through sales of
properties or interests in properties and through the issuance of
equity or equity-related securities if market conditions are
favorable; and
- potential dilution from any capital raising transactions or
other equity issuances.
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, 2017 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
September 30,
|
|
Nine Months
Ended
September 30,
|
(In
thousands)
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
|
|
|
|
|
|
|
|
REVENUE:
|
|
|
|
|
|
|
|
|
Real
estate revenue:
|
|
|
|
|
|
|
|
|
Base rent
|
|
$
|
56,372
|
|
|
$
|
56,874
|
|
|
$
|
167,714
|
|
|
$
|
171,078
|
|
Expense
reimbursements
|
|
26,833
|
|
|
26,900
|
|
|
80,194
|
|
|
81,981
|
|
Percentage
rent
|
|
646
|
|
|
593
|
|
|
902
|
|
|
1,223
|
|
Lease termination
revenue
|
|
45
|
|
|
7
|
|
|
7,166
|
|
|
2,279
|
|
Other real estate
revenue
|
|
2,493
|
|
|
2,345
|
|
|
6,928
|
|
|
6,992
|
|
Total real estate
revenue
|
|
86,389
|
|
|
86,719
|
|
|
262,904
|
|
|
263,553
|
|
Other
income
|
|
1,714
|
|
|
2,492
|
|
|
3,454
|
|
|
4,172
|
|
Total
revenue
|
|
88,103
|
|
|
89,211
|
|
|
266,358
|
|
|
267,725
|
|
EXPENSES:
|
|
|
|
|
|
|
|
|
Operating
expenses
|
|
|
|
|
|
|
|
|
Property operating
expenses:
|
|
|
|
|
|
|
|
|
CAM and real estate
taxes
|
|
(27,826)
|
|
|
(25,772)
|
|
|
(84,569)
|
|
|
(83,985)
|
|
Utilities
|
|
(4,430)
|
|
|
(4,444)
|
|
|
(12,143)
|
|
|
(12,407)
|
|
Other property
operating expenses
|
|
(2,444)
|
|
|
(3,087)
|
|
|
(8,752)
|
|
|
(9,117)
|
|
Total property
operating expenses
|
|
(34,700)
|
|
|
(33,303)
|
|
|
(105,464)
|
|
|
(105,509)
|
|
Depreciation and
amortization
|
|
(33,119)
|
|
|
(29,966)
|
|
|
(100,505)
|
|
|
(94,652)
|
|
General and
administrative expenses
|
|
(8,441)
|
|
|
(8,288)
|
|
|
(27,969)
|
|
|
(26,561)
|
|
Provision for
employee separation expense
|
|
(561)
|
|
|
—
|
|
|
(956)
|
|
|
(1,053)
|
|
Project costs and
other expenses
|
|
(214)
|
|
|
(150)
|
|
|
(465)
|
|
|
(547)
|
|
Total operating
expenses
|
|
(77,035)
|
|
|
(71,707)
|
|
|
(235,359)
|
|
|
(228,322)
|
|
Interest expense,
net
|
|
(15,181)
|
|
|
(14,342)
|
|
|
(46,064)
|
|
|
(44,098)
|
|
Impairment of
assets
|
|
—
|
|
|
(1,825)
|
|
|
(34,286)
|
|
|
(55,742)
|
|
Total
expenses
|
|
(92,216)
|
|
|
(87,874)
|
|
|
(315,709)
|
|
|
(328,162)
|
|
(Loss) income before
equity in income of partnerships, gain on sale of real estate by
equity method investee, gains (adjustment to gains) on sales of
interests in non operating real estate and gains (losses) on sales
of interests in real estate, net
|
|
(4,113)
|
|
|
1,337
|
|
|
(49,351)
|
|
|
(60,437)
|
|
Equity in income of
partnerships
|
|
2,477
|
|
|
4,254
|
|
|
8,186
|
|
|
12,144
|
|
Gain on sale of real
estate by equity method investee
|
|
—
|
|
|
6,718
|
|
|
2,773
|
|
|
6,718
|
|
Gains (adjustment to
gains) on sales of interests in non
operating real estate
|
|
—
|
|
|
—
|
|
|
(25)
|
|
|
486
|
|
Gains (losses) on
sales of interests in real estate, net
|
|
—
|
|
|
(9)
|
|
|
748
|
|
|
(374)
|
|
Net (loss)
income
|
|
(1,636)
|
|
|
12,300
|
|
|
(37,669)
|
|
|
(41,463)
|
|
Less: net loss
(income) attributable to noncontrolling interest
|
|
891
|
|
|
(507)
|
|
|
6,122
|
|
|
6,627
|
|
Net (loss) income
attributable to PREIT
|
|
(745)
|
|
|
11,793
|
|
|
(31,547)
|
|
|
(34,836)
|
|
Less: preferred share
dividends
|
|
(6,843)
|
|
|
(7,525)
|
|
|
(20,531)
|
|
|
(20,797)
|
|
Net (loss) income
attributable to PREIT common shareholders
|
|
$
|
(7,588)
|
|
|
$
|
4,268
|
|
|
$
|
(52,078)
|
|
|
$
|
(55,633)
|
|
EARNINGS PER
SHARE (Unaudited)
|
Quarter Ended
September 30,
|
|
Nine Months
Ended
September 30,
|
(in thousands of
dollars, except per share amounts)
|
2018
|
|
2017
|
|
2018
|
|
2017
|
Net (loss)
income
|
$
|
(1,636)
|
|
|
$
|
12,300
|
|
|
$
|
(37,669)
|
|
|
$
|
(41,463)
|
|
Noncontrolling
interest
|
891
|
|
|
(507)
|
|
|
6,122
|
|
|
6,627
|
|
Preferred share
dividends
|
(6,843)
|
|
|
(7,525)
|
|
|
(20,531)
|
|
|
(20,797)
|
|
Dividends on unvested
restricted shares
|
(136)
|
|
|
(87)
|
|
|
(412)
|
|
|
(272)
|
|
Net loss used to
calculate loss per share—basic and
diluted
|
$
|
(7,724)
|
|
|
$
|
4,181
|
|
|
$
|
(52,490)
|
|
|
$
|
(55,905)
|
|
|
|
|
|
|
|
|
|
Basic and diluted
loss per share:
|
$
|
(0.11)
|
|
|
$
|
0.06
|
|
|
$
|
(0.75)
|
|
|
$
|
(0.81)
|
|
|
|
|
|
|
|
|
|
(in thousands of
shares)
|
|
|
|
|
|
|
|
Weighted average
shares outstanding—basic
|
69,803
|
|
|
69,424
|
|
|
69,718
|
|
|
69,319
|
|
Effect of common
share equivalents (1)
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Weighted average
shares outstanding—diluted
|
69,803
|
|
|
69,424
|
|
|
69,718
|
|
|
69,319
|
|
|
(1)The
company had net losses for the quarters and nine months ended
September 30, 2018 and the nine months ended September 30,
2018 and 2017, respectively, 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. There
were no common share equivalents for the three months ended
September 30, 2017.
|
OTHER
COMPREHENSIVE INCOME (LOSS) (Unaudited)
|
|
Quarter Ended
September 30,
|
|
Nine Months
Ended
September 30,
|
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
(In
thousands)
|
|
|
|
|
|
|
|
|
Comprehensive
income:
|
|
|
|
|
|
|
|
|
Net (loss)
income
|
|
$
|
(1,636)
|
|
|
$
|
12,300
|
|
|
$
|
(37,669)
|
|
|
$
|
(41,463)
|
|
Unrealized gain
(loss) on derivatives
|
|
1,905
|
|
|
266
|
|
|
9,662
|
|
|
1,544
|
|
Amortization of
settled swaps
|
|
180
|
|
|
259
|
|
|
719
|
|
|
597
|
|
Total comprehensive
income (loss)
|
|
449
|
|
|
12,825
|
|
|
(27,288)
|
|
|
(39,322)
|
|
Less: comprehensive
loss (income) attributable to
noncontrolling interest
|
|
669
|
|
|
(563)
|
|
|
5,020
|
|
|
6,398
|
|
Comprehensive income
(loss) attributable to PREIT
|
|
$
|
1,118
|
|
|
$
|
12,262
|
|
|
$
|
(22,268)
|
|
|
$
|
(32,924)
|
|
The following table presents a reconciliation of net income
(loss) determined in accordance with GAAP to (i) Funds from
operations attributable to common shareholders and OP Unit holders,
(ii) Funds from operations, as adjusted, attributable to common
shareholders and OP Unit holders , (iii) Funds from operations, as
adjusted for assets sold, (iv) Funds from operations attributable
to common shareholders and OP Unit holders per diluted share and OP
Unit (v) Funds from operations, as adjusted, attributable to common
shareholders and OP Unit holders per diluted share and OP Unit, and
(vi) Funds from operations, as adjusted for assets sold per diluted
share and OP Unit for the quarter and nine months ended
September 30, 2018 and 2017, respectively:
|
Quarter Ended
September 30,
|
|
Nine Months
Ended
September 30,
|
(in thousands,
except per share amounts)
|
2018
|
|
2017
|
|
2018
|
|
2017
|
Net (loss)
income
|
$
|
(1,636)
|
|
|
$
|
12,300
|
|
|
$
|
(37,669)
|
|
|
$
|
(41,463)
|
|
Depreciation and amortization on real estate:
|
|
|
|
|
|
|
|
Consolidated properties
|
32,764
|
|
|
29,589
|
|
|
99,428
|
|
|
93,529
|
|
PREIT's share of equity method investments
|
2,132
|
|
|
2,902
|
|
|
6,518
|
|
|
8,493
|
|
Gain on sale of real estate
by equity method investee
|
—
|
|
|
(6,718)
|
|
|
(2,773)
|
|
|
(6,718)
|
|
Losses (gains) losses on
sales of interests in real estate, net
|
—
|
|
|
9
|
|
|
(748)
|
|
|
374
|
|
Impairment of
assets
|
—
|
|
|
1,825
|
|
|
34,286
|
|
|
55,742
|
|
Preferred share
dividends
|
(6,843)
|
|
|
(7,525)
|
|
|
(20,531)
|
|
|
(20,797)
|
|
Funds from operations
attributable to common shareholders and OP Unit holders
|
26,417
|
|
|
32,382
|
|
|
78,511
|
|
|
89,160
|
|
Accelerated
amortization of financing costs
|
—
|
|
|
—
|
|
|
363
|
|
|
—
|
|
Provision for
employee separation expense
|
561
|
|
|
—
|
|
|
956
|
|
|
1,053
|
|
Funds from
operations, as adjusted, attributable to common shareholders and OP
Unit holders
|
26,978
|
|
|
32,382
|
|
|
79,830
|
|
|
90,213
|
|
Less: Funds from
operations from assets sold in 2018 and 2017
|
66
|
|
|
(1,594)
|
|
|
(311)
|
|
|
(6,619)
|
|
Funds from
operations, as adjusted for assets sold
|
$
|
27,044
|
|
|
$
|
30,788
|
|
|
$
|
79,519
|
|
|
$
|
83,594
|
|
|
|
|
|
|
|
|
|
Funds from operations
attributable to common shareholders and OP Unit holders per diluted
share and OP Unit
|
$
|
0.34
|
|
|
$
|
0.42
|
|
|
$
|
1.00
|
|
|
$
|
1.15
|
|
Funds from
operations, as adjusted, attributable to common
shareholders and OP Unit holders per diluted share and OP
Unit
|
$
|
0.35
|
|
|
$
|
0.42
|
|
|
$
|
1.02
|
|
|
$
|
1.16
|
|
Funds from
operations, as adjusted for assets sold per diluted share and OP
Unit
|
$
|
0.35
|
|
|
$
|
0.40
|
|
|
$
|
1.02
|
|
|
$
|
1.08
|
|
|
|
|
|
|
|
|
|
Weighted average
number of shares outstanding
|
69,803
|
|
|
69,424
|
|
|
69,718
|
|
|
69,319
|
|
Weighted average
effect of full conversion of OP Units
|
8,273
|
|
|
8,291
|
|
|
8,273
|
|
|
8,303
|
|
Effect of common
share equivalents
|
38
|
|
|
—
|
|
|
272
|
|
|
51
|
|
Total weighted
average shares outstanding, including OP Units
|
78,114
|
|
|
77,715
|
|
|
78,263
|
|
|
77,673
|
|
NOI for the quarters ended September 30, 2018 and 2017:
|
|
Same
Store
|
|
Non-Same
Store
|
|
Total
|
(In
thousands)
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
NOI from consolidated
properties
|
|
$
|
49,925
|
|
|
$
|
50,858
|
|
|
$
|
1,764
|
|
|
$
|
2,558
|
|
|
$
|
51,689
|
|
|
$
|
53,416
|
|
NOI from equity
method investments at
ownership share
|
|
7,351
|
|
|
7,604
|
|
|
(41)
|
|
|
2,098
|
|
|
7,310
|
|
|
9,702
|
|
Total NOI
|
|
57,276
|
|
|
58,462
|
|
|
1,723
|
|
|
4,656
|
|
|
58,999
|
|
|
63,118
|
|
Less: lease
termination revenue
|
|
252
|
|
|
282
|
|
|
14
|
|
|
—
|
|
|
266
|
|
|
282
|
|
Total NOI excluding
lease termination revenue
|
|
$
|
57,024
|
|
|
$
|
58,180
|
|
|
$
|
1,709
|
|
|
$
|
4,656
|
|
|
$
|
58,733
|
|
|
$
|
62,836
|
|
NOI for the nine months ended September 30, 2018 and
2017:
|
|
Same
Store
|
|
Non-Same
Store
|
|
Total
|
(In
thousands)
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
NOI from consolidated
properties
|
|
$
|
152,330
|
|
|
$
|
148,591
|
|
|
$
|
5,110
|
|
|
$
|
9,453
|
|
|
$
|
157,440
|
|
|
$
|
158,044
|
|
NOI from equity
method investments at
ownership share
|
|
22,280
|
|
|
22,340
|
|
|
479
|
|
|
5,960
|
|
|
22,759
|
|
|
28,300
|
|
Total NOI
|
|
174,610
|
|
|
170,931
|
|
|
5,589
|
|
|
15,413
|
|
|
180,199
|
|
|
186,344
|
|
Less: lease
termination revenue
|
|
7,608
|
|
|
2,629
|
|
|
35
|
|
|
71
|
|
|
7,643
|
|
|
2,700
|
|
Total NOI excluding
lease termination revenue
|
|
$
|
167,002
|
|
|
$
|
168,302
|
|
|
$
|
5,554
|
|
|
$
|
15,342
|
|
|
$
|
172,556
|
|
|
$
|
183,644
|
|
The table below reconciles net loss to NOI of our consolidated
properties for the quarters and nine months ended
September 30, 2018 and 2017.
|
Quarter Ended
September 30,
|
|
Nine Months
Ended
September 30,
|
(in
thousands)
|
2018
|
|
2017
|
|
2018
|
|
2017
|
Net (loss)
income
|
$
|
(1,636)
|
|
|
$
|
12,300
|
|
|
$
|
(37,669)
|
|
|
$
|
(41,463)
|
|
Other
income
|
(1,714)
|
|
|
(2,492)
|
|
|
(3,454)
|
|
|
(4,172)
|
|
Depreciation and
amortization
|
33,119
|
|
|
29,966
|
|
|
100,505
|
|
|
94,652
|
|
General and
administrative expenses
|
8,441
|
|
|
8,288
|
|
|
27,969
|
|
|
26,561
|
|
Employee separation
expenses
|
561
|
|
|
—
|
|
|
956
|
|
|
1,053
|
|
Project costs and
other expenses
|
214
|
|
|
150
|
|
|
465
|
|
|
547
|
|
Interest expense,
net
|
15,181
|
|
|
14,342
|
|
|
46,064
|
|
|
44,098
|
|
Impairment of
assets
|
—
|
|
|
1,825
|
|
|
34,286
|
|
|
55,742
|
|
Equity in income of
partnerships
|
(2,477)
|
|
|
(4,254)
|
|
|
(8,186)
|
|
|
(12,144)
|
|
Gain on sale of real
estate by equity method investee
|
—
|
|
|
(6,718)
|
|
|
(2,773)
|
|
|
(6,718)
|
|
Losses (gains) on
sales of interests in real estate, net
|
—
|
|
|
9
|
|
|
(748)
|
|
|
374
|
|
Losses (adjustment to
gains) on sales of interest in non
operating real estate
|
—
|
|
|
—
|
|
|
25
|
|
|
(486)
|
|
NOI from consolidated
properties
|
51,689
|
|
|
53,416
|
|
|
157,440
|
|
|
158,044
|
|
Less: Non Same Store
NOI of consolidated properties
|
1,764
|
|
|
2,558
|
|
|
5,110
|
|
|
9,453
|
|
Same Store NOI from
consolidated properties
|
49,925
|
|
|
50,858
|
|
|
152,330
|
|
|
148,591
|
|
Less: Same Store
lease termination revenue
|
31
|
|
|
7
|
|
|
7,131
|
|
|
2,208
|
|
Same Store NOI
excluding lease termination revenue
|
$
|
49,894
|
|
|
$
|
50,851
|
|
|
$
|
145,199
|
|
|
$
|
146,383
|
|
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, 2018 and
2017:
|
Quarter Ended
September 30,
|
|
Nine Months
Ended
September 30,
|
(in
thousands)
|
2018
|
|
2017
|
|
2018
|
|
2017
|
Equity in income of
partnerships
|
$
|
2,477
|
|
|
$
|
4,254
|
|
|
$
|
8,186
|
|
|
$
|
12,144
|
|
Other
income
|
(12)
|
|
|
(20)
|
|
|
(35)
|
|
|
(20)
|
|
Depreciation and
amortization
|
2,132
|
|
|
2,902
|
|
|
6,518
|
|
|
8,493
|
|
Interest and other
expenses
|
2,713
|
|
|
2,566
|
|
|
8,090
|
|
|
7,683
|
|
Net operating income
from equity method investments at
ownership share
|
7,310
|
|
|
9,702
|
|
|
22,759
|
|
|
28,300
|
|
Less: Non Same Store
NOI from equity method investments
at ownership share
|
(41)
|
|
|
2,098
|
|
|
479
|
|
|
5,960
|
|
Same Store NOI of
equity method investments at ownership share
|
7,351
|
|
|
7,604
|
|
|
22,280
|
|
|
22,340
|
|
Less: Same Store
lease termination revenue
|
221
|
|
|
275
|
|
|
477
|
|
|
421
|
|
Same Store NOI from
equity method investments excluding
lease termination revenue at ownership share
|
$
|
7,130
|
|
|
$
|
7,329
|
|
|
$
|
21,803
|
|
|
$
|
21,919
|
|
CONSOLIDATED
BALANCE SHEETS
|
|
September 30,
2018
|
|
December 31,
2017
|
|
|
(Unaudited)
|
|
|
(In
thousands)
|
|
|
|
|
ASSETS:
|
|
|
|
|
INVESTMENTS IN REAL
ESTATE, at cost:
|
|
|
|
|
Operating
properties
|
|
$
|
3,184,656
|
|
|
$
|
3,180,212
|
|
Construction in
progress
|
|
121,204
|
|
|
113,609
|
|
Land held for
development
|
|
5,881
|
|
|
5,881
|
|
Total investments in
real estate
|
|
3,311,741
|
|
|
3,299,702
|
|
Accumulated
depreciation
|
|
(1,169,709)
|
|
|
(1,111,007)
|
|
Net investments in
real estate
|
|
2,142,032
|
|
|
2,188,695
|
|
INVESTMENTS IN
PARTNERSHIPS, at equity:
|
|
120,915
|
|
|
216,823
|
|
OTHER
ASSETS:
|
|
|
|
|
Cash and cash
equivalents
|
|
19,294
|
|
|
15,348
|
|
Tenant and other
receivables (net of allowance for doubtful
accounts of $7,246 and $7,248 at September 30, 2018 and
December 31, 2017, respectively)
|
|
33,801
|
|
|
38,166
|
|
Intangible assets
(net of accumulated amortization of $14,791
and $13,117 at September 30, 2018 and December 31, 2017,
respectively)
|
|
17,360
|
|
|
17,693
|
|
Deferred costs and
other assets, net
|
|
131,043
|
|
|
112,046
|
|
Assets held for
sale
|
|
15,874
|
|
|
—
|
|
Total
assets
|
|
$
|
2,480,319
|
|
|
$
|
2,588,771
|
|
LIABILITIES:
|
|
|
|
|
Mortgage loans
payable, net
|
|
$
|
1,052,138
|
|
|
$
|
1,056,084
|
|
Term Loans,
net
|
|
547,108
|
|
|
547,758
|
|
Revolving
Facility
|
|
37,000
|
|
|
53,000
|
|
Tenants' deposits and
deferred rent
|
|
10,155
|
|
|
11,446
|
|
Distributions in
excess of partnership investments
|
|
92,682
|
|
|
97,868
|
|
Fair value of
derivative liabilities
|
|
—
|
|
|
20
|
|
Accrued expenses and
other liabilities
|
|
71,862
|
|
|
61,604
|
|
Total
liabilities
|
|
1,810,945
|
|
|
1,827,780
|
|
EQUITY:
|
|
669,374
|
|
|
760,991
|
|
Total liabilities and
equity
|
|
$
|
2,480,319
|
|
|
$
|
2,588,771
|
|
Changes in Funds from Operations for the Quarter Ended
September 30, 2018 (all per share amounts on a diluted basis
unless otherwise noted; rounded to the nearest half penny; amounts
may not total due to rounding)
(in thousands,
except per share amounts)
|
|
Quarter Ended
September 30
|
|
Per Diluted
Share and OP
Unit
|
|
Funds from
Operations September 30, 2017
|
|
$
|
32,382
|
|
|
$
|
0.42
|
|
|
Provision for
employee separation expense
|
|
—
|
|
|
—
|
|
|
Accelerated
amortization of financing costs
|
|
—
|
|
|
—
|
|
|
Funds from
Operations, as adjusted September 30, 2017
|
|
$
|
32,382
|
|
|
$
|
0.42
|
|
|
|
|
|
|
|
|
Changes - 2017 to
2018
|
|
|
|
|
|
|
|
|
|
|
|
Contribution from
anchor replacements, increase in base rents and net CAM and real
estate tax recoveries
|
|
2,008
|
|
|
0.025
|
|
|
Impact from
bankruptcies
|
|
(485)
|
|
|
(0.005)
|
|
|
Impact of co-tenancy
claims
|
|
(316)
|
|
|
(0.005)
|
|
|
Impact of store
closures from terminated tenants
|
|
(505)
|
|
|
(0.005)
|
|
|
Impact of 2017 real
estate tax appeal
|
|
(1,775)
|
|
|
(0.025)
|
|
|
Lease termination
revenue
|
|
24
|
|
|
—
|
|
|
Other NOI
changes
|
|
116
|
|
|
—
|
|
|
Same Store NOI from
consolidated properties
|
|
(933)
|
|
|
(0.010)
|
|
|
Same Store NOI from
unconsolidated properties
|
|
(253)
|
|
|
(0.005)
|
|
|
Same Store
NOI
|
|
(1,186)
|
|
|
(0.015)
|
|
|
Non Same Store
NOI
|
|
(838)
|
|
|
(0.010)
|
|
|
Dilutive effect of
asset sales
|
|
(1,660)
|
|
|
(0.020)
|
|
|
General and
administrative expenses
|
|
(153)
|
|
|
—
|
|
|
Amortization of
historic tax credits
|
|
(959)
|
|
|
(0.010)
|
|
|
Other income
(expenses), net
|
|
129
|
|
|
—
|
|
|
Interest expense, net
of impact of asset sales
|
|
(1,419)
|
|
|
(0.020)
|
|
|
Preferred share
dividends
|
|
682
|
|
|
0.010
|
|
|
Increase in weighted
average shares
|
|
—
|
|
|
(0.005)
|
|
|
|
|
|
|
|
|
Funds from
Operations, as adjusted September 30, 2018
|
|
$
|
26,978
|
|
|
$
|
0.35
|
|
|
Provision for
employee separation expense
|
|
(561)
|
|
|
(0.005)
|
|
|
Accelerated
amortization of financing costs
|
|
—
|
|
|
—
|
|
|
Funds from
Operations September 30, 2018
|
|
$
|
26,417
|
|
|
$
|
0.34
|
|
|
Changes in Funds from Operations for the Nine Months Ended
September 30, 2018 (all per share amounts on a diluted basis
unless otherwise noted; rounded to the nearest half penny; amounts
may not total due to rounding)
(in thousands,
except per share amounts)
|
|
Nine Months
Ended
September 30
|
|
Per Diluted
Share and OP
Unit
|
|
Funds from
Operations September 30, 2017
|
|
$
|
89,160
|
|
|
$
|
1.15
|
|
|
Provision for
employee separation expense
|
|
1,053
|
|
|
0.015
|
|
|
Accelerated
amortization of financing costs
|
|
—
|
|
|
—
|
|
|
Funds from
Operations, as adjusted September 30, 2017
|
|
$
|
90,213
|
|
|
$
|
1.16
|
|
|
|
|
|
|
|
|
Changes - 2017 to
2018
|
|
|
|
|
|
|
|
|
|
|
|
Contribution from
anchor replacements, increase in base rents and net CAM and real
estate tax recoveries
|
|
4,373
|
|
|
0.055
|
|
|
Impact from
bankruptcies
|
|
(1,906)
|
|
|
(0.025)
|
|
|
Impact of co-tenancy
claims
|
|
(743)
|
|
|
(0.010)
|
|
|
Impact of store
closures from terminated tenants
|
|
(701)
|
|
|
(0.010)
|
|
|
Impact of 2017 real
estate tax appeal
|
|
(1,775)
|
|
|
(0.025)
|
|
|
Lease termination
revenue
|
|
4,923
|
|
|
0.065
|
|
|
Other NOI
changes
|
|
(432)
|
|
|
(0.005)
|
|
|
Same Store NOI from
consolidated properties
|
|
3,739
|
|
|
0.050
|
|
|
Same Store NOI from
unconsolidated properties
|
|
(59)
|
|
|
—
|
|
|
Same Store
NOI
|
|
3,680
|
|
|
0.050
|
|
|
Non Same Store
NOI
|
|
(2,204)
|
|
|
(0.030)
|
|
|
Dilutive effect of
asset sales
|
|
(6,308)
|
|
|
(0.080)
|
|
|
General and
administrative expenses
|
|
(1,408)
|
|
|
(0.020)
|
|
|
Amortization of
historic tax credits
|
|
(959)
|
|
|
(0.010)
|
|
|
Other income
(expenses), net
|
|
234
|
|
|
—
|
|
|
Interest expense, net
of impact of asset sales
|
|
(3,684)
|
|
|
(0.045)
|
|
|
Preferred share
dividends
|
|
266
|
|
|
0.005
|
|
|
Increase in weighted
average shares
|
|
—
|
|
|
—
|
|
|
|
|
|
|
|
|
Funds from
Operations, as adjusted September 30, 2018
|
|
$
|
79,830
|
|
|
$
|
1.02
|
|
|
Provision for
employee separation expense
|
|
(956)
|
|
|
(0.010)
|
|
|
Accelerated
amortization of financing costs
|
|
(363)
|
|
|
(0.005)
|
|
|
Funds from
Operations September 30, 2018
|
|
$
|
78,511
|
|
|
$
|
1.00
|
|
|
CONTACT: AT THE COMPANY
Robert McCadden
EVP & CFO
(215) 875-0735
Heather Crowell
SVP, Strategy & Communications
(215) 454-1241
heather.crowell@preit.com
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SOURCE PREIT