PEI Pennsylvania Real Estate Investment Trust

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

 

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 OR 15(d)

of The Securities Exchange Act of 1934

Date of report (Date of earliest event reported): May 21, 2020

Pennsylvania Real Estate Investment Trust

(Exact Name of Registrant as Specified in its Charter)

Registrant's telephone number, including area code: (215) 875-0700

 

(Former Name or Former Address, if Changed Since Last Report)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

 

Securities registered pursuant to Section 12(b) of the Act:

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

 

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

 

 

 

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On May 21, 2020, Pennsylvania Real Estate Investment Trust issued a press release reporting its financial results for the first quarter ended March 31, 2020. A copy of the press release is attached as Exhibit 99.1 to this report.

The information furnished under this "Item 2.02. Results of Operations and Financial Condition" shall not be deemed filed for purposes of Section 18 of the Securities Exchange Act of 1934, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, except as shall be expressly set forth by specific reference in such a filing.

 

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

 

 

 

 

 

 

 

 

 

 

 

 

PREIT / 1    

Exhibit 99.1

CONTACT: AT THE COMPANY

Mario Ventresca

EVP & CFO

(215) 875-0703

 

Heather Crowell

EVP, Strategy and Communications

(215) 454-1241

heather.crowell@preit.com

 

PREIT Reports First Quarter 2020 Results and Business Update

 

Core Mall NOI-Weighted Sales per square foot Reached $551 through February

Average Renewal Spreads for Wholly-Owned Properties were 4.5%

Total Leased Space Stable at 94.0%

Progressing with Mall Re-openings

 

Philadelphia, May 21, 2020 - PREIT (NYSE: PEI) today reported results for the three months ended March 31, 2020.  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.

 

 

“As we slowly emerge from an unprecedented environment, we are focused on ensuring the safety and well-being of our associates and communities while enhancing near-term liquidity with a laser-focus on improving our balance sheet to position PREIT for long-term success,” said Joseph F. Coradino, Chairman and CEO of PREIT. “The PREIT team has been resilient and courageous as we navigate this challenging environment.  We have pivoted quickly, making difficult decisions and focusing our efforts on supporting our communities of tenants, shoppers, retail employees and our staff.”

 

Coradino added, “PREIT was among the first companies in our sector to embark on a proactive effort to improve our portfolio through asset sales and anchor repositioning and redevelopment, completing the program ahead of

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industry peers and in advance of the COVID-19 pandemic.  We believe our properties are well-positioned with mass-market offerings appealing to a value-focused shopper.  These properties, with prime locations in their respective markets, are dominant retail hubs and we believe they will ultimately gain market share as they re-open.”

 

 

Leasing and Redevelopment

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Mall Re-openings and Community Support Initiatives

 

Primary Factors Affecting Financial Results for the Three Months Ended March 31, 2020 and 2019:

 

All NOI and FFO amounts referenced as primary factors affecting financial results above include our share of unconsolidated properties’ revenues and expenses.  Additional information regarding changes in operating results for the three months ended March 31, 2020 and 2019 is included on page 16.

 

Asset Dispositions

The Company executed agreements of sale for remaining expected gross proceeds of $281.0 million as detailed below.

 

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Sale/Leaseback: In February 2020, the Company entered into an agreement of sale for the sale and leaseback of five properties for $153.6 million.  Structured as a 99-year lease with an option to repurchase, the agreement   provides for release of parcels related to multifamily development and is subject to ongoing lease payments at 7% ($10.75 million) with annual 1.25% escalations.  Closing on the transaction is subject to customary closing conditions, including due diligence provisions and is forecast for late in the year.

 

Multifamily Land Parcels: The Company has three executed agreements of sale for land parcels for anticipated multifamily development in the amount of $107.3 million.  The agreements are with three different buyers across five properties for 2,650 units as part of Phase I of the Company’s previously announced multifamily land sale plan.  Closing on the transactions is subject to customary due diligence provisions and securing entitlements.  One buyer for two other land parcels had terminated its agreement and PREIT has now executed letters of intent with another buyer.

 

Outparcels: The Company has executed an agreement of sale with Four Corners Property Trust for 14 outparcels, which we expect to generate $29.9 million in total proceeds.  To date, the Company has closed on the sale of six of the parcels, totaling $13.4 million in proceeds.  The remaining 8 outparcels are expected to close late in the second quarter or early in the third quarter of 2020 and are subject to customary due diligence provisions.

 

Hotel Parcels: The Company has executed two agreements of sale to convey land parcels for anticipated hotel development in the amount of $3.75 million.  The agreements are with two separate buyers for approximately 250 rooms.  Closings on the transactions are subject to customary due diligence provisions and securing entitlements.

 

Retail Operations

The following table sets forth information regarding sales per square foot in the Company’s mall portfolio, including unconsolidated properties:

 

A reconciliation of portfolio sales per square foot ⁽¹⁾ for the Core Mall portfolio can be found below:

 

2020 Outlook

On March 31, 2020, the Company withdrew its financial outlook for 2020 provided in its February 25, 2020 earnings press release.

 

Conference Call Information

Management has scheduled a conference call for 1:00 p.m. Eastern Time on Thursday,
May 21, 2020, 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  6664627, 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.

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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

 

Funds From Operations (FFO)

 

The National Association of Real Estate Investment Trusts (“NAREIT”) defines FFO, which is a non-GAAP measure commonly used by REITs, as net income (computed in accordance with GAAP) excluding (i) depreciation and amortization related to real estate, (ii) gains and losses from the sale of certain real estate assets, (iii) gains and losses from change in control, and (iv) impairment write-downs of certain real estate assets and investments in entities when the impairment is directly attributable to decreases in the value of depreciable real estate held by the entity. 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.

 

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”) and, when applicable, related measures such as Funds From Operations, as adjusted, 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.

 

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When applicable, 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, to show the effect of such items as gain or loss on debt extinguishment (including accelerated amortization of financing costs), impairment of assets, provision for employee separation expense, and insurance recoveries or losses, net, which can have 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, loss on debt extinguishment (including accelerated amortization of financing costs) and insurance losses and recoveries.

 

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/adjustments to gains on sale of interest in non operating real estate, gain/adjustments to gain on sale of interest in real estate by equity method investee, gains/losses on sales of interests in real estate, net, project costs, gain or loss on debt extinguishment, insurance losses or recoveries, net 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.  In 2019, Wyoming Valley, Exton Square and Valley View Malls were designated as non-core and are excluded from Same Store NOI.  In 2020, Exton Square and Valley View Malls are designated as non-core and are excluded from Same Store NOI. 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

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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 rata 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.

 

Core Properties

 

Core Properties include all operating retail properties except for Exton Square Mall, Valley View Mall and Fashion District Philadelphia.  Core Malls excludes these properties, power centers and Gloucester Premium Outlets.

 

 

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,” “intend,” “may,” “project”  or similar expressions. Forward-looking statements relate to expectations, beliefs, projections, future plans, strategies, anticipated events, trends and other matters, including our expectations regarding the impact of COVID-19 on our business, that are not historical facts. These forward-looking statements reflect our current views about future events, achievements, results, cost reductions, dividend payments and the impact of COVID-19 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:

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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, in our Annual Report on Form 10-K for the year ended December 31, 2019 in the section entitled “Item 1A. Risk Factors” in the section entitled “Item 1A. Risk Factors,” in our Current Report on Form 8-K filed on May 11, 2020, and any subsequent reports we may file with the SEC. 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     **

 

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PREIT / 9     Pennsylvania Real Estate Investment Trust

                     Selected Financial Data

 

 

 

 

 

 

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PREIT / 10     Pennsylvania Real Estate Investment Trust

                     Selected Financial Data

 

⁽¹⁾The Company had net losses for the three months ended March 31, 2020 and 2019, 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.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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PREIT / 11     Pennsylvania Real Estate Investment Trust

                     Selected Financial Data

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 three months ended March 31, 2020 and 2019, respectively:

 

 

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PREIT / 12     Pennsylvania Real Estate Investment Trust

                     Selected Financial Data

NOI for the three months ended March 31, 2020 and 2019:

 

 

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PREIT / 13     Pennsylvania Real Estate Investment Trust

                     Selected Financial Data

 

The table below reconciles net loss to NOI of our consolidated properties for the three months ended March 31, 2020 and 2019.

 

 

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PREIT / 14     Pennsylvania Real Estate Investment Trust

                     Selected Financial Data

The table below reconciles equity in income of partnerships to NOI of equity method investments at ownership share for the three months ended March 31, 2020 and 2019:

 

 

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PREIT / 15     Pennsylvania Real Estate Investment Trust

                     Selected Financial Data

 

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PREIT / 16     Pennsylvania Real Estate Investment Trust

                     Selected Financial Data

Changes in Funds from Operations for the three months ended March 31, 2020 as compared to the three months ended March 31, 2019 (all per share amounts on a diluted basis unless otherwise noted; rounded to the nearest half penny; amounts may not total due to rounding)

 

 

 

 

v3.20.1

Document and Entity Information	May 21, 2020
Document and Entity Information [Line Items]
Document Type	8-K
Amendment Flag	false
Document Period End Date	May 21, 2020
Entity Registrant Name	Pennsylvania Real Estate Investment Trust
Entity Central Index Key	0000077281
Entity Emerging Growth Company	false
Entity File Number	1-6300
Entity Incorporation, State Country Code	PA
Entity Tax Identification Number	23-6216339
Entity Address, Address Line One	One Commerce Square
Entity Address, Address Line Two	2005 Market Street
Entity Address, Address Line Three	Suite 1000
Entity Address, City or Town	Philadelphia
Entity Address, State or Province	PA
Entity Address, Postal Zip Code	19103
City Area Code	(215)
Local Phone Number	875-0700
Written Communications	false
Soliciting Material	false
Pre-commencement Tender Offer	false
Pre-commencement Issuer Tender Offer	false
Fair Value Measured at Net Asset Value Per Share [Member]
Document and Entity Information [Line Items]
Security 12b Title	Shares of Beneficial Interest, par value $1.00 per share
Trading Symbol	PEI
Security Exchange Name	NYSE
Series B Preferred Shares [Member]
Document and Entity Information [Line Items]
Security 12b Title	Series B Preferred Shares, par value $0.01 per share
Trading Symbol	PEIPrB
Security Exchange Name	NYSE
Series C Preferred Shares [Member]
Document and Entity Information [Line Items]
Security 12b Title	Series C Preferred Shares, par value $0.01 per share
Trading Symbol	PEIPrC
Security Exchange Name	NYSE
Series D Preferred Shares [Member]
Document and Entity Information [Line Items]
Security 12b Title	Series D Preferred Shares, par value $0.01 per share
Trading Symbol	PEIPrD
Security Exchange Name	NYSE