PREIT Puts Two More Malls Up for Sale

Philadelphia-based PREIT (NYSE: PEI) announced plans to sell two more of its regional malls after receiving unsolicited inquiries from potential buyers.

PREIT said it will pursue the sale of its 900,000-square-foot Logan Valley Mall in Altoona, PA, and the 600,000-square-foot Valley View Mall in LaCrosse, WI.

The REIT did not reveal the identities of the potential buyers or an expected sales timeline, but said any proceeds from the dispositions would be used to fund its redevelopment pipeline.

"PREIT has a demonstrated record of transforming and revitalizing the traditional mall model to capitalize on new opportunities and evolving trends in the market," said Joseph F. Coradino, CEO of PREIT. "To date, we have successfully sold 16 lower-productivity malls as part of our non-core property disposition program. With these additional dispositions, we are taking further action to strengthen our portfolio amid a challenging retail climate."

PREIT recently announced that midwest department store Herberger's would be relocating and expanding at Valley View Mall to fill Macy's former location. Owned by The Bon-Ton Stores Inc., Herberger's will move from its current 42,000-square-foot to the 100,000-square-foot space formerly occupied by Macy's. The move is expected in October 2017.

However, Logan Valley is PREIT's worst-performing property and Valley View ranks as its eighth-worst among the REIT's 22 remaining malls on a sales-per-square-foot basis, according to PRET's most recent quarterly financial disclosure. PREIT said selling the malls is expected to boost its portfolio’s sales by $10 per square foot.

Since initiating a major disposition strategy to prune low-sales properties and focus on its best-performing centers beginning in 2013, PREIT has netted about $730 million from selling 16 of its properties.

PREIT has also focused on revamping its tenant mix, adding more dining, exercise and entertainment options to appeal to changing shopper patterns.

"The historic view of the mall, heavily reliant on apparel and traditional retail, has expired and a new model is rising," said CEO Coradino. "Dining, entertainment and experiential concepts represent the mall of the future."

In recent leasing activity, PREIT leased 28,000 square feet to Dave & Buster's in its Capital City Mall in Harrisburg, PA. At Plymouth Meeting Mall near Philadelphia, PREIT signed a new tenant called 5 Wits, which offers live-action entertainment experience that immerses guests in realistic situations that includes hands-on challenges and requires teamwork," according to a description. The 14,000-square-foot space will be across from the mall's Legoland Discovery Center. PREIT also recently signed indoor cycling firm Cyclebar at its Plymouth Meeting center, offering what it describes as "high-energy workouts in a concert-like atmosphere."

"As the retail format lines continue to blur, we are capitalizing on owning quality properties in the best locations in their markets, capturing a wide variety of tenant interest," Coradino added. "At the same time, we are systematically reducing exposure to select department stores, driving increased net operating income and enhancing the consumer experience, thereby creating long term shareholder value and driving NAV."

Coradino said the REIT will also continue to engage in discussions with third parties as its looks to optimize its mall portfolio and increase shareholder value.
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