Friday, May 6, 2022

Philadelphia-based PREIT Mall Landlord Offers Long-Term Game Plan

 By Linda Moss CoStar News

Mall owner Pennsylvania Real Estate Investment Trust plans to raise capital, with $275 million in property sales in the works, to help pay down its debt and looks to unveil a long-term plan to address its nagging financial woes this summer.

Philadelphia-based PREIT reported its first-quarter earnings on Thursday, with CEO Joseph Coradino discussing the company's balance sheet, which at this juncture presents a much less rosy picture than its retail operations. The real estate investment trust, which is at risk of being delisted by the New York Stock Exchange, is poised to receive a one-year extension on its credit facilities, Coradino said during a conference call.

"It’s clear that the mission in front of us is to achieve the credit-facility extension and to raise capital to delever the balance sheet,” he said. "New opportunities to harvest capital are presenting themselves as a result of the strength of the markets we operate in and the compelling opportunity we’ve created."

PREIT said it expects $109 million of its $275 million in pending deals to close before June 30. The company already sold the Exton Square Mall in Exton, Pennsylvania, in March for $27.5 million.

The firm was one of three retail-property REITs to file for Chapter 11 bankruptcy protection in 2020 amid the pandemic, when temporary store closures to stop the spread of the coronavirus wreaked havoc on malls and retailers. PREIT emerged from the proceedings after restructuring about a month after it filed. But it hasn't been an easy road back since then, as PREIT has sustained more than $600 million in losses since 2021, with $39.3 million in the first quarter this year.

In its first-quarter supplemental materials, PREIT said as of March 31 it was in compliance with the terms of its credit agreements.

"However, a material decline in future operating results could affect our ability to comply with the financial covenants, including additional covenants that came into effect starting on June 30," PREIT said.

But on the call, Coradino was reassuring, saying, "We are developing a longer-term plan that will demonstrate value to shareholders and an improved balance sheet that we expect to detail for you this summer."

He touted the strong performance many PREIT malls have enjoyed in the wake of the pandemic. For example, mall sales per square foot hit $613 in March, up from $603 at the end of last year. And strong leasing activity led to core-mall occupancy reaching 94%. PREIT has also had success finding tenants for vacant anchor stores.

PREIT is reviewing its options for the upcoming debt maturity, later this year, for the Cumberland Mall in Vineland, New Jersey, the Woodland Mall in Grand Rapids, Michigan, and the Cherry Hill Mall in Cherry Hill, New Jersey, according to Coradino. All three of these properties have recently experienced strong sales and occupancy growth, he said.

The REIT's portfolio includes 25 retail properties, 24 of which are operating properties and one is a development property. The 24 operating retail properties have a total of 19.6 million square feet and include 20 shopping malls and four other retail properties.

In February, the NYSE informed PREIT it was out of compliance with the exchange's listing standards, which require a company's common stock to maintain a minimum average closing price of $1 per share over a consecutive 30-trading day period.

PREIT has until Aug. 4 to regain its compliance and is reviewing its options with its with advisers and board, according to Coradino.

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