Q1 2021 Pennsylvania Real Estate Investment Trust Earnings Call
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Good day, and thank you for standing by welcome.
<unk> Q1, 2021 earnings call at this time, all participants are in a listen only mode. After the speaker's presentation. There will be a question and answer session to ask a question. During the session you will need to press star one on your telephone.
Please be advised that today's conference is being recorded if you require any further assistance. Please press star zero.
Okay on the conference over to your Speaker today, Heather Crowell EVP strategy and communications. Thank you. Please go ahead.
Thank you good morning.
And thank you all for joining us from first quarter 2021 earnings call. During this call we will make certain forward looking statements within the meaning of federal Securities laws. These statements relate to expectations beliefs projections trends and other matters that are not historical facts and are subject to risks and uncertainties that might affect future events or results.
Scriptures of these risks are set forth in the company's SEC filings statements that <unk> makes today might be accurate only as of today may six 2021, and <unk> makes no undertaking to update any such statements.
Also certain non-GAAP measures will be discussed.
<unk> has included reconciliations of such measures to the comparable GAAP measures in its earnings release and other documents filed with the SEC.
During this call management will answer questions from analysts. We also invite individual investors to submit questions via email to investor info at <unk> Dot com.
Members of management on the call today are Joe <unk>, Chairman and CEO and Mario Ventresca CFO Joe.
Thank you Heather and good morning, everyone.
We're pleased that all indicators point to this quarter, marking the end of the COVID-19 impact on our results.
In fact, the year is kicking more better than our most optimistic expectations in many ways.
<unk> distribution increases we begin to approach herd immunity.
Striction Saar region on the strength of our portfolio is evident with tangible results being demonstrated.
Here are some facts that illustrate the strength of the recovery.
New transaction activity is exceeding expectations with an increase of over 500% compared to 2020 activity on 135% of 2019 volume.
Our collections levels continue to improve with cash flow change approximately 150% of April billings, we're seeing improved pricing on residential land sales as we remarketed one project and received a bid of 40% higher if the receipt.
Zoning and anchor approvals.
Traffic is steadily increasing and reached 90% of 2019 levels across the portfolio for the month of April.
This is indicative of the direction of the portfolio on our last call. We made five key points, which we should signal a bright future for free.
One it's clear we're in the real estate business with an ability to attract a wide array of uses and deliver a broader customer base to our properties to demand is robust from uses far beyond traditional retail, including life Sciences healthcare on self storage three.
Business will return on a significant way for retailers restaurants, and entertainment in the book and the brick and mortar format.
For quality real estate will thrive into the future and our region, leading properties are gaining market share as weaker properties declined.
And five growth in suburban markets will catalyze demand for our offerings and for our multifamily and hotel densification effort.
These statements have been validated by a growing body of evidence consider this.
Since the beginning of the year the company executed transactions to occupy nearly 600000 square feet of space as compares to over 100000 and all of 2020.
As tenants continue to commit to preach collection of high barrier to entry communities.
The diversity of tenancy illustrates the changing landscape that includes a broad array of uses not always found in retail centers.
These non traditional uses included 165000 square foot Cooper University medical facility at Moorestown Mall on.
On a 90000 square foot self storage facility at mall of Prince Georges Aldi at Dartmouth Mall, and Homegoods at Cumberland Mall.
<unk> on entertainment category is also poised for explosive growth as restrictions are alleviated, including tilt studios and crab does Europe Meg volume.
Paul and restaurant 54 at Springfield Town Center.
We also saw an increase in apparel retailers opening stores, including Rosen Remington and expanding first a portfolio tenant known for cheeks style will open at woodland mall.
Windsor fashion best known for its array of dresses and Formalwear signed five leases for 29000 square feet in our portfolio grew 21, well known for its offering of the latest trends at affordable price has signed three new transactions for over 18000.
Square feet.
We're also seeing significant growth in local regional and minority owned businesses opening new locations with us, creating a more unique mix of offerings.
Toward that end, we launched a new initiative to support our black owned businesses and brands by Spotlighting. These brands to bring awareness and drive sales to them through our more websites.
Concurrently, we're seeing well known retailers expand into new concepts like American eagle's offline or increase their store count betting on this revival.
Our pipeline is healthier than it's been in years.
And we're looking forward to bringing in new exciting concepts.
This is a time of new growth in our industry Best described by Jay Schottenstein American Eagle's, CEO, who foresees a quote roaring twenties like recovery occurring in the mall space and quote.
Adding to these factors as our anchor re leasing program, where we continue to lead the sector dealing with anchor challenges proactively today.
Today, we have leases out or sign for all on leased anchor spaces in the portfolio.
If this increased pace of leasing activity werent enough evidence of the resurrection of the sector. The surging traffic and sales we are experiencing is.
Based on a comparable set of tenants who reported sales in March of 19, and 21 sales grew at 14 of the company's managed properties for the quarter more than half of our properties reported improved sales for comparable tenants.
Traffic flows continue to climb back to pre pandemic levels in April our comparable properties recorded an 11 percentage point increase from March registering 86% of 2019 levels with half of the portfolio registering 90% or more.
The economic indicators for our business are strong consumer confidence so its largest one month, increasing 18 years in March consumers have a master reported two trillion in excess savings on their spending on discretionary goods and services people.
We're getting dressed they're going out and tenants are opening businesses as restrictions ease across the country.
We think our portfolio is uniquely situated to capitalize on this improving landscape and is comprised of three distinct property classifications fortress destinations comprised of high quality retail and entertainment venues with improving sales and tenant mix profile.
Phil such as Cherry Hill Mall.
High barrier to entry properties in Philadelphia, and D. C densely populated markets with a scarcity of well located land. These properties are well situated with ample parking and access to millions of customers through major road networks. They attract an array of uses inquiry.
<unk> Life Sciences Medical office Grocers Big box other open air tenancy fulfillment fitness storage. In addition to apartments senior housing in hotels now Morristown Mall is a good example of this category.
And winner take all properties in markets, where competitive retail centers have fallen by the wayside. We're finding that we have captured the undivided attention of the consumer we call. These our winner take all properties markets represented in this category include Harrisburg in Scranton, Pennsylvania.
Dania, Newport News in Virginia, Dartmouth, Massachusetts, and Grand Rapids, Michigan.
In these markets there is a right sizing of retail and clear evidence that we are winning the battle for tenants and customers with March sales for comparable properties. In this group were increasing 19% compared to 2019.
This collection of properties is designed to attract a broader array of customers.
<unk> the opportunities for our tenants as our tenants get stronger our collections are improving and pricing power will follow.
It is important that we continue to monitor and improve our liquidity position through continued progress and collections share of our multifamily demand and reduced capital spending.
We are pleased with how far we've come and that our liquidity forecast is on track we are well along in the entitlement and tenant approval process on our multifamily land and are seeing improved pricing in this market.
We expect to receive approvals on two of our multifamily properties during this calendar year.
As we see it today the recovery of our business is intensifying and the steps we have taken to strengthen our portfolio provides us with a myriad of options for the company as asset values improve.
We believe we're well positioned.
And poised to pursue any and all options to drive stakeholder value.
We have adapted which we've been doing for years, and we will thrive in the future ready marketplace with that I'm happy to turn it over to Mario.
Thank you Joe.
As Joe noted in his remarks, we are seeing incredible new leasing activity collection levels that are exceeding our liquidity forecast a sharp return of consumer spending and overall improved perception of the space.
It is worth noting that this quarter represents a comparison to the first quarter of 2020, which was only minimally impacted by pandemic related closures and we expect our comps to improve considerably as the year progresses.
The results that we're reporting are reflective of a portfolio that is nearly recovered from the impact of the pandemic as demonstrated by the sequential contraction in NOI declined compared to the fourth quarter of 2020, and a significant improvement over both second and third quarters of last year.
Last night, we reported results that were incrementally impacted by pandemic and bankruptcy related closures.
As well as increased snow removal costs and interest expenses.
Conversely in the first quarter, we have continued to see the pace of bankruptcies subside, having experienced only three immaterial tenant bankruptcies, marking one of the lowest volume first quarters in recent history.
We believe that we're at an inflection point.
As leasing volumes are strong and sales are improving with our tenants paying percentage sales in lieu of minimum rent having exceeded our forecast.
On the leasing and occupancy front when we factor in the impact of tenants with signed leases that have not yet taken physical occupancy total occupancy is for quick forecast declined to 97%.
Average renewal spreads in the wholly owned portfolio were a positive two 2% representing 300 basis points of sequential improvement and the first quarter of positive renewal spreads since COVID-19 manifested itself in our leasing activity.
We also saw a significant improvement in renewal spreads and the percentage rent and Lou category.
In reviewing collections for the 12 month period from April one 2020 through March 31, 2021, we collected 58% of brands compared to 81% of current rents collected in this year's first quarter.
Including collection of prior month's rents, we collected 89% of billed rent for the period from April one 2020 through March 31, 2021, and 119% of build first quarter rents.
As a result, our outstanding accounts receivable has decreased materially by $14 $1 million and at the end of the quarter. Our accounts receivable balance was $40 4 million, which compares favorably to pre pandemic levels of $41 million as of December 2000.
19.
As it relates to April the momentum continued we collected 88, 8% of our build brands and on a cash collected basis, including payments towards prior month's rents, we collected 149% of our build rates.
As of March 31, 2021, total liquidity was $103 $6 million inclusive of $28 $4 million of cash and unrestricted bank accounts and.
$75 $2 million of availability on our revolver.
We are forecasting ending 2021 with incremental improvement in our total liquidity, including $13 $3 million of gross proceeds from anticipated land sales.
Regarding our outstanding mortgages, we are in the process of refinancing near term maturities for <unk> mall and three joint venture properties Red Rose Commons.
Courted, Oxford Valley and pavilion at market East a short extension has been executed per pavilion and the new loan is expected to close within the next month completion of this refinancing activity will address all of our near term nonrecourse debt maturities.
As we look ahead comps will continue to improve leading to an anticipated high single to low double digit NOI growth. This year as our backlog of revenue from signed leases comes online and continues to grow.
Our cash flow on liquidity forecasts are improving.
And we believe we are we are at a tipping point, where NOI is growing there.
There is positive momentum in the space such that we should see cap rate compression and improved asset valuations.
We are pleased with where we are currently and see continued reasons for optimism with that we'll open it up for questions.
At this time I would like to remind everyone in order to ask a question press star one on your telephone to.
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We'll pause for a moment to compile the Q&A roster.
We will continue to keep on us to compile questions as a reminder.
To ask a question press star one.
And I will turn the call back over to the speakers for closing remarks.
Thank you everyone.
As we noted this year is kicking or better than our most optimistic expectations.
Economic and portfolio indicators are decidedly positive and we are proactively taking advantage of these factors to improve our results.
Just to recap leashing activity is astonishing.
Our liquidity picture is improving and there are a myriad of options for <unk> future. Thank you.
This concludes today's conference call. Thank.
Thank you for participating you may now disconnect.
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