Q1 2022 Pennsylvania Real Estate Investment Trust Earnings Call

Because we have a.

Curated our portfolio that is thriving due to our efforts to bring in dynamic and compelling uses.

We continue to experience strong demand from consumers and tenants as many of our properties have emerged as a dominant and closed retail destination in their respective markets with exclusive tenancy and the benefit of new anchors.

Progress on the operating side of the business continues as well sales per square foot have grown by 32% over five years, an indicator of the quality we've cultivated.

And over one 5 million square feet of new stores have opened in the last 15 months as we have driven the portfolio to a swift recovery.

The improving environment and our operating prowess have resulted in sequential growth in renewal spreads.

Three 7% for the quarter, an indicator of improved pricing power driven by our quality portfolio.

And currently we have over 400000 square feet of new leases executed for future occupancy, which will deliver over $6 million in annual revenue.

Through April traffic is up 10% year to date compared to 2021, and we are ahead of 2019, driven largely by our continual merchandising refresh.

Pacifically at Woodland mall traffic was up an impressive 41% over 2021 for the weekend after the Phoenix Theater open.

Through March core mall sales were $613 per square foot Cherry Hill mall sales continue to lead the way and nearly a $1000 per foot three.

Three of our other key assets mall of Prince Georges Springfield tense town Center and Woodland Mall have showed the largest sequential growth from Q4 'twenty one.

NOI continue to grow significantly up 18% over Q1, 'twenty one on a same store basis.

These results were driven organically a result of 2020 ones robust leasing activity and continued consumer strength.

So we continue to make progress in improving operating fundamentals.

Support our ability to execute on asset sales to improve the health of our balance sheet. We remain confident we will achieve our extension and are finalizing our longer term plan that we plan to communicate to you. This summer now ill turn it over to Mario to review our financial results.

Thanks, Joe we continued to see strong fundamentals and sales occupancy and leasing volume growth, leading to NOI and <unk> improvement relative to last year.

Liquidity is tracking ahead of our internal business plan.

We ended the quarter with cash and unrestricted bank accounts of $34 $3 million.

When including capacity under the revolver total liquidity was $110 $5 million as of the end of the first quarter.

Our strong leasing activity continues to drive performance during the quarter, we opened 30 tenants in 125000 square feet.

We currently have a pipeline of 408000 square feet signed for future occupancy this represents over $6 $8 million in annualized future rents.

We are seeing positive same store NOI trends.

Same store NOI increased 18% during the quarter compared to the same period of last year.

Our accounts receivable balance decreased by $5 3 million from year end the.

The current balance of $37 $2 million is approximately 10% less than our pre COVID-19 historical AR balance of $41 $3 million, which was as of December 31 2019.

Base rents for our wholly owned same store assets increased by $2 million or four 4% as compared to the first quarter of 2021.

Add to that we have had no bankruptcies during the quarter as tenant performance and financial strength continue to improve.

Comp sales are exceeding underwritten expectations, we ended the quarter with comparable tenant sales of $613 per square foot, which is a $10 increase per square foot over sales at the end of 2021.

This morning, we reported first quarter 2020 to NAREIT <unk> of negative $1 2 million or negative <unk> <unk> per share.

<unk> as adjusted of negative $4 8 million or negative <unk> <unk> per share. This was driven largely by interest expense.

To provide a relevant data point.

Pro forma 50% reduction to normalize the above market portion of our interest expenses would result in an <unk> <unk> per share improvement in quarterly <unk>.

For the quarter results were primarily impacted by a strong leasing and sales environment, resulting in increased rent and percentage rent percentage sales and common area revenue, which totaled $3 $5 million and a decrease in credit losses for challenge tenants of $2 1 million compared to the three months ended March.

<unk> 31 of 2020.

Lease termination revenues have increased by approximately $800000 over the first quarter of last year.

Also in the quarter G&A expenses decreased by $300000 driven by a reduction in people cost.

Moving to operating metrics, we ended the first quarter with total occupancy at our core malls of 92, 7% an increase of 500 basis points from the first quarter of 2021.

This improvement includes many large format tenant openings.

Tilt at Magnolia mall that replace JC Penney.

Power warehouses at Cumberland Mall.

That replace Burlington turned seven at Moorestown that replace Lord <unk> Taylor all of these are indicators of our expeditious anchor replacement program.

Core mall inline occupancy of 88, 8% growth to 94% when factoring in the pipeline of executed leases.

Looking ahead to the balance of 2022, where we are up against strong comps from last year, where we've recovered significant revenue from deferred rents, but do expect to continue to drive organic revenue growth as a result of incremental leasing activity and improving renewal spreads.

To reiterate what we have said previously we fully expect to achieve the credit facility extension later this year.

With that we will begin our Q&A session.

Thanks, Mary Anne I will now share the top questions received on our Q&A portal.

The first question is what will be done to ensure that freight does not get delisted.

Actually we have until August 4th to regain compliance and we're currently reviewing our options with both our advisers and our board.

Thank you.

Second question is are you still on track to sell over $120 million in land and operating parcels by the middle of this year beyond the yourself what is the outlook for further capital raising.

As we mentioned in our remarks, we now have transactions underway for $275 million in asset sales as the quality of our portfolio continues to surface interest.

Many investors are concerned about the company's ability to meet <unk> requirements stipulated in our recent restructuring agreement does the company have sufficient recurring revenue to meet obligations to creditors.

When including capacity under the revolver total liquidity was $110.

$5 million as of the end of the first quarter as we mentioned in our prepared remarks, we're confident we'll achieve the extension.

And we have $275 million in asset sales in process and are underway with a longer term plan that we will communicate this summer that positions the company for a refinancing in the future.

Do you plan on paying a dividend.

We do hope to be in a position ourselves to be dividend paying again in the future. However, our current credit facility does prohibit paying dividends.

Thank you what does the current leasing environment look like are you seeing more inquiries from prospective tenants.

The leasing environment continues to be robust, we have a healthy and growing pipeline of signed leases currently with over 400000 square feet of new leases and a strong pipeline.

Thank you our last question for today is that the company recently filed a neat creditor obligations regarding reserve cash balance is triggering a cash clawback from creditors. If so how has this been address to ensure our solvency.

Absolutely not we are in compliance with our credit facility covenants and expect to achieve our one year extension later this year.

Thank you that concludes our Q&A session and I will turn it over to Joe for closing remarks.

Thank you all for listening today are operating performance continues to be a bright spot and we are confident that our efforts on our capital plan will allow us to secure our credit facility extension and extend our outstanding maturities and we look forward to presenting to you our longer term strategic plan. This summer.

Thank you all and have a good day.

This concludes today's call you may now disconnect your lines. Thank you all for joining.