Q2 2023 Pennsylvania Real Estate Investment Trust Earnings Call
Right.
Thank you for standing by and welcome to <unk> second quarter 2023 earnings Conference call.
I will now hand, the call over to our speakers.
Good morning, and thank you all for joining us for <unk> second quarter 2023 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.
Descriptions of these risks are set forth in the company's SEC filings.
Is that pretty it makes today might be accurate only as of today August three 2023, and <unk> makes no undertaking to update any such statements.
Also certain non-GAAP measures will be discussed where it has included reconciliations of such measures to the comparable GAAP measures in its earnings release and other documents filed with the SEC.
Members of management on the call today are Joe <unk>, Chairman and CEO and Mario Ventresca CFO .
Thank you Heather and good morning, everybody.
Thanks for joining us we're pleased to report continued traction in leasing and occupancy at Viper.
Tenant demand for space in our portfolio.
Pre remains committed to advancing the goals of the company.
Its various stakeholders and is keenly focused on addressing the upcoming maturity of our credit facility.
He is focused on recovering occupancy following the COVID-19 pandemic, bringing diverse uses to the portfolio to enhance the business garnering approvals for multifamily development and its properties to allow for land sales and raising capital through an array of asset sales.
Among other initiatives designed to improve portfolio value.
Core mall total occupancy improved from 93, 8% to 94, 2%.
Core mall non anchor occupancy increased from 95% to 91, 2%.
Average renewal spreads on a year to year to date basis, or five 1% compared to two 3% through June 32022.
Year to date total leasing volume, including new and renewal leases has increased by nearly 60% through June 30th.
Sales remained strong at $592 per square foot amid a challenging economic backdrop for our consumers.
What this tells US is that we took the right steps in terms of selectively pairing or portfolio and continuously introducing new tenants and diverse uses.
A combination of healthier tenants and limited quality supply is driving strong <unk>.
<unk> demand atmosphere for mall landlords, particularly in high barrier to entry markets, such as Philadelphia, and Washington D C.
Some recent and upcoming examples of these new and different uses include tilted 10 is now open at Willow Grove Park. Its first location in the region. Joseph 10 offers 16 full bowling lanes with the VIP bowling lounge over 150 video pinball.
Arcade games Black light laser tag Arena, $2 18 whole theme lastly, golf courses, many bowling lanes and bumper cars.
Lego Discovery Center said its grand opening for August 19th at Springfield Town Center in Burlington.
As its work towards a late fall opening this year.
And the health care category Cooper University Health care offered a sneak peak to the media ahead of its opening later this year and Banfield Pet Hospital started seeing patients at Moorestown Mall Meredith shelf is underway at Valley mall with an anticipated opening in 2020.
Four.
Work is also moving ahead for ulta to be able to open new stores at Dartmouth This year.
Dartmouth mall with sales nearing $600 per square foot and over 97% occupied has.
Cemented itself as the exclusive enclosed mall experience in the area, which has created a unique opportunity to attract new tenants Alta will join aldi in Burlington and occupy the former Sears location that we proactively recaptured.
Currently we have a pipeline of over 216000 square feet of leases signed for future occupancy representing over $6 million in annualized future rents.
So far this year, we have signed 225000 square feet of new leases.
Zeroing in on one of our top performing assets would have been more with traffic ahead of prepay endemic levels. We've continued to bring in new experiences and offerings to the market as competitive properties fall behind.
So we're pleased to be adding shorter if their brands abercrombie and versus owner sit.
Can you define the success of our 2019 redevelopment effort.
Next year the centers entertainment offering will be bolstered with the addition of main event.
With respect to multifamily approvals and land sales. In addition to the approvals we secured for apartments and our hotel at Moorestown Mall, we have also achieved.
Achieve municipal approvals for an apartment and hotel at Springfield Town Center with those land sales anticipated to close this year.
Regarding other asset sales the company has been very active over the past 18 months selling over $140 million of assets in 2022, the company sold assets generating over $113 million in gross proceeds and apply these.
Proceeds in excess cash from operations to pay down debt by over $141 million.
In 2023, we have sold assets for gross proceeds of over $30 million.
Our advisors are P. J T continue to work to address the upcoming maturity of our credit facility by pursuing all available alternatives. We continue to believe that the steps we have taken position our portfolio, well, which was resulting in strong tenant demand.
And customer visitation.
Further enhancement with the addition of non traditional mall uses like healthcare fitness centers apartments hotels, and more will continue to distinguish our properties and their markets and our portfolio to our business partners with that I'm happy to turn it over to Mario.
To review our results.
Thanks, Joe as you noted from an operational perspective, the business is performing well with improvements in occupancy collections and leasing activity.
Second quarter same store NOI, excluding lease termination decreased three 4% or two 2% when excluding the impact of the sale of whole foods at Plymouth meeting mall, driven primarily by reduced tenant sales impacting percentage sales and rents as well as increasing costs impacting <unk>.
Recoveries as well as credit reserves, resulting from elevated tenant bankruptcies compared to last year.
Tenant occupancy stands at 94, 2%, a 40 basis point increase over the second quarter of last year.
Leasing volume is strong and compares favorably to 2022 <unk>.
During the quarter, we signed 682000 square feet of new and renewal leases as compared to 350000 square feet in the second quarter of last year.
As Joe mentioned, we currently have a pipeline of over 216000 square feet signed for future occupancy representing approximately $6, one 5 million in annualized future rents.
Average renewal spreads were four 7% for the quarter and our accounts receivable balances decreased sequentially, both demonstrating a healthier tenant operating environment, we remain in compliance with all of our credit facility debt covenants.
This morning, we reported second quarter, 2023, NAREIT <unk> and <unk> as adjusted of negative $3 15 per share and year to date, NAREIT <unk> and <unk> as adjusted of negative $6 20 per share.
Primary drivers of the variance to 2022 actuals for the quarter were.
A $1 $6 million decrease in same store NOI.
A decrease of $2 2 million in non same store NOI, resulting from the sale of Cumberland Mall and Gloucester premium outlets in 2022 inter.
Interest expense increased by $13 $2 million, driven primarily by higher weighted average interest rates as compared to the second quarter of last year.
While we have experienced an elevated number of bankruptcies during the quarter affecting $871000 in annual revenue and 160000 square feet. We remain compliant with our credit facility covenants and are pleased by the continued tenant interest in our properties.
On the property level mortgage front permanent financing remains challenging, but we have successfully extended the mortgage loan on Cherry Hill Mall through December one 2023 with an additional five month option that is exercisable subject to satisfaction of certain conditions.
And also the loan on woodland mall.
Was extended through October 5th of 2023. Thank you all for joining us have a great day.
Ladies and gentlemen that concludes today's call. Thank you all for joining me and you may now disconnect.
Okay.
Yes.
Disconnect.