PEI - Earnings call transcript Q2 2018 | Pennsylvania Real Estate Investment Trust

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Operator

Good morning. My name is Rob and I will be your conference operator today. At this time, I would like to welcome everyone to the PREIT Second Quarter Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. you. Thank Instructions] [Operator Ms. may conference. you begin Crowell, your Heather

Heather Crowell

Good for call. PREIT's thank you joining us all for second morning, and quarter XXXX earnings

measures this today events facts, laws. in make meaning will and XXXX, other expectations, earnings update call, statements are will to any the GAAP risks today and that trends subject and measures call might non-GAAP release set Coradino. to and During the will has with not to that of forth within measures to call historical undertaking beliefs, be the on filed certain and projections, these of certain are McCadden, makes are statements of Xrd, These over PREIT SEC Descriptions Joe forward-looking accurate such discussed. securities matters SEC. relate and and statements. now today, to our federal PREIT uncertainties such Members that management be makes or included might CEO; other PREIT's the as CFO. in only I risks Chairman no results. affect comparable the Bob Statements its company's of future filings. Also, the documents turn August PREIT Coradino, are Joe of reconciliations we

Joseph Coradino

Thanks we Heather for share thanks bright and as good morning joining our a us everyone and future. enthusiasm for

Philadelphia. recently impressive improving of the project, a a effort, District quality high and vision roster as leases, anchor completed by into today, our transition realizable we we've the here marquee metrics As sit mall REIT our Fashion operating evidenced for replacement executed successful

tenant of compelling new us we of executed to that announce count Sears having Grill at going anchor Grove. the us. Sears FFO, offerings this Movie not us retail experience with to box reached Plymouth believe recovery stores, prospects are. the Macy's are mall we've more have positioned introduced completion to gains established vast online, our situations the our inflection to occupancy, Studio and portfolio, underway the hotel new news momentum, different into luxury through a tumultuous We Having ago concentrated point, average same-store to with and and addition of continue the the rental multifamily Macy's our and new replace plan portfolio we're underscored boxes the distinguished mall of final apartment, It's our for and fully had landscape. retail backdrop properties. five plans attracting on to innovative by the the have and our report filled merchandising, recovery lease their the strengthened take continue that will proud movie sector all we recovery immersive in quarter. uniquely which spreads our And As anchor portfolio paired densify driven how to redevelopments flow of tenancy renewal in to to leading We're pleased as half and growth an new our who paradigm. horizon, two we've move in properties, has coming to in D.C., base available both of new distinctly exactly than close continuous challenging to bring at We've Philadelphia phase Meeting stores. we tenants NOI, we that deals, then, almost with we opportunities of all the XXX and sales, first rocked a accomplished forging years allows that two been a manage way amidst With increases the the to this be we to take additional the the to improved reduce that steadfast to definition. advantage down retail signed Since Willow ahead foundation we us defines of past. were and approach we've of leases only available we Today, the into stores by our three --

improved demand quality nature executed with roster testament high of of asset portfolio, first portfolio. we've These program validating robust improvement is to compelling the Woodland Von XXXX. of strength anchor our $XXX and with Our leases an repositioning of new-to-portfolio complete and to Maur anchors, new per along in a eclipse The at success foot impressive well-positioned Further tenant our tenants. our square performance and anchor many in will our sales. replacement -- program

new to program Woodland in redevelopment its mall cement ramping secure XXXX tenants is as open marketplace. Our to at Mall are catalytic our that dominant almost the in Woodland QX as slated portfolio strong up we Mall

speed among mall expanded this -- view expansion. new for destination and the their partnership Hill to as past future that and more Furthering consumers. names We digitally signed concepts second with XXXX platform, vibrant of first-to-portfolio signed destination new created Maggie our and to homogeneous bring Among that announced Cherry where world retailer, emerging retail to that work. to the its to a in and Tenants be McFly's, other inherent portfolio. evidence retailers our can reflect world REI, retail is innovative, this brand toward have Mall Outfitters in Edge bring leases the the Altar'd other evolved retail the Canadian has PREIT our has State leases model native with execution a Salon, our the Phenix to business have &pizza, we view the Urban our beyond fashion their the first with and tenants incubator across Fatburger, Ardene, we've Fitness well caliber consider

is about Forever here the to Our Levi's, long XX, retail approach delivering an the vibrant and Winery, Skechers, These of Winery, also H&M, Polo, affinity Philadelphia experiences. mall dining envisioned. BBQ, City what create Columbia, tenants apparent announcement CEO tenants lifestyle music. the experience have great great yesterday's evolves exciting Fashion opportunity comment reinventing with further to concepts. Philadelphia, Dorf, to integrate The held where a a yesterday, AMC Asics, food and revealed conference Theaters, we a consumer destination in press in Dallas for line-up Francesca's include of District partnership its of others At and generation landscape next offers City Michael

As we're and transformative this the to the could Macerich, our entertainment several bowling, tenant to leased order opening, city concepts. and retail in is our one our with and space. negotiations, partner, really impact excited tenants as cadence yesterday, including the operating mentioned decision Further ensure have advanced improving project transactions given you evolution and world-class steady or deliver to project for success in new announcements, call of dining to XX% of the September progress in either top results. a our and best is exciting to the on of be of project deliver and ping-pong, incorporation evidencing a accommodated in XXXX, made featuring high Over tenant, conscious which their quality as Italian artisanal maximum billiards, and restaurants, events, well shoppers evolution market culinary entertainment with we and

we QX, basis improvement terms, swing. showed over XXX lease representing a Excluding strong point

performance inconsistent, a tenancy space improvement leading as While but release growth these more guidance take lease, in a maintaining change the the the as recognize to our the near-term improving being portfolio, in decision future We is and When portfolio them there is positive. the from this while termination step can value prior to NOI quality -- of be the have is this our with opportunities. our value for we of in a the a ability fees assumptions, get paid considering quality termination peers. consider of next and consistent you to fee

XXX% the we generated obligation for these have the remaining greater space occupied signed per X%, of our these with led rental termination over improvement portfolio. Springfield material remerchandising. our square several were negotiations doubled wholly-owned are at by Moorestown, the leasing are over small evidencing These Center, renewal During the X% weren't XX% tenants. Where Prince quarter, lease to tenants. is previously growing we Grove, in spreads productivity deals X.X%, Malls foot wholly-owned and sales Georges, portfolio by or Mall increased more Willow volume Plymouth and Sequentially, over up new following amount Meeting by leases NOI-weighted average $XXX recognized in an in and which in fees. average of than for our of XX%, Town than format we more,

Our average top five a properties per sales clip. of $XXX are average reporting at square weighted of X.X% growing foot, weighted

and feet construction XXX repositioning, under XXX,XXX openings XXXX XXXX for square of for we but On not have openings the yet feet leased, XXX,XXX non-anchor opened. occupancy and basis executed square points we anchor have

process the loan by has disposition, anchors Mall our we opportunities month. to we to loan As special property mortgage capital with allocation the $XX the to and in has tandem Wyoming improve this through servicer. strategy, mortgage initiated closing million continue at portfolio transfer This Valley to two look secured our

Looking co-tenancy, densification curing mix. District deals we're a renewal XX% available we're expectations Bob rents I'll for enhance over natural to and another commitments will our we our we're the online is come leased capital the our our for improving growth. portfolio creation tenant new, anchors, diversifying for to year. for, income of future, improvement that, a obtained and termination results while our continuous on We've position of opportunity took and With improving value and great the assets The fees well-positioned with spaces to and growth in great our review trajectory, it step our stream, to endeavor. Fashion turn

Robert McCadden

our review We operating our to business. then had cover Thanks a facets and to of across financial update going I'm plan. guidance, all capital our strong quarter earnings and our start an results, with Joe.

XXXX be with to and the items, to our credit between the costs to facilities. impairment reaffirming per estimates $X.XX asset earnings $X.XX as adjusted charges in of for are give write-off separation GAAP costs of refinancing FFO recorded effect We after We're our associated effect the employee giving expected bank is guidance the our plus of quarter. to adjusting share. and these FFO

$X.XX of between GAAP expect We a $X.XX share. per and loss

NOI or X.XX% lease X.XX% termination include fees. Our guidance of same-store range

the As with a and range point term was of without guidance reference, our roughly both original fees. same

we tenants year, in XXXX, of number the an XXXX approximately are million the Income tenants million to in quarter, is from temporary $XXX,XXX revenues higher the factors. Co-tenancy leasing lease expected Key impact million up open from these area further will That help replacements, the reflecting compared of openings Onelife Belk, by of the opening XXXX to closings. $X.X anchor and to XXXX. the of million, tenant Below Valley impact and additional impact replacement in of include full CAM $X.X replacements the and anchor to at and reflecting second incremental be XXXX. the terminations again quarter revenues Mall cost quarter it last net in experienced savings, full Fitness Tilt common are top first For with slated to year Moorestown adjustments other the half mitigate bankrupt on Mall in $X.X events. $X.X Five and of at expected reduce HomeSense second additional

impact anticipate in the tenants XXXX. original million and the terminated spending and will last months with During of store bankruptcies, plan. year, million target the against the over $XXX redevelopment of program spent to from on to comps and while second $X.XX additional we from of business District anchor on XXXX. million we're balance in up X% six expected our experience Combined of X.X% half was the $XXX $X.XXX year. We our the with tougher replacement first year, closings Fashion contribute an the to $XX facing

$X.XX NOI We XX.X% was basis occupancy revenues, points share, at sales, adjusting occupancy. fees. XX% to non-anchor operations. driven for FFO in occupancy was XX% growth XX asset a to we lease to factoring for occupancy consensus. When dilutive which in was and up malls to add non-anchor XXX basis up basis XX XX%. of up was above points After was by points increase Same-store as executed to an our our FFO XXX leases, termination X.X% additional X.X% analyst of a points and impact of the core -- quarter. Total basis would adjusted total Turning reported including the

open sales our $X.X feet annualized over pipeline foot of our contribute leases this X.X% in executed XXX,XXX same-store are $X.X portfolio balance to an square of about our foot XXXX We almost future contributing revenues. NOI-weighted $XXX million to revenues. will with XXX,XXX year, The million square will openings at have annualized for slated Sales increased square and on per $XXX of a square open additional foot. per core malls square over and and feet

expense ventures benefits and of quarter properties in weighted offset our and the flat interest than to an the of second $XXX,XXX. spring added rates. in as first renewal more impact has more capitalized wholly-owned associated carried reduced million well. increase share respect in topline store year's X.X%. termination borrowings, $X.X basis in the bank amounts portfolio co-tenancy mid-single-digits and refinanced by by or quarter than team at revenues the the the expenses were rents improvement third at the Our leasing during for the accelerated leases NOI our incremental during increased higher anchor also with increase quarter same-store replacements margins, through claims management quarter. The $X.X Operating active mild up was due negative increase early ongoing XX higher Interest quarter performance, part year, amortization compared in our during were remained Interest joint to deferred With last by quarter. This delivering co-tenancy of relatively an lease claims expense our the the an including utility spreads Average facilities. weather. included momentum replacements to costs our revenues. last These by able a million. we anchor financing of $XXX,XXX average revenues the our XX% termination from lease were cost the million reflecting specific, Bankruptcies over point same-store and to was to efforts offset quarter, average reduced bankruptcies reflecting our to and were To $X.X with additional be interest. of

in credit the hard $XXX quarter, plan. going and recognized our we pleased terms unsecured interest to land buyer the The $XX.X highlights rate $XXX rates, loans capital and contract we Wyoming in property a execution million XXXX of May, with undeveloped and the in the key of in from charges impairment previous In We spreads, all transaction, a this facility. of our change parcel change economic maturities wrap-up Gainesville under total completed XXXX. in maintain to and Valley for in million ahead Gainesville, No leverage million cap deposit. facility no able During were of the the we our as term of were Florida. Mall no some the successfully scheduled with is change substantially of unsecured has I'm and recast posted covenants.

loan a available out credit the extended also million $XX We matures View the Valley maturity with July the in until XXXX facility. The extension options Mall mortgage XXXX. non-recourse on in

until that, Beyond our XXXX. next debt maturity doesn't occur

available continues liquidity of of position to end liquidity the June. Our $XXX be at with strong million

through either and $X.XX Our FAD XX% for expectations. XXXth maintained payout times, share rates. EBITDA or continue at bank of it a FFO to our announced in our we'll well was X.X ratio payable debt, dividend and to rising leverage rolling questions. to ratio XX%. was approximately debt we with we With the our third with be line that, XX.X%, week, quarter, Last fixed a positioned period in XX-month open our of And swapped, our basis, manage a our as On adjusted net up ratio September. XX% consecutive is payout was for interest

Operator

[Operator Instructions] question McElroy line the Citi. Your from of from comes first Christy

Your open. line is

Christine McElroy

good morning Bob, wanted Hi, up Hey guidance. follow everyone. the on to just

rent the So, XXXX. from higher terms to like me term NOI it comments the of that than fees are revision, in in leasing your the same-store sounds you're

term unchanged, core just you're So, keeping same-store lease other NOI degradation fees in including that seeing. growth in implies that

on maybe some So, provide can that. you color

Robert McCadden

million we in those -- for received not it had We where termination leases. would otherwise of tenants early been was had fees that it termination XXXX received income of the Sure. $X the we have

Christine McElroy

driving are color terms else -- some or what's bankruptcies what on in moving then other And maybe what kind that, of of the same-store? just parts is the just within

Robert McCadden

I'm sorry; that repeat question? you just second can

Christine McElroy

Yes, sure.

around provide other, the the growth, some the the you same-store just Just top -- so driving leases, are of NOI color moving What that. expect in that's those degradation excluding in parts loss same-store of that fees termination termination additional lower? those on terms of lease other rent the from

Robert McCadden

Okay.

closings, -- in in to, real of of year's appeal, around at tax we year. which be year estate of having was impact the bad half anticipate revenue this benefit level of obviously, some think and last could appeals store the addition sponsorship debt the we a our received timing it the don't I favorable variability tax second same

We also based And revenue percentage of saw one in percentage who a rent sales, some improvement in sales. of on pay expected we little erosion our bit their a of of that. tenants their in a

to We that haven't but seen. yet, seen remains still it be

our that guidance a not going into to revised be that's factor So, assumptions. we're factoring

Christine McElroy

to just guidance. be fee termination on And then clear Okay. lease

So, the at end guided to million. that upper around were you're you Last $X.X you've and year quarter now million. beginning I -- of million $X.X $X.X think to about at the range the you of

new -- assuming no higher additional fees inherent million? in a one the than in number expect So, should a $X.X the that guidance you the of -- lease we year inherent in in or half higher back termination range, the are

Robert McCadden

at -- to binary we a we range, maybe get we $X.X of million of of or going that. fees. end that Yes, additional up would either our none the be expect That's transaction; lease of again an to all term upper

Operator

comes Zhang Hong from of line next from Your Morgan. JP the question from

is open. Your line

Hongliang Zhang

termination fees tenants or that shops closing lot tenant Yes, as guys. you closed quarter, small was relates one the it shops? hi lot of guess, a I down received to a lease this large of this

Robert McCadden

-- are number -- couple was the tenant of for But -- we're is the space, I of focused lease, had the receive likely we made of be and I the would termination large large expect of It tenants wrong had under who that large this the that think, discussion. point with again, that's fee. one to a the key important the commitments the, of with one point benefit so a in aspects discussion, most closing combination are XXXX. these that point think on XX% think of that we this leased in But that I to the stores

Hongliang Zhang

Got you. Thank you.

Operator

comes line your of Sachs. from next from the question And Caitlin Burrows Goldman

Your line is open.

Caitlin Burrows

guess, Hi, XXXX. about we up District stabilization wondering good now on should morning expected the Fashion and was think team. in to I build just on how I

there you open first So, driver XXXX? say it is by and stabilization when but future a does in throughout that's to guys expect you be realize that detailed, September I quarter of mean kind next in pretty XXXX, build is guess, I that year numbers. of the or big

Robert McCadden

the pertaining Yes, we're I question, think open -- in think of to with a to higher occupancy XXXX. when going your I start we level

throughout as So, But we'll your see you half second XXXX to buildup likelihood, year. XXXX. occurring in in openings normal in would the stabilization half you second occurring seasonal have of certainly all of a the the the have

Caitlin Burrows

Wyoming Okay, the just the there's on back was of probably got Valley what in Bon-Ton other XXXX. And I Valley with it. mortgage think, you expected you a matures timing mentioned property -- going also I sort then And also, there? that you to wondering mentioned View lender, then

you on to So, any what do plan update at Valley View?

Robert McCadden

Valley, on for Wyoming View-- process. On appropriate comment But to in don’t that think it's I us Valley

Joseph Coradino

I View, Joe -- Coradino. this is think Valley In

options with through it's there, are to debt I looking we still backfilling at Valley we consider, anchors. mean, think also I we're our and to non-recourse obviously that respect have View, working

at we're to very but process; And we're relates as want to our as said, think a it our of this don't capital Wyoming, point. at Valley we be through careful at looking that, commitment I will going comment View. Bob options all at still We about

Operator

from question Bin of from Kim next Ki comes the Your line SunTrust.

open. is line Your

Ki Bin Kim

Good Thanks. guys. morning

basis think the on about of that couple a just lease going amounted on over So, been the amount percentage a percentage help years renewal you what's the leases Can rent you're XX% growing I me all has to it -- doing now, renewals, of activity. to past -- there? the understand

Robert McCadden

is Hey, this Bin, Ki Bob.

in seen or standards. methodology in some a the put what their of to the sales of the relatively portfolio reflecting replacement either our It's trouble probably bankruptcy by number have total. through to we of tenants. of that of of is of historical a just minimum that tenants last XX tenants Just a we we want that percentage of modest in maintaining And rent find than I were less into in a as coming you've in think things of context, that kind paying are quarters lieu some were using out where continue occupancy, of the way couple tenant state working while tenants is

those year, of term it's the percentage a at and year look generally you half. leases, sales If a

So, fix our tenant kind as see part don't some rather situations. of those that specific dealing a with portfolio of an we short-term of ongoing

Ki Bin Kim

you're Okay. expect of million internal lease accounting much And in you're for terms looks in like do terms of How $X next year, that's the what about to it of new that this expense year? to leasing language, trending costs. you

Robert McCadden

No, $X at, I our I'm sorry, report. if in historical at rate, you look been -- covered million year. you I And think your about on run if you it's think average per million look $X it

share will million roughly So, about results. $X.XX $X.XX, a the or impact our to XXXX be $X.XX

Ki Bin Kim

you. Thank Okay.

Operator

next the Street And Spenser of Allaway Green line your from comes Advisors. from question

Your open. line is

Spenser Allaway

Thank you.

on Just guidance. another

into So, closures your any known guidance the co-tenancy baked in $X.X there XQ. were opening in million adjustments cushion relative that today you Is event based increased? on the referenced is to is or remarks, closures the up

Robert McCadden

increase It's most that don't -- have in expect see estimate. for we the in the of generally based that anchor part would closures. on result XXXX known But in any don't balance additional any any or to closures we anticipated

Spenser Allaway

you. Okay. Thank

Operator

[Operator Securities. the Karin Instructions] Ford MUFG comes line Your next from from question of

Your line is open.

Karin Ford

was cost Hi, the if detail could commensurately up went wondering Fashion the at I down? give good us why, return District and why why I you came on guess, more morning.

Joseph Coradino

see originally out around point reasons occupy we entertainment And at the lots we an level. with saw to to not of this a least going that go this in of the vertical top and top and, component have an you developments, entertainment when -- fully top probably We we build were floor lease fact, with the of vacancies project concept that couple Essentially, Joe. conceived the which, and with is this Karen, as the AMC you Hi, was as the Sure. the et not the cetera. ping-pong, opportunity well country, cost. entertainment you'll for project, case floor. look to on at the raise and roof order stadium that accompanied that on the negotiations lease the in have executed the at was a I drove literally cost seating was that cost mentioned not call, bowling, -- movie theater, In we the in reason to the an And and the component as in that original biggest entertainment that increases. had for really not

Karin Ford

And not level I leased right? it's getting Is that on return right. incremental third an high incremental that yet return, just because is be that think dollars? those fully you're not that'd incremental as

Joseph Coradino

No, pro entire is the those for forma is in and actually level the in the lease of top -- numbers level, the the is reflected up that in third returns. revised

Karin Ford

okay. Okay,

Joseph Coradino

bought is about would of contracted allowances. our the by project I either to add, project or that it completed, the as relates the XX% out way,

on forward So, a exposure we have very a little basis. going cost

Karin Ford

Great. just last And then question the guidance, again. on

having the midpoint to know my a in you're and What half in come takes to puts of is takes zero? bring? is X% if implying back in correct, so, So, that first you growth the that anchors the what down that X.X% just lot NOI I of NOI growth online. same-store are half order did you're kind hit math that and the

Robert McCadden

our didn't Toys"R"Us that right part on yet of is second we haven't Bon-Ton bankruptcy the is or point occur in obviously the Those associated of we I expect closings and really third results math early the of think But co-tenancy. and the until recognized the operating closings half and quarter. year. second kind key late Yes, quarter, flattish the the I impact of your think

year. is So, progress Again, identifying that's -- up point some The additional in thing of be pretty we mentioned drag we impacting anticipate in those there favorable real question going I yes, this tax our which last for year, had rent for that's from sales as made have some again, were also, sales we benefit my, biggest have some potentially is that we properties. we of of the Christy's backfills which that's year going we on have received we last have. couple revenue bankrupt appeals tenants. percentage I be estate we to had good to comps tough multiple issues guess, mentioned then against that that, some to from I don't a response and international the percentage that, tenant, which tenant just the And

Operator

there this no time. I remarks. questions further to some over are back the for turn call And presenters our closing at will

Joseph Coradino

and call. your you you all thank for Enjoy in you. the the participating in of Well, rest see August I'll all Thank September.

Operator

concludes today's conference This call.

You disconnect. now may

Pennsylvania Real Estate Investment Trust (PRET) 3 Aug 182018 Q2 Earnings call transcript