PREIT Reports First Quarter 2019 Results

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PHILADELPHIA, May 2, 2019 /PRNewswire/ -- PREIT PEI today reported results for the quarter ended March 31, 2019.  A description of each non-GAAP financial measure and the related reconciliation to the comparable GAAP financial measure is located in the tables accompanying this release.



Quarter Ended

March 31,

(per share amounts)

2019



2018

Net loss - basic and diluted

$(0.30)



$(0.14)

FFO

$0.17



$0.29

FFO, as adjusted

$0.26



$0.29

FFO from assets sold in 2018

--



$(0.01)

FFO, as adjusted for assets sold

$0.26



$0.28

  • Same Store NOI, both including and excluding lease termination revenue, was up 2.2% for the quarter compared to March 31, 2018.
    • Same Store NOI, excluding lease termination revenue, in PREIT's wholly-owned portfolio was up 3.2% compared to March 31, 2018.
    • Lower revenues from tenants that filed for bankruptcy protection in 2018 and 2019 reduced first quarter 2019 Same Store NOI by $0.5 million compared to last year's first quarter. The impact of co-tenancy adjustments on same store NOI was not material.
  • NOI-weighted sales at our core malls increased to $531 per square foot. Core Mall sales per square foot reached $517, a 2.8% increase over the prior year and a sequential increase of 1.4%. Average comparable sales per square foot increased 4.2% in PREIT's top 6 properties to $621.
  • Core Mall total occupancy was 94.7%, a 100 bps increase over March 31, 2018. Leased space continues to exceed 95%, when factoring in 613,000 square feet of executed new leases slated for future occupancy.
    • Executed leases are comprised of 494,000 square feet of space expected to open in 2019 contributing annual gross rent of $10.4 million and 119,000 square feet opening in 2020 contributing annual gross rent of $2.3 million.
  • Average renewal spreads were 2.2% for the quarter, impacted by two lease renewals at contracting rents. Excluding these transactions, spreads would have been 7.5%. We expect this metric to normalize in the high single digits for the year.
  • Percentage in lieu renewal leases for the quarter resulted from portfolio transactions with several underperforming tenants. On average, the term of these leases is 1.9 years as we seek replacements throughout our portfolio. 66% of these transactions include fixed rent floors, mitigating downside risk.
  • Year-to-date, the Company has completed asset sales generating cash proceeds of $43 million and improved its liquidity position by over $70 million. The Company has no material debt maturities until 2021.

www.preit.com or on Twitter or LinkedIn. (PRNewsFoto/PREIT) (PRNewsFoto/)" alt="PREIT has a primary focus on the ownership and management of differentiated retail shopping malls crafted to fit the dynamic communities they serve. The Company operates properties in 12 states in the eastern U.S. with concentration in the Mid-Atlantic and Greater Philadelphia region. The Company is headquartered in Philadelphia, Pennsylvania. More information about PREIT can be found at www.preit.com or on Twitter or LinkedIn. (PRNewsFoto/PREIT) (PRNewsFoto/)">

"As catalyst projects are set to come online this Fall and we progress on our densification initiatives, PREIT continues to lead the way in redefining the mall experience with results that validate our strategy," said Joseph F. Coradino, Chairman and Chief Executive Officer of PREIT.  "With sales per square foot approaching the next milestone of $550, no unleased anchor space in our core mall portfolio and progress on delivering over 5,000 apartment units, our portfolio is attractive to tenants and reflective of the future of our industry.  We continue to place a strong emphasis on delivering new and differentiated customer experiences to our malls and have a strategy to generate proceeds to recapitalize the Company for sustainable growth in the future."

Primary Factors Affecting Financial Results for the Quarters Ended March 31, 2019 and March 31, 2018:

  • Net loss attributable to PREIT common shareholders was $21.4 million, or $0.30 per basic and diluted share for the quarter ended March 31, 2019, compared to net loss attributable to PREIT common shareholders of $9.4 million, or $0.14 per basic and diluted share for the quarter ended March 31, 2018.
  • Same Store NOI increased by $1.1 million, or 2.2%, from $51.2 million for the quarter ended March 31, 2018 to $52.3 million for the quarter ended March 31, 2019. Revenue from new store openings, including contributions from replacement anchors, mitigated the impact of revenue lost to bankruptcies and associated store closings. Non Same Store NOI decreased by $1.3 million primarily due to lower rents and associated co-tenancy revenue adjustments from multiple anchor closings at Wyoming Valley and Valley View malls and the sale of an office property at Fashion District in the first quarter of 2018.
  • Same Store NOI, excluding lease termination revenue, at unconsolidated properties declined 3.7%.
  • FFO, as adjusted, for the quarter was $0.26 per share and OP Unit, compared to $0.29 per share and OP Unit in the prior year.
  • FFO for the quarter was $0.17 per share and OP Unit compared to $0.29 per share and OP Unit in the prior year. Adjustments to FFO in the 2019 quarter included $0.06 per share loss on debt extinguishment, $0.02 per share impairment of a development land parcel, and $0.01 per share provision for employee separation expense. There were no such adjustments in the 2018 period. However, net dilution from assets sold in 2018 was approximately $0.01 per share.
  • General and administrative expenses were impacted by the new lease accounting standard that now limits the capitalization of certain leasing costs. We expensed $1.5 million ($0.02 per share) of costs in the first quarter of 2019 that would have been capitalized under the prior standard.

All NOI and FFO amounts referenced as primary factors affecting financial results above include our share of unconsolidated properties' revenues and expenses. 

Asset Dispositions

In March 2019, we sold a portion of our undeveloped land located in Gainesville, Florida for consideration of $5.0 million. The remaining portion of the land is expected to close in the second half of 2019 for approximately $10.0 million

In April 2019, we closed on the sale of the Whole Foods parcel located at Exton Square Mall for $22.1 million

In April 2019, we sold an undeveloped land parcel located in New Garden Township, Pennsylvania, for total consideration of $11.0 million consisting of $8.25 million in cash and $2.75 million of preferred stock.  

Financing Activity

In March 2018, we repaid a $58.5 million mortgage loan including accrued interest, secured by Capital City Mall in Camp Hill, Pennsylvania using funds from our 2013 Revolving Facility and the balance from available working capital. We recorded a loss on debt extinguishment of $4.8 million in March 2019 in connection with this repayment.  The addition of Capital City Mall to our unencumbered pool is expected to generate approximately $40 million in incremental capacity under our Revolving Facility.

Capital Transaction Summary



Closed

Under

Contract

Total



Gainesville Development Parcel

$5,000

$10,000

$15,000

(1)

New Garden Township Parcel

8,250



8,250

(2)

Wiregrass mortgage loan sale

8,000



8,000



Whole Foods Parcel

10,500



10,500

(3)

Capital City transaction - incremental capacity

40,000



40,000

(4)

Total

$71,750

$10,000

$81,750













(1) Under contract and expected to close in the second half of 2019









(2) Represents cash proceeds; does not include $2.8 million of preferred stock received by the Company



(3) Represents the net liquidity to the Company after adjusting for line capacity.  Sale price was $22.1 million

(4) Represents the Company's approximate incremental borrowing capacity by the end of 2019, net of the Capital City mortgage loan defeasance















Leasing and Redevelopment

  • Excluding Fashion District Philadelphia, 613,000 square feet of leases are signed for future openings. This is comprised of 494,000 square feet of space expected to open in 2019 contributing annual gross rent of $10.4 million and 119,000 square feet opening in 2020 contributing annual gross rent of $2.3 million.
  • At Moorestown Mall, Sierra opened in the former Macy's space, joining Five Below and the region's first HomeSense.
  • At Willow Grove Park, construction continues on the 51,000 square foot Studio Movie Grill, which is projected to open in first quarter of 2020. During the quarter, a lease was executed with Yard House which will complement the movie theater along with an additional entertainment operator, for which a lease is being negotiated.
  • At Valley Mall, both Macy's and The Bon Ton were replaced in 2018. In December 2018, the Company signed a lease with DICK's Sporting Goods to replace a former Sears that was acquired in 2018. DICK's Sporting Goods is expected to open in 2020.
  • At Fashion District Philadelphia, leases for over 85% of the leasable area are signed or are in active negotiation. Noteworthy commitments joining Century 21 and Burlington include H&M, Nike, Forever 21, AMC Theaters, Round One, City Winery, Ulta, Columbia Sportswear and Guess Factory. The first wave of tenants is expected to open in September 2019.
  • At Plymouth Meeting Mall, work continues to replace a former Macy's with five new tenants – Burlington, DICK's Sporting Goods, Miller's Ale House, Michael's and Edge Fitness. All five tenants are expected to open in October 2019.
  • The redevelopment at Woodland Mall is in its final stages, with opening of the new wing planned for October 2019. The first REI in our portfolio will open here this month and, during the quarter, we executed a lease with The Cheesecake Factory which will open this Fall.

Retail Operations

The following table sets forth information regarding sales per square foot in the Company's core mall portfolio, including unconsolidated properties:

A reconciliation of portfolio sales per square foot (1) for the core mall portfolio can be found below:



Comp store sales for the rolling twelve months ended March 31, 2018

$485



Organic sales growth

14



Impact of non-core malls

18



Comp store sales for the rolling twelve months ended March 31, 2019

$517







(1)

Based on reported sales by all comparable non-anchor tenants that lease individual spaces of less than 10,000 square feet and have occupied the space for at least 24 months.

2019 Outlook

The Company expects a GAAP net loss of between $0.63 and $0.46 per diluted share for the year ending December 31, 2019.

The Company is reaffirming its February 13, 2019 guidance for FFO as adjusted of $1.20 to $1.34 per share.  FFO is expected to be between $1.17 and $1.31 per share. Same Store NOI, excluding termination revenue, is expected to grow between 1.0% and 1.9% with wholly-owned properties in the range of 1.6% to 2.6% and joint venture properties declining between 3.0% and 2.4%.

A reconciliation between GAAP net loss and FFO is as follows: 



2019 Guidance Range

(Estimates per diluted share)

Low

High

Net loss attributable to common shareholders

$ (0.63)

$ (0.46)

Depreciation and amortization, non-controlling interest and other

1.80

1.77

FFO per share

$ 1.17

$ 1.31

Loss on debt extinguishment

0.06

0.06

Impairment of development land parcel

0.02

0.02

Provision for employee separation expense

0.01

0.01

Insurance recoveries

(0.06)

(0.06)

FFO per share, as adjusted

$ 1.20

$ 1.34

Detailed guidance assumptions are included herein in our financial tables.

Our 2019 guidance is based on our current assumptions and expectations about market conditions, our projections regarding occupancy, retail sales and rental rates, and planned capital spending. Our guidance is forward-looking, and is subject to risks, uncertainties and changes in circumstances that might cause future events, achievements or results to differ materially from those expressed or implied by the forward-looking statements.

Conference Call Information

Management has scheduled a conference call for 11:00 a.m. Eastern Time on Friday, May 3, 2019, to review the Company's results and future outlook.  To listen to the call, please dial 1-844-885-9139 (domestic toll free), or 1-647-689-4441 (international), and request to join the PREIT call, Conference ID  4279998, at least five minutes before the scheduled start time.  Investors can also access the call in a "listen only" mode via the internet at the Company's website, preit.com.  Please allow extra time prior to the call to visit the site and download the necessary software to listen to the Internet broadcast.  Financial and statistical information expected to be discussed on the call will also be available on the Company's website. For best results when listening to the webcast, the Company recommends using Flash Player.

For interested individuals unable to join the conference call, the online archive of the webcast will also be available for one year following the call.

About PREIT

PREIT PEI is a publicly traded real estate investment trust that owns and manages quality properties in compelling markets. PREIT's robust portfolio of carefully curated retail and lifestyle offerings mixed with destination dining and entertainment experiences are located primarily in the densely-populated eastern U.S. with concentrations in the mid-Atlantic's top MSAs. Since 2012, the Company has driven a transformation guided by an emphasis on portfolio quality and balance sheet strength driven by disciplined capital expenditures. Additional information is available at www.preit.com or on Twitter or LinkedIn.

Rounding

Certain summarized information in the tables above may not total due to rounding.

Definitions

Funds From Operations (FFO)

The National Association of Real Estate Investment Trusts ("NAREIT") defines FFO, which is a non-GAAP measure commonly used by REITs, as net income (computed in accordance with GAAP) excluding (i) depreciation and amortization related to real estate, (ii) gains and losses from the sale of certain real estate assets, (iii) gains and losses from change in control, and (iv) impairment write-downs of certain real estate assets and investments in entities when the impairment is directly attributable to decreases in the value of depreciable real estate held by the entity. We compute FFO in accordance with standards established by NAREIT, which may not be comparable to FFO reported by other REITs that do not define the term in accordance with the current NAREIT definition, or that interpret the current NAREIT definition differently than we do.

FFO is a commonly used measure of operating performance and profitability among REITs.  We use FFO and FFO per diluted share and unit of limited partnership interest in our operating partnership ("OP Unit") and, when applicable, related measures such as Funds From Operations, as adjusted, in measuring our performance against our peers and as one of the performance measures for determining incentive compensation amounts earned under certain of our performance-based executive compensation programs. 

FFO does not include gains and losses on sales of operating real estate assets or impairment write downs of depreciable real estate, which are included in the determination of net income in accordance with GAAP. Accordingly, FFO is not a comprehensive measure of our operating cash flows. In addition, since FFO does not include depreciation on real estate assets, FFO may not be a useful performance measure when comparing our operating performance to that of other non-real estate commercial enterprises. We compensate for these limitations by using FFO in conjunction with other GAAP financial performance measures, such as net income and net cash provided by operating activities, and other non-GAAP financial performance measures, such as NOI. FFO does not represent cash generated from operating activities in accordance with GAAP and should not be considered to be an alternative to net income (determined in accordance with GAAP) as an indication of our financial performance or to be an alternative to cash flow from operating activities (determined in accordance with GAAP) as a measure of our liquidity, nor is it indicative of funds available for our cash needs, including our ability to make cash distributions. We believe that net income is the most directly comparable GAAP measurement to FFO.

When applicable, we also present Funds From Operations, as adjusted, and Funds From Operations per diluted share and OP Unit, as adjusted, which are non-GAAP measures, to show the effect of such items as provision for employee separation expense and accelerated amortization of financing costs, which can have a significant effect on our results of operations, but are not, in our opinion, indicative of our operating performance.  We also present FFO on a further adjusted basis to isolate the impact on FFO caused by property dispositions.

We believe that FFO is helpful to management and investors as a measure of operating performance because it excludes various items included in net income that do not relate to or are not indicative of operating performance, such as gains on sales of operating real estate and depreciation and amortization of real estate, among others. We believe that Funds From Operations, as adjusted, is helpful to management and investors as a measure of operating performance because it adjusts FFO to exclude items that management does not believe are indicative of our operating performance, such as provision for employee separation expense, loss on debt extinguishment and insurance losses and recoveries.

Net Operating Income ("NOI")

NOI (a non-GAAP measure) is derived from real estate revenue (determined in accordance with GAAP, including lease termination revenue), minus property operating expenses (determined in accordance with GAAP), plus our pro rata share of revenue and property operating expenses of our unconsolidated partnership investments. NOI does not represent cash generated from operating activities in accordance with GAAP and should not be considered to be an alternative to net income (determined in accordance with GAAP) as an indication of our financial performance or to be an alternative to cash flow from operating activities (determined in accordance with GAAP) as a measure of our liquidity. It is not indicative of funds available for our cash needs, including our ability to make cash distributions.  We believe that NOI is helpful to management and investors as a measure of operating performance because it is an indicator of the return on property investment, and provides a method of comparing property performance over time. We believe that net income is the most directly comparable GAAP measurement to NOI.

NOI excludes other income, general and administrative expenses, provision for employee separation expenses, interest expense, depreciation and amortization, impairment of assets, gains on sale of interest in non operating real estate, gain/adjustments to gain on sale of interest in real estate by equity method investee, gains/losses on sales of interests in real estate, net, project costs, loss on debt extinguishment, insurance losses recoveries and other expenses.

Same Store NOI is calculated using retail properties owned for the full periods presented and excludes properties acquired, disposed, under redevelopment or designated as non-core during the periods presented.  In 2018, Wyoming Valley Mall was designated as non-core.  In 2019, Exton Square and Valley View Malls were designated as non-core and will be excluded from Same Store NOI.  Non Same Store NOI is calculated using the retail properties excluded from the calculation of Same Store NOI.

Financial Information of our Unconsolidated Properties

The non-GAAP financial measures of FFO and NOI presented in this press release incorporate financial information attributable to our share of unconsolidated properties. This proportionate financial information is also non-GAAP financial information, but we believe that it is helpful information because it reflects the proportionate contribution from our unconsolidated properties that are owned through investments accounted for under GAAP using the equity method of accounting.  Under such method, earnings from these unconsolidated partnerships are recorded in our statements of operations prepared in accordance with GAAP under the caption entitled "Equity in income of partnerships."

To derive the proportionate financial information from our unconsolidated properties, we multiplied the percentage of our economic interest in each partnership on a property-by-property basis by each line item.  Under the partnership agreements relating to our current unconsolidated partnerships with third parties, we own a 25% to 50% economic interest in such partnerships, and there are generally no provisions in such partnership agreements relating to special non-proportionate allocations of income or loss, and there are no preferred or priority returns of capital or other similar provisions.  While this method approximates our indirect economic interest in our pro rate share of the revenue and expenses of our unconsolidated partnerships, we do not have a direct legal claim to the assets, liabilities, revenues or expenses of the unconsolidated partnerships beyond our rights as an equity owner in the event of any liquidation of such entity.  Our percentage ownership is not necessarily indicative of the legal and economic implications of our ownership interest.  Accordingly, NOI and FFO results based on our share of the results of unconsolidated partnerships do not represent cash generated from our investments in these partnerships.

Core Properties

Core Properties include all operating retail properties except for Exton Square Mall, Valley View Mall, Wyoming Valley Mall and Fashion District Philadelphia, which is currently under redevelopment.  Core Malls excludes these properties, power centers and Gloucester Premium Outlets.

Forward Looking Statements

This press release contains certain forward-looking statements that can be identified by the use of words such as "anticipate," "believe," "estimate," "expect," "intend," "may," "project"  or similar expressions. Forward-looking statements relate to expectations, beliefs, projections, future plans, strategies, anticipated events, trends and other matters that are not historical facts. These forward-looking statements reflect our current views about future events, achievements or results and are subject to risks, uncertainties and changes in circumstances that might cause future events, achievements or results to differ materially from those expressed or implied by the forward-looking statements. In particular, our business might be materially and adversely affected by the following:

  • changes in the retail and real estate industries, including consolidation and store closings, particularly among anchor tenants;
  • current economic conditions and the corresponding effects on tenant business performance, prospects, solvency and leasing decisions;
  • our inability to collect rent due to the bankruptcy or insolvency of tenants or otherwise;
  • our ability to maintain and increase property occupancy, sales and rental rates;
  • increases in operating costs that cannot be passed on to tenants;
  • the effects of online shopping and other uses of technology on our retail tenants;
  • risks related to our development and redevelopment activities, including delays, cost overruns and our inability to reach projected occupancy or rental rates;
  • acts of violence at malls, including our properties, or at other similar spaces, and the potential effect on traffic and sales;
  • our ability to sell properties that we seek to dispose of or our ability to obtain prices we seek;
  • potential losses on impairment of certain long-lived assets, such as real estate, including losses that we might be required to record in connection with any disposition of assets;
  • our substantial debt and the liquidation preference of our preferred shares and our high leverage ratio;
  • our ability to refinance our existing indebtedness when it matures, on favorable terms or at all;
  • our ability to raise capital, including through sales of properties or interests in properties and through the issuance of equity or equity-related securities if market conditions are favorable; and
  • potential dilution from any capital raising transactions or other equity issuances.

Additional factors that might cause future events, achievements or results to differ materially from those expressed or implied by our forward-looking statements include those discussed herein and in our Annual Report on Form 10-K for the year ended December 31, 2018 in the section entitled "Item 1A. Risk Factors." We do not intend to update or revise any forward-looking statements to reflect new information, future events or otherwise.

**     Quarterly supplemental financial and operating     **

**     information will be available on www.preit.com 
   **

CONTACT: AT THE COMPANY

Robert McCadden

EVP & CFO

(215) 875-0735

Heather Crowell

EVP, Strategy and Communications

(215) 454-1241

heather.crowell@preit.com

 



2018 Actual



2019 Guidance



Same Store NOI Growth



Low



High



Low



High

Same Store NOI, excluding termination revenue



















Wholly-owned properties

$

188.7





$

191.7





$

193.6





1.6

%



2.6

%

Unconsolidated properties

29.7





28.8





29.0





(3.0)

%



(2.4)

%



218.4





220.5





222.6





1.0

%



1.9

%

Non-Same Store NOI

20.1





13.7





14.0











NOI, excluding lease termination revenue

238.5





234.2





236.6











Lease termination revenue of consolidated and unconsolidated properties

9.2





2.0





4.0











Total NOI

$

247.7





$

236.2





$

240.6











General and administrative and leasing expenses



















General and administrative expenses

(38.3)





(38.0)





(37.5)











Leasing costs expensed under ASC 842





(5.7)





(6.0)











Other income (expenses)



















Corporate revenues

4.3





1.1





1.3











Land sale gains

8.1





5.5





10.0











Provision for employee separation expense

(1.1)





(0.7)





(0.7)











Impairment of mortgage loan receivable/land parcel

(8.1)





(1.5)





(1.5)











Other, including non-real estate depreciation

(1.5)





(2.2)





(2.0)











Insurance losses (recoveries)





4.0





5.0











Capital costs



















Interest expense, gross

(83.3)





(88.9)





(88.5)











Capitalized interest

11.1





14.2





14.6











Preferred share dividends

(27.4)





(27.4)





(27.4)











Loss on debt extinguishment





(4.8)





(4.8)











Funds from Operations (FFO)

$

111.5





$

91.8





$

103.1











Adjustments:



















Impairment of mortgage loan receivable/land parcel

8.1





1.5





1.5











Provision for employee separation expense

1.1





0.7





0.7











Insurance recoveries and other

(0.3)





(4.0)





(5.0)











Loss on debt extinguishment





4.8





4.8











FFO as adjusted

$

120.4





$

94.8





$

105.1











FFO per share

$

1.42





$

1.17





$

1.31











FFO, as adjusted per share

$

1.54





$

1.20





$

1.34













































































2018 Actual



2019 Guidance





Low



High













Net loss

$

(126.5)





$

(20.7)





$

(7.4)



Depreciation and amortization

140.3





138.0





136.0



Gains on sales of operating assets

(4.3)





1.9





1.9



Impairment of real estate assets

129.4











Preferred share dividends

(27.4)





(27.4)





(27.4)



Funds From Operations

$

111.5





$

91.8





$

103.1



Adjustments:











Impairment of mortgage loan receivable/land parcel

8.1





1.5





1.5



Provision for employee separation expense

1.1





0.7





0.7



Insurance recoveries and other

(0.3)





(4.0)





(5.0)



Loss on debt extinguishment





4.8





4.8



FFO as adjusted

$

120.4





$

94.8





$

105.1















Net loss

$

(126.5)





$

(20.7)





$

(7.4)



Preferred share dividends

(27.4)





(27.4)





(27.4)



Noncontrolling interest

16.2





2.0





1.4



Dividends on unvested restricted shares

(0.5)





(0.9)





(0.9)



Net loss used to calculate earnings per share

$

(138.2)





$

(47.0)





$

(34.3)















Weighted average shares

69.7





75.1





75.1



Weighted average shares, including OP units

78.3





78.3





78.3















Net loss per share

$

(1.98)





$

(0.63)





$

(0.46)



 

 

STATEMENTS OF OPERATIONS (Unaudited)



Quarter Ended

March 31,



(in thousands)



2019



2018















REVENUE:











   Real estate revenue:











 Lease revenue



$

76,615





$

77,998





 Expense reimbursements



5,062





5,234





 Other real estate revenue



3,001





2,161





Total real estate revenue



84,678





85,393





 Other income



627





889





Total revenue



85,305





86,282





EXPENSES:











Operating expenses











 Property operating expenses:











CAM and real estate taxes



(29,403)





(29,396)





Utilities



(3,660)





(3,909)





Credit losses







(1,062)





Other property operating expenses



(2,065)





(2,338)





Total property operating expenses



(35,128)





(36,705)





 Depreciation and amortization



(34,904)





(34,030)





 General and administrative expenses



(11,205)





(10,132)





 Provision for employee separation expense



(719)









 Project costs and other expenses



(294)





(112)





Total operating expenses



(82,250)





(80,979)





 Interest expense, net



(15,898)





(14,901)





 Loss on debt extinguishment



(4,768)









 Impairment of development land parcel



(1,464)









Total expenses



(104,380)





(95,880)





Loss before equity in income of partnerships, gain on sale of real estate by equity method investee, and adjustment to gains on sales of interests in non operating real estate



(19,075)





(9,598)





Equity in income of partnerships



2,289





3,138





Gain on sale of real estate by equity method investee



563





2,773





Adjustment to gains on sales of interests in non operating real estate







(25)





Net loss



(16,223)





(3,712)





Less: net loss attributable to noncontrolling interest



1,688





1,111





Net loss attributable to PREIT



(14,535)





(2,601)





Less: preferred share dividends



(6,844)





(6,844)





Net loss attributable to PREIT common shareholders



$

(21,379)





$

(9,445)





 

EARNINGS PER SHARE (Unaudited)

Quarter Ended

March 31,



(in thousands of dollars, except per share amounts)

2019



2018



Net loss

$

(16,223)





$

(3,712)





Noncontrolling interest

1,688





1,111





Preferred share dividends

(6,844)





(6,844)





Dividends on unvested restricted shares

(218)





(138)





Net loss used to calculate loss per share—basic and diluted

$

(21,597)





$

(9,583)















Basic and diluted loss per share:

$

(0.30)





$

(0.14)















(in thousands of shares)









Weighted average shares outstanding—basic

71,358





69,601





Effect of common share equivalents (1)









Weighted average shares outstanding—diluted

71,358





69,601







 (1)The company had net losses for the quarters ended March 31, 2019 and 2018, respectively, therefore, the effects of common share equivalents are excluded from the calculation of diluted loss per share for these periods because they would be antidilutive.

 

OTHER COMPREHENSIVE INCOME (LOSS) (Unaudited)



Quarter Ended

March 31,







2019



2018



(in thousands)











Comprehensive (loss) income:











Net loss



$

(16,223)





$

(3,712)





Unrealized (loss) gain on derivatives



(6,508)





4,828





Amortization of settled swaps



2





275





Total comprehensive (loss) income



(22,729)





1,391





Less: comprehensive loss attributable to noncontrolling interest



2,253





570





Comprehensive (loss) income attributable to PREIT



$

(20,476)





$

1,961





 

The following table presents a reconciliation of net income (loss) determined in accordance with GAAP to (i) Funds from operations attributable to common shareholders and OP Unit holders, (ii) Funds from operations, as adjusted, attributable to common shareholders and OP Unit holders , (iii) Funds from operations, as adjusted for assets sold, (iv) Funds from operations attributable to common shareholders and OP Unit holders per diluted share and OP Unit (v) Funds from operations, as adjusted, attributable to common shareholders and OP Unit holders per diluted share and OP Unit, and (vi) Funds from operations, as adjusted for assets sold per diluted share and OP Unit for the quarters ended March 31, 2019 and 2018, respectively:



Quarter Ended

March 31,



(in thousands, except per share amounts)

2019



2018



Net loss

$

(16,223)





$

(3,712)





    Depreciation and amortization on real estate:









    Consolidated properties

34,565





33,663





    PREIT's share of equity method investments

1,970





2,241





     Gain on sale of real estate by equity method investee





(2,773)





     Preferred share dividends

(6,844)





(6,844)





Funds from operations attributable to common shareholders and OP Unit holders

13,468





22,575





 Loss on debt extinguishment

4,768









 Impairment of development land parcel

1,464









 Provision for employee separation expense

719









 Insurance losses, net

236









Funds from operations, as adjusted, attributable to common shareholders and OP Unit holders

20,655





22,575





Less: Funds from operations from assets sold in 2019 and 2018





(412)





Funds from operations, as adjusted for assets sold

$

20,655





$

22,163















Funds from operations attributable to common shareholders and OP Unit holders per diluted share and OP Unit

$

0.17





$

0.29





Funds from operations, as adjusted, attributable to common shareholders and OP Unit holders per diluted share and OP Unit

$

0.26





$

0.29





Funds from operations, as adjusted for assets sold per diluted share and OP Unit

$

0.26





$

0.28















Weighted average number of shares outstanding

71,358





69,601





Weighted average effect of full conversion of OP Units

6,884





8,274





Effect of common share equivalents

309





209





Total weighted average shares outstanding, including OP Units

78,551





78,084





 

NOI for the quarters ended March 31, 2019 and 2018:





Same Store



Non-Same Store



Total

 (in thousands)



2019



2018



2019



2018



2019



2018

NOI from consolidated properties



$

45,271





$

43,607





$

4,278





$

5,081





$

49,549





$

48,688



NOI from equity method investments at ownership share



7,052





7,575





(29)





463





7,023





8,038



Total NOI



52,323





51,182





4,249





5,544





56,572





56,726



Less: lease termination revenue



300





261





16





21





316





282



Total NOI excluding lease termination revenue



$

52,023





$

50,921





$

4,233





$

5,523





$

56,256





$

56,444



 

The table below reconciles net loss to NOI of our consolidated properties for the quarters ended March 31, 2019 and 2018.



Quarter Ended

March 31,



(in thousands)

2019



2018



Net loss

$

(16,223)





$

(3,712)





Other income

(628)





(889)





Depreciation and amortization

34,904





34,030





General and administrative expenses

11,205





10,132





Provision for employee separation expense

719









Project costs and other expenses

294





112





Interest expense, net

15,898





14,901





Impairment of development land parcel

1,464









Loss on debt extinguishment

4,768









Equity in income of partnerships

(2,289)





(3,138)





Gain on sale of real estate by equity method investee

(563)





(2,773)





(Adjustment to gains) gains on sales of interest in non operating real estate





25





NOI from consolidated properties

49,549





48,688





Less: Non Same Store NOI of consolidated properties

4,278





5,081





Same Store NOI from consolidated properties

45,271





43,607





Less: Same Store lease termination revenue

297





10





Same Store NOI excluding lease termination revenue

$

44,974





$

43,597





 

The table below reconciles equity in income of partnerships to NOI of equity method investments at ownership share for the quarters ended March 31, 2019 and 2018:



Quarter Ended

March 31,



(in thousands)

2019



2018



Equity in income of partnerships

$

2,289





$

3,138





Other income

(12)





(12)





Depreciation and amortization

1,970





2,241





Interest and other expenses

2,776





2,671





Net operating income from equity method investments at ownership share

7,023





8,038





Less: Non Same Store NOI from equity method investments at ownership share

(29)





463





Same Store NOI of equity method investments at ownership share

7,052





7,575





Less: Same Store lease termination revenue

3





251





Same Store NOI from equity method investments excluding lease termination revenue at ownership share

$

7,049





$

7,324





 

CONSOLIDATED BALANCE SHEETS



March 31, 2019



December 31, 2018





(Unaudited)





(in thousands)









ASSETS:









INVESTMENTS IN REAL ESTATE, at cost:









Operating properties



$

3,058,422





$

3,063,531



Construction in progress



119,873





115,182



Land held for development



5,881





5,881



Total investments in real estate



3,184,176





3,184,594



Accumulated depreciation



(1,148,794)





(1,118,582)



Net investments in real estate



2,035,382





2,066,012



INVESTMENTS IN PARTNERSHIPS, at equity:



149,795





131,124



OTHER ASSETS:









Cash and cash equivalents



10,416





18,084



Tenant and other receivables, net



35,344





38,914



Intangible assets (net of accumulated amortization of $16,391 and $15,543 at March 31, 2019 and December 31, 2018, respectively)



17,020





17,868



Deferred costs and other assets, net



107,239





110,805



Assets held for sale



35,275





22,307



Total assets



$

2,390,471





$

2,405,114



LIABILITIES:









Mortgage loans payable, net



$

985,763





$

1,047,906



Term Loans, net



547,478





547,289



Revolving Facilities



162,000





65,000



Tenants' deposits and deferred rent



10,261





15,400



Distributions in excess of partnership investments



91,227





92,057



Fair value of derivative liabilities



6,364





3,010



Accrued expenses and other liabilities



85,431





87,901



Total liabilities



1,888,524





1,858,563



EQUITY:



501,947





546,551



Total liabilities and equity



$

2,390,471





$

2,405,114



 

Changes in Funds from Operations for the Quarter Ended March 31, 2019 as compared to the Quarter Ended March 31, 2018 (all per share amounts on a diluted basis unless otherwise noted; rounded to the nearest half penny; amounts may not total due to rounding)

(in thousands, except per share amounts)



Quarter Ended

March 31, 2019



Per Diluted Share

and OP Unit



Funds from Operations, as adjusted March 31, 2018



$

22,575





$

0.29

















Changes - Q1 2018 to Q1 2019























Contribution from anchor replacements, increase in base rents and net CAM and real estate tax recoveries



1,290





0.015





Impact from bankruptcies



(462)





(0.005)





Lease termination revenue



287





0.005





Bad debt expense



455





0.005





Other



93









Same Store NOI from unconsolidated properties



(522)





(0.005)





Same Store NOI



1,141





0.015





Non Same Store NOI



(803)





(0.010)





Dilutive effect of asset sales



(412)





(0.005)





General and administrative expenses



110









Capitalization of leasing costs



(1,184)





(0.015)





Gain on sale of non-operating real estate



589





0.010





Other



(294)





(0.005)





Interest expense



(1,067)





(0.015)





Funds from Operations, as adjusted March 31, 2019



$

20,655





$

0.26





      Loss on debt extinguishment



(4,768)





(0.060)





      Impairment of development land parcel



(1,464)





(0.020)





      Provision for employee separation expense



(719)





(0.010)





      Insurance losses, net



(236)









Funds from Operations March 31, 2019



$

13,468





$

0.17





 

 

Cision View original content to download multimedia:http://www.prnewswire.com/news-releases/preit-reports-first-quarter-2019-results-300843166.html

SOURCE PREIT

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