EX-99.1 2 a2018q2exhibit991earningsr.htm EXHIBIT 99.1 Exhibit
Exhibit 99.1


preitlogoa19.jpg
CONTACT: AT THE COMPANY
Robert McCadden
EVP & CFO
(215) 875-0735

Heather Crowell
SVP, Corporate Communications and Investor Relations
(215) 454-1241
heather.crowell@preit.com

PREIT Reports Second Quarter 2018 Results
Executed Non-Anchor Leases add 230 bps to Occupancy
Sales PSF at Top 5 Properties Exceed $600
$700 Million Credit Facility Recast Complete
Average Renewal Spreads were 7.5% in Wholly Owned Portfolio

Philadelphia, PA, August 2, 2018 - PREIT (NYSE: PEI) today reported results for the quarter and six months ended June 30, 2018. A description of each non-GAAP financial measure used in this release and the related reconciliation to the comparable GAAP financial measure is located in the tables accompanying this release.

 
Quarter Ended
June 30,
 
Six Months Ended
June 30,
(per share amounts)
2018
 
2017
 
2018
 
2017
Net loss per share - basic and diluted
$(0.51)
 
$(0.79)
 
$(0.66)
 
$(0.89)
FFO per diluted share and OP unit
$0.38
 
$0.38
 
$0.67
 
$0.73
FFO, as adjusted
$0.39
 
$0.39
 
$0.68
 
$0.74
FFO from assets sold in 2017 and 2018
—

 
$(0.03)
 
$(0.01)
 
$(0.06)
FFO, as adjusted for assets sold
$0.39
 
$0.36
 
$0.67
 
$0.68

Highlights from the quarter include:
•
Executed leases with impressive roster of high-performance tenants, validating the improved quality of the Company’s portfolio, including: REI, Urban Outfitters, Dick’s Sporting Goods, Polo Ralph Lauren, Studio Movie Grill, Forever 21, Maggie McFly’s, City Winery, Burlington, Fatburger, &pizza, Altar’d State, Phenix Salon Suites, Edge Fitness, Ardene, Kay Jewelers, 1776 and more.
•
Same Store NOI increased by 10.7% for the quarter and 4.3% for the six months ended June 30, 2018 compared to the prior periods.
•
Same Store NOI excluding lease termination revenue increased by 1.4% for the quarter and was essentially flat for the six months ended June 30, 2018 compared to the prior periods.

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•
The quarterly results were adversely impacted by an incremental $0.9 million from bankruptcies and $0.8 million from co-tenancy claims.
•
FFO, as adjusted for assets sold increased by 9.5% during the quarter.
•
NOI-weighted sales per square foot were $501.
•
Core Mall GLA-weighted sales per square foot reached $489, a 2.1% increase over the prior year.
•
Total leased space for core malls was 94.3% with non-anchor leased space for core malls at 93.3%.
•
Average rent renewal spreads for tenants less than 10,000 square feet at wholly owned properties were 7.5% for the quarter, a 310 bps sequential improvement.
•
Credit Facility amendment and restatement results in no debt maturities until July 2020.

"We have now completed the transition into a high-quality mall REIT as evidenced by the impressive roster of recently executed leases, our successful anchor replacement efforts, improving operating metrics and a realizable vision for our marquee project, Fashion District Philadelphia,” said Joseph F. Coradino, Chief Executive Officer. “As we look toward near-term execution of our first multifamily addition, we are redefining the mall paradigm and have created a commanding portfolio supported by powerful demographics where our guests can shop, dine, play, work and stay. This course of action is delivering increased traffic and sales which we expect will drive shareholder value.”

Primary Factors Affecting Financial Results for the Quarters Ended June 30, 2018 and June 30, 2017:
•
Net loss attributable to PREIT common shareholders was $35.8 million, or $0.51 per basic and diluted share, compared to net loss attributable to PREIT common shareholders of $54.7 million, or $0.79 per basic and diluted share, for the quarter ended June 30, 2017. 
•
Impairment of assets of $32.2 million and $2.1 million was recognized on Wyoming Valley Mall and undeveloped land located in Gainesville, Florida, respectively, for the quarter ended June 30, 2018 compared to impairment of assets of $38.4 million and $15.5 million recognized on Logan Valley Mall (sold in 2017) and Valley View Mall, respectively, for the quarter ended June 30, 2017.
•
Same Store NOI increased to $62.8 million for the quarter ended June 30, 2018 compared to $56.7 million for the quarter ended June 30, 2017.
•
Same Store NOI excluding lease termination revenue increased to $55.7 million for the quarter ended June 30, 2018 compared to $54.9 million for the quarter ended June 30, 2017.
•
Non Same Store NOI decreased $4.5 million primarily due to properties sold in 2018 and 2017. 
•
FFO, as adjusted, for the quarter was $0.39 per diluted share and OP Unit in both periods. The 2017 period included approximately $0.03 per share of FFO from assets sold in 2018 and 2017.
•
Interest expense increased by $1.7 million primarily due to higher average borrowings, increased interest rates and accelerated amortization of deferred financing fees of $0.4 million in connection with our 2018 Amended Credit Agreements, partially offset by greater amounts of capitalized interest.
•
Preferred share dividends decreased by $0.2 million following the redemption of Series A preferred shares in October 2017.

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Primary Factors Affecting Financial Results for the Six Months Ended June 30, 2018 and June 30, 2017:
•
Net loss attributable to PREIT common shareholders was $45.9 million, or $0.66 per basic and diluted share, compared to net loss attributable to PREIT common shareholders of $61.3 million, or $0.89 per basic and diluted share, for the six months ended June 30, 2017.
•
Impairment of assets of $32.2 million and $2.1 million was recognized on Wyoming Valley Mall and undeveloped land located in Gainesville, Florida, respectively, for the six months ended June 30, 2018 compared to impairment of assets of $38.4 million and $15.5 million recognized on Logan Valley Mall (sold in 2017) and Valley View Mall, respectively, for the six months ended June 30, 2017.
•
Same Store NOI was $117.3 million for the six months ended June 30, 2018 compared to $112.5 million for the six months ended June 30, 2017.
•
Same Store NOI excluding lease termination revenue was $110.0 million for the six months ended June 30, 2018 compared to $110.1 million for the six months ended June 30, 2017.
•
Non Same Store NOI decreased $6.8 million primarily due to properties sold in 2018 and 2017.
•
FFO, as adjusted, for the six months was $0.68 per diluted share and OP Unit, compared to $0.74 per diluted share and OP Unit in the prior year. The FFO contribution from assets sold in 2018 and 2017 was approximately $0.01 per share for the six months ending June 30, 2018 and $0.06 per share for the six months ending June 30, 2017.
•
Interest expense increased by $1.4 million primarily due to higher average borrowings, increased interest rates and accelerated amortization of deferred financing fees of $0.4 million in connection with our 2018 Amended Credit Agreements, partially offset by greater amounts of capitalized interest.
•
Preferred share dividends increased by $0.4 million.

All amounts referenced as primary factors affecting financial results above include PREIT’s proportionate share of partnership revenues and expenses.
Leasing and Redevelopment
With 812,000 square feet of leases signed for future openings, progress on key leasing and redevelopment initiatives continues. We have fully executed a lease with Studio Movie Grill for a 12-screen, 50,000 square foot movie theater at Willow Grove Park. At Plymouth Meeting Mall, we have three leases comprising 137,000 square feet executed to replace our final available Macy’s box with two additional leases being negotiated. Our anchor replacement program continues its rapid progression with 280,000 square feet under construction for 2018 openings and leases with respect to 230,000 square feet executed for 2019 openings.

At Fashion District Philadelphia, we announced key project milestones. The project is over 80% committed. Announced tenants include City Winery, Dallas BBQ, AMC Theatres, Polo Ralph Lauren, H&M and more, joining the existing Century 21 and Burlington Stores. As the partnership continues to execute on the vision, it is clear that in order to maximize overall success, Fashion District Philadelphia will have one high-impact grand opening in September 2019. New cost estimates and project returns incorporate execution of the dining and entertainment components not originally underwritten. PREIT’s multi-year capital plan includes these projected costs.

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Financing Activity
During the quarter, we amended and restated our $400 million unsecured Revolving Credit Facility and two unsecured $150 million 5-Year Term Loans with terms and conditions substantially the same as its existing loans, now maturing in 2023, including extension options on the Revolving Credit Facility. Pricing, capacity and valuations remained unchanged from the prior loans.



Retail Operations
The following tables set forth information regarding sales per square foot and occupancy in the Company’s mall portfolio, including unconsolidated properties:

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

Comp store sales for the rolling 12 months ended June 30, 2017
$468
Organic sales growth
10

Impact of asset sales and non-core malls
11

Comp store sales for the rolling 12 months ended June 30, 2018
$489

(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.
 
Leased as of:
Occupancy as of:
 
June 30, 2018
June 30, 2018
June 30, 2017
Core Malls:
 
 
 
   Total including anchors(1)
94.3%
93.0%
92.8%
   Total excluding anchors(1)
93.3%
91.0%
90.7%
Total Portfolio:
 
 
 
   Total including anchors(1)
94.2%
92.9%
92.7%
   Total excluding anchors(1)
93.0%
90.8%
90.1%
(1) Includes both consolidated and unconsolidated properties. We own a 25% to 50% interest in each of our unconsolidated properties and do not control such properties. Our percentage ownership is not necessarily indicative of the legal and economic implications of our ownership.

2018 Outlook
The Company is reaffirming its February 14, 2018 FFO guidance after giving effect to employee separation expenses and accelerated amortization of deferred financing costs and revising its estimate of GAAP earnings to give effect to these factors, impairment of assets and operating results for the first half of 2018. For the year ended December 31, 2018, FFO is expected to be between $1.49 and $1.59, FFO as adjusted is expected to be between $1.50 and $1.60 per diluted share, while net loss attributable to common shareholders is expected to be between $0.73 and $0.62 per diluted share.

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A reconciliation between GAAP net loss and FFO is as follows:
 
2018 Guidance Range
(Estimates per diluted share)
Low
High
Net loss attributable to common shareholders
$(0.73)
$(0.62)
Depreciation and amortization, non-controlling interest and other
1.83

1.82

Impairment of assets
0.44

0.44

Gain on sale of operating property
(0.05
)
(0.05
)
FFO per share
$1.49
$1.59
Employee separation expenses, other
0.01

0.01

FFO per share, as adjusted
$1.50
$1.60


Our guidance incorporates the 2019 opening date for Fashion District Philadelphia and assumes full year 2018 Same Store NOI growth of 1.25-2.25% including termination fees.

Our 2018 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, August 3, 2018, to review the Company’s results and future outlook. To listen to the call, please dial 1-866-393-4306 (domestic toll free), or 1-734-385-2616 (international), and request to join the PREIT call, Conference ID 9757686, 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 (NYSE: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.

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


Definitions of Non-GAAP Measures


Funds From Operations

The National Association of Real Estate Investment Trusts (“NAREIT”) defines Funds From Operations (“FFO”), which is a non-GAAP measure commonly used by REITs, as net income (computed in accordance with GAAP) excluding gains and losses on sales of operating properties, plus real estate depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures to reflect funds from operations on the same basis. 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. NAREIT’s established guidance provides that excluding impairment write downs of depreciable real estate is consistent with the NAREIT definition.     

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”) 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.

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, for the three and six months ended June 30, 2018 and 2017, respectively, to show the effect of such items as provision for employee separation expense and accelerated amortization of financing costs, which had a significant effect on our results of operations, but are not, in our

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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 and accelerated amortization of financing costs.

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, employee separation expenses, interest expense, depreciation and amortization, impairment of assets, gains/ adjustment to gains on sale of interest in non operating real estate, gain on sale of interest in real estate by equity method investee, gains/ losses on sales of interests in real estate, net, and project costs 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. 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

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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.

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,” “project,” “intend,” “may” 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;
•
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.


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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, 2017 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 **













PREIT / 10             Pennsylvania Real Estate Investment Trust
Selected Financial Data

STATEMENTS OF OPERATIONS (Unaudited)
 
Quarter Ended
June 30,
 
Six Months Ended
June 30,
(In thousands)
 
2018
 
2017
 
2018
 
2017
 
 
 
 
 
 
 
 
 
REVENUE:
 
 
 
 
 
 
 
 
   Real estate revenue:
 
 
 
 
 
 
 
 
Base rent
 
$
55,366

 
$
56,769

 
$
111,342

 
$
114,204

Expense reimbursements
 
26,231

 
26,984

 
53,361

 
55,081

Percentage rent
 
161

 
326

 
256

 
630

Lease termination revenue
 
7,090

 
1,791

 
7,121

 
2,272

Other real estate revenue
 
2,274

 
2,540

 
4,435

 
4,647

Total real estate revenue
 
91,122

 
88,410

 
176,515

 
176,834

Other income
 
851

 
840

 
1,740

 
1,680

Total revenue
 
91,973

 
89,250

 
178,255

 
178,514

EXPENSES:
 
 
 
 
 
 
 
 
Operating expenses
 
 
 
 
 
 
 
 
Property operating expenses:
 
 
 
 
 
 
 
 
CAM and real estate taxes
 
(27,347
)
 
(28,261
)
 
(56,743
)
 
(58,213
)
Utilities
 
(3,804
)
 
(4,140
)
 
(7,713
)
 
(7,963
)
Other property operating expenses
 
(2,908
)
 
(2,825
)
 
(6,308
)
 
(6,030
)
Total property operating expenses
 
(34,059
)
 
(35,226
)
 
(70,764
)
 
(72,206
)
Depreciation and amortization
 
(33,356
)
 
(32,928
)
 
(67,386
)
 
(64,686
)
General and administrative expenses
 
(9,396
)
 
(9,232
)
 
(19,528
)
 
(18,273
)
Provision for employee separation expense
 
(395
)
 
(1,053
)
 
(395
)
 
(1,053
)
Project costs and other expenses
 
(139
)
 
(85
)
 
(251
)
 
(397
)
Total operating expenses
 
(77,345
)
 
(78,524
)
 
(158,324
)
 
(156,615
)
Interest expense, net
 
(15,982
)
 
(14,418
)
 
(30,883
)
 
(29,756
)
Impairment of assets
 
(34,286
)
 
(53,917
)
 
(34,286
)
 
(53,917
)
Total expenses
 
(127,613
)
 
(146,859
)
 
(223,493
)
 
(240,288
)
Loss before equity in income of partnerships, gain on sale of real estate by equity method investee, gains (adjustment to gains) on sales of interests in non operating real estate and gains (losses) on sales of interests in real estate, net
 
(35,640
)
 
(57,609
)
 
(45,238
)
 
(61,774
)
Equity in income of partnerships
 
2,571

 
4,154

 
5,709

 
7,890

Gain on sale of real estate by equity method investee
 
—

 
—

 
2,773

 
—

Gains (adjustment to gains) on sales of interests in non operating real estate
 
—

 
486

 
(25
)
 
486

Gains (losses) on sales of interests in real estate, net
 
748

 
(308
)
 
748

 
(365
)
Net loss
 
(32,321
)
 
(53,277
)
 
(36,033
)
 
(53,763
)
Less: net loss attributable to noncontrolling interest
 
3,400

 
5,669

 
3,794

 
5,721

Net loss attributable to PREIT
 
(28,921
)
 
(47,608
)
 
(32,239
)
 
(48,042
)
Less: preferred share dividends
 
(6,844
)
 
(7,067
)
 
(13,688
)
 
(13,272
)
Net loss attributable to PREIT common shareholders
 
$
(35,765
)
 
$
(54,675
)
 
$
(45,927
)
 
$
(61,314
)




PREIT / 11             Pennsylvania Real Estate Investment Trust
Selected Financial Data

EARNINGS PER SHARE (Unaudited)
Quarter Ended
June 30,
 
Six Months Ended
June 30,
(in thousands of dollars, except per share amounts)
2018
 
2017
 
2018
 
2017
Net loss
$
(32,321
)
 
$
(53,277
)
 
$
(36,033
)
 
$
(53,763
)
Noncontrolling interest
3,400

 
5,669

 
3,794

 
5,721

Preferred share dividends
(6,844
)
 
(7,067
)
 
(13,688
)
 
(13,272
)
Dividends on unvested restricted shares
(138
)
 
(88
)
 
(276
)
 
(185
)
Net loss used to calculate loss per share—basic and diluted
$
(35,903
)
 
$
(54,763
)
 
$
(46,203
)
 
$
(61,499
)
 
 
 
 
 
 
 
 
Basic and diluted loss per share:
$
(0.51
)
 
$
(0.79
)
 
$
(0.66
)
 
$
(0.89
)
 
 
 
 
 
 
 
 
(in thousands of shares)
 
 
 
 
 
 
 
Weighted average shares outstanding—basic
69,747

 
69,307

 
69,675

 
69,263

Effect of common share equivalents (1) 
—

 
—

 
—

 
—

Weighted average shares outstanding—diluted
69,747

 
69,307

 
69,675

 
69,263

 (1)The company had net losses for the quarters and six months ended June 30, 2018 and 2017, 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. There were no common share equivalents for the three months ended June 30, 2017.







OTHER COMPREHENSIVE INCOME (LOSS) (Unaudited)
 
Quarter Ended
June 30,
 
Six Months Ended
June 30,
 
 
2018
 
2017
 
2018
 
2017
(In thousands)
 
 
 
 
 
 
 
 
Comprehensive income:
 
 
 
 
 
 
 
 
Net loss
 
$
(32,321
)
 
$
(53,277
)
 
$
(36,033
)
 
$
(53,763
)
Unrealized gain (loss) on derivatives
 
2,929

 
(432
)
 
7,757

 
1,278

Amortization of settled swaps
 
264

 
213

 
539

 
338

Total comprehensive loss
 
(29,128
)
 
(53,496
)
 
(27,737
)
 
(52,147
)
Less: comprehensive loss attributable to noncontrolling interest
 
3,061

 
5,693

 
2,914

 
5,548

Comprehensive loss attributable to PREIT
 
$
(26,067
)
 
$
(47,803
)
 
$
(24,823
)
 
$
(46,599
)



PREIT / 12             Pennsylvania Real Estate Investment Trust
Selected Financial Data



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 quarter and six months ended June 30, 2018 and 2017, respectively: 

 
Quarter Ended 
June 30,
 
Six Months Ended 
 June 30,
(in thousands, except per share amounts)
2018
 
2017
 
2018
 
2017
Net loss
$
(32,321
)
 
$
(53,277
)
 
$
(36,033
)
 
$
(53,763
)
     Depreciation and amortization on real estate:
 
 
 
 
 
 
 
    Consolidated properties
33,002

 
32,506

 
66,664

 
63,940

    PREIT’s share of equity method investments
2,145

 
3,026

 
4,385

 
5,592

     Gain on sale of real estate by equity method investee
—

 
—

 
(2,773
)
 
—

     (Gains) losses on sales of interests in real estate, net
(748
)
 
308

 
(748
)
 
365

     Impairment of assets
34,286

 
53,917

 
34,286

 
53,917

     Preferred share dividends
(6,844
)
 
(7,067
)
 
(13,688
)
 
(13,272
)
Funds from operations attributable to common shareholders and OP Unit holders
29,520

 
29,413

 
52,093

 
56,779

Accelerated amortization of financing costs
363

 
—

 
363

 
—

Provision for employee separation expense
395

 
1,053

 
395

 
1,053

Funds from operations, as adjusted, attributable to common shareholders and OP Unit holders
30,278

 
30,466

 
52,851

 
57,832

Less: Funds from operations from assets sold in 2018 and 2017
34

 
(2,775
)
 
(378
)
 
(5,025
)
Funds from operations, as adjusted for assets sold
$
30,312

 
$
27,691

 
$
52,473

 
$
52,807

 
 
 
 
 
 
 
 
Funds from operations attributable to common shareholders and OP Unit holders per diluted share and OP Unit
$
0.38

 
$
0.38

 
$
0.67

 
$
0.73

Funds from operations, as adjusted, attributable to common shareholders and OP Unit holders per diluted share and OP Unit
$
0.39

 
$
0.39

 
$
0.68

 
$
0.74

Funds from operations, as adjusted for assets sold per diluted share and OP Unit
$
0.39

 
$
0.36

 
$
0.67

 
$
0.68

 
 
 
 
 
 
 
 
Weighted average number of shares outstanding
69,747

 
69,307

 
69,675

 
69,263

Weighted average effect of full conversion of OP Units
8,273

 
8,313

 
8,273

 
8,313

Effect of common share equivalents
367

 
—

 
340

 
57

Total weighted average shares outstanding, including OP Units
78,387

 
77,620

 
78,288

 
77,633

 



PREIT / 13             Pennsylvania Real Estate Investment Trust
Selected Financial Data



NOI for the quarters ended June 30, 2018 and 2017:
 
 
Same Store
 
Non-Same Store
 
Total
 (In thousands)
 
2018
 
2017
 
2018
 
2017
 
2018
 
2017
NOI from consolidated properties
 
$
55,417

 
$
49,544

 
$
1,646

 
$
3,640

 
$
57,063

 
$
53,184

NOI from equity method investments at ownership share
 
7,354

 
7,173

 
56

 
2,573

 
7,410

 
9,746

Total NOI
 
62,771

 
56,717

 
1,702

 
6,213

 
64,473

 
62,930

Less: lease termination revenue
 
7,095

 
1,827

 
—

 
35

 
7,095

 
1,862

Total NOI excluding lease termination revenue
 
$
55,676

 
$
54,890

 
$
1,702

 
$
6,178

 
$
57,378

 
$
61,068

  


NOI for the six months ended June 30, 2018 and 2017:
 
 
Same Store
 
Non-Same Store
 
Total
 (In thousands)
 
2018
 
2017
 
2018
 
2017
 
2018
 
2017
NOI from consolidated properties
 
$
102,405

 
$
97,733

 
$
3,346

 
$
6,895

 
$
105,751

 
$
104,628

NOI from equity method investments at ownership share
 
14,929

 
14,736

 
520

 
3,862

 
15,449

 
18,598

Total NOI
 
117,334

 
112,469

 
3,866

 
10,757

 
121,200

 
123,226

Less: lease termination revenue
 
7,356

 
2,346

 
21

 
71

 
7,377

 
2,417

Total NOI excluding lease termination revenue
 
$
109,978

 
$
110,123

 
$
3,845

 
$
10,686

 
$
113,823

 
$
120,809

  

















PREIT / 14             Pennsylvania Real Estate Investment Trust
Selected Financial Data

The table below reconciles net loss to NOI of our consolidated properties for the quarters and six months ended June 30, 2018 and 2017.

 
Quarter Ended 
June 30,
 
Six Months Ended 
 June 30,
(in thousands of dollars)
2018
 
2017
 
2018
 
2017
Net loss
$
(32,321
)
 
$
(53,277
)
 
$
(36,033
)
 
$
(53,763
)
Other income
(851
)
 
(840
)
 
(1,740
)
 
(1,680
)
Depreciation and amortization
33,356

 
32,928

 
67,386

 
64,686

General and administrative expenses
9,396

 
9,232

 
19,528

 
18,273

Employee separation expenses
395

 
1,053

 
395

 
1,053

Project costs and other expenses
139

 
85

 
251

 
397

Interest expense, net
15,982

 
14,418

 
30,883

 
29,756

Impairment of assets
34,286

 
53,917

 
34,286

 
53,917

Equity in income of partnerships
(2,571
)
 
(4,154
)
 
(5,709
)
 
(7,890
)
Gain on sale of real estate by equity method investee
—

 
—

 
(2,773
)
 
—

(Gains) losses on sales of interests in real estate, net
(748
)
 
308

 
(748
)
 
365

(Gains) adjustment to gains on sales of interest in non operating real estate
—

 
(486
)
 
25

 
(486
)
NOI from consolidated properties
57,063

 
53,184

 
105,751

 
104,628

Less: Non Same Store NOI of consolidated properties
1,646

 
3,640

 
3,346

 
6,895

Same Store NOI from consolidated properties
55,417

 
49,544

 
102,405

 
97,733

Less: same store lease termination revenue
7,090

 
1,756

 
7,100

 
2,201

Same Store NOI excluding lease termination revenue
$
48,327

 
$
47,788

 
$
95,305

 
$
95,532



The table below reconciles equity in income of partnerships to NOI of equity method investments at ownership share for the quarters and six months ended June 30, 2018 and 2017:

 
Quarter Ended 
 June 30
 
Six Months Ended 
 June 30,
(in thousands of dollars)
2018
 
2017
 
2018
 
2017
Equity in income of partnerships
$
2,571

 
$
4,154

 
$
5,709

 
$
7,890

Other income
(12
)
 
—

 
(23
)
 
—

Depreciation and amortization
2,145

 
3,026

 
4,385

 
5,592

Interest and other expenses
2,706

 
2,566

 
5,378

 
5,116

Net operating income from equity method investments at ownership share
7,410

 
9,746

 
15,449

 
18,598

Less: Non Same Store NOI from equity method investments at ownership share
56

 
2,573

 
520

 
3,862

Same Store NOI of equity method investments at ownership share
7,354

 
7,173

 
14,929

 
14,736

Less: lease termination revenue
5

 
71

 
256

 
145

Same Store NOI from equity method investments excluding lease termination revenue at ownership share
$
7,349

 
$
7,102

 
$
14,673

 
$
14,591








PREIT / 15             Pennsylvania Real Estate Investment Trust
Selected Financial Data





CONSOLIDATED BALANCE SHEETS
 
June 30, 2018
 
December 31, 2017
 
 
(Unaudited)
 
 
(In thousands)
 
 
 
 
ASSETS:
 
 
 
 
INVESTMENTS IN REAL ESTATE, at cost:
 
 
 
 
Operating properties
 
$
3,156,877

 
$
3,180,212

Construction in progress
 
117,503

 
113,609

Land held for development
 
5,881

 
5,881

Total investments in real estate
 
3,280,261

 
3,299,702

Accumulated depreciation
 
(1,144,291
)
 
(1,111,007
)
Net investments in real estate
 
2,135,970

 
2,188,695

INVESTMENTS IN PARTNERSHIPS, at equity:
 
106,945

 
216,823

OTHER ASSETS:
 
 
 
 
Cash and cash equivalents
 
42,198

 
15,348

Tenant and other receivables (net of allowance for doubtful accounts of $7,278 and $7,248 at June 30, 2018 and December 31, 2017, respectively)
 
30,708

 
38,166

Intangible assets (net of accumulated amortization of $14,294 and $13,117 at June 30, 2018 and December 31, 2017, respectively)
 
17,857

 
17,693

Deferred costs and other assets, net
 
122,221

 
112,046

Assets held for sale
 
15,874

 
—

Total assets
 
$
2,471,773

 
$
2,588,771

LIABILITIES:
 
 
 
 
Mortgage loans payable, net
 
$
1,056,686

 
$
1,056,084

Term Loans, net
 
546,919

 
547,758

Revolving Facility
 
—

 
53,000

Tenants' deposits and deferred rent
 
13,742

 
11,446

Distributions in excess of partnership investments
 
94,639

 
97,868

Fair value of derivative liabilities
 
—

 
20

Accrued expenses and other liabilities
 
69,445

 
61,604

Total liabilities
 
1,781,431

 
1,827,780

EQUITY:
 
690,342

 
760,991

Total liabilities and equity
 
$
2,471,773

 
$
2,588,771


###