Financing Activity

9 Months Ended

Sep. 30, 2023

Debt Disclosure [Abstract]

Financing Activity

4. FINANCING ACTIVITY

Credit Agreements

On December 10, 2020 we entered into the “Credit Agreements”: (a) an Amended and Restated First Lien Credit Agreement (the “First Lien Credit Agreement”) with Wells Fargo Bank, National Association (“Wells Fargo Bank”) and the other financial institutions signatory thereto and their assignees, for secured loan facilities consisting of: (i) a secured first lien revolving credit facility allowing for borrowings up to $130.0 million, including a sub-facility for letters of credit to be issued thereunder in an aggregate stated amount of up to $10.0 million (collectively, the “First Lien Revolving Facility”), and (ii) a $384.5 million secured first lien term loan facility (the “First Lien Term Loan Facility”), and (b) a Second Lien Credit Agreement (the “Second Lien Credit Agreement”), as amended February 8, 2021 with Wells Fargo Bank and the other financial institutions signatory thereto and their assignees for a $535.2 million secured second lien term loan facility (the “Second Lien Term Loan Facility”). The Credit Agreements were to mature in December 2022, and the maturity date was extended to December 2023. The First Lien Term Loan Facility and the Second Lien Term Loan Facility are collectively referred to as the “Term Loans.”

As of September 30, 2023, we had outstanding borrowings of $305.7 million under the First Lien Term Loan Facility, $713.7 million under the Second Lien Term Loan Facility and $99.4 million under the First Lien Revolving Facility. The carrying value of the Term Loans on our consolidated balance sheet as of September 30, 2023 is net of $0.5 million of unamortized debt issuance costs. The maximum amount that was available to us under the First Lien Revolving Facility as of September 30, 2023 was $30.6 million. In August 2023, we borrowed $15.0 million under the First Lien Revolving Facility. In September 2023, we borrowed $56.9 million under the First Lien Revolving Facility.

Wilmington Savings Fund Society, FSB is Administrative Agent under the First Lien Credit Agreement, the Second Lien Credit Agreement and, in each case, the related loan documents. There is currently no letter of credit issuer under the First Lien Revolving Facility, accordingly, the Company cannot currently access the letters of credit sub-facility.

Interest expense and deferred financing fee amortization related to the Credit Agreements for the three and nine months ended September 30, 2023 and 2022 were as follows:

	Three Months Ended September 30,				Nine Months Ended September 30,
(in thousands of dollars)	2023		2022		2023		2022
Revolving Facilities:
Interest expense (1)	$	923	$	284	$	1,963	$	1,376
Deferred financing amortization		418		298		532		895
Term Loans:
Interest expense (2)	$	32,653	$	23,822	$	89,453	$	65,340
Deferred financing amortization		969		1,784		1,818		5,352

(1)All of the expense applied to the First Lien Revolving Facility.

(2)All of the expense applied to the Term Loans, of which $23.8 million and $66.5 million, for the three and nine months ended September 30, 2023 and $16.0 million and $42.0 million for the three and nine months ended September 30, 2022, respectively, was for the Second Lien Term Loan Facility and was not paid in cash, but capitalized to the principal balance of the loan.

Our obligations under the Credit Agreements are guaranteed by certain of our subsidiaries. Our obligations under the Credit Agreements and the guaranties are secured by mortgages and deeds of trust on a portfolio of 10 of our subsidiaries’ properties, including nine malls and one additional parcel. The obligations are further secured by a lien on substantially all of our personal property pursuant to collateral agreements and a pledge of substantially all of the equity interests held by us and the guarantors, pursuant to pledge agreements, in each case subject to limited exceptions.

In December 2022, we exercised our option and satisfied the conditions to extend the maturity date of our Credit Agreements, such that it is now December 10, 2023 (the “Maturity Date”). See Going Concern Considerations section in Note 1. The loans under the Credit Agreements are repayable in full on the Maturity Date, subject to mandatory prepayment provisions in the event of certain events including asset sales, incurrence of indebtedness, issuances of equity and receipt of casualty insurance proceeds. The terms of our Credit Agreements place restrictions on, among other things, and subject to certain exceptions, our ability to make certain restricted payments (including payments of dividends), make certain types of investments and acquisitions, issue redeemable securities, incur additional indebtedness, incur liens on our assets, enter into agreements with a negative pledge, make certain intercompany transfers, merge, consolidate, or sell our assets or the equity interests in our subsidiaries, amend our organizational documents or material contracts, enter into certain transactions with affiliates, or enter into derivatives contracts. Additionally, if we receive net cash proceeds from certain capital events (including equity issuances), we are required to prepay loans under our Credit Agreements. In addition, the Credit Agreements contain cross-default provisions that trigger an event of default if we fail to make certain payments or otherwise fail to comply with our obligations with respect to certain of our other indebtedness.

First Lien Credit Agreement

Amounts borrowed under the First Lien Credit Agreement may be either Base Rate Loans or LIBOR Loans. Base Rate Loans bear interest at the highest of (a) the Prime Rate, (b) the Federal Funds Rate plus 0.50% and (c) the LIBOR Market Index Rate plus 1.0%, provided that the Base Rate will not be less than 1.50% per annum, in each case plus (w) for revolving loans, 2.50% per annum, and (x) for term loans, 4.74% per annum. LIBOR Loans bear interest at LIBOR plus (y) for revolving loans, 3.50% per annum, and (z) for term loans, 5.74% per annum, in each case, provided that LIBOR will not be less than 0.50% per annum. Interest is due to be paid in cash on the last day of each applicable interest period (with rolling 30-day interest periods) and on the Maturity Date. We are required to pay certain fees to the administrative agent for the account of the lenders in connection with the First Lien Credit Agreement, including an unused fee for the account of the revolving lenders, which will accrue (i) 0.35% per annum on the daily amount of the unused revolving commitments when that amount is greater than or equal to 50% of the aggregate amount of revolving commitments, and (ii) 0.25% when that amount is less than 50% of the aggregate amount of revolving commitments. Accrued and unpaid unused fees will be payable quarterly in arrears during the term of the First Lien Credit Agreement and on the revolving termination date (or any earlier date of termination of the revolving commitments or reduction of the revolving commitments to zero).

Letters of credit and the proceeds of revolving loans may be used (i) to refinance indebtedness under the Bridge Credit Agreement (which agreement was canceled and refinanced upon our entry into the Credit Agreements), (ii) for working capital and general corporate purposes (subject to certain exceptions set forth in the First Lien Credit Agreement, including limitations on investments in non-borrowing base properties), and (iii) to fund professional fee payments and other fees and expenses subject to the provisions of the Plan and related confirmation order and for other uses permitted by the provisions of the First Lien Credit Agreement, Plan and confirmation order, in each case consistent with an approved annual business plan. We may terminate or reduce the amount of the revolving commitments at any time and from time to time without penalty or premium, subject to the terms of the First Lien Credit Agreement.

The First Lien Credit Agreement contains, among other restrictions, certain additional affirmative and negative covenants and other terms, many of which substantially align with those in the Second Lien Credit Agreement and are summarized below under “Similar Terms of the Credit Agreements.”

Second Lien Credit Agreement

Amounts borrowed under the Second Lien Credit Agreement may be either Base Rate Loans or LIBOR Loans. Base Rate Loans bear interest at the highest of (a) the Prime Rate, (b) the Federal Funds Rate plus 0.50% and (c) the LIBOR Market Index Rate plus 1.0%, provided that the Base Rate will not be less than 1.50% per annum, in each case plus 7.00% per annum. LIBOR Loans bear interest at LIBOR plus 8.00% per annum, provided that LIBOR will not be less than 0.50% per annum. Interest is due to be paid in kind on the last day of each applicable interest period (with rolling 30-day interest periods) by adding the accrued and unpaid amount thereof to the principal balance of the loans under the Second Lien Credit Agreement and then accruing interest on the increased principal amount (provided that after the discharge of our obligations under the First Lien Credit Agreement and any other senior debt obligations, interest will be paid in cash). We are required to pay certain fees to the administrative agent for the account of the lenders in connection with the Second Lien Credit Agreement.

The Second Lien Credit Agreement contains, among other restrictions, certain additional affirmative and negative covenants and other terms, many of which substantially align with those in the First Lien Credit Agreement and are summarized below under “Similar Terms of the Credit Agreements.”

Credit Agreement Amendments

On September 27, 2023, the First Lien Credit Agreement was amended to revise certain of the negative covenants to enable the use of up to $54.0 million of proceeds of the First Lien Revolving Facility to refinance the Dartmouth Mall mortgage and use up to a certain amount of proceeds of the First Lien Revolving Facility to consummate a specified property acquisition. The amendment did not increase the Borrower’s maximum borrowing capacity or extend the December 10, 2023 maturity date under the First Lien Credit Agreement. Additionally, the Dartmouth Mall and/or the property acquired in the specified acquisition will become collateral under the First Lien Credit Agreement and the Second Lien Credit Agreement in connection with the Dartmouth Mall mortgage refinancing and/or the specified acquisition, to the extent consummated, as applicable.

On September 27, 2023, the Borrower borrowed $54.0 million for purposes of the Dartmouth Mall mortgage refinancing and $2.9 million for costs under the First Lien Revolving Facility.

On May 12, 2023, the Credit Agreements were amended to replace the interest rate benchmark from LIBOR to SOFR. As a result, borrowings under the Credit Agreements other than Base Rate Loans, will bear interest at Term SOFR plus 0.10% plus an applicable margin as noted above for each agreement.

Similar Terms of the Credit Agreements

Each of the Credit Agreements contains certain affirmative and negative covenants and other provisions, as described in detail below, which substantially align with those contained in the other Credit Agreements.

Covenants

Each of the Credit Agreements contains, among other restrictions, certain affirmative and negative covenants, including, without limitation, requirements that we:

•maintain liquidity of at least $25.0 million, to be comprised of unrestricted cash held in certain deposit accounts subject to control agreements, up to $5.0 million held in a certain other deposit account excluded from the collateral, the unused revolving loan commitments under the First Lien Credit Agreement (to the extent available to be drawn), and amounts on deposit in a designated collateral proceeds account and amounts on deposit in a cash collateral account;

•maintain a minimum senior debt yield of 11.35% from and after June 30, 2021;

•maintain a minimum corporate debt yield of (a) 6.50% from June 30, 2021 through and including September 30, 2021 and (b) 7.25% from and after October 1, 2021;

•provide to the administrative agent, among other things, PREIT and its subsidiaries’ quarterly and annual financial statements, annual budget, reports on projected sources and uses of cash, and an updated annual business plan, as well as quarterly and annual operating statements, rent rolls, and certain other collections and tenant reports and information as the administrative agent may reasonably request with respect to each Borrowing Base Property;

•maintain PREIT’s status as a REIT;

•use commercially reasonable efforts to obtain subordination, non-disturbance and attornment agreements from each tenant under certain Major leases as well as ground lease estoppel certificates from each ground lessor of a borrowing base property;

•comply with the requirements of the various security documents and, at the administrative agent’s request, promptly notify the administrative agent of any acquisition of any owned real property that is not subject to a mortgage and grant liens on such real property to secure our obligations under the applicable Credit Agreement;

•not amend any existing sale agreements with respect to borrowing base properties to result in a reduction of cash consideration by 20% or more; and

•not retain more than $6.5 million of cash in property-level accounts held by our subsidiaries that are owners of real property (subject to certain exceptions).

Each of the Credit Agreements also limits our ability, subject to certain exceptions, to make certain restricted payments (including payments of dividends and voluntary prepayments of certain indebtedness which includes, with respect to the First Lien Credit Agreement, voluntary prepayments under the Second Lien Credit Agreement), make certain types of investments and acquisitions, issue redeemable securities, incur additional indebtedness, incur liens on our assets, enter into agreements with a negative pledge, make certain intercompany transfers, merge, consolidate or sell all or substantially all of our assets or the equity interests in our subsidiaries, amend our organizational documents or material contracts, enter into transactions with affiliates, or enter into derivatives contracts. We are also prohibited from selling certain properties unless certain conditions are satisfied with respect to the terms of the sale agreement for such property or, in the case of Borrowing Base Properties, payment of certain release prices (certain Borrowing Base Properties also require lender consent).

The First Lien Credit Agreement and, after our Senior Debt Obligations are discharged, the Second Lien Credit Agreement, each prohibit us from (i) entering into major leases, (ii) assigning leases, (iii) discounting any rent under leases where the leased premises is at least 7,500 square feet at a borrowing base property and the discounted amount is more than $750,000 and more than 25% of the aggregate contractual base rent payable over the initial term (not including any extension options), (iv) collecting rent in advance, (v) terminating or modifying the terms of any major lease or releasing or discharging tenants from any obligations thereunder, (vi) consenting to a tenant’s assignment or subletting of a major lease, or (vii) subordinating any lease to any other deed of trust, mortgage, deed to secure debt or encumbrance, other than the mortgages already encumbering the applicable borrowing base property and the mortgages entered into in connection with the other Credit Agreement. Under the First Lien Credit Agreement, and under the Second Lien Credit Agreement after the First Lien Termination Date, any amounts equal to or greater than $2.5 million but less than $3.5 million received by or on behalf of a guarantor in consideration of any termination or modification of a lease (or the release or discharge of a tenant) are subject to restrictions on use, and such amounts that are equal to or greater than $3.5 million must be applied to reduce our outstanding obligations under the applicable Credit Agreement.

As of September 30, 2023, we were in compliance with all financial covenants under the Credit Agreements.

Consolidated Mortgage Loans

The estimated fair values of our consolidated mortgage loans based on year-end interest rates and market conditions at September 30, 2023 and December 31, 2022 were as follows:

	September 30, 2023				December 31, 2022
(in millions of dollars)	Carrying Value		Fair Value		Carrying Value		Fair Value
Mortgage loans(1)	$	670.3	$	650.3	$	751.5	$	733.7

(1) The carrying value of mortgage loans excludes unamortized debt issuance costs of $0.5 million and $2.1 million as of September 30, 2023 and December 31, 2022, respectively.

The following table outlines the timing of principal payments and balloon payments pursuant to the terms of our consolidated mortgage loans of our consolidated properties as of September 30, 2023:

(in thousands of dollars)	Principal Amortization		Balloon Payments		Total
October 1 through December 31, 2023 (1) (2)	$	2,442	$	328,092	$	330,534
2024		6,405		117,610		124,015
2025		4,406		211,346		215,752
2026		—		—		—
2027 and thereafter		—		—		—
Total principal payments	$	13,253	$	657,048		670,301
Less: Unamortized debt issuance costs						520
Carrying value of mortgage notes payable					$	669,781

(1) Includes Cherry Hill Mall mortgage for which the maturity was extended through December 1, 2023.

(2) Includes Woodland Mall mortgage for which the forbearance has been extended through December 1, 2023.

The consolidated mortgage loans contain various customary default provisions. As of September 30, 2023, we were not in default on any of the consolidated mortgage loans.

Mortgage Loan Activity

Dartmouth Mall Mortgage

On April 1, 2023, certain of our consolidated subsidiaries entered into a forbearance agreement as it relates to the mortgage loan secured by the property at Dartmouth Mall in North Dartmouth, Massachusetts. The loan matured on April 1, 2023 and was then in default, and the borrowers were unable to thereafter comply with the terms of the forbearance agreement and repay the loan in full by June 1, 2023, resulting in the appointment of a special servicer. On August 25, 2023, a forbearance letter agreement was entered into that extended the forbearance period until October 25, 2023 with one option to extend the forbearance period to November 27, 2023 with an additional $0.5 million principal payment. On September 27, 2023, the Dartmouth Mall mortgage was paid in full. As of September 30, 2023, there was no outstanding mortgage loan balance.

Cherry Hill Mall Mortgage

On May 1, 2023, certain of our consolidated subsidiaries entered into an amendment and extension to our mortgage loan secured by the property at Cherry Hill Mall in Cherry Hill, New Jersey. This agreement extended the maturity date to December 1, 2023 with a $5.0 million principal paydown at time of execution, and requires the borrower to continue making scheduled monthly debt service payments. The agreement also includes an option to extend the maturity to May 1, 2024 with an additional $5.0 million principal payment. As of September 30, 2023, the mortgage loan has an outstanding balance of $228.2 million.

Woodland Mall Mortgage

Certain of our consolidated subsidiaries are party to a mortgage loan secured by the property at Woodland Mall in Grand Rapids, Michigan. The agreement had an option to extend the maturity date to October 5, 2023 and required the borrower to continue making scheduled monthly debt service payments. In June 2023, we sold a parcel of land at Woodland Mall for $4.8 million and used net proceeds of $3.4 million from the sale to pay down the mortgage and exercise our option to extend the maturity date to October 5, 2023. The loan was not repaid at maturity, and on October 6, 2023, the Woodland Mall mortgage went into a maturity default. On October 26, 2023, a forbearance letter agreement was entered into that extended the forbearance period until November 10, 2023. On November 10, 2023, a forbearance extension was executed to extend the forbearance termination date to December 1, 2023. During this extension period, the lender will forbear from exercising its rights or remedies, including against the guarantee provided by PREIT Associates, L.P. We continue to pursue all available options relating to this debt. As of September 30, 2023, the mortgage loan has an outstanding balance of $100.7 million.