EX-99.1 2 dex991.htm PRESS RELEASE Press Release

Exhibit 99.1

 

LOGO    LOGO   

 

Pennsylvania Real Estate Investment Trust

     

200 South Broad Street

Philadelphia, PA 19102

      www.preit.com
      Phone:    215-875-0700
      Fax:    215-546-7311
      Toll Free:    866-875-0700

CONTACT:

Robert McCadden

EVP & CFO

(215) 875-0735

Nurit Yaron

VP, Investor Relations

(215) 875-0735

Pennsylvania Real Estate Investment Trust

Reports Fourth Quarter and Full Year 2008 Results

Philadelphia, PA, February 25, 2009 – Pennsylvania Real Estate Investment Trust (NYSE: PEI) today reported results for the quarter and twelve months ended December 31, 2008.

Net income available to common shareholders for the fourth quarter of 2008 was $2.3 million, or $0.05 per diluted share, compared to $8.7 million, or $0.22 per diluted share, for the fourth quarter of 2007. Results for the quarter included a $29.3 million gain on extinguishment of debt and $27.6 million in impairment charges. Net loss allocable to common shareholders for 2008 was $10.4 million, or $0.30 per diluted share, compared to net income available to common shareholders of $28.6 million, or $0.73 per diluted share, last year, including a $13.3 million gain on the redemption of preferred shares in July 2007. See below for a description of the primary non-operating factors affecting financial results.

Funds From Operations (“FFO”) for the quarter was $44.4 million, or $1.08 per diluted share, compared to $45.9 million, or $1.12 per diluted share, a year ago. For the year, FFO was $146.7 million, or $3.57 per diluted share, compared to $160.7 million, or $3.90 per diluted share, for 2007.

Net Operating Income (NOI) for the quarter was $84.6 million, compared to $84.7 million for the fourth quarter of 2007. For 2008, NOI was $307.3 million, compared to $303.4 million last year. A description of each non-GAAP financial measure and the related reconciliation to the comparable GAAP measure are located at the end of this press release.

Ronald Rubin, Chairman and Chief Executive Officer of the Company, said, “As we work through a challenging economic environment in 2009, the Company has entered the final stages of its multi-year redevelopment program. We look forward to the re-opening of our Cherry Hill Mall and the completion of our Plymouth Meeting Mall and Voorhees Town Center projects, which will offer exciting opportunities to our tenants and shoppers. The decision to invest in these and other completed redevelopment projects has positioned the Company to improve market share and create shareholder value when the economy regains its footing.”

Primary Non-Operating Factors Affecting Financial Results

The following factors affected results for the fourth quarter and year ended December 31, 2008:

 

  •  

$29.3 million gain on extinguishment of debt resulting from our repurchase of $46.0 million of our exchangeable notes; and

 

  •  

$27.6 million in impairment charges, including $11.8 million related to White Clay Point, in Landenberg, Pennsylvania, $7.0 million on Sunrise Plaza, in Forked River, New Jersey, and $4.6 million of goodwill.

The following factors affected results for the year ended December 31, 2007:

 

  •  

$13.3 million gain on redemption of preferred shares;

 

  •  

$9.0 million gain on sales of assets; and

 

  •  

Payment of $7.9 million of preferred share dividends.

Financing Activities

During the quarter, the Company completed $173 million in mortgage financings. For the year, including these transactions, the Company completed approximately $817 million in new financings comprised of approximately $647 million of mortgage financings and a $170 million unsecured term loan. Also during the year, the Company repaid approximately $507 million of expiring debt and invested approximately $345 million in its consolidated properties.

Retail Operations

The following tables set forth information regarding occupancy and sales per square foot in the Company’s retail portfolio:

 

     Occupancy as of:  
     December 31, 2008     December 31, 2007  

Retail portfolio weighted average: (1)

     

Total including anchors (2)

    90.9 %   91.2 %

Total excluding anchors

    88.2 %   89.1 %

Enclosed malls weighted average: (1)

     

Total including anchors (2)

    89.7 %   90.4 %

Total excluding anchors

    86.7 %   88.1 %

Strip/power centers weighted average:

    97.6 %   96.3 %

 

(1) Includes properties owned by partnerships in which we own a 50% interest.
(2) Includes approximately 1.1 million square feet of vacant anchor space, as of December 31, 2008, of which approximately 0.4 million square feet has been leased but is not occupied. As of December 31, 2007, total vacant anchor space was approximately 1.1 million square feet.

 

     Twelve Months Ended:
     December 31, 2008    December 31, 2007

Sales per square foot (1)

    $ 342    $ 358

 

(1) Includes properties in the Company’s portfolio as of the respective dates. Data based on sales reported by tenants leasing 10,000 square feet or less of non-anchor space for at least 24 months.

Same store NOI decreased 1.3% to $83.2 million for the quarter, including $1.5 million in lease termination revenue. These results included higher bad debt expense and other charges related to tenants that filed for bankruptcy protection during the quarter. For the fourth quarter of 2007, same store NOI was $84.3 million, including $0.2 million in lease termination revenue.

Same store NOI for the year was unchanged from 2007 at $302.6 million. Lease termination revenue was $4.1 million for 2008, compared to $1.6 million for the twelve months ended December 31, 2007. Same store results represent retail properties that the Company owned for the full periods presented.

2009 Outlook

Based on today’s outlook, the Company estimates that net loss per diluted share and FFO per diluted share will be as follows:

Estimates Per Diluted Share

 

Net loss

    $ (1.35) - $ (1.15)

Depreciation and amortization (includes Company’s proportionate share of unconsolidated properties), net of minority interest, and other adjustments

    $ 4.10

Funds From Operations

    $ 2.75 - $ 2.95

Assumptions

 

  •  

A decline in projected 2009 NOI of 1% to 3%, excluding lease termination revenues, resulting from additional store closings and delayed openings, and higher bad debt expense;

 

  •  

Higher interest expense related to placing completed redevelopment and development assets into service in 2008 and 2009; implementation of new accounting rules applicable to our exchangeable notes; amortization of interest rate swap settlement costs; and a temporary cessation of interest capitalization on certain redevelopment and development properties;

 

  •  

Reduction of general and administrative expenses offset by lower management company revenues; and

 

  •  

No acquisitions, dispositions or sales of parcels.

Conference Call Information

Management has scheduled a conference call for 3:00 p.m. Eastern Time today to review the Company’s fourth quarter and full year results, market trends, and future outlook. To listen to the call, please dial (800) 762-8779 (domestic) or (480) 629-9031 (international), 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 website, www.preit.com, or at www.viavid.net. 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 interested individuals unable to join the conference call, a replay of the call will be available through March 11, 2009 at (800) 406-7325 (domestic) or (303) 590-3030 (international), (Replay Password: 3961734). The online archive of the webcast will be available for 14 days following the call.

About Pennsylvania Real Estate Investment Trust

Pennsylvania Real Estate Investment Trust, founded in 1960 and one of the first equity REITs in the U.S., has a primary investment focus on retail shopping malls and power centers. Currently, the Company’s retail portfolio is approximately 34 million square feet and consists of 56 properties, including 38 shopping malls, 14 strip and power centers, and four properties under development. The Company’s properties are located in 13 states in the eastern half of the United States, primarily in the Mid-Atlantic region. PREIT is headquartered in Philadelphia, Pennsylvania. The Company’s website can be found at www.preit.com. PREIT is publicly traded on the NYSE under the symbol PEI.

Definitions

The National Association of Real Estate Investment Trusts (“NAREIT”) defines Funds From Operations, which is a non-GAAP measure, as income before gains (losses) on sales of operating properties and extraordinary items (computed in accordance with GAAP); plus real estate depreciation; plus or minus adjustments for unconsolidated partnerships to reflect funds from operations on the same basis. The Company computes Funds From Operations by taking the amount determined pursuant to the NAREIT definition and subtracting dividends on preferred shares (“FFO”) (for periods during which the Company had preferred shares outstanding).

Funds From Operations is a commonly used measure of operating performance and profitability in the REIT industry and we use FFO as a supplemental non-GAAP measure to compare our Company’s performance to that of our industry peers. Similarly, FFO per diluted share is a measure that is useful because it reflects the dilutive impact of outstanding convertible securities. In addition, we use FFO and FFO per diluted share as a performance measure for determining bonus amounts earned under certain of our performance-based executive compensation programs. The Company computes FFO in accordance with standards established by NAREIT, less dividends on preferred shares (for periods during which the Company had preferred shares outstanding), which may not be comparable to Funds From Operations 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 the Company. FFO does not include gains or losses on the sale of operating real estate assets, 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 net operating income. 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 the Company’s financial performance, or to be an alternative to cash flow from operating activities (determined in accordance with GAAP) as a measure of the Company’s liquidity, nor is it indicative of funds available for the Company’s cash needs, including its ability to make cash distributions.

The Company believes that net income is the most directly comparable GAAP measurement to FFO. The Company believes 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 various non-recurring items that are considered extraordinary under GAAP, gains on sales of operating real estate and depreciation and amortization of real estate.

Net operating income (“NOI”), which is a non-GAAP measure, is derived from real estate revenues (determined in accordance with GAAP) minus property operating expenses (determined in accordance with GAAP). Net operating income is a non-GAAP measure. It 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 the Company’s financial performance or to be an alternative to cash flow from operating activities (determined in accordance with GAAP) as a measure of the Company’s liquidity; nor is it indicative of funds available for the Company’s cash needs, including its ability to make cash distributions. The Company believes that net income is the most directly comparable GAAP measurement to net operating income.

The Company believes that net operating income 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. Net operating income excludes general and administrative

 

4

expenses, management company revenues, interest income, interest expense, depreciation and amortization and gains on sales of interests in real estate.

Forward Looking Statements

This press release contains certain “forward-looking statements” within the meaning of the U.S. Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. 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 PREIT’s current views about future events 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. More specifically, PREIT’s business might be affected by uncertainties affecting real estate businesses generally as well as the following, among other factors: general economic, financial and political conditions, including credit market conditions, changes in interest rates or the possibility of war or terrorist attacks; changes in local market conditions or other competitive or retail industry factors in the regions where our properties are concentrated; PREIT’s ability to maintain and increase property occupancy and rental rates, and risks relating to development or redevelopment activities, including construction, obtaining entitlements and managing multiple projects simultaneously. Additionally, there can be no assurance that PREIT’s actual results will not differ significantly from the estimates set forth above, or that PREIT’s returns on its developments, redevelopments or acquisitions will be consistent with the estimates outlined in press releases or other disclosures. Investors are also directed to consider the risks and uncertainties discussed in documents PREIT has filed with the Securities and Exchange Commission and, in particular, PREIT’s Annual Report on Form 10-K for the year ended December 31, 2007. PREIT does not intend to update or revise any forward-looking statements to reflect new information, future events or otherwise.

[Financial Tables Follow]

** Quarterly supplemental financial and operating **

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

#    #    #

Pennsylvania Real Estate Investment Trust

Selected Financial Data

CONSOLIDATED BALANCE SHEET

 

(In thousands, except share and per share amounts)    December 31,
2008		     December 31,
2007		  

ASSETS:

     

INVESTMENTS IN REAL ESTATE, at cost:

     

Operating properties

    $ 3,291,103     $ 3,074,562  

Construction in progress

      411,479       287,116  

Land held for development

      5,466       5,616  
                

Total investments in real estate

      3,708,048       3,367,294  

Accumulated depreciation

      (516,832 )     (401,502 )
                

Net investments in real estate

      3,191,216       2,965,792  

INVESTMENTS IN PARTNERSHIPS, at equity:

      36,164       36,424  

OTHER ASSETS:

     

Cash and cash equivalents

      9,786       27,925  

Tenant and other receivables (net of allowance for doubtful accounts of $16,895 and $11,424 at December 31, 2008 and December 31, 2007, respectively)

      57,970       49,094  

Intangible assets (net of accumulated amortization of $169,189 and $137,809 at December 31, 2008 and December 31, 2007, respectively)

      68,296       104,136  

Deferred costs and other assets, net

      80,845       80,703  
                

Total assets

    $ 3,444,277     $ 3,264,074  
                

LIABILITIES:

     

Mortgage notes payable

    $ 1,756,270     $ 1,643,122  

Debt premium on mortgage notes payable

      4,026       13,820  

Exchangeable notes

      241,500       287,500  

Senior unsecured Credit Facility

      400,000       330,000  

Senior unsecured term loan

      170,000       —    

Distributions in excess of partnership investments

      48,788       49,166  

Tenants’ deposits and deferred rents

      13,112       16,213  

Accrued expenses and other liabilities

      123,739       111,378  
                

Total liabilities

      2,757,435       2,451,199  

MINORITY INTEREST: (Redemption value $16,397 and $66,560 at December 31, 2008 and December 31, 2007, respectively)

      52,326       55,256  
                

SHAREHOLDERS’ EQUITY:

     

Shares of beneficial interest, $1.00 par value per share; 100,000,000 shares authorized; issued and outstanding 39,469,000 shares at December 31, 2008 and 39,134,000 shares at December 31, 2007

      39,469       39,134  

Capital contributed in excess of par

      834,026       818,966  

Accumulated other comprehensive loss

      (45,341 )     (6,968 )

Distributions in excess of net income

      (193,638 )     (93,513 )
                

Total shareholders’ equity

      634,516       757,619  
                

Total liabilities, minority interest and shareholders’ equity

    $ 3,444,277     $ 3,264,074  
                

Pennsylvania Real Estate Investment Trust

Selected Financial Data

FUNDS FROM OPERATIONS

 

      Three Months Ended    Twelve Months Ended  
(In thousands, except per share amounts)    December 31,
2008		    December 31,
2007		    December 31,
2008		     December 31,
2007		  

Net (loss) income

    $ 2,277    $ 8,703    $ (10,380 )   $ 23,161  

Adjustments:

           

Minority interest

      211      530      (287 )     2,105  

Dividends on preferred shares

      —        —        —         (7,941 )

Redemption of preferred shares

      —        —        —         13,347  

Gain on sales of interests in real estate

      —        —        —         (579 )

Gain on sale of discontinued operations

      —        —        —         (6,699 )

Depreciation and amortization:

           

Wholly owned & consolidated partnerships (a)

      39,522      34,650      149,005       129,924  

Unconsolidated partnerships (a)

      2,373      2,003      8,361       7,130  

Discontinued operations

      —        —        —         215  
                              

FUNDS FROM OPERATIONS (b)

    $ 44,383    $ 45,886    $ 146,699     $ 160,663  
                              

FUNDS FROM OPERATIONS PER DILUTED SHARE AND OP UNIT

    $ 1.08    $ 1.12    $ 3.57     $ 3.90  

Weighted average number of shares outstanding

      38,882      38,465      38,807       37,577  

Weighted average effect of full conversion of OP Units

      2,228      2,409      2,236       3,308  

Effect of common share equivalents

      —        211      14       325  
                              

Total weighted average shares outstanding, including OP Units

      41,110      41,085      41,057       41,210  
                              

 

a) Excludes depreciation of non-real estate assets, amortization of deferred financing costs and discontinued operations.
b) Includes the non-cash effect of straight-line rents of $(318) and $945 for the fourth quarter 2008 and 2007, respectively, and the non-cash effect of straight-line rents of $2,016 and $2,484 for the twelve months ended December 31, 2008 and 2007, respectively.

STATEMENTS OF INCOME

 

     Three Months Ended     Twelve Months Ended  
(In thousands, except per share amounts)    December 31,
2008		     December 31,
2007		     December 31,
2008		     December 31,
2007		  

REVENUE:

         

Real estate revenue:

         

Base rent

    $ 80,335     $ 79,810     $ 300,287     $ 293,110  

Expense reimbursements

      36,219       35,331       139,636       136,360  

Percentage rent

      3,631       4,145       7,157       9,067  

Lease termination revenue

      1,496       181       4,114       1,589  

Other real estate revenue

      7,436       8,142       18,387       19,470  
                                

Total real estate revenue

      129,117       127,609       469,581       459,596  
                                

Management company revenue

      737       2,592       3,730       4,419  

Interest and other income

      98       234       769       2,557  
                                

Total revenue

      129,952       130,435       474,080       466,572  
                                

EXPENSES:

         

Property operating expenses:

         

CAM and real estate tax

      (36,447 )     (34,223 )     (135,293 )     (129,338 )

Utilities

      (5,564 )     (5,943 )     (24,872 )     (24,998 )

Other property operating expenses

      (8,785 )     (9,128 )     (27,787 )     (26,083 )
                                

Total property operating expenses

      (50,796 )     (49,294 )     (187,952 )     (180,419 )
                                

Depreciation and amortization

      (40,156 )     (35,215 )     (151,612 )     (132,184 )

Other expenses:

         

General and administrative expenses

      (8,546 )     (10,446 )     (40,324 )     (41,415 )

Impairment of assets

      (27,592 )     —         (27,592 )     —    

Abandoned project costs, income taxes and other expenses

      280       (1,078 )     (1,534 )     (1,944 )
                                

Total other expenses

      (35,858 )     (11,524 )     (69,450 )     (43,359 )
                                

Interest expense, net

      (31,247 )     (26,522 )     (112,064 )     (98,860 )
                                

Total expenses

      (158,057 )     (122,555 )     (521,078 )     (454,822 )
                                

(Loss) income before equity in income of partnerships, gains on sales of interests in real estate, minority interest and discontinued operations

      (28,105 )     7,880       (46,998 )     11,750  

Equity in income of partnerships

      1,315       1,365       7,053       4,637  

Gain on extinguishment of debt

      29,278       —         29,278       —    

Gain on sales of interests in real estate

      —         —         —         579  

Gain on sales of non-operating real estate

      —         —         —         1,731  
                                

(Loss) income before minority interest and discontinued operations

      2,488       9,245       (10,667 )     18,697  

Minority interest

      (211 )     (531 )     287       (1,414 )
                                

(Loss) income from continuing operations

      2,277       8,714       (10,380 )     17,283  
                                

Discontinued operations:

         

Operating results from discontinued operations

      —         (12 )     —         (130 )

Gain on sale of discontinued operations

      —         —         —         6,699  

Minority interest

      —         1       —         (691 )
                                

Income from discontinued operations

      —         (11 )     —         5,878  
                                

Net income

      2,277       8,703       (10,380 )     23,161  

Redemption of preferred shares

      —         —         —         13,347  

Dividends on preferred shares

      —         —         —         (7,941 )
                                

Net (loss allocable) income available to common shareholders

    $ 2,277     $ 8,703     $ (10,380 )   $ 28,567  
                                

BASIC (LOSS) EARNINGS PER SHARE

         

From continuing operations available to common shareholders

    $ 0.05     $ 0.22     $ (0.30 )   $ 0.57  

From discontinued operations

      —         —         —         0.16  
                                

TOTAL BASIC (LOSS) EARNINGS PER SHARE

    $ 0.05     $ 0.22     $ (0.30 )   $ 0.73  
                                

DILUTED (LOSS) EARNINGS PER SHARE

         

From continuing operations available to common shareholders

    $ 0.05     $ 0.22     $ (0.30 )   $ 0.57  

From discontinued operations

      —         —         —         0.16  
                                

TOTAL DILUTED (LOSS) EARNINGS PER SHARE

    $ 0.05     $ 0.22     $ (0.30 )   $ 0.73  
                                

Weighted average number of shares outstanding for diluted EPS (1)

      38,882       38,676       38,807       37,902  
                                

 

(1)

For the year ended December 31, 2008, there is a net loss allocable to common shareholders from continuing operations, so the effect of common share equivalents is excluded from the calculation of diluted loss per share for this period.

Pennsylvania Real Estate Investment Trust

Selected Financial Data

NET OPERATING INCOME

 

      Three Months Ended     Twelve Months Ended  
(In thousands)    December 31,
2008		     December 31,
2007		     December 31,
2008		     December 31,
2007		  

Net income

    $ 2,277     $ 8,703     $ (10,380 )   $ 23,161  

Adjustments:

         

Depreciation and amortization

         

Wholly owned and consolidated partnerships

      40,156       35,215       151,612       132,184  

Unconsolidated partnerships

      2,373       2,003       8,361       7,130  

Discontinued operations

      —         —         —         215  

Interest expense, net

         

Wholly owned and consolidated partnerships

      31,247       26,522       112,064       98,860  

Unconsolidated partnerships

      2,607       3,034       10,274       12,241  

Discontinued operations

      —         —         —         136  

Minority interest

      211       530       (287 )     2,105  

Gain on extinguishment of debt

      (29,278 )     —         (29,278 )     —    

Impairment of assets

      27,592       —         27,592       —    

Gain on sales of interests in real estate

      —         —         —         (579 )

Gain on sales of non-operating real estate

      —         —         —         (1,731 )

Gain on sale of discontinued operations

      —         —         —         (6,699 )

Other expenses

      8,266       11,524       41,858       43,359  

Management company revenue

      (737 )     (2,592 )     (3,730 )     (4,419 )

Interest and other income

      (98 )     (234 )     (769 )     (2,557 )
                                

Property net operating income

    $ 84,616     $ 84,705     $ 307,317     $ 303,406  
                                

Same store retail properties

    $ 83,153     $ 84,262     $ 302,564     $ 302,607  

Non-same store properties

      1,463       443       4,753       799  
                                

Property net operating income

    $ 84,616     $ 84,705     $ 307,317     $ 303,406  
                                
EQUITY IN INCOME OF PARTNERSHIPS     
     Three Months Ended     Twelve Months Ended  
(In thousands)    December 31,
2008		     December 31,
2007		     December 31,
2008		     December 31,
2007		  

Gross revenue from real estate

    $ 18,734     $ 19,574     $ 75,168     $ 70,116  

Expenses:

         

Property operating expenses

      (6,103 )     (6,871 )     (23,112 )     (22,095 )

Mortgage interest expense

      (5,315 )     (6,065 )     (21,226 )     (24,472 )

Depreciation and amortization

      (4,563 )     (3,882 )     (16,458 )     (13,763 )
                                

Total expenses

      (15,981 )     (16,818 )     (60,796 )     (60,330 )
                                

Net income from real estate

      2,753       2,756       14,372       9,786  

Partners’ share

      (1,366 )     (1,378 )     (7,154 )     (4,893 )
                                

Company’s share

      1,387       1,378       7,218       4,893  

Amortization of excess investment

      (72 )     (13 )     (165 )     (256 )
                                

EQUITY IN INCOME OF PARTNERSHIPS

    $ 1,315     $ 1,365     $ 7,053     $ 4,637