Pennsylvania Real Estate Investment Trust : PREIT Reports Second Quarter 2023 Results

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CONTACT: AT THE COMPANY

Mario Ventresca

EVP & CFO [phone]

INVESTOR RELATIONSHeather Crowell [e-mail]

PREIT Reports Second Quarter 2023 Results

Core Mall Total Occupancy Grew to 94.2%, Portfolio 95.0% Leased

Core Mall Sales Per Square Foot Were $592 in June

Average Renewal Spreads Were 4.7% for the Quarter Ended June 30, 2023

Philadelphia, August 3, 2023 - PREIT (OTCQB:PRET) today reported results for the three and six months ended June 30, 2023. A description of each non-GAAP financial measure and the related reconciliation to the comparable GAAP financial measure is provided in the tables accompanying this release.

		Three Months Ended June 30,		Six Months Ended June 30,
(per share amounts)		2023				2022			2023				2022
Net loss - basic and diluted	$	(9.73)			$	(3.32)		$	(19.48)			$	(10.72	)
FFO	$	(3.15)	$	1.72		$	(6.20)	$	1.51
FFO, as adjusted	$	(3.15)			$	1.71		$	(6.20)			$	0.83

"Our quarterly results demonstrate that our portfolio continues to be attractive to tenants and customers with core mall non-anchor occupancy improving 120 basis points and total leasing activity nearly 60% ahead of last year," said Joseph F. Coradino, Chairman and CEO of PREIT. "Improvements in occupancy and renewal spreads are clear indicators of compelling nature of our portfolio to tenants."

• Same Store NOI, excluding lease termination revenue, decreased 3.4% and decreased 2.2% when excluding Whole Foods at Plymouth Meeting for the three months ended June 30, 2023 compared to the three months ended June 30, 2022.
• Robust leasing activity is driving increased occupancy with Core Mall Total Occupancy increasing by 40 basis points to 94.2% compared to the second quarter 2022. Core Mall non-anchor Occupancy improved 70 basis points to 91.2% compared to the second quarter 2022.
• Core Mall total leased space, at 95.0%, exceeds occupied space by 80 basis points, and Core Mall non-anchor leased space, at 92.4%, is higher than occupied space by 120 basis points when including executed new leases slated for future occupancy, demonstrating the rapid pace of leasing activity.

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• For the rolling 12 month period ended June 30, 2023, Core Mall comparable sales were $592 per square foot, compared to $539 for the year ended December 31, 2019.
• Average renewal spreads for the three and six months ended June 30, 2023 were 4.7% and 5.1%, respectively.
• Since the beginning of 2023, the Company sold assets generating just over $30 million in gross proceeds.

Leasing and Redevelopment

• 216,000 square feet of leases are signed for future openings, which is expected to contribute annualized gross rent of approximately $6.15 million.
• Construction is underway on the new self-storage facility in previously unused, below grade space at Mall at
  Prince George's with an anticipated opening in the third quarter of 2023.
• Tilted 10 opened Phase II of its planned two-level indoor family entertainment center at Willow Grove Park in July 2023, adding family entertainment to this locally-loved destination shopping experience.
• At Moorestown Mall, construction is underway for the new state-of-the-art Cooper University Healthcare facility, expected to open its initial phase in fall 2023, and the 375-unit Pearl apartment development, following completion of the sale of land in the second quarter of 2022.
• At Springfield Town Center, tenant construction is underway for a new prototype, 32,000 square foot, LEGO® Discovery Center with an announced grand opening of August 9, 2023. Construction on the new 30,000 square foot Burlington location is also underway for an anticipated opening later this year. Municipal approvals were obtained for the development of 460 apartments and a 165-room hotel, setting the stage for sale of these parcels in the second half of 2023.

Primary Factors Affecting Financial Results for the Three Months Ended June 30, 2023 and 2022

• Net loss attributable to PREIT common shareholders was $51.8 million (which takes into consideration the accrual of preferred dividends that accumulated during the quarter but have not been paid), or $(9.73) per basic and diluted share for the three months ended June 30, 2023, compared to net loss attributable to PREIT common shareholders of $17.6 million, or $(3.32) per basic and diluted share for the three months ended June 30, 2022.
• Funds from Operations decreased in the three months ended June 30, 2023 compared to the prior year period primarily due to higher interest expense and a decrease in gain on sale of equity method investment.
• FFO for the three months ended June 30, 2023 was $(3.15) per diluted share and OP Unit compared to $1.72 per diluted share and OP Unit for the three months ended June 30, 2022.

All NOI and FFO amounts referenced as primary factors affecting financial results above include our share of unconsolidated properties' revenues and expenses. Additional information regarding changes in operating results for the three and six months ended June 30, 2023 and 2022 is included on page 15.

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Liquidity and Financing Activities

As of June 30, 2023, the Company had $102.5 million available under its First Lien Revolving Credit Facility. The Company's corporate cash balances, when combined with available credit, provide total liquidity of $110.7 million. The Company's Credit Facilities, with a balance of $1,023.1 million as of June 30, 2023, mature on December 10, 2023. The Company is working to address the upcoming maturity by pursuing all available alternatives, including refinancing, selling assets and engaging in discussions with lenders.

During the quarter, the Company extended the mortgage loan secured by Cherry Hill Mall through December 1, 2023 with an additional five month extension option exercisable subject to satisfaction of certain conditions. The Company also extended the maturity date on the mortgage loan secured by Woodland Mall through October 5, 2023.

Asset Dispositions

During the quarter, the Company closed on the sale of a land parcel to Main Event at Woodland Mall for $4.8 million.

2023 Outlook

The Company is not issuing detailed guidance at this time.

Conference Call Information

Management has scheduled a conference call for 11:00 a.m. Eastern Time on Thursday August 3, 2023, to review the Company's results and future outlook. To listen to the call, please dial 1(888) 330-2024 (domestic toll free), or 1(646) 960- 0187 (international), and request to join the PREIT call, Conference ID 9326912, at least fifteen minutes before the scheduled start time as callers could experience delays. 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 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 (OTCQB:PRET) is a publicly traded real estate investment trust that owns and manages innovative properties developed to be thoughtful, community-centric hubs. PREIT's robust portfolio of carefully curated, ever-evolving properties generates success for its tenants and meaningful impact for the communities it serves by keenly focusing on five core areas of established and emerging opportunity: multi-family & hotel, health & tech, retail, essentials & grocery and experiential. Located primarily in densely-populated regions, PREIT is a top operator of high quality, purposeful places that serve as one-stop destinations for customers to shop, dine, play and stay. Additional information is available at www.preit.comor on Twitter, Instagram or LinkedIn.

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Rounding

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

Definitions

Funds From Operations ("FFO")

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 (i) depreciation and amortization of real estate, (ii) gains and losses on sales 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. 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 (including development land parcels), which are included in the determination of net loss 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 loss and net cash used in 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 loss (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 loss is the most directly comparable GAAP measurement to FFO.

When applicable, we also present FFO, as adjusted, and FFO per diluted share and OP Unit, as adjusted, which are non- GAAP measures, for the three and six months ended June 30, 2023 and 2022, respectively, to show the effect of such items as provision for employee separation expense, gain on sale of preferred equity interest, depreciation and amortization on real estate at PREIT's consolidated properties, PREIT's share of depreciation and amortization of equity method investments, loss on project costs by equity method investee, gain on sales of interests in real estate and gain on sales of equity method investment, which had an effect on our results of operations, but are not, in our opinion, indicative of our ongoing operating performance.

We believe that FFO is helpful to management and investors as a measure of operating performance because it excludes various items included in net loss that do not relate to or are not indicative of operating performance, 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 gain on sale of preferred equity interest.

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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 loss (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 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 loss is the most directly comparable GAAP measure to NOI. NOI excludes other income, depreciation and amortization, general and administrative expenses, other expenses (which includes provision for employee separation expense and project costs), interest expense, net, equity in loss of partnerships, gain/loss on project costs by equity method investee, gain on sales of interest in real estate, gain on sale of equity method investment, gain on sale of preferred equity interest, and gain on sales of non operating real estate.

Same Store NOI is calculated using retail properties owned for the full periods presented and excludes properties acquired or disposed of, 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.

Unconsolidated Properties and Proportionate Financial Information

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 non-GAAP financial information, but we believe that it is helpful information because it reflects the pro rata 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 (loss) 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 40% to 50% economic interest in such partnerships, and there are generally no provisions in such partnership agreements relating to special non- pro rata 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 rata 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 Malls

Core Malls exclude Exton Square Mall, Cumberland Mall and Valley View Mall and power centers.