PREIT Results: “A Function Of Timing”


The good news is that PREIT (NYSE:PEI) is still plowing ahead its disposition program — 14 percent of its total market capitalization — whose proceeds should reach $560 million for ten properties that have been or are to be acquired. Annual sales of the last three recently-sold malls were below $400 per square foot, driving up the rolling twelve-month portfolio mall sales by 14 percent to $431 per square foot. However, during Q2 2015, internal growth was weak, and occupancy fell slightly for non-anchor tenants because of Q1 tenant bankruptcies. Management says the results were a function of timing. In response, share price decreased 2 percent following the second-quarter announcement.

Same-store NOI has remained practically flat as the 2014-2015 change has been -0.1 percent. A caveat is that they await 24 months to include new acquisitions, and management has considered reducing this period. They said that, nonetheless, including new assets would barely change the same-store NOI figure; still, 1.7-2.7 percent guidance for 2015 same-store NOI growth remains unchanged.

Adjusted FFO- and FAD-per-share have both dropped as assets are sold and gross leasable area reduced. Debt-to-total capitalization has been 53 percent. PREIT has amended and extended a $400 million revolving facility and closed on a new $150 million 5-year term loan. Fixed debt is 86 percent.

Given PREIT’s transitional period and the difficulty of assessing the impact of these changes, its price-to-FFO is still distant from peers with better portfolio mall sales such as Macerich (NYSE:MAC), Simon Property (NYSE: SPG) and General Growth (NYSE:GGP). The stock has been trading at 11.4×, as opposed to 20× for those peers.

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Source: PREIT, Fast Graphs

Written by Heli Brecailo

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