I N V E S TO R U P D AT E S E P T E M B E R

Transcription

1 I N V E S TO R U P D AT E S E P T E M B E R

2 PREIT: Company Overview Strong market position with quality properties concentrated in mid-atlantic s top MSAs 22 million square feet dedicated to retail, dining and entertainment with an increasingly strong and diversified anchor mix Early-mover advantage in rapidly-changing retail environment has created differentiated platform Small scale creates outsized growth opportunities through: Redevelopment and remerchandising Anchor transformation Densification 2

3 Key Investment Highlights C O N C E N T R A T E D P O R T F O L I O IN D E N S E L Y P O P U L A T E D, H I G H B A R R I E R - TO- E N T R Y M A R K E T S C A P I T A L I Z I N G O N O P P O R T U N I T I E S T O I M P R O V E Q U A L I T Y T H R O U G H R E M E R C H A N D I S I N G A N D R E D E V E L O P M E N T D I V E R S I F I E D T E N A N T M I X : O V E R 1 M I L L I O N S Q U A R E F E E T O F S P A C E A D D E D I N D I N I N G, E N T E R T A I N M E N T, F A S T F A S H I O N, G R O C E R Y, H E A L T H & W E L L N E S S A N D O F F - P R I C E C A T E G O R I E S I N S U L A T E D P O R T F O L I O C R E A T E S S T A B I L I T Y A N D O P P O R T U N I T Y F O R O U T S I Z E D G R O W T H L I M I T E D A B S O L U T E E X P O S U R E T O S E A R S T H R O U G H P R O A C T I V E R E P L A C E M E N T E F F O R T S U F F I C I E N T L I Q U I D I T Y T O M A N A G E E X I S T I N G P R O J E C T S A S W E L L A S P O T E N T I A L F U T U R E D E P A R T M E N T S T O R E C L O S U R E S 3

4 Geography PHILADELPHIA WASHINGTON DC Valley Mall Willow Grove Park Francis Scott Key Mall Plymouth Meeting Mall Exton Square Mall Springfield Mall Fashion District Moorestown Mall Cherry Hill Mall Gloucester Premium Outlets Mall at Prince Georges Cumberland Mall Springfield Town Center PREIT s portfolio is primarily located along the east coast with a concentration in the mid-atlantic s top MSA s - Philadelphia and Washington DC. 4

5 Successful Transformation CREATED A FOCUSED MARKET STRATEGY Concentrated portfolio in densely populated, high barrier-to-entry markets >40% of NOI generated from Top 5 assets with sales PSF of $588 OPTIMIZED PORTFOLIO Significantly reduced risk profile through strategic disposition program Sold 17 low-productivity malls with 1 more on the market Capitalizing on opportunities to improve quality through remerchandising and redevelopment REVITALIZING CORE ASSETS TO CAPITALIZE ON RAPIDLY CHANGING LANDSCAPE Sector leading ~20% of space committed to dining & entertainment Proactively replace challenged department stores with diverse mix of highperformance retailers Over 1 million square feet of space added in dining, entertainment, fast fashion, grocery, health & wellness and off-price categories IMPROVED BALANCE SHEET ACHIEVED OPERATIONAL EXCELLENCE Liquidity; $400 million credit facility with no outstanding balance (as of 9/27/17) Well-laddered debt maturities $750 million raised through asset sales Minimal exposure to floating rate debt Roadmap to lower leverage through NOI growth and asset sales Targeted leverage below 47% and Debt/EBITDA below 7x Independent sales projection reflects stabilized portfolio reaching ~$540 psf in 2019 Multi-year plan reflects average NOI growth of 6-8% over 4 years Avg Sales/SF of $478 and NOI-weighted sales of $495 (excl. assets marketed for sale) P R E I T H A S A T R A C K R E C O R D O F S U C C E S S F U L L Y E X E C U T I N G O N K E Y I N I T I A T I V E S, T R A N S F O R M I N G T H E C O M P A N Y A N D I M P R O V I N G T H E Q U A L I T Y O F O U R P O R T F O L I O. 5

6 Transformation: By The Numbers Beyond 2018 # of Properties # of States # of Markets Total GLA 33 million 22 million 22 million Portfolio Sales/SF $365 $468 ~$540 Assets > $500/SF 3 5 >10 % of NOI from assets with sales > $500 PSF 20% 39% > 55% 6

7 A Differentiated Platform Insulated Portfolio creates stability Small scale results in manageable impact from retailer fallout Opportunity for outsized growth upon execution of redevelopment program Strategic position in Top 10 Markets - Philadelphia and Washington DC Limited absolute exposure to Sears through proactive replacement effort Portfolio Sales productivity exceeds Low Productivity Peers 7

8 Sears exposure as a differentiator SPG GGP CBL WPG MAC PEI TCO

9 Underappreciated Quality N E A R L Y 4 0 % O F M A L L N O I C O M E S F R O M T O P 5 P R O P E R T I E S G E N E R A T I N G S A L E S P S F O F $ % of TTM Mall NOI Sales PSF % Change in Sales PSF Top % Add chart of NOI by tier here $ % % $ % % $407 (3.3%) % $356 (1.1%) Marketed for sale 5.0% $350 (2.5%) A V E R A G E P O R T F O L I O S A L E S / S F O F $ A N D N O I - W E I G H T E D S A L E S O F $495 ( E X C L. A S S E T S M A R K E T E D F O R S A L E ) 9

10 Quality Differentiator Current Portfolio (8/31/17) Excluding Asset Offered for Sale Estimated Stabilized Portfolio Sales (1) : Fashion Outlets Philadelphia Estimate (2) : Estimated Stabilized Portfolio Sales: ~ (1)Gerney Research study dated (2)Estimated by 3 rd party research firm. 10

11 Completed Anchor Replacements Prior Tenant Property Tenant Size (SF) Status/Description JC Penney Cumberland Mall DICK S Sporting Goods 50,000 OPEN 2016 Exton Square Round 1 58,000 OPEN 2016 Sears Willow Grove Park Primark 80,000 OPEN Viewmont Mall Home Goods, DICK s Sporting Goods and Field & Stream 23,000 90,000 OPEN Magnolia Mall Burlington HomeGoods 5 Below 50,000 23,000 8,500 OPEN OPENING SPRING 18 OPENING SPRING 18 Capital City Mall DICK s Sporting Goods Fine Wine + Good Spirits 50,000 11,500 OPENING Friday OPENING Q4 17 Woodland Mall Von Maur 90,000 OPENING Q4 19 K Mart Exton Square Whole Foods Market 55,000 OPENING Q1 18 Bon-Ton Valley Belk 120,000 OPENING Q4 18 P R E I T H A S A S T R O N G T R A C K R E C O R D O F C R E A T I N G V A L U E T H R O U G H A N C H O R R E P L A C E M E N T S 11

12 Anchor Replacement Status Prior Tenant Property Tenant Size (SF) Status/Description JC Penney Willow Grove Park Movie Theatre Lease being negotiated Macy s Valley Mall Moorestown Fitness Entertainment New-to-market tenants Leases being negotiated Lease in final form Plymouth Meeting Off-Price Entertainment Restaurant Lease being negotiated 12

13 Completed Anchor Replacements 13

14 Track Record of Replacing Tenants P R E I T S R E L A T I V E L Y S M A L L P O R T F O L I O, L O C A T E D I N H I G H Q U A L I T Y M A R K E T S, I S P R O T E C T E D F R O M M A T E R I A L I M P A C T R E L A T E D T O R E T A I L E R F A L L O U T. GLA impacted % Covered (1) 2016 Bankruptcies 236,394 79% 2017 YTD Bankruptcies 349,220 63% Total 571,239 69% For tenants that filed for Bankruptcy protection in 2017, PREIT currently expects only 25 stores to close within its portfolio. (1) Data as of June 30,

15 Expanding Retailers T E N A N T S H A V E B E C O M E A G N O S T I C T O R E T A I L F O R M A T A N D A R E F O C U S E D O N L O C A T I O N A N D P O S I T I O N I N G A B O V E A L L E L S E 15

16 Expanding Retailers - continued T E N A N T S H A V E B E C O M E A G N O S T I C T O R E T A I L F O R M A T A N D A R E F O C U S E D O N L O C A T I O N A N D P O S I T I O N I N G A B O V E A L L E L S E 16

17 Redevelopment & Anchor Repositioning Strategy I N V E S T I N G I N E X I S T I N G A S S E T S I N S T R O N G, G R O W I N G M A R K E T S W H E R E L O N G - T E R M A S S E T V A L U E C A N B E E N H A N C E D. Proactively identify market-position improvement opportunities including: Anchor replacement, remerchandising, renovation and densification Priority given to A malls and high-quality B s that are cap rate transformative Targeted returns of bps over trading cap rate Minimum leasing thresholds required before commitment is finalized 17

18 Fashion District Philadelphia THE STORY: Spanning 4 city blocks, the Fashion District Philadelphia will represent a unique metropolitan experience blending flagship and outlet retail destination dining experiences and entertainment offerings. Opening in 2018 with bright, contemporary spaces that will welcome shoppers and reconnect to Market Street with accessible storefronts, sidewalk cafés, a new streetscape, digital signage and graphics, all complementing the existing office space. STATUS: Opening: 2018 Stabilization: 2020 Incremental Cost: $153-$183 million Incremental Return: 8-9% Leasing Status: 70% of space committed 18

19 Fashion District Philadelphia 19

20 Springfield Town Center - Densification THE STORY: PREIT acquired Springfield Town Center in 2015, following its successful full-scale remodel. Along with the mall, PREIT acquired the ability to add over 3 million square feet of mixed use to the periphery. With the property marching toward stabilization, over 90% occupied and growing sales, we look toward the future of this mixed-use opportunity that will add tremendous value. STATUS: Planning 20

21 Viewmont Mall Anchor Transformation THE STORY: Viewmont Mall has recently been a focus in PREIT's remerchandising strategy. Viewmont's tenancy upgrade cemented its position as the dominant shopping and recreational destination in the Scranton/Wilkes-Barre region. The addition of Ulta, Buffalo Wild Wings, Forever 21 and Yankee Candle along with new prototype store for a majority of key, national retailers, set the stage for a second phase of redevelopment. A proactive recapture of the Sears space has paved the way for a new combination Dick s Sporting Goods / Field & Stream store accompanied by HomeGoods, NOW OPEN, adding to the mall s impressive line up of destination, traffic driving tenants. STATUS: OPEN Stabilization: 2018 Incremental Cost: $21-$22 million Incremental Return: 8-9% Leasing Status: Anchors under construction 21

22 Mall at Prince Georges - Remerchandising STATUS: Opening: Stabilization: 2019 Project Cost: $34-35 million Incremental Return: 8-9% Leasing Status: DSW/ULTA executed for 18 openings Small shop leasing 80% 4 Fast Casual leases signed THE STORY: Just 2 miles from the University of Maryland and minutes from Washington DC, the Mall at Prince Georges position in the market is strengthened by the volume of development immediately surrounding the property over $1 billion in recent development has occurred in the trade area. A remerchandising program, highlighted by H&M, DSW, ULTA. 73% of the non-anchor space will be updated with new tenants or new store prototypes. The addition of fast casual restaurants along the exterior of the mall will add to the curb appeal of the property and increase mall traffic. 22

23 Balance Sheet Strategy O U R G O A L I S T O M A I N T A I N F L E X I B I L I T Y T O C A P I T A L I Z E O N O P P O R T U N I T I E S A N D E N S U R E S T A B I L I T Y D U R I N G C H A L L E N G I N G T I M E S W e l l - l a d d e r e d d e b t m a t u r i t i e s Only one significant mortgage loan maturity between now and July 2020 Credit facility has 3 years of term remaining including extension options M i n i m a l e x p o s u r e t o f l o a t i n g r a t e d e b t 96% of debt is fixed or swapped to fixed S u f f i c i e n t l i q u i d i t y b e y o n d p r o g r a m m e d c a p i t a l n e e d s No amounts currently outstanding under $400 million credit facility S t r o n g d i v i d e n d c o v e r a g e 47% FFO payout ratio 85% FAD payout ratio 23

24 Addressing Capital Plan & Liquidity (millions) Committed Redevelopment Spend remaining $171-$213 Capital Reserve for Unspecified Projects $100-$125 Total Redevelopment Spend $271-$338 Sale of Interests in Operating Assets $125-$200 Financings Construction Loans & Excess Proceeds on Mortgage Refinancings $125-$175 Non-Operating Asset Sales $21-$26 Densification/Air Rights Sales $10-$15 Range of Potential Future Sources $281-$416 Credit Facility Capacity $400 Liquidity $410-$478 As of June

25 Redevelopment Spend Forecast Incurred Remaining to Spend (1) Property Through 6/30/17 Low High Fashion District Philadelphia $91.5 $61.0 $91.0 Mall at Prince Georges Sears replacements Woodland Mall Capital City Mall Viewmont Mall Magnolia Mall Macy's replacements Valley View Mall Total Committed Redevelopment Spending Reserve for Unspecified Projects Total Redevelopment Spending $271.2 $338.7 (1) At PREIT's estimated share. Amounts shown are net of any expected tenant reimbursements, parcel sales, tax credits or other incentives. 25

26 Status of Capital Raising Initiatives Initiative Status Non-Operating Asset Sales Negotiating contracts on land parcels in Chester County,PA and Gainesville, FL. Retained land parcel at Beaver Valley mall SOLD Densification/Air Rights Sales Negotiating agreement of sale for Air Rights at FOP Executed Agreement for land sale at Exton anticipated closing in 2018 Sale of Interests in Operating Assets Logan Valley Mall SOLD 801 Market SOLD Valley View Mall being marketed Marketing interest in several medium-high quality malls through 3 rd party broker Financings Construction Loans & Excess Proceeds on Mortgage Refinancings Discussions underway for Phase I Construction Loan on FDP Additional proceeds for Viewmont Mall following completion of Sears replacement 26

27 Well-Laddered Debt Maturities $500 $400 $300 $200 $100 $ Mortgage Loans Term Loans Credit Facility Maturities shown reflect available extension options. No amounts are currently outstanding under $400M Credit Facility, which can be extended until June

28 Strategic Vision C O N T I N U E T R A N S F O R M A T I O N I N T O A T O P - T I E R M A L L R E I T T H R O U G H P O R T F O L I O O P T I M I Z A T I O N, A D I V E R S I F I E D T E N A N T M I X A N D A S T R O N G B A L A N C E S H E E T T O C A P I T A L I Z E O N O P P O R T U N I T I E S T O C R E A T E V A L U E S T R A T E G I C I N V E S T M E N T A N D E X P A N S I O N I N A T T R A C T I V E M A R K E T S E M P L O Y I N G A C O N S U M E R - D R I V E N A P P R O A C H T O T E N A N T M I X C A P I T A L I Z I N G O N S H I F T I N G C O N S U M E R S H O P P I N G B E H A V I O R S B Y A N T I C I P A T I N G T R E N D S D E L I V E R O P E R A T I N G R E S U L T S T H A T R E F L E C T T H E Q U A L I T Y O F T H E P O R T F O L I O E X P E D I T E C A P I T A L P L A N T O M A X I M I Z E L I Q U I D I T Y A N D R E D U C E L E V E R A G E S O W E C A N C O N T I N U E T O C A P I T A L I Z E O N V A L U E - E N H A N C I N G O P P O R T U N I T I E S 28

29 Forward Looking Statement This presentation, together with other statements and information publicly disseminated by us, contain certain forward-looking statements within the meaning of the federal securities laws. Forward-looking statements relate to expectations, beliefs, projections, future plans, strategies, anticipated events, trends and other matters that are not historical facts. When used, the words anticipate, believe, estimate, target, goal, expect, intend. may, plan, project, result, should, will, and similar expressions, which do not relate solely to historical matters, are intended to identify forward looking statements. We caution investors that any forward looking statements presented in this presentation and the documents that we may incorporate by reference into this document are based on management s beliefs and assumptions made by, and currently available to management. These forwardlooking 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 uncertainties affecting real estate businesses generally as well as the following, among other factors: Changes in the retail and real estate industries, including consolidation and store closings, particularly among anchor tenants; our ability to maintain and increase property occupancy, sales and rental rates, in light of the relatively high number of leases that have expired or are expiring in the next two years; increases in operating costs that cannot be passed on to tenants; current economic conditions and the state of employment growth and consumer confidence and spending, and the corresponding effects on tenant business performance, prospects, solvency and leasing decisions and on our cash flows, and the value and potential impairment of our properties; the effects of online shopping and other uses of technology on our retail tenants; risks related to our development and redevelopment activities; acts of violence at malls, including our properties, or at other similar spaces, and the potential effect on traffic and sales; our ability to identify and execute on suitable acquisition opportunities and to integrate acquired properties into our portfolio; our partnerships and joint ventures with third parties to acquire or develop properties concentration of our properties in the Mid-Atlantic region; changes in local market conditions, such as the supply of or demand for retail space, or other competitive factors; changes to our corporate management team and any resulting modifications to our business strategies; our ability to sell properties that we seek to dispose of or our ability to obtain prices we seek; potential losses on impairment of certain long-lived assets, such as real estate, or of intangible assets, such as goodwill, including such losses that we might be required to record in connection with any dispositions of assets; our substantial debt and liquidation preference of our preferred shares and our high leverage ratio; constraining leverage, unencumbered debt yield, interest and tangible net worth covenants under our principal credit agreements; our ability to refinance our existing indebtedness when it matures, on favorable terms or at all; our ability to raise capital, including through joint ventures or other partnerships, through sales of properties or interests in properties, through the issuance of equity or equity-related securities if market conditions are favorable, or through other actions; our short- and long-term liquidity position; potential dilution from any capital raising transactions or other equity issuances; and general economic, financial and political conditions, including credit and capital market conditions, changes in interest rates or unemployment. 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, 2016 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.