Mall owner PREIT reports loss due to COVID-19 shutdowns

PREIT, which owns the Fashion District and Cherry Hill shopping centers among others, reported a net loss of $ 23.1 million in the three months ended June 30.

The number, after a net loss of 6.1 million Results report on Tuesday.

Total revenue was $ 56.8 million, a 30% decrease from the prior year quarter.

“The last few months have been intense and challenging. As a world, as a company and certainly as a sector, our determination will continue to be tested, ”said Joseph F. Coradino, CEO of PREIT, in a conference call with analysts following the release of the report. “As Thomas Paine said, ‘These are the times when the souls of men are being tested.’”

PREIT’s shares closed at $ 1.21 on Tuesday, down 3.97% from their closing price on Monday. The Russell 3000 Index, which includes PREIT as a member, ended the day down 0.79%.

Chris Kuiper, an analyst at CFRA Research in New York, said in a research note Tuesday that he expects PREIT to drop to $ 1 per share due to bankruptcies among its retail tenants as it works with its banks to prevent it that his loans are in default.

“We expect store closures and bankruptcies to accelerate further over the course of the year as the recession continues,” he said. “Investors underestimate this risk together with the risk of increasing bad debt losses and write-offs.”

The Pennsylvania Real Estate Investment Trust, the full name of PREIT, is the largest shopping mall owner in Philadelphia and the surrounding counties with 4.7 million square feet under under management in the region, according to Market Tracker CoStar Group.

The 21 malls in nine states include the Fashion District in Center City, formerly Gallery at Market East; Willow Grove Park and the Plymouth Meeting Mall in Montgomery County; and the Cherry Hill Mall, Moorestown Mall and Cumberland Mall in South Jersey.

Even before all properties closed in March to aid containment the coronavirus, PREIT and other retail landlords had fought hard to rent their properties for years as buyers increasingly migrated from shopping malls to e-commerce sites.

PREIT’s shopping centers reopened in mid-May, with the last of its properties, the Fashion District, resuming operations last month. Some of the fashion district’s largest tenants – including AMC Theaters, the City Winery restaurant and performance center, and the Round One entertainment venue – remain closed, which is hindering traffic and revenue.

Since early 2020, the company has seen bankruptcies from tenants such as JC Penney Co., GNC Holdings and Ann Taylor-parent Ascena Retail Group affecting 101 stores in its malls, Coradino said Tuesday.

With the exception of JC Penney, the brands occupy approximately 388,000 square feet and pay gross rents of $ 12.5 million, although most of their stores are expected to remain open despite the bankruptcy filings, he said.

In view of these challenges, PREIT reiterated in its earnings release on Tuesday that there would be “serious doubts about the company’s ability to continue as a going concern” if it were not able to maintain solvency through measures such as renegotiating its bank loans. This disclosure first appeared on their latest earnings statement, which covered the first three months of 2020.

PREIT CFO Mario C. Ventresca Jr. told analysts Tuesday that the company will not have to pay back the costs Received $ 4.5 million loan in April under the Small Business Administration’s $ 659 billion paycheck protection program. The program requires that the loans be waived if the money is used to save jobs.

Coradino, meanwhile, said the company expects to sign a $ 30 million bridging loan agreement later Tuesday, due to be repaid by Sept. 30, to “offset the effects” of rent deferrals and temporary cuts that are on As insolvent tenants widen, it is working to negotiate a longer term agreement with its lenders.

The enterprise said last month that his creditors had granted him a short-term respite from the “covenants” that the company must adhere to in order to keep its loans in good condition.

The new $ 30 million loan “really gives us the opportunity and the time to negotiate a longer-term deal with our banks,” Coradino said.