Pennsylvania Real Estate Investment Trust
Q4 2020 Earnings Call Transcript

Published: 12 Mar 2021

[Operator:]

Ladies and gentlemen, thank you for standing by, and welcome to the PREIT 4Q 2020 Earnings Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. I would now like to hand the conference over to your speaker today, Heather Crowell, EVP of Strategy and Communications. Thank you. Please go ahead.

[Heather Crowell:]

Thank you. Good morning, and thank you all for joining us for PREIT's fourth quarter 2020 earnings call. We hope everyone is well. During this call, we will make certain forward-looking statements within the meaning of federal securities laws. These statements relate to expectations, beliefs, projections, trends and other matters that are not historical facts and are subject to risks and uncertainties that might affect future events or results. Descriptions of these risks are set forth in the company's SEC filings. Statements that PREIT makes today might be accurate only as of today, March 12, 2021, and PREIT makes no undertaking to update any such statements. Also, certain non-GAAP measures will be discussed. PREIT has included reconciliations of such measures to the comparable GAAP measures in its earnings release and other documents filed with the SEC.

[Joe Coradino:]

Thanks, Heather, and good morning, everyone. We're here today to make five key points, which signal a bright future for PREIT. It's clear as a result of the factors accelerated by COVID that we're in the real estate business with an ability to attract a wide array of uses and deliver a broader customer base to our properties. Demand is robust from uses far beyond traditional retail, including life sciences, health care and self-storage. Business will return in a significant way for retailers, restaurants and entertainment in the brick-and-mortar format. Quality real estate will thrive into the future, and our region-leading properties are gaining market share as weaker properties decline. Growth in suburban markets will catalyze demand for our offerings and for our multifamily and hotel densification effort. So we're not going to talk to you about retailers closing and new retailers taking their place. That is happening, but it's not today's headline. Today's headline reads

[Mario Ventresca:]

Thanks, Joe. We are encouraged by the facts that are upon us. Collections continue to improve, signaling renewed health among our tenant base. Restrictions are lifting, and people are getting vaccinated, driving improved traffic, which is growing for the second straight week. People are beginning to travel again, and we are seeing a return to normalcy and will benefit from people craving experiences and tiring of being prisoners in their homes. The results that will be communicated today are reflective of a portfolio that is recovering from the impact of COVID-19 pandemic. After the close yesterday, we announced a quarterly same-store NOI decline of 33.3% and FFO results that were impacted by these NOI declines, increased interest expense and restructuring expenses. Our results were in line with our larger peers from a same-store NOI and occupancy perspective, which demonstrates the relative health and strength within our portfolio. We never lost sight of our core business. We continue to make progress on collecting COVID-period rents as our tenants' business recovers. As of December 31, we recognized cash receipts representing 80% of billed second quarter through fourth quarter 2020 rents. Including collection of prior months' rents, we collected 112% of billed fourth quarter rents. The fourth quarter, and for that matter, the third quarter, at 99% of billed amounts collected both stand out as stellar cash collection periods. At the end of December, we had reduced our accounts receivable balances to $55 million. This is a reduction of $19 million from our peak AR balance of $74 million in August 2020 and just $13 million more than our pre-COVID historical AR balance. This reduction in accounts receivable balances, coupled with the significant improvement in cash collection rates, demonstrates that our tenants are back in business. We have finalized deferral or abatement transactions with over 95% of our national and local tenants. As a result of this effort, we expect to ultimately collect in excess of 85% of our billed COVID-period rents. During the year, we aggressively reduced capital spending for redevelopment by $135 million and have just under $16 million in redevelopment spending slated for 2021. We also began to realize improvements in our results driven by our cost-saving measures in G&A and operating expenses that were implemented starting in the second quarter with the onset of COVID. Over the past two years, we have reduced head count and managed other general and administrative expenses and are forecasting that these will save the company $5 million annually.

[Operator:]

You have a question from Sheldon Grodsky with Grodsky Associates. Your line is open.

[Sheldon Grodsky:]

Good morning, everybody. I'm glad you survived your bankruptcy. Let's hope we can do well going forward. Could you explain the write-down on Fashion District? Did you hear me?

[Mario Ventresca:]

Yes, I'm sorry. I was on mute. We went through our fourth quarter impairment testing, as we typically do, as part of our annual audit. We did receive an appraisal for the asset that came in at a value that put our investment in the equity of the asset at the written down amount that you saw, which required the $148 million write-down.

[Sheldon Grodsky:]

Okay. So I mean your equity investment, has it -- does it have any value at this point on the balance sheet?

[Mario Ventresca:]

Yes, it does.

[Sheldon Grodsky:]

Yes. Let that’d it for the moment.

[Operator:]

There are no further questions at this time.

[Joe Coradino:]

Thank you very much, and thank you all for being on the call. In closing, I'd like to state, really where I began, it's clear that as a result of the factors accelerated by COVID that we're in the real estate business. Demand is robust for uses far beyond traditional retail. Business will return in a significant way for retailers, restaurants and entertainment. Quality real estate will thrive into the future and growth in suburban markets will catalyze demand for our offerings. With that, I again thank you for being on the call, and have a great day. Bye now.

[Operator:]

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.