Pennsylvania Real Estate Investment Trust CEO Discuses Q3 2010 Results - Earnings Call Transcript
Pennsylvania Real Estate Investment Trust (
)
Q3 2010 Earnings Call
November 04, 2010 3:00 pm ET
Executives
Garth Russell - KCFA Strategic Communications
Ron Rubin - Chairman and CEO
Ed Glickman - President
Bob McCadden - CFO
Joe Coradino - Head, Retail Operation
Analysts
Craig Schmidt - BofA Merrill Lynch
Quentin Velleley - Citi
Nathan Isbee - Stifel Nicolaus
Michael Mueller - JPMorgan
Ben Yang - KBW
Cedric Lachance - Green Street Advisors
Presentation
Operator
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Pennsylvania Real Estate Investment Trust Q2 2010 Earnings Call Transcript
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Pennsylvania Real Estate Investment Trust Q3 2009 Earnings Call Transcript
Welcome to the Pennsylvania Real Estate Investment Trust Third Quarter 2010 Earnings Conference Call. During today’s presentation all participants will be in a listen-only mode. Following the presentation, the conference will be opened for questions. (Operator Instructions) This conference is being recorded today, Thursday, November 4, 2010.
At this time, I would like to turn the conference over to Garth Russell with KCSA Strategic Communications. Please go ahead sir.
Garth Russell
Before turning the call over to management for their prepared remarks, I would like to state that this conference call will contain certain forward-looking statements within the meaning of 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.
These forward-looking statements reflect PREIT’s current views about future events 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 these forward-looking statements.
PREIT’s business may be affected by uncertainties affecting real estate businesses generally, as well as specific factors discussed in PREIT’s press releases, documents PREIT has filed with the Securities and Exchange Commission, and in particular PREIT’s annual report on Form 10-K for the year ended December 31, 2008. PREIT does not intend to update or revise any forward-looking statements to reflect new information, future events or otherwise.
Now I would like to turn the call over to Ron Rubin, Chairman and CEO of PREIT. Ron, the floor is yours.
Ron Rubin
Thanks very much Garth. Welcome to the Pennsylvania Real Estate Investment Trust third quarter 2010 conference call. Joining me on the call today are Ed Glickman, President; Bob McCadden, CFO; and Joe Coradino, President of our Management Company and Head of our Retail Operations. Also in the room today are Vice Chairman George Rubin and General Counsel Bruce Goldman.
Today we will discuss our third quarter results and our expectations for the balance of 2010. After we conclude our remarks, the call will be opened for your questions. We continue to make progress towards achieving our 2010 goals. At the end of the third quarter, we completed the sale of five power centers at a cap rate in the mid 7s. We used to proceeds of our $135 million to make further reductions in our outstanding debt balances to reduced the company’s leverage and improve our liquidity position.
Operating results for the quarter were in line with our expectations and we are cautiously optimistic about the upcoming holiday season. Tenants have generally been reporting increases in sales, and we are hopeful that consumer confidence will continue to improve through the fourth quarter and 2011.
We have been able to drive an increase in our overall portfolio occupancy level over the past year. However, maintaining occupancy at certain of our properties continues to remain challenging. Our emphasis continues to be on executing renewals and sourcing new leasing opportunities where possible for our properties.
We are also focused on exploring mixed use opportunities for a number of our assets. This includes medical facilities and offices. Joe Coradino will tell you specifically about our progress at Voorhees town center.
Our management team is keenly focused on realizing returns on the investments we made in many of our properties over the past five years. As the economy continues to recover, PREIT is well positioned to attract new tenants to hopefully maximize NOI. As always we remain focused on creating long-term value for our shareholders.
With that, I’ll turn the call over to Ed Glickman.
Ed Glickman
Thanks Ron. Good afternoon and thank you for joining us on this call. In the third quarter, the company continues to show positive top line trends. Portfolio occupancy was up 1.3% to 90.2%, small shop base reasons were up $0.19 to $30.70 and comp sales grew 3.9% from the $335 to $348. We believe that these results are a function of our corporate emphasis on improving occupancy as well as indicative of a greater level of retailer stability than we have seen in recent quarter.
Compared to last year, same store revenues grew 1.2% from $117.2 million to a $118.6 million. At the same time as the top line is improving, we continue to experience declining same store NOI due to higher expense levels primarily and real estate taxes. When possible we have focused on cutting cost. In the stronger market, it would enable us to pass through more of these expenses. In this market, however, we have also observed the higher percentage of these costs to maintain occupancy and to keep our malls vibrant and attractive to shoppers.
During the last quarter, leasing activity improved and we signed 631,000 square feet of non-income leases. This compares to 602,000 in the third quarter of last year. In the first nine months and including all type tenants our focus on leasing has resulted in 3.8 million square feet of executed deals this year compared to 2.6 million square feet in the same period last year. While we have made progress in improving occupancy, maintaining rent level has remained challenging. Renewal spreads in the quarter were negative 3.6% and new leases were negative 11% spreads at prior level.
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