Pennsylvania Real Estate Investment Trust (PEI)

Q2 2011 Earnings Call

July 28, 2011 11:00 AM ET

Executives

Ron Rubin – Chairman and CEO

Ed Glickman – President

Bob McCadden – Chief Financial Officer

Joe Coradino – VP, Management Company and Head, Retail Operations

George Rubin – Vice Chairman

Bruce Goldman – General Counsel

Analysts

Craig Schmidt – Bank of America/Merrill Lynch

Nathan Isbee – Stifel, Nicolaus

Quentin Velleley – Citi

Ben Yang – Keefe, Bruyette & Woods

Jeff Lau – Sidoti & Company

Cedrik Lachance – Green Street Advisors

Presentation

Operator

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Good day, ladies and gentlemen. Thank you for standing by. Welcome to the Pennsylvania Real Estate Investment Trust Second Quarter 2011 Conference Call. During today’s presentation, all parties will be in a listen only mode. Following the presentation the conference will be opened for question. (Operator Instructions)

This conference is being recorded today, Thursday, July 28, 2011. I would now like to turn the conference over to our host, Mr. Garth Russell with KCSA Strategic Communications. Please go ahead, sir.

Garth Russell

Thank you, [Sonia]. Before turning the call over to management for their prepared remarks, I’d like to state that this conference call will contain certain forward looking statements within the meaning of the federal securities laws. Forward look statements relate to expectations, beliefs, projections, future plans strategies and 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 might be affected by uncertainties effecting real estate businesses generally, as well as specific factors discussed in PREIT’s press releases, documents PREIT has filed with the Security and Exchange Commission and in particular PREIT’s annual report on Form 10-K. PREIT does not intend to update or revise any forward-looking statements to reflect new information, future events or otherwise.

It is now my pleasure to turn the call over to Ron Rubin, Chairman and CEO of PREIT. Ron the floor is yours.

Ron Rubin

Thank you very much, Garth. Welcome to the Pennsylvania Real Estate Investment Trust second quarter 2011 conference call. Joining me on the call today are Ed Glickman, President; Bob McCadden, CFO; and Joe Coradino, Vice 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 second quarter results, the status of our current projects and our expectations for the balance of 2011. After we conclude our remarks, as usual, the call will be open for your questions.

As noted in our press release, the company’s progress is being recognized by our shoppers, our tenants and our by our banks. The shoppers are returning to our malls as evidenced by our six consecutive quarter of comp store sales growth.

In addition, new and exciting tenants are joining our properties. We are very pleased with the re-tenanting of the former Strawbridge store at Willow Grove Park and by the exciting line up of tenants joining the streetscape at Voorhees Town Center.

These efforts have been acknowledged by the financial institutions who participated with us during the quarter to modify the company’s credit facility and who have worked with us in a number of property financings on what we consider to be favorable terms.

While comfortable with the trends in sales in an occupancy we understand that the recover continues. However concern still exists, with stable performance consistent with our guidance we are making steady progress in our efforts to strengthen our financial position, also to improve our operational performance and maximize the value of our properties.

To do this we are working to improve our balance sheet, place tenants in our properties, to increase NOI, improve occupancy and generate positive leasing spreads, all as part of our strategy to create long-term value to shareholders.

And with that, I’ll turn the call over to Ed Glickman.

Ed Glickman

Thanks, Ron, and thanks to all of you for joining us on this call. In the second quarter, PREIT continued to show steady progress toward returning to growth as the number of our operating metrics continued their positive momentum.

This quarter was our sixth consecutive quarter of comp sales growth with the same store sales now at $359 per foot, up 4.4% from a year ago. The improvement in sales continues to be broad based to 29 of 38 malls showing increases. We have almost fully return our steps to our peak level of $364 per foot in the second quarter of ‘07.

Portfolio occupancy continues to move forward and we are now at 90.8% overall. In addition, to the progress in occupancy there are a number of fundamental leasing achievements at Philadelphia area properties, which are very positive for the portfolio and point to continued momentum. Joe Coradino will give you the details on these important developments.

While space productivity has improved and demand has stabilized at our middle market assets we’re still in a buyers market, even though our base rent level is up overall, we’re gaining pricing power at these properties remains challenging and restoring our expense recovery margin continues to be our priority. This has slowed our progress towards generating positive same store NOI growth.

With greater clarity in the economic forecast we expect to see additional tenants out for longer lease terms and accept a more traditional expense price model. As our comp store sales and occupancy continue to improve, we have become increasingly reluctant to compromise on economics.

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