PREIT Takes No Questions On Q2 Earnings Call After Losses Nearly Triple Year-Over-Year

Despite strength in occupancy and sales at its core malls, PREIT’s financial situation — and its relationship with shareholders — continues to deteriorate.

The Philadelphia-based mall REIT lost $9.73 per share in Q2, nearly triple what it lost in the same period last year, according to its quarterly report filed on Thursday with the Securities and Exchange Commission. Though its net sales per square foot dipped slightly, the main culprit for its deep losses was the escalating cost of its debt load, which cracked $1B in the quarter.

PREIT’s interest expense increased by $13.2M in Q2, Chief Financial Officer Mario Ventresca said on the company’s earnings call. The floating-rate term loan worth $995M and maturing Dec. 10, carried an interest rate of more than 10% in Q2, per PREIT’s quarterly report.

PREIT’s attempts to sell property to pay down its debt stalled out in the first half of the year after bringing in more than $120M last year. After raising about $25M in the first quarter, PREIT only managed to sell a single outparcel in Q2, a lot at its Woodland Mall in Michigan for $4.8M.

PREIT CEO Joe Coradino did not detail on the call what other efforts it is making to address the $1B-plus term loan maturing on Dec. 10, except to say that adviser PJT Partners is pursuing all options. 

“Right now, I think we’re dealing with PREIT rearranging the deck chairs on the Titanic,” longtime PREIT analyst Sheldon Grodsky told Bisnow after the earnings release. “I think the board includes some very knowledgeable and good people, but they’re in a situation that may have no good way out for them.”

After Ventresca spoke about some of PREIT’s financial results, the call ended abruptly without any questions. PREIT previously answered presubmitted, anonymized questions on past earnings calls, but those were absent on Thursday.

“PREIT has provided extensive disclosures that provide investors with appropriate information regarding the company’s business and financial performance,” PREIT spokesperson Jacqueline Tammaro said in an emailed response about the lack of questions on the call.

The company’s tight-lipped earnings call comes after a quarter in which some of its largest shareholders expressed public outrage at PREIT’s seven longest-tenured trustees for refusing to resign after a shareholder vote of no confidence.

The trustees were forced to submit resignation letters after failing to secure enough shareholder votes to stay, but they later voted to reject each others’ resignations, claiming that a wholesale leadership change would destabilize the company.

Private investor Scott Bishins, who co-authored a July 6 letter calling on the seven board members to resign, told Bisnow at the time that PREIT’s lack of detailed communication about its refinancing efforts was the source of his frustration. For retiree and shareholder Claire Pare, the issue is one of priorities.

“In my opinion, PREIT’s management doesn’t appreciate the fact that many retirees are in part dependent on the dividends,” Pare told Bisnow. “And I think they’re being very … it’s very unfair to ignore that fact.”

Neither Coradino nor Ventresca addressed the public shareholder discontent on the Q2 call.

“PREIT has addressed this publicly on multiple occasions and there is nothing to add at the moment,” Tammaro said of the shareholder revolt.

PREIT gained municipal approval to build apartments and a hotel on land around Springfield Town Center in Virginia in Q2, paving the way for the selected parcels to be sold in the second half of the year, the company reported in its SEC filing. 

The dip in mall sales was not unique to PREIT, as Simon Property Group cut its profit projections for the year due to reduced retail spending. PREIT also had bankruptcies hit 160K SF worth of stores across its portfolio, Ventresca said.

“The irony, because of all the talk of the death of shopping malls, is that it’s not their major problem right now,” Grodsky said.