Pennsylvania Real Estate Investment Trust (NYSE:PEI) Q4 2019 Earnings Conference Call - Final Transcript

Feb 26, 2020 • 11:00 am ET


Pennsylvania Real Estate Investment Trust (NYSE:PEI) Q4 2019 Earnings Conference Call - Final Transcript


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Ladies and gentlemen, thank you for standing by, and welcome to the PREIT Fourth Quarter 2019 Earnings Call. [Operator Instructions] I will now like to hand the conference over to your speaker today, Heather Crowell. Thank you. Please go ahead, ma'am.

Heather Crowell

Good morning, and thank you all for joining us for PREIT's fourth quarter 2019 earnings call. 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, February 26, 2020, 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. Members of management who are on the call today are Joe Coradino, PREIT's Chairman and CEO; and Mario Ventresca, our CFO.

I'd now like to turn the call over to Joe Coradino.

joseph f. Coradino

Thanks, Heather, and good day, everyone. We're nearly two months into 2020. And as we look back where we were a year ago, it feels a little different. We're beginning to believe that the headwinds are slowly subsiding, and the work we've done positions us to capitalize on an improved operating environment. With last night's earnings release, we announced completion of transactions, confirming that we were on our way to shoring up our balance sheet. The effort includes selling over $300 million in assets in the form of nonincome-producing land for multifamily and hotel densification, operating outparcels and sale leaseback of five mid-tier properties. We entered into this sale-leaseback transaction for five properties that will deliver $153.6 million in proceeds, netting approximately $57 million in liquidity. The transaction is structured as a 99-year lease with an option to repurchase.

The agreement also provides for release of parcels related to multifamily development and is subject to ongoing lease payments at 7% with annual escalations. The land sales represent Phase one of the multifamily densification plan. We have signed purchase and sale agreements with four buyers on seven properties for $125 million. This phase will include 3,450 of the 5,000 to 7,000 units that are buildable. Upon receipt of entitlements, we'll close on these land sales, which will allow us to reduce our leverage levels. Note that this represents only half of our land available for densification, and we expect to monetize the balance as part of Phase 2. Additionally, the company has two hotels and 12 additional outparcels under agreement of sale, which are expected to net an additional $12 million in liquidity. These transactions demonstrate our ability to efficiently access internally generated capital, and together with potential modifications to our credit facility covenants create the runway needed in order