Pennsylvania Real Estate Investment Trust

Good morning, and thank you all for joining us for PREET's fourth quarter 2022 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 Preet makes today might be accurate only as of today, March 22nd, 2023, and Preet makes no undertaking to update any such statements. Also, certain non-GAAP measures will be discussed. Preet has included reconciliations of such measures to the comparable GAAP measures in its earnings release and other documents filed with the SEC. We continue to partner with Say Technology to offer an opportunity for any shareholder to ask questions of management. During this call, management will answer questions received over this Q&A platform. Members of management on the call today are Joe Corradino, REIT's chairman and CEO, and Mario Ventresca, CFO.

Joe? Thank you, Heather. Good morning, and thank you for joining us. 2022 was a year with twists and turns. But as I look back on the year, I'm proud of what the team has accomplished, despite mounting economic headwinds. We continue to deliver new-to-portfolio tenants and robust leasing results, including adding diverse uses. We raised capital through opportunistic asset sales. We drove outstanding occupancy gains, achieving pre-pandemic occupancy levels and positive renewal spreads over the course of the year. We obtained approvals and have apartments under construction at Moorestown Mall and expect to close on the sale of apartment and hotel ground at Springfield Town Center this summer. By capitalizing on the strategic foundation put in place over the years, we continue to position our core malls as best-in-class retail assets in their respective trade areas. Robust leasing has driven increased core mall occupancy to 94.8%, a 150 basis point improvement over last year. Core mall non-anchor occupancy improved by 240 basis points to 92.1%. we have a pipeline of over 336,000 square feet signed for future occupancy representing over 7.4 million in annualized future rents, leading to a total leased occupancy level of 95.7%, the highest it's been in the past three years and the second highest in the last decade. In spite of this high watermark, we see continued opportunity to grow as pricing power shifts to the landlord. As a result of this activity, we ended the year fully occupied at half of our properties and have attracted a number of new to portfolio tenants that included at Cherry Hill Mall, Psycho Bunny, Levi's, Warby Parker, Oak and Fort, Mark Kane, Rooming Life, and top tier dining destination Eddie D's opening this spring. Uniqlo is also underway to take its place as one of only two in the Philadelphia suburbs. Phoenix Theater opened at Woodland Mall. Box Lunch opened multiple locations, Patrick Henry, Willow Grove, Springfield Town Center, and Capital City Mall. Edgewood Outfitters joined Patrick Henry Mall. Sketchers opened in Dartmouth Mall. Lovisa, which had opened in Woodland Mall in 2021, expanded in our portfolio to Magnolia Mall, Patrick Henry Mall, and Valley Mall. And Daily Thread, executed leases from multiple locations in the portfolio, including Dartmouth, Francis Scott Key, Magnolia, Moorestown, Patrick Henry, and Valley Malls. Additionally, we continued to focus on bringing diverse uses into the portfolio, having attracted exciting non-retail uses, Workout World at Dartmouth Mall, Extra Space Storage at Mall of Prince George's, expected to open in Q3 23, Banfield Pet Hospital and Cooper University Healthcare at Moorestown Mall, which is expected to open its state-of-the-art outpatient facility late this year. In other new uses, Dick's Sporting Goods is in the process of converting to House of Sports at Viewmont Mall. House of Sports is Dick's experiential concept that we look forward to having at one of our key winner-take-all properties. We also executed a lease with Burlington, for a 30,000 square foot location at Springfield Town Center, expected to open later this year. Earlier this month, Tilted 10 opened phase one at Walgrove Park and are expected to open phase two this spring, furthering Preet's continued effort to diversify our tendency to incorporate entertainment. For over a decade, we've focused on elevating our offerings, including entertainment options such as family-friendly amusement experiences and adventures, restaurants, movie theaters, and more. Now we're expanding this even further as populations shift to the suburbs as a result of an evolving work-life experience. We have found that our suburban malls, with parking that is underutilized, are attractive to a diverse blend of uses, including apartments, hotels, medical facilities, life sciences, and technology. With a key initiative in improving our balance sheet, capital raising through asset sales has been a top priority. Along these lines, we successfully executed on the following asset sales since the beginning of 2022. Cumberland Mall for 44.6 million, Gloucester Premium Outlets for 35.4 million, Whole Foods of Plymouth Meeting for 27.2 million, six operating parcels FCPT for $14.2 million, multifamily for $11.8 million, and a former Sears TBA for $3.5 million, both at Morristown Mall, former Herberger's Box at Valley View Mall for $2.6 million, and preferred equity at New Garden for $2.4 million. Since the beginning of 2022, the company sold assets, generating over $140 million in gross proceeds. and has applied these proceeds and excess cash from operations to pay down debt by over 184 million through January 31st, 2023. Earlier this year, we extended the maturity date of our credit facilities to December 10th, 2023, and are pursuing all available alternatives to address this upcoming maturity. We have historically been successful in identifying when markets were over retailed and where population growth was limited and exit those markets by selling properties with questionable useful lives, anticipating that retailers are going to rationalize their store accounts. Recent examples of dispositions that improve the overall quality of our portfolio include Cumberland Mall in Vineland, New Jersey, Valley View Mall in La Crosse, Wisconsin, and Wyoming Mall in Wilkes-Barre, Pennsylvania. Preet has been a thought leader in reimagining the enclosed mall shopping experience. We were among the first to introduce these diverse uses and proactively take back underperforming anchor spaces to better use them, replacing 19 department stores with over 40 different uses. Our portfolio is well positioned to entice the modern consumer as evidenced by sales and traffic recovery experienced in January. With that, I am happy to turn it over to Mario to review our results.

Thanks, Joe. During 2022, we continued to experience strong business fundamentals while monitoring the evolving economic environment. We took advantage of a continued appetite for leasing space and asset sales despite challenging financing markets. Liquidity continues to track ahead of our original business plan, at approximately $120 million. Same Store NOI declined relative to last year's fourth quarter as a result of strong credit loss recovery in the 2021 quarter and an increasing operating cost environment, as many of our peers are also experiencing. For the year, Same Store NOI, excluding lease termination revenue, declined by a modest 30 basis points, primarily resulting from the factors we just mentioned. Leasing volume remains strong, demonstrated by continued growth relative to 2019. During the quarter, we executed new leases for 26% more square footage than in last year's fourth quarter, having signed 377,000 square feet of new and renewal leases in total. This morning, we reported fourth quarter 2022 NAREIT FFO of negative 93 cents per share, and FFO as adjusted of negative $0.88 per share. For the year, NAREID FFO was negative $0.55 per share, and FFO as adjusted was negative $1.18 per share. The primary drivers of this variance to 2020 actuals for the fourth quarter were a $2.6 million non-sames-to-rent OI decrease, of which $2.3 million was due to our strategic disposition effort that included the sale of Gloucester premium outlets in June and Cumberland Mall in October of 2022. An increase in G&A expenses of $1.8 million due to the recognition of the $1.5 million of employee retention credits in the fourth quarter of 2021. Interest expense increased by $9.6 million due to higher interest rates and an increase in the second lean term loan balance as well as an increase in the Fashion District Philadelphia partnership loan balance, and a decrease in same-store NOI of $4.6 million that came from a $2.3 million decrease in percentage sales income for comparable tenants, and a decrease in bad debt recoveries. The primary drivers of the variance for the year were consistent with the drivers for the quarter, in addition to the recognition of a $10.5 million gain resulting from the sale of the multifamily parcel at Morristown and the Sears TBA parcel, and on a full-year basis, G&A decreased by $5.8 million due primarily to a reduction in corporate overhead. Core mall sales were $596 per square foot, an increase to $606 per square foot in January, demonstrating a resilient consumer. We remain compliant with all of our debt covenants and are pleased by the continued tenant interest in our properties. With that, I will turn it over to Heather to review the questions we received on our Q&A platform.