![REMERCHANDISING: Viewmont MallScranton, PA
• Capture underserved customer and expand dominant
position in the trade area by bringing in several first-to-
market tenants
• Solidify value through re-negotiated long term leases
with high quality tenants
Vision
• Capitalize on lease expirations to right-size existing
tenants
• Add catalyst tenants that would open only store in market
Strategy
• CVS Lease expiration [9,000sf]
• Limited Superstore renegotiation [30,000sf]
• Secured new tenants
• New store prototype build-out for existing tenants
Execution
61](https://image.slidesharecdn.com/investordayfinal-161205132349/85/Investor-day-61-320.jpg)
![92
•Sales as of 9.30.14$384
•Impact of dispositions+$7 (2%)
•Store closings resulting from bankruptcy+$11 (3%)
•Organic improvement in sales performance through concerted
remerchandising efforts+$26 (7%)
•Sales psf as of 9.30.15$428
•Impact of anticipated additional asset sales [Avg Sales psf = $297]+$20 (5%)
•Sales post Dispositions$448
•Springfield Town Center [at $525 psf]
•Fashion Outlets of Philadelphia [at $650 psf]+$29 (7%)
•Projected Portfolio Sales psf upon stabilization$477
STC and Fashion Outlets of Philadelphia are assumed to stabilize in 2018 and 2019 respectively.
Assumes balance of portfolioremains static.
PATHWAY TO NOI GROWTHSales growth drives opportunity to drive rents](https://image.slidesharecdn.com/investordayfinal-161205132349/85/Investor-day-92-320.jpg)
Investor day
- 2. Forward Looking Statement This presentation contains certain "forward-looking statements" within the meaning of the 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 our current views about future events, achievements or results 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 the forward-looking statements. In particular, our business might be materially and adversely affected by uncertainties affecting real estate businesses generally as well as the following, among other factors: our substantial debt, stated value of preferred shares and our high leverage ratio; constraining leverage, interest and tangible net worth covenants under our 2013 Revolving Facility, our 2014 Term Loans and our 2015 Term Loan; potential losses on impairment of certain long-lived assets, such as real estate, or of intangible assets, such as goodwill, including such losses that we might be required to record in connection with any dispositions of assets; changes to our corporate management team and any resulting modifications to our business strategies; our ability to refinance our existing indebtedness when it matures, on favorable terms or at all; our ability to raise capital, including through the issuance of equity or equity-related securities if market conditions are favorable, through joint ventures or other partnerships, through sales of properties or interests in properties, or through other actions; our ability to identify and execute on suitable acquisition opportunities and to integrate acquired properties into our portfolio; our partnerships and joint ventures with third parties to acquire or develop properties; our short- and long-term liquidity position; current economic conditions and their effect on employment, consumer confidence and spending and the corresponding effects on tenant business performance, prospects, solvency and leasing decisions and on our cash flows, and the value and potential impairment of our properties; general economic, financial and political conditions, including credit market conditions, changes in interest rates or unemployment; changes in the retail industry, including consolidation and store closings, particularly among anchor tenants; the effects of online shopping and other uses of technology on our retail tenants; our ability to sell properties that we seek to dispose of or our ability to obtain estimated sale prices; our ability to maintain and increase property occupancy, sales and rental rates, in light of the relatively high number of leases that have expired or are expiring in the next two years; acts of violence at malls, including our properties, or at other similar spaces, and the potential effect on traffic and sales; increases in operating costs that cannot be passed on to tenants; risks relating to development and redevelopment activities which could be subject to delays or other risks and might not yield the returns we anticipate; concentration of our properties in the Mid-Atlantic region; changes in local market conditions, such as the supply of or demand for retail space, or other competitive factors; and potential dilution from any capital raising transactions. Additional factors that might cause future events, achievements or results to differ materially from those expressed or implied by our forward-looking statements include those discussed in our most recent Annual Report on Form 10-K and in any subsequent Quarterly Report on Form 10-Q in the section entitled "Item 1A. Risk Factors." We do not intend to update or revise any forward- looking statements to reflect new information, future events or otherwise. 2
- 3. ITINERARY 3 Q&A Travel to Fashion Outlets of Philadelphia Management Presentation 8:30-11:00 AM 12:30 – 1:15 PM 11:00 AM – noon On Site Fashion Outlets of Philadelphia Presentation 1:30 – 2:30 PM
- 5. 5 BREAKING NEWS Non refundable deposit received for Palmer Park Mall Non refundable deposit received for three mall package
- 6. 6 KEY CATALYSTSOur future is bright Move to QUALITY is pronounced and accelerating RESULTS achieved are demonstrable and sustainable Experiencing a dramatic increase in new retail DEMAND REDEVELOPMENT opportunities are realizable and impactful Balance sheet is STRONG and improving
- 7. SHAREHOLDER VALUE 7 BACK TO THE FUTURE A LOOK BACK AND FORWARD
- 8. A VISION REALIZEDA sustainable, growing platform Balance Sheet Improvement Operational Excellence Elevating Portfolio Quality Positioning for Growth In 2012 we outlined a strategy focused on 4 key objectives to drive NAV and shareholder value: We have created a sustainable, stable platform with a flexible balance sheet with realizable growth opportunities. 8
- 9. NEXT STAGEA sustainable, growing platform 9 $500 psf in sales More than 50% of NOI generated from top 10 MSAs Sustained NOI growth greater than 3% Leverage below 48%
- 10. WHERE WE AREGoals Per 2012 Investor Day 10 Enhanced Portfolio Quality Strengthened the Balance Sheet Measure of Success 9/30/12 2015 Goal 12/31/15 Estimate (1) Leverage 62% < 55% <50% Debt/EBITDA 8.8 < 7.5 8.0 SS NOI Growth 1–2% > 3% Upper end of guidance range of 2-2.7% Total Mall Occupancy 92.6% 95.0% 95.4% Occupancy Cost 11.4% 12.5% 12.7% Sales PSF $379 > $400 $428 (1) Sales figure is from 9/30/15
- 11. STRONG, FLEXIBLE BALANCE SHEET 11 Ample Liquidity Laddered maturities Minimal exposure to floating rate debt Plan to reduce leverage below 47% by end of 2018
- 12. SALES OUTPACING OCCUPANCY COSTSOpportunity to drive rents to correlate with sales growth 12(1) Excludes 6 malls currently marketed for sale, Fashion Outlets of Philadelphia and Springfield Town Center (1)
- 13. IMPROVING RENEWAL RENT SPREADSImproved portfolio balances leverage with tenants 13
- 14. G&AAS % OF REVENUEReduced and scalable G&A 14
- 15. SS NOI COMPOSITIONPercentage of NOI from high productivity properties increasing 15
- 16. 16 KEY TAKEAWAYSOur future is bright Our move to QUALITY is pronounced and accelerating RESULTS achieved demonstrate our success We are experiencing a dramatic increase in new retail DEMAND REDEVELOPMENT opportunities are realizable and impactful Our balance sheet is STRONG and improving
- 17. SELECT ANCHOR PROFILEReduced exposure to select anchors 29 16 12 29 19 19 12 3 3 Tenant # of locations 2012 # of locations post-disposition # of locations post-recapture 17
- 18. A UNIQUE PLATFORMRealizing a Transformed PREIT 18 Concentration in densely populated, high barrier-to-entry markets High quality assets in two Top 10 MSAs is attracting productive retailers Opportunities to improve asset quality through remerchandising & redevelopment Significantly reduced risk profile through dispositions Well-positioned portfolio with high-quality assets Mitigated anchor exposure through asset sales & replacement initiative Scale allows for intensive focus by senior management on priority endeavors Improved portfolio has provided ability to attract and retain top talent
- 19. 19 TCO MAC SPG GGP PEI CBL WPG RSE Sales per square foot $805 $630 $616 $593 $424 $371 $352 $345 TTM sales growth 1.9% 7.0% 0.5% 3.7% 9.6% 4.2% 5.6% 7.1% SS NOI (2015E) 3.1% 5.8% 4.0% 4.0% 2.5% -0.6% -1.2% 3.3% Occupancy 91.7% 95.7% 95.9% 95.2% 91.9% 90.8% 90.2% 89.5% Occupancy cost ratio 13.8% 13.2% 12.1% 13.3% 12.7% 13.0% 12.7% 11.1% Releasing spreads 15% 15% 18% 10% 6% 7% 0% 7% Average HHI $68k $63k $64k $59k $57k $54k $56k $53k Source: Green Street Advisors, Mall Sector Update, November 11, 2015 (All operating data as of September 30, 2015) SHIFTING PEER GROUPImproving position
- 20. 20 TCO MAC SPG GGP PEI CBL WPG RSE G&A/Asset value(bps) 36 33 14 50 60 53 60 105 Total leverage ratio 28% 28% 30% 39% 48% 56% 51% 62% Debt/EBITDA 7.7x 6.6x 6.1x 8.9x 7.8x 7.0x 6.8x 8.8x Floating rate exposure 25% 18% 10% 19% 11% 24% 25% 26% Credit Line Maturity 2020 2018 2019 2020 2020 2020 2019 2018 Net Asset Value/Share $116 $93 $227 $35 $33 $26 $18 $17 Source: Green Street Advisors, Mall Sector Update, November 11, 2015 (All operating data as of September 30, 2015) SHIFTING PEER GROUPImproving position 20
- 21. IMPROVED LINEUPBringing shoppers more of what they want 4 13 1 3 4 8 3 4 2 11 Tenant # of locations 2012 # of locations 2015 (1) (1) Includes executed leases not yet open 21
- 22. NEW-TO-PORTFOLIO TENANCYSince 2012, PREIT has added x new tenants to the portfolio Marquee first-to-portfolio tenants 22 Century 21 opened their first store outside of NY Metro in Philadelphia. Legoland Discovery Center will join Plymouth Meeting in 2017; one of only 9 in the US.
- 23. ELEVATING PORTFOLIO QUALITYTransformed tenancy driving sales & quality of earning stream 23 INCREASING SHARE DECREASING SHARE OUT OF TOP 20
- 24. 24 KEY TAKEAWAYSOur future is bright Our move to QUALITY is pronounced and accelerating RESULTS achieved demonstrate our success We are experiencing a dramatic increase in new retail DEMAND REDEVELOPMENT opportunities are realizable and impactful Our balance sheet is STRONG and improving
- 25. OUR TEAM Robert McCadden Executive Vice President & Chief Financial Officer Joseph Aristone Senior Vice President Leasing Bruce Goldman Executive Vice President General Counsel & Secretary Daniel Herman Senior Vice President Redevelopment Andrew Ioannou Executive Vice President Finance & Acquisitions Mario Ventresca, Jr. Executive Vice President Operations Heather Crowell Vice President Investor Relations & Corporate Communications 25
- 26. CULTURAL EVOLUTIONNew Production Talent 26 VP, Development Leasing VP, Retail Leasing Director, Retail Leasing Director, Retail Leasing Director, Retail Leasing Director, Partnership Marketing Sr Director, Partnership Marketing 31 years experience 31 years experience 25 years experience 18 years experience 30 years experience 10 years experience 13 years experience Previous developer: Vornado, Federal, GGP Previous developer: Simon, GGP Previous developer: Westfield, Forest City, Prime Retail Previous developer: Simon Previous developer: CBL Previous developer: Westfield Previous developer: Westfield Michael Khouri Jeffrey Sneddon Donna DiPeso Sean Linehan Lori McCommons Heidi Kempf Scott Degraffenreid
- 27. TALENT EVOLUTIONAttracting & Maintaining Key Production Personnel Quality Portfolio Quality People Quality Tenants EXCEPTIONAL RESULTS 27
- 28. POST-TRANSFORMATIONA higher quality mall company 28 25Quality malls • 55% NOI generated from top 10 MSAs $450 psf • With clear path to $500 psf $90k• Average HHI from metro portfolio 3%SS NOI growth + +
- 29. TOP US MARKETSTwelve Malls in Top 10 DMAs 29 Philadelphia, PA Washington DC
- 30. PHILADELPHIA MARKET PRESENCEPREIT is the Dominant Enclosed Mall Landlord in the 6th largest MSA Own 41% of the enclosed mall GLA in the Philadelphia Metro Area Serve 6+ Million residents and 40 million visitors in the Philadelphia Metro Area Exton Square Mall Springfield Mall Cumberland Mall Moorestown Mall Cherry Hill Mall Gloucester Premium Outlets Willow Grove Park Plymouth Meeting Mall Fashion Outlets 30
- 31. PHILADELPHIA MARKET STRENGTHHow the region compares • 2nd Highest Urban Population Density • 4th Largest Media Market • 6th Largest Personal Income • 6th Largest Employment Market • 7th in Academic R&D Expenditures 31
- 32. PHILADELPHIA MARKET STRENGTHPeople want to be here Over 25 Fortune 1,000 companies call the Philadelphia Region home 32 Diverse & stable economy bolstered by healthcare, pharma and education Lowest rental rate for Class A office and industrial space compared to New York, Boston, Washington DC and Atlanta Lowest Cost of Living of Northeast US metros Largest percentage growth in millenials among the nation’s 30 largest cities Home to over 100 degree granting institutions educating nearly 500,000 students
- 33. WASHINGTON DC MARKET PRESENCEPREIT has established a strong presence in the 7th largest MSA • Own 4 of 19 enclosed malls serving unique and growing markets • Serve 3+ million residents and tens of millions of visitors in the Washington DC Metro Area Valley Mall Francis Scott Key Mall Mall at Prince Georges Springfield Town Center 33
- 34. WASHINGTON DC MARKET INSIGHTS3rd Wealthiest MSA in the country Fairfax County Prince Georges County Frederick County Washington County • 3rd wealthiest county in the US • Gross County Product is nearly $100 billion • 18% Population Growth since 2000 • DC Suburb just to the northeast of downtown DC • $1 billion in nearby developments continue to create density and attract educated, young residents to the area • Interstates 70 and 270 offer direct access to Washington DC & Baltimore • Upscale community with benefits of proximity to urban areas mixed with quieter country living • 42% of households earn $100k+ • One of the fastest growing counties on the east coast • 25% Population Growth since 2000 • Residents lured by lower cost of living and convenience of living on I-81 corridor 34
- 35. VALUE CREATION FRAMEWORKPathway to Driving Shareholder Value Portfolio Optimization Executing Growth Initiatives Performance Priority Measured Capital Allocation Continue to evaluate all properties and divest when necessary or invest when the opportunity presents itself. Myopic focus on delivering results that rival the high quality peer set, namely 3%+ SS NOI growth. The scale of our portfolio provides an opportunity to impact the platform through well - executed repositioning projects Attention to balance sheet is a must with a focus on timing of spend and risk-adjusted returns. 35
- 36. 36 KEY CATALYSTSOur future is bright Move to QUALITY is pronounced and accelerating RESULTS achieved are demonstrable and sustainable Experiencing a dramatic increase in new retail DEMAND REDEVELOPMENT opportunities are realizable and impactful Balance sheet is STRONG and improving
- 37. Heather Crowell VP, Corporate Communications & Investor Relations 37
- 39. INVESTOR PERSPECTIVE 39 Top 5 active shareholders were not or were nominal holders 3 yrs ago Activated shareholder relations program Goal to increase sell side coverage Dramatic increase in institutional ownership to 81%
- 40. GOVERNANCE PRIORITY 40 Five board changes in three years; reduced average tenure and increased independent director percentage Eliminated Executive Chairman role Significant share ownership requirements for CEO and Board ISS Quickscore of 3 demonstrates low governance risk • Strong pay for performance alignment
- 41. 41 Source: SNL MALL SECTOR COMPARISONS3 Year Total Shareholder Returns – Year End 2015 41
- 43. THE IDEAL MALL 43 Lifestyle & personal services Soft and hard goods Dining and entertainment destinations Amenities that compel extended visits
- 44. OPPORTUNITIES EVOLVING RETAIL ENVIRONMENT“Mall” is a 4-Letter Word A Place for Engagement & Commerce 44 Then - 1998 Now
- 46. RETAIL ENVIRONMENT Department Stores Specialty Shops Large Format Value cohabitating with Full Price 46
- 50. IMPROVED EXPERIENCES 50 Enhancements: • Valet Parking • Upgraded Soft Seating • Children’s Play Spaces • Wi-fi & iBeacons Event Strategy Criteria • Traffic Generators • Retailer Tie-In • Community Engagement • NOI Drivers • Unique Experiences
- 51. RETAIL ENVIRONMENT Department Stores Specialty Shops Large Format Convenience Amenities Brand Pop-Ups Click to Bricks Dining Entertainment Fast Fashion 51 HESS TRUCK
- 52. RETAIL ENVIRONMENT Department Stores Specialty Shops Large Format Dining Entertainment Fast Fashion Convenience Amenities Brand Pop-Ups Click to Bricks Value cohabitating with Full Price 52
- 53. CONSTANTLY EVOLVING TENANT BASE 53 GONE AND FORGOTTEN NEW & IMPROVED
- 54. CONSTANTLY EVOLVING TENANT BASE 54
- 55. PORTFOLIO OPTIMIZATION STRATEGYStrategic Planning Hold Sell Invest Redevelopment Strategic re-tenanting 55
- 56. PORTFOLIO OPTIMIZATION STRATEGYThe PREIT Perspective 56 Demographics Anchor strength Capital requirements NOI growth profile Competitive landscape Economic Development
- 58. STRATEGIC RE-TENANTING EFFORTSPower of market knowledge Define the VISION Develop a STRATEGY EXECUTE 58
- 59. NEW BUSINESS DEVELOPMENT 59 Cultivating a robust pipeline of new relationships including 200 qualified leads and 31 “hot” prospects Mission to source new-to-portfolio tenants Top Prospects
- 60. EXPANDING RETAILERS 60 Department Stores Nordstrom Dillard’s Belk Primark Ross Stores Kohl’s Burlington TJ Maxx Men’s & Women Buckle Zumiez Express Lululemon Urban Outfitters Women’s Stores Chico/Soma Anthropologie Christopher & Banks Lane Bryant Victoria Secret White House/Black Market Fast Casual Concept Zara H&M (major expansion) Men’s Apparel DXL Men’s Wearhouse Build A Bear GNC Container Store White Barn Candle Co Dicks Sporting Goods Hibbett’s Academy Sports Field & Stream Cosmetic Personal Services Bath & Body Works ULTA Sephora LUSH Jewelry Kay Jewelers Zales Electronics Apple Gamestop Home Furnishings Restoration Hardware Home Goods La Z Boy Accessories Fossil Francesca’s Collection Michael Kors Vera Bradley Shoes DSW Famous Footwear Footlocker Johnson & Murphy Journey’s Shoe Dept Encore Department Stores & Boxes Men’s & Women’s Women’s Apparel Fast Fashion Men’s Apparel Specialty Retail Accessories Shoes Jewelry Electronics Home Furnishings Sporting Goods Cosmetics
- 61. REMERCHANDISING: Viewmont MallScranton, PA • Capture underserved customer and expand dominant position in the trade area by bringing in several first-to- market tenants • Solidify value through re-negotiated long term leases with high quality tenants Vision • Capitalize on lease expirations to right-size existing tenants • Add catalyst tenants that would open only store in market Strategy • CVS Lease expiration [9,000sf] • Limited Superstore renegotiation [30,000sf] • Secured new tenants • New store prototype build-out for existing tenants Execution 61
- 62. REMERCHANDISING: Viewmont MallScranton, PA 62 Newly Opened / Fully Executed
- 63. REMERCHANDISING: Viewmont MallScranton, PA 63
- 64. REMERCHANDISING: Viewmont MallScranton, PA 64 RESULTS Sales Non Anchor Occupancy Est. NOI Growth $442 psf (as of 11/30/15) - Up 20% since Q1 ‘13 98.2% - Up 450 bps over 12/31/14 +20% - measured from 2014-2015
- 65. REMERCHANDISING: Moorestown MallMoorestown, NJ 65 Marketing research uncovered enormous unmet demand for quality restaurant offerings which prompted successful 2011 liquor referendum and paved way for evolution of the mall Located 5 miles from Cherry Hill Mall in a distinct, affluent immediate trade area Multi-phase remerchandising effort centered around curated dining experiences, high-end boutique row offerings, flagship salon & spa and first-to-market entertainment experiences Excellent real estate, serviced by NJ Route 38 and easily accessed by NJ Turnpike and Interstate 295
- 66. REMERCHANDISING: Moorestown MallMoorestown, NJ 66 Experiences Boutique Row Dining 18,000+ sf H&M, to open in 2016 and will serve as additional catalyst for remerchandising
- 67. • Differentiate mall offerings by creating a dining and entertainment focus with best-of-breed local retailers • Attract affluent customer base Vision • Introduce high quality dining and entertainment • Add high-end boutiques offering brand name products in boutique atmosphere Strategy • Attracted best-of-breed, destination dining options • Secured only RPX theater in Philadelphia market • Relocated award-winning salon to add to lifestyle atmosphere • Successfully leased Boutique Row Execution REMERCHANDISING: Moorestown MallMoorestown, NJ 67
- 68. REMERCHANDISING: Moorestown MallMoorestown, NJ 68 Newly Opened / Fully Executed Opportunity for Remerchandising
- 71. REMERCHANDISING: Moorestown MallMoorestown, NJ 71 RESULTS Sales Occupancy Est. NOI Growth $355 psf - with expectations to exceed $400 psf upon stabilization 87.4% Non-Anchor - Up 9% since 2011 Referendum +40% - measured from 2011-2016 (e)
- 72. REMERCHANDISING: IN PROGRESS 72 Patrick Henry Mall Valley Mall Capital City Mall Francis Scott Key Mall Francis Scott Key Mall Valley Mall Capital City Mall Patrick Henry Mall
- 73. REMERCHANDISING: Patrick Henry MallNewport News, VA 73 THE MARKET: Population Average HHI Daytime Population THE STORY: Located on the Hampton Roads peninsula, Patrick Henry Mall is the only enclosed mall between Richmond and Norfolk. Completely renovated in 2006 as other shopping centers opened in market, the property withstood the competition and remains the strongest retail destination in the trade area. Two area Macy’s closings will serve to strengthen the property’s market position. With several key in-demand, fashion-oriented retailers opened or opening soon, the mall is poised to capitalize on the leasing momentum as more hot national, retailers look to join. 625,655 $75,026 635,740 THE PROPERTY Sales Non-Anchor Occupancy $420 93.6%
- 74. REMERCHANDISING: Patrick Henry MallNewport News, VA • Further property’s position in the market as the dominant, established retail shopping destination in the Hampton Roads market Vision • Attract key tenants looking to exit competitive project • Upgrade merchandising mix with catalyst tenants that would enhance shopping experience & attract other key tenants • Upgrade restaurant offerings Strategy • Backfilled former Borders store with Forever 21 at main mall entrance • H&M – opening Q2 2016 Current Accomplishments 74
- 75. REMERCHANDISING: Patrick Henry MallNewport News, VA 75 Targeted Retailers Newly Opened / Fully Executed Opportunity for Remerchandising
- 76. REMERCHANDISING: Valley MallHagerstown. MD 76 THE MARKET: Population Average HHI Daytime Population THE STORY: Located at the western edge of the Washington Metro area, Valley Mall is the dominant regional enclosed mall within 30 miles. The trade area has seen immense growth over the past twenty years due to improved highway accessibility to Washington DC and Baltimore coupled with lower cost of living compared to other metro suburbs. The mall also benefits from its location along the I-81 corridor, a vital north-south route. Due to the growth , the mall has evolved with an impressive lineup of restaurants and an ever improving roster of in-demand national retailers. 474,158 $68,277 $66,555 THE PROPERTY Sales Non-Anchor Occupancy $392 96.0%
- 77. REMERCHANDISING: Valley MallHagerstown, MD • Capture underserved customer and expand dominant position in the trade area by bringing in several first-to- market tenants Vision • Add catalyst tenants that would open only store in market • Secure replacement for underperforming anchor tenant with new department store that better serves trade area Strategy • Upgrade front of mall facing Halfway Boulevard with destination restaurants • H&M – opening Q2 2016 • Secured additional new impact tenants Current Accomplishments 77
- 78. REMERCHANDISING: Valley MallHagerstown. MD 78 Targeted Retailers Newly Opened / Fully Executed Opportunity for Remerchandising
- 79. REMERCHANDISING: Capital City MallCamp Hill, PA 79 THE MARKET: Population Average HHI Daytime Population THE STORY: Located just eight miles from downtown Harrisburg, PA – the state capital, Capital City Mall is the dominant retail center in the region, featuring a wide array of first-to-market and exclusive retailers including DSW , The Buckle and Forever 21. A strong regional economy and location in the more desirable West Shore section of trade area puts the mall in the perfect position to capitalize on shopper demand for better brands and a differentiated experience. 531,839 $76,283 620,502 THE PROPERTY Sales Non-Anchor Occupancy $392 97.6%
- 80. REMERCHANDISING: Capital City MallCamp Hill, PA • Continue to elevate the merchandising mix to provide shoppers better fashion-oriented brandsVision • Capitalize on available outparcel with prime visibility to major regional highway • Build off success of DSW and Forever 21 to add catalyst tenants that would open only store in market Strategy • Field & Stream – Opened in Q4 2015 • H&M – Opening Q2 2016 • Discussions with several other better fashion retailers • Discussions with restaurants for pad locations Current Accomplishments 80
- 81. REMERCHANDISING: Capital City MallCamp Hill, PA 81 Targeted Retailers Newly Opened / Fully Executed Opportunity for Remerchandising
- 82. REMERCHANDISING: Francis Scott Key MallFrederick. MD 82 THE MARKET: Population Average HHI Daytime Population THE STORY: Strategically located Washington DC bedroom community at the intersection of I- 70 and I-270, Francis Scott Key Mall is perfectly situated in the expanding, upscale suburban communities of Frederick County. Along with rising populations, home values and household incomes, the trade area’s demand for better retail has grown. An upgraded merchandising mix and better restaurant offerings will keep consumers from traveling south and east to find the brands and cuisine they desire. 328,328 $103,109 289,304 THE PROPERTY Sales Non-Anchor Occupancy $363 97.8%
- 83. REMERCHANDISING: Francis Scott Key MallFrederick, MD • Capture underserved customer and expand dominant position in the trade area by bringing in several first-to- market tenants Vision • Add catalyst tenants that would open only store in market • Expand strong performing tenants looking for more GLA • Create restaurant cluster Strategy • H&M – opening in Q2 2016 • Discussions with several better fashion retailers • Discussions with restaurants for exterior box location Current Accomplishments 83
- 84. REMERCHANDISING: Francis Scott Key MallFrederick, MD 84 Targeted Retailers Newly Opened / Fully Executed Opportunity for Remerchandising Value City Furniture Dick’s Sporting Goods
- 85. 85 KEY CATALYSTSOur future is bright Our move to QUALITY is pronounced and accelerating RESULTS achieved demonstrate our success We are experiencing a dramatic increase in new retail DEMAND REDEVELOPMENT opportunities are realizable and impactful Our balance sheet is STRONG and improving
- 87. Property Date Sold Sales Price (millions) Sales psf Gross Rent psf Non-anchor occupancy Cap Rate Phillipsburg Mall Jan ’13 $ 11.5 $ 229 $26.24 66.5% 9.8% Orlando Fashion Square Feb ’13 35.0 233 $30.78 80.7% 9.8% Chambersburg Mall Nov ‘13 8.5 235 $19.46 76.2% n/a South Mall Jun ‘14 23.6 227 $25.10 90.6% 10.1% Nittany Mall Sep ‘14 32.3 243 $28.99 70.0% 16.2% North Hanover Mall Sep ‘14 (included w/Nittany) 275 $36.06 72.8% 11.0% Uniontown Mall Aug ‘15 23.0 282 $26.71 84.5% 17.5% Voorhees Town Center Sep ‘15 13.4 261 $26.33 74.3% 10.3% Total Malls $147.3 Paxton Town Centre Jan ’13 76.8 6.9% Commons at Magnolia Sep ’13 12.3 8.9% Christiana Center Sep ’13 75.0 6.5% The Gallery (50% interest) Jul ’14 106.8 5.1% Whitehall Mall Dec ’14 20.0 7.0% Springfield Park Jul ‘15 20.2 7.0% Other properties Various 25.3 Grand total $483.7 DISPOSITION REVIEWOptimally timed program yields results 87
- 88. DISPOSITION UPDATEFinalizing transactions underway solidifies mall platform Mall Property Status Estimated Closing Package –Gadsden, Wiregrass, New River Valley Under Contract 1H 2016 Palmer Park Mall Non refundable deposit 1H 2016 Lycoming Mall Marketing 2H 2016 Washington Crown Center Marketing 2H 2016 88 Non-Mall Property Status Estimated Closing 1520-22 Chestnut & 1501-05 Walnut St Negotiating Contract 1H 2016 Gainesville, FL Land Parcel Under Contract 1H 2017 Estimated Gross Proceeds: $200 - $225 million
- 89. PROGRAM IMPLEMENTATION & SUMMARYKeys to Success 89 Assets are accessible to the buyer pool; many within a few hours from New York City Developed relationships with well-capitalized entrepreneurial buyers Realistic approach to trading cap rates
- 90. 90 KEY CATALYSTSOur future is bright Our move to QUALITY is pronounced and accelerating RESULTS achieved demonstrate our success We are experiencing a dramatic increase in new retail DEMAND REDEVELOPMENT opportunities are realizable and impactful Our balance sheet is STRONG and improving
- 92. 92 •Sales as of 9.30.14$384 •Impact of dispositions+$7 (2%) •Store closings resulting from bankruptcy+$11 (3%) •Organic improvement in sales performance through concerted remerchandising efforts+$26 (7%) •Sales psf as of 9.30.15$428 •Impact of anticipated additional asset sales [Avg Sales psf = $297]+$20 (5%) •Sales post Dispositions$448 •Springfield Town Center [at $525 psf] •Fashion Outlets of Philadelphia [at $650 psf]+$29 (7%) •Projected Portfolio Sales psf upon stabilization$477 STC and Fashion Outlets of Philadelphia are assumed to stabilize in 2018 and 2019 respectively. Assumes balance of portfolioremains static. PATHWAY TO NOI GROWTHSales growth drives opportunity to drive rents
- 93. ORGANIC GROWTH LEVERSRenewal Spreads 93 12/31/15 Avg Rent 2016 Expirations 2017 Expirations 2018 Expirations Premier $67.60 $53.69 $52.97 $57.17 Core Growth – Major Market $45.79 $40.05 $44.49 $42.36 Core Growth – Market Dominant $44.13 $43.64 $49.40 $43.38 3.8 million sf of leases expiring 2016 – 2018 represent opportunity to drive $5.0-10.0 million in incremental revenue at estimated average 7% spread
- 94. ORGANIC GROWTH LEVERSConversion to Fixed CAM provides an opportunity for margin expansion $1.5 to $2.0 million of additional contribution from tenants with Fixed CAM leases 94
- 95. ORGANIC GROWTH LEVERSOpportunity to grow operating margin through Fixed CAM greater in post-disposition portfolio 95 (1) Calculated as CAM revenues divided by CAM Operating Expenses excluding non-cash CAM depreciation (2) Includes all malls owned during the periods presented excluding The Gallery and Springfield Town Center (3) Excludes 6 malls currently marketed for sale, Fashion Outlets of Philadelphia and Springfield Town Center
- 96. ORGANIC GROWTH LEVERSImprove Common Area Margin $1.0 million per annum through increased revenue and expense control. 96 Increased Revenue Opportunities • Solar Panels • Electric Vehicle Charging • Vending Improved Expense Control • Block & Index Energy Purchasing • Housekeeping & Maintenance • Security
- 97. ORGANIC GROWTH LEVERSImprove Common Area Margin $1.0 million per annum increases through increased revenue and expense control. 97
- 98. ORGANIC GROWTH LEVERSOccupancy Gains Each 50 bps of non-anchor occupancy at $40 psf = $1.7 million 98
- 99. ORGANIC GROWTH LEVERSTemp-to-Perm Conversion 99 Conversion of 25% of temporary tenants generates $1.3 million in annual revenue uplift
- 100. ORGANIC GROWTH LEVERSNew GLA Opportunities 100 Every 50,000 sf of additional exterior GLA can add $1.5 million with typically strong return prospects and credit tenants.
- 101. ORGANIC GROWTH LEVERSLease Quality – managing the details allows us to control our destiny 101 Qualitative lease terms: -Co-tenancy Provisions -Sales Kickout thresholds -Tenant Credit New Business Development Merchandising Plans Account management & scrutiny -Review of opportunities -Portfolio view of transactions Transaction Approval Committee
- 102. ORGANIC GROWTH OPPORTUNITIESSummary 102 Improved common area margin: $1 Million Migration to fixed CAM: $1.5 – 2 Million Occupancy gains: $1.7 – 5.1 Million Temp-to-perm conversion: $1.25 Million Improved renewal spreads: $5 – 10 Million New buildable area: $1.5 Million Quantified opportunity to drive 3%+ annual increases in Same Store NOI= $16.4 Million
- 103. 103 KEY CATALYSTSOur future is bright Our move to QUALITY is pronounced and accelerating RESULTS achieved demonstrate our success We are experiencing a dramatic increase in new retail DEMAND REDEVELOPMENT opportunities are realizable and impactful Our balance sheet is STRONG and improving
- 104. 104
- 107. ACTIVE REDEVELOPMENTStabilizing Springfield Town Center - Springfield, VA 94.4% $9-10M Total space leased committed Incremental NOI anticipated in 2016 40,000 sf new leases being negotiated $6M renovation currently underway at Macy’s $505 1st Year Sales PSF 107 71% of 2016 incremental leasing revenue secured Recently opened Dave & Buster’s in 32,000 square feet. Strong sales indicate strength of location. 94.4% $9-10M 40,000 sf 71%
- 108. ACTIVE REDEVELOPMENTStabilizing Springfield Town Center - Springfield, VA 108 EST.EST.
- 109. ACTIVE REDEVELOPMENTFashion Outlets of Philadelphia – Philadelphia, PA (1) JV Cost (2) Net of Grants 109 THE MARKET: Population Average HHI Average Home Value Daytime Population THE STORY: Spanning three city blocks, the Fashion Outlets of Philadelphia will offer a fusion of outlet retail taking the form of luxury and moderate brands, traditional mall retail, popular flagship retail, destination dining experiences and entertainment offerings. Opening in 2018 with bright, contemporary spaces that will welcome shoppers and reconnect to Market Street with accessible storefronts, sidewalk cafés, a new streetscape, digital signage and graphics, all complementing the existing office space. PROJECT DETAILS Cost $320- $380 million (1) Net Cost $275-$335 million (2) Targeted Return 8%-9% Stabilized Year 2020 6,302,012 $86,507 $288,340 6,693,353
- 110. ACTIVE REDEVELOPMENTFashion Outlets of Philadelphia – Philadelphia, PA 110
- 111. ACTIVE REDEVELOPMENTFashion Outlets of Philadelphia – Philadelphia, PA 111 Public Financing Sources & Amounts $55 million $58 million $13 million $30 million $1.5 million $1.0 million Commonwealth (2) Redevelopment Assistance Capital Program (RACP) Committed RACP Pending RACP Infrastructure Facilities Improvement Program (IFIP) Multimodal Transportation Fund (MTF) Local (1) Public Access Easement Agreement Tax Increment Financing TIF TOTAL: $158.5 million (1) Paid over time (2) Paid upon meeting grant requirements
- 112. ACTIVE REDEVELOPMENTExton Square – Phase I 112 THE MARKET: Population Average HHI Average Home Value Daytime Population THE STORY : Located in Chester County, the wealthiest and fastest growing in PA, Exton Square Mall sits at the heart of the area’s retail hub. Noted for its strong line-up of national retailers in a convenient, easy-to-shop setting, the property will see an increase in traffic with the addition of a Whole Foods Market, opening in 2017. Additional synergy will be created on-mall with the potential addition of a first-to-market bowling and entertainment concept in the former JCPenney anchor box. 522,688 $109,631 $369,499 544,048 PROJECT DETAILS Cost $30-$33 million Targeted Return 9%-10% Stabilized Year 2018
- 113. ACTIVE REDEVELOPMENTExton Square – Phase I 113 Anticipated Opening 2017
- 114. ACTIVE REDEVELOPMENTExton Square – Phase I 114 Anticipated Opening 2016
- 115. ACTIVE REDEVELOPMENTPlymouth Meeting Mall – Plymouth Meeting, PA 115 THE MARKET: Population Average HHI Daytime Population THE STORY: Capitalizing on the over 90 million cars passing the center every year and expanding the mall’s trade area to a 2-hour drive time, Plymouth Meeting will become a true destination for visitors. The the addition of Legoland Discovery Center will complement an already unique experience that combines great shopping with destination entertainment, high quality dining and a gourmet grocer. This addition is expected to act as a catalyst for an interior mall remerchandising. 1,008,315 $92,967 1,116,568 PROJECT DETAILS Cost $6.6 - $7.3 million Targeted Return 8%-9% Stabilized Year 2018
- 116. ACTIVE REDEVELOPMENTPlymouth Meeting Mall – Plymouth Meeting, PA 116
- 117. ACTIVE REDEVELOPMENTPlymouth Meeting Mall – Plymouth Meeting, PA 117
- 118. ACTIVE REDEVELOPMENTCumberland Mall – Vineland, NJ 118 THE MARKET: Population Average HHI Daytime Population THE STORY: The spring 2015 closure of JCPenney presented the opportunity to upgrade Cumberland Mall. The former anchor box sits at the most visible corner of the property and immediately attracted the attention of retailers looking to relocate to mall. In December 2015, a lease was signed with Dick’s Sporting Goods who will open a 50,000 sf store in early 2017. As the only Dick’s Sporting Goods for over 20 miles, the store will drive incremental traffic to the center and solidify its position in the market. 920,251 $79,272 881,662 PROJECT DETAILS Cost $7.45 - $8.25 million Targeted Return 10% - 11% Stabilized Year 2017
- 119. ACTIVE REDEVELOPMENTCumberland Mall – Vineland, NJ 119
- 120. ACTIVE REDEVELOPMENTMall at Prince Georges – Hyattsville, MD 120 THE MARKET: Population Average HHI Daytime Population THE STORY Just 2 miles from the University of Maryland and minutes from Washington DC, the Mall at Prince Georges’ position in the market is strengthened by the sheer volume of development immediately surrounding the property – over $1 billion in recent development has occurred in the trade area. A remerchandising program, highlighted by the recent H&M transaction , will attract the high-income, fashion-oriented customers that have flocked to the area. Additional opportunities to add fast casual restaurants along the exterior of the mall will add to the density of the property and increase mall traffic. 1,514,259 $86,108 1,516,634 PROJECT DETAILS Cost $22.4 - $27 million Targeted Return 8%-9% Stabilized Year 2018
- 121. ACTIVE REDEVELOPMENTMall at Prince Georges – Hyattsville, MD 121 1. Belcrest Plaza: 25 acre redevelopment, 2,675 residential units, multi family/town homes; 2. 3350 at Alterra 283 multi-family units 3. Post Park: $87M mixed use project. 396 high-end apartment homes 4. Kiplinger Property: $73M, 452-unit with 34,200 sf of retail space. 5. The Gateway at University Town Center: $7M addition completed in 2015. 6. Mosaic at Metro: 260 luxury apartments 7. College Park Place: $20M, 156-room Courtyard by Marriot, with retail and apartments 8. University of Maryland Conference Hotel: $150M facility with 300 hotel rooms and 43,000 SF of conference space. 9. Terrapin Row: $8M student housing complex with 1,575+ beds. 10. Landmark College Park: Student housing with 850 beds and 11. The Reserve at College Heights: Single-family luxury homes. 12. M-Square: Largest research park in MD ($500M+ invested). 6,500+ employees. 13. Riverdale Park Station: $250M mixed-use project including county’s first Whole Foods. 14. Arts District at Hyattsville: $213M, award-winning mixed use
- 122. ACTIVE REDEVELOPMENTMall at Prince Georges – Hyattsville, MD 122
- 123. ACTIVE REDEVELOPMENTMall at Prince Georges – Hyattsville, MD 123
- 124. Cost (in millions) Targeted Return Stabilized Year Fashion Outlets of Philadelphia $160-$190(1) 8% - 9% 2020 Exton Square Mall $30-$33 9% - 10% 2018 Plymouth Meeting Mall $6.6 - $7.3 8% - 9% 2018 Cumberland Mall $7.45 - $8.25 10% -11% 2017 Mall at Prince Georges $24.4 - $27.0 8% - 9% 2018 ACTIVE REDEVLOPMENT PROJECTSSummary 124 (1) PREIT Share of Cost
- 125. 125 KEY CATALYSTSOur future is bright Our move to QUALITY is pronounced and accelerating RESULTS achieved demonstrate our success We are experiencing a dramatic increase in new retail DEMAND REDEVELOPMENT opportunities are realizable and impactful Our balance sheet is STRONG and improving
- 127. SHAREHOLDER VALUE 127 CAPITAL ALLOCATION BALANCE SHEET TARGETS
- 128. 128 CAPITALALLOCATION PROTOCOLCareful, measured approach Priority given to A malls and high-quality B’s that are cap rate transformative Limit number and scope of projects being pursued at any given point Priority given to value enhancing (offensive) projects vs. maintaining (defensive) Timing of outlay & balance sheet impact modeled to ensure internal targets are achieved Predevelopment costs capped Targeted returns of 200-300 bps over trading cap rate Minimum leasing thresholds required before commitment is finalized
- 129. 64.1% 50.4% <48% 46.5% 8.9x 8.0x <7.5x 7.1x $267 $286 >$250 $258 129 9/30/12 12/31/15 (E) Post- Redevelopment Bank Leverage Debt/EBITDA Liquidity (in millions) Year End 2018 Target BALANCE SHEET TARGETS3 Year Investment Horizon
- 130. BALANCE SHEET PRIORITIES 130 Continuous improvement of financial instrument terms Reduce leverage Maintain significant liquidity
- 131. 131 BALANCE SHEET SECURITY Refinancing efforts since 2012 have resulted in reduced interest expense of $30 million annually.
- 132. 132 LADDERED DEBT MATURITIES 5.3 years - average time to maturity of mortgage loans
- 133. IMPROVING LIQUIDITYAmended Revolving Facility LEAD Wells Fargo Bank NA SIZE $400 million ACCORDIAN $200 million PRICING 120 – 155 bps over LIBOR MATURITY 2018; with options to 2020 AVAILABILTY 11% debt yield on unencumbered pool NOI 133 MATURITY AVAILABILITY LEAD SIZE PRICING ACCORDIAN
- 135. 135 IMPROVING LEVERAGEBank leverage is significantly reduced and expected to fall to high-40s
- 136. CAPITAL PLAN3 Year Investment Horizon 136 (1) Liabilities-to-GAV per bank credit facility (after adjustment for STC valuation) (2) Total Debt exc. Cash/Trailing 4Q EBITDA (3) Credit facility availability less LOC plus available cash (after payoff of $79M loan on Valley Mall Q1 16) 50.4% 8.0x $286 3.0%/yr (280 bps) (.6x) $19 $200-$225M (80 bps) (.1x) $140 $145-$155M (210 bps) (.3x) $66 $250-$300M 640 bps 1.1x ($275) ~8.25% return (320 bps) (.7x) $22 $20M/yr (140 bps) (.3x) - 46.5% 7.1x $258 <48% <7.5x >$250 Bank Leverage (1) Debt/EBITDA (2) Liquidity (in millions) (3) 12/31/15 (E) Target Baseline NOI Growth Sale of JV Power Centers Redevelopment Capital Redevelopment NOI Debt Amortization Post-Redevelopment Sale of Marketed Assets Estimate
- 137. SOURCES & USES OF CAPITALPreliminary View 137 (1) Assumes that FFO is sufficient to cover dividends, recurring capital expenditures, normal tenant allowances and principal payments on debt. Sources 2016 2017 2018 FFO(1) --- --- --- Proceeds from asset sales ($345-$380M) $ 325 $ 20 n/a Proceeds from mortgage loans 160 190 n/a Other loan (at ownership share) 25 25 n/a Total sources $510 $235 $ -- Uses Mortgage loan repayments (220) (218) --- Mortgages repaid from sale proceeds / assumed (142) --- --- Redevelopment CapEx ($250-$300M) (125) (110) (65) Total uses (487) (328) (65) Net source (use) $ 23 $(93) $(65)
- 138. BALANCE SHEET PILLARSFocus on continued improvement 138 We will continue to reduce leverage through asset sales and NOI growth We have ample liquidity to complete projects underway and protect us in the event of a downturn Our debt maturity schedule protects us from any disruption in credit markets We have limited exposure to variable interest rates
- 139. 139 2016 OUTLOOK
- 140. 2016 OUTLOOKFocus on continued improvement 140 • Targeted same store NOI growth of 3% • 80 -100bps increase in same store non-anchor occupancy • All anchor replacements accounted • Gallery / FOP redevelopment begins Material Operating Assumptions • Six malls and street retail properties sold mid-year • Power Center portfolio sold at the end of 2016 • Land parcel sold in 2017 • Annualized dilution from assumed mall and street retail dispositions is $0.25 per share; 2016 impact is approx. $0.12 to $0.13 per share. Asset Disposition Assumptions • Addresses upcoming mortgage maturities • Refinance mortgage at Woodland Mall; repay Valley loan • Finalize EB-5 loan for FOP • Use proceeds from asset sales & borrowings to fund redevelopment expenditures Capital Plan • None PlannedAsset Acquisitions
- 141. 2016-2018 CAPITAL SPENDINGFocus on continued improvement 141 Redevelopment CAPEX: $250 -$300 million over 3 years • Fashion Outlets of Philadelphia - $150 million • Exton Square - Whole Foods & JCPenney replacement - $32 million • Mall at Prince Georges - $25 million • Other projects, anchor replacements and catalyst tenants such as LEGOLAND and H&M - $45 to $95
- 142. 2016-2018 CAPITAL OUTLAYSIncludes redevelopment and recurring capital expenditures $250 to $300 million of redevelopment capital spending over the next three years 142
- 143. In millions, except per share amounts 2016 Guidance NOI from 2016 Same Store Properties (1) $ 231-233 NOI from properties for sale (2) 20-22 NOI from Springfield Town Center and Gloucester 22-24 NOI from Fashion Outlets of Philadelphia 4 Total NOI $ 277 - $283 Other revenues/expenses, net (33-34) Interest expense (84-85) Preferred dividends (16) FFO $ 143 - $149 FFO/share $1.83 - $1.91 Wtd average shares & equivalents 78 2016 EARNINGS GUIDANCEPreliminary View 143 (1) Includes 23 malls identified in premier, core growth – major markets, core growth – market dominant categories (2) Includes 6 non-core malls, 2 street-level properties and our interest in 3 power centers
- 144. In millions, except per share amounts 2016 Guidance FFO $ 143 - $149 Depreciation and amortization (139 – 142) Non-controlling interest (2-3) Net income allocable to common shareholders $ 2 - $4 Net income per share $0.03 - $0.06 Weighted average shares and equivalents 69 RECONCILIATION TO GAAP EARNINGSPreliminary View 144
- 145. NOI GROWTHProjected through 2018 NOI grows to $300 million by 2018, after asset dispositions 145
- 147. FUTURE GROWTH OPPORTUNITIESCherry Hill Mall - Fashion Anchor Addition 147 Remerchandising of existing anchor with fashion department store Addition of new upscale fashion anchors along with the repurposing of One Cherry Hill office building
- 148. FUTURE GROWTH OPPORTUNITIESExton Square Mall Phase II 148 Additional retail and restaurant development and interior remerchandising
- 149. FUTURE GROWTH OPPORTUNITIESSpringfield Town Center Peripheral Land 149 Development of 3 million sf of entitled peripheral land with office, multi-family, hotel and additional retail
- 150. FUTURE GROWTH OPPORTUNITIESFashion Outlets of Philadelphia Overbuild 150 Vertical development at site with the addition of hotel, multi-family and/or office
- 151. FUTURE GROWTH OPPORTUNITIESWoodland Mall Redevelopment 151 Fashion anchor addition along with new GLA for restaurants and exterior facing retail
- 152. FUTURE GROWTH OPPORTUNITIESPlymouth Meeting Mall Master Plan 152 Development of PA Turnpike and former office parcel into hotel and potential flagship office space
- 153. 153 KEY CATALYSTSOur future is bright Our move to QUALITY is pronounced and accelerating RESULTS achieved demonstrate our success We are experiencing a dramatic increase in new retail DEMAND REDEVELOPMENT opportunities are realizable and impactful Our balance sheet is STRONG and improving