Pennsylvania R.E.I.T. (PRETQ)

[Enterprising Investor]

PREIT now eyeing up to 7,000 apartments on its mall properties as it looks to rebuild value (2/20/23)

By Paul Schwedelson

PREIT's plan to gain approval for multifamily developments at six of its mall properties has now swelled to as many as 7,000 apartments, CEO Joseph Coradino told the Philadelphia Business Journal.

After selling off more than 20 malls in the past two decades, the Philadelphia company's strategy has shifted to maximizing its remaining properties by converting uses and selling underused land adjacent to the malls.

In the Philadelphia area, PREIT is working toward building a total of 1,400 apartments on its land at the Moorestown Mall, Plymouth Meeting Mall, Willow Grove Park and Exton Square properties. That includes 375 apartments at the Moorestown Mall that are already under construction. PREIT is in the process of gaining approvals at the other three properties.

At PREIT's Springfield Town Center in northern Virginia, Texas-based developer Hanover is planning 460 apartments, which have been approved, on parking lot space at the mall. At Mall at Prince George's in Hyattsville, Maryland, PREIT is finalizing a sale and plans to continue the approval process for 300 to 400 apartments.

Adding apartments is part of a larger effort to rebuild PREIT's value following financial struggles that led the company to file for Chapter 11 bankruptcy protection in November 2020. While it emerged a month later, the mall operator continues to struggle. It reported a net loss of $71.3 million in the third quarter of 2022 and was delisted from the New York Stock Exchange in December.

“[We want] to look for an opportunity for some kind of a strategic merger,” Coradino said. “That’s ultimately where the business goes. We’ve now put ourselves in a position where we’re quite digestible. … We think the portfolio we created is compelling.”

PREIT recently sold the site of a Whole Foods at Plymouth Meeting Mall to Michigan-based Agree Realty for $27 million and has now generated $141 million from property sales since the beginning of 2022 to pay down debt.

At its peak in 2003, PREIT owned 43 malls. Now, it owns 19. Coradino said whittling down the portfolio allows PREIT to focus on properties that could yield the best results. Coradino said he’s no longer actively looking to sell more malls, just the underused land on those properties, such as parking lot space that isn’t generating value.

Finding ways to maximize value could help PREIT become more attractive for a possible suitor.

Coradino said department stores at PREIT’s malls are 95.6% occupied, but the company is also considering using its properties for medical, life sciences and hotel space. Everything is on the table, Coradino said.

Medical facilities or residential components are seen as complementary to existing retail. At Moorestown Mall, Cooper University Health plans to open a 165,000-square-foot specialty care facility. Coradino said Cooper anticipates more than 1.5 million patients will visit the facility each year, which could double the mall’s foot traffic. Similarly, adding apartment buildings adjacent to the malls would add a built-in customer base within walking distance.

Selling land would thus result in money up front and eventually help retail space, too.

“We’re bringing in new, different, better. Getting rid of the bad stuff,” Coradino said. “We’re seeing traffic increase, sales increase. Hopefully over time, the world’s view of malls is that as those malls that probably shouldn’t have been built go away, what’s left is viable, vibrant properties.”

Incorporating other uses is what Coradino sees as the path ahead.

“The rationale behind it is that malls aren’t what they used to be,” Coradino said. “They’re different tenants, being reinvented, experience is changing from purely shopping to shopping, dining, entertainment, residential, medical.”

A challenge facing PREIT for now, though, is that lending markets are “frozen,” Coradino said. Without access to financing, selling underused portions of its properties to raise capital becomes even more important.

After being delisted from the New York Stock Exchange in December, PREIT has been sold over the counter. Its share price was $1.45 when the market closed Friday.

Ultimately, Coradino said he’d like PREIT to return to the New York Stock Exchange, but the company has to improve its share price to reach that point.

“I don’t think it’s going to happen tomorrow,” Coradino said. “It takes some work, which we’re up for.”

https://www.bizjournals.com/philadelphia/news/2023/02/20/preit-merger-mall-sales-development.amp.html