investor day
TRANSCRIPT
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.
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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
Joseph F. Coradino
CEO
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5
BREAKING NEWS
Non refundable deposit received for Palmer Park Mall
Non refundable deposit received for three mall package
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KEY CATALYSTS Our 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
SHAREHOLDER VALUE
7
BACK TO THE FUTURE
A LOOK BACK AND FORWARD
A VISION REALIZED A 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.
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NEXT STAGE A 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%
WHERE WE ARE Goals 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
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
SALES OUTPACING OCCUPANCY COSTS Opportunity 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)
IMPROVING RENEWAL RENT SPREADS Improved portfolio balances leverage with tenants
13
G&A AS % OF REVENUE Reduced and scalable G&A
14
SS NOI COMPOSITION Percentage of NOI from high productivity properties increasing
15
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KEY TAKEAWAYS Our 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
SELECT ANCHOR PROFILE Reduced 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
A UNIQUE PLATFORM Realizing a Transformed PREIT
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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
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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 GROUP Improving position
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 GROUP Improving position
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IMPROVED LINEUP Bringing 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
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NEW-TO-PORTFOLIO TENANCY Since 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.
ELEVATING PORTFOLIO QUALITY Transformed tenancy driving sales & quality of earning stream
23
INCREASING
SHARE
DECREASING
SHARE
OUT OF TOP 20
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KEY TAKEAWAYS Our 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
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
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CULTURAL EVOLUTION New Production Talent
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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
TALENT EVOLUTION Attracting & Maintaining Key Production Personnel
Quality Portfolio
Quality People
Quality Tenants EXCEPTIONAL
RESULTS
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POST-TRANSFORMATION A higher quality mall company
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25 Quality 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 +
+
TOP US MARKETS Twelve Malls in Top 10 DMAs
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Philadelphia, PA Washington DC
PHILADELPHIA MARKET PRESENCE PREIT 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
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PHILADELPHIA MARKET STRENGTH How 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
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PHILADELPHIA MARKET STRENGTH People want to be here
Over 25 Fortune 1,000 companies call the Philadelphia Region home
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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
WASHINGTON DC MARKET PRESENCE PREIT 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
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WASHINGTON DC MARKET INSIGHTS 3rd 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
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VALUE CREATION FRAMEWORK Pathway 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.
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KEY CATALYSTS Our 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
Heather Crowell
VP, Corporate Communications & Investor
Relations
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SHAREHOLDER RELATIONS
INVESTOR PERSPECTIVE
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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%
GOVERNANCE PRIORITY
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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
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Source: SNL
MALL SECTOR COMPARISONS 3 Year Total Shareholder Returns – Year End 2015
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TODAY’S RETAIL ENVIRONMENT
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THE IDEAL MALL
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Lifestyle & personal services
Soft and hard goods
Dining and entertainment destinations
Amenities that compel extended visits
OPPORTUNITIES
EVOLVING RETAIL ENVIRONMENT “Mall” is a 4-Letter Word
A Place for Engagement & Commerce
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Then - 1998 Now
RETAIL ENVIRONMENT
Department Stores
Specialty Shops
Dining and Entertainment
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RETAIL ENVIRONMENT
Department Stores
Specialty Shops
Large Format
Value cohabitating
with Full Price
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RETAIL ENVIRONMENT
Department Stores
Specialty Shops
Large Format
Dining Entertainment
Fast Fashion
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RETAIL ENVIRONMENT
48
RETAIL ENVIRONMENT
Department Stores
Specialty Shops
Large Format
Convenience Amenities
Dining Entertainment
Fast Fashion
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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
RETAIL ENVIRONMENT
Department Stores
Specialty Shops
Large Format
Convenience Amenities
Brand Pop-Ups
Click to Bricks
Dining Entertainment
Fast Fashion
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HESS TRUCK
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
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CONSTANTLY EVOLVING TENANT BASE
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GONE AND FORGOTTEN NEW & IMPROVED
CONSTANTLY EVOLVING TENANT BASE
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PORTFOLIO OPTIMIZATION STRATEGY Strategic Planning
Hold
Sell
Invest
Redevelopment
Strategic re-tenanting
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PORTFOLIO OPTIMIZATION STRATEGY The PREIT Perspective
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Demographics
Anchor strength
Capital requirements
NOI growth profile
Competitive landscape
Economic Development
Joe Aristone
SVP, Leasing
57
STRATEGIC RE-TENANTING EFFORTS Power of market knowledge
Define the VISION Develop a STRATEGY EXECUTE
58
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
EXPANDING RETAILERS
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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
REMERCHANDISING: Viewmont Mall Scranton, 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
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REMERCHANDISING: Viewmont Mall Scranton, PA
62
Newly Opened / Fully Executed
REMERCHANDISING: Viewmont Mall Scranton, PA
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REMERCHANDISING: Viewmont Mall Scranton, PA
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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
REMERCHANDISING: Moorestown Mall Moorestown, NJ
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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
REMERCHANDISING: Moorestown Mall Moorestown, NJ
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Experiences Boutique Row Dining
18,000+ sf H&M, to open in 2016 and will serve as additional catalyst for remerchandising
• 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 Mall Moorestown, NJ
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REMERCHANDISING: Moorestown Mall Moorestown, NJ
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Newly Opened / Fully Executed
Opportunity for Remerchandising
REMERCHANDISING: Moorestown Mall Moorestown, NJ
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REMERCHANDISING: Moorestown Mall Moorestown, NJ
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REMERCHANDISING: Moorestown Mall Moorestown, NJ
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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)
REMERCHANDISING: IN PROGRESS
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Patrick Henry Mall
Valley Mall
Capital City Mall
Francis Scott Key Mall
Francis Scott Key Mall
Valley Mall
Capital City Mall
Patrick Henry Mall
REMERCHANDISING: Patrick Henry Mall Newport News, VA
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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%
REMERCHANDISING: Patrick Henry Mall Newport 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
REMERCHANDISING: Patrick Henry Mall Newport News, VA
75
Targeted Retailers Newly Opened / Fully Executed
Opportunity for Remerchandising
REMERCHANDISING: Valley Mall Hagerstown. MD
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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%
REMERCHANDISING: Valley Mall Hagerstown, 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
REMERCHANDISING: Valley Mall Hagerstown. MD
78
Targeted Retailers Newly Opened / Fully Executed
Opportunity for Remerchandising
REMERCHANDISING: Capital City Mall Camp Hill, PA
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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%
REMERCHANDISING: Capital City Mall Camp Hill, PA
• Continue to elevate the merchandising mix to provide shoppers better fashion-oriented brands Vision
• 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
REMERCHANDISING: Capital City Mall Camp Hill, PA
81
Targeted Retailers
Newly Opened / Fully Executed
Opportunity for Remerchandising
REMERCHANDISING: Francis Scott Key Mall Frederick. 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%
REMERCHANDISING: Francis Scott Key Mall Frederick, 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
REMERCHANDISING: Francis Scott Key Mall Frederick, MD
84
Targeted Retailers
Newly Opened / Fully Executed
Opportunity for Remerchandising
Value City Furniture
Dick’s Sporting Goods
85
KEY CATALYSTS Our 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
Mario Ventresca
EVP, Operations
86
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 REVIEW Optimally timed program yields results
87
DISPOSITION UPDATE Finalizing 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
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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
PROGRAM IMPLEMENTATION & SUMMARY Keys 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
KEY CATALYSTS Our 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
91
PERFORMANCE PRIORIT Y
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 portfolio remains static.
PATHWAY TO NOI GROWTH Sales growth drives opportunity to drive rents
ORGANIC GROWTH LEVERS Renewal 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
ORGANIC GROWTH LEVERS Conversion 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
ORGANIC GROWTH LEVERS Opportunity 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
ORGANIC GROWTH LEVERS Improve 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
ORGANIC GROWTH LEVERS Improve Common Area Margin
$1.0 million per annum increases through increased revenue and expense control.
97
ORGANIC GROWTH LEVERS Occupancy Gains
Each 50 bps of non-anchor occupancy at $40 psf = $1.7 million
98
ORGANIC GROWTH LEVERS Temp-to-Perm Conversion
99
Conversion of 25% of temporary tenants generates $1.3 million in annual revenue uplift
ORGANIC GROWTH LEVERS New GLA Opportunities
100
Every 50,000 sf of additional exterior GLA can add $1.5 million with typically strong return prospects and credit tenants.
ORGANIC GROWTH LEVERS Lease 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
ORGANIC GROWTH OPPORTUNITIES Summary
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
KEY CATALYSTS Our 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
Daniel Herman
SVP, Development
105
106
EXECUTING GROWTH INITIATIVES
ACTIVE REDEVELOPMENT Stabilizing 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%
ACTIVE REDEVELOPMENT Stabilizing Springfield Town Center - Springfield, VA
108
EST. EST.
ACTIVE REDEVELOPMENT Fashion 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
ACTIVE REDEVELOPMENT Fashion Outlets of Philadelphia – Philadelphia, PA
110
ACTIVE REDEVELOPMENT Fashion 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
ACTIVE REDEVELOPMENT Exton 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
ACTIVE REDEVELOPMENT Exton Square – Phase I
113
Anticipated Opening 2017
ACTIVE REDEVELOPMENT Exton Square – Phase I
114
Anticipated Opening 2016
ACTIVE REDEVELOPMENT Plymouth 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
ACTIVE REDEVELOPMENT Plymouth Meeting Mall – Plymouth Meeting, PA
116
ACTIVE REDEVELOPMENT Plymouth Meeting Mall – Plymouth Meeting, PA
117
ACTIVE REDEVELOPMENT Cumberland 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
ACTIVE REDEVELOPMENT Cumberland Mall – Vineland, NJ
119
ACTIVE REDEVELOPMENT Mall 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
ACTIVE REDEVELOPMENT Mall 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
ACTIVE REDEVELOPMENT Mall at Prince Georges – Hyattsville, MD
122
ACTIVE REDEVELOPMENT Mall at Prince Georges – Hyattsville, MD
123
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 PROJECTS Summary
124
(1) PREIT Share of Cost
125
KEY CATALYSTS Our 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
Robert McCadden
CFO
126
SHAREHOLDER VALUE
127
CAPITAL ALLOCATION
BALANCE SHEET TARGETS
128
CAPITAL ALLOCATION PROTOCOL Careful, 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
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 TARGETS 3 Year Investment Horizon
BALANCE SHEET PRIORITIES
130
Continuous improvement of financial instrument terms
Reduce leverage
Maintain significant liquidity
131
BALANCE SHEET SECURITY
Refinancing efforts since 2012 have resulted in reduced interest expense of $30 million annually.
132
LADDERED DEBT MATURITIES
5.3 years - average time to maturity of mortgage loans
IMPROVING LIQUIDITY Amended 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
UNENCUMBERED POOL
134
2016
135
IMPROVING LEVERAGE Bank leverage is significantly reduced and expected to fall to high-40s
CAPITAL PLAN 3 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
SOURCES & USES OF CAPITAL Preliminary 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)
BALANCE SHEET PILLARS Focus 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
2016 OUTLOOK
2016 OUTLOOK Focus 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 Planned Asset Acquisitions
2016-2018 CAPITAL SPENDING Focus 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
2016-2018 CAPITAL OUTLAYS Includes redevelopment and recurring capital expenditures
$250 to $300 million of redevelopment capital spending over the next three years
142
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 GUIDANCE Preliminary 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
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 EARNINGS Preliminary View
144
NOI GROWTH Projected through 2018
NOI grows to $300 million by 2018, after asset dispositions
145
Joseph F. Coradino
CEO
146
FUTURE GROWTH OPPORTUNITIES Cherry 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
FUTURE GROWTH OPPORTUNITIES Exton Square Mall Phase II
148
Additional retail and restaurant development and interior remerchandising
FUTURE GROWTH OPPORTUNITIES Springfield Town Center Peripheral Land
149
Development of 3 million sf of entitled peripheral land with office, multi-family, hotel and additional retail
FUTURE GROWTH OPPORTUNITIES Fashion Outlets of Philadelphia Overbuild
150
Vertical development at site with the addition of hotel, multi-family and/or office
FUTURE GROWTH OPPORTUNITIES Woodland Mall Redevelopment
151
Fashion anchor addition along with new GLA for restaurants and exterior facing retail
FUTURE GROWTH OPPORTUNITIES Plymouth Meeting Mall Master Plan
152
Development of PA Turnpike and former office parcel into hotel and potential flagship office space
153
KEY CATALYSTS Our 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