UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form
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Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
For the quarterly period ended
or
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Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
For the transition period from to
Commission File Number:
(Exact name of Registrant as specified in its charter)
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(State or other jurisdiction of incorporation or organization) |
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(I.R.S. Employer Identification No.) |
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(Address of principal executive offices) |
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(Zip Code) |
Registrant’s telephone number, including area code (
Securities registered pursuant to Section 12(b) of the Act:
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Title of each class |
Trading Symbol(s) |
Name of Exchange on which registered |
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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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Large accelerated filer |
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Non-accelerated filer |
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Smaller reporting company |
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Emerging growth company |
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13, or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes ☒ No ☐
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. On May 3, 2021,
PENNSYLVANIA REAL ESTATE INVESTMENT TRUST
CONTENTS
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Page |
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PART I—FINANCIAL INFORMATION |
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Item 1. |
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1 |
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Consolidated Balance Sheets—March 31, 2021 and December 31, 2020 |
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Consolidated Statements of Operations—Three Months Ended March 31, 2021 and 2020 |
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Consolidated Statements of Comprehensive Loss—Three Months Ended March 31, 2021 and 2020 |
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Consolidated Statements of Equity—Three Months Ended March 31, 2021 and 2020 |
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Consolidated Statements of Cash Flows—Three Months Ended March 31, 2021 and 2020 |
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Item 2. |
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Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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Item 3. |
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42 |
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Item 4. |
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44 |
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PART II—OTHER INFORMATION |
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Item 1. |
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45 |
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Item 1A. |
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45 |
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Item 2. |
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45 |
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Item 3. |
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45 |
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Item 4. |
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Not Applicable |
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Item 5. |
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Not Applicable |
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Item 6. |
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46 |
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48 |
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Except as the context otherwise requires, references in this Quarterly Report on Form 10-Q to “we,” “our,” “us,” the “Company” and “PREIT” refer to Pennsylvania Real Estate Investment Trust and its subsidiaries, including our operating partnership, PREIT Associates, L.P. References in this Quarterly Report on Form 10-Q to “PREIT Associates” or the “Operating Partnership” refer to PREIT Associates, L.P.
Item 1. FINANCIAL STATEMENTS
PENNSYLVANIA REAL ESTATE INVESTMENT TRUST
CONSOLIDATED BALANCE SHEETS
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March 31, 2021 |
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December 31, 2020 |
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(in thousands, except per share amounts) |
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(Unaudited) |
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ASSETS: |
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INVESTMENTS IN REAL ESTATE, at cost: |
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Operating properties |
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$ |
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$ |
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Construction in progress |
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Land held for development |
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Total investments in real estate |
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Accumulated depreciation |
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Net investments in real estate |
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INVESTMENTS IN PARTNERSHIPS, at equity: |
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OTHER ASSETS: |
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Cash and cash equivalents |
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Tenant and other receivables |
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Intangible assets (net of accumulated amortization of $ |
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Deferred costs and other assets, net |
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Assets held for sale |
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Total assets |
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$ |
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$ |
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LIABILITIES: |
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Mortgage loans payable, net |
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$ |
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$ |
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Term Loans, net |
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Revolving Facilities |
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Tenants’ deposits and deferred rent |
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Distributions in excess of partnership investments |
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Fair value of derivative instruments |
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Accrued expenses and other liabilities |
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Total liabilities |
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COMMITMENTS AND CONTINGENCIES (Note 8) |
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EQUITY: |
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Series B Preferred Shares, $ |
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Series C Preferred Shares, $ |
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Series D Preferred Shares, $ |
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Shares of beneficial interest, $ |
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Capital contributed in excess of par |
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Accumulated other comprehensive loss |
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Distributions in excess of net income |
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Total equity – Pennsylvania Real Estate Investment Trust |
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Noncontrolling interest |
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Total equity |
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Total liabilities and equity |
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$ |
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$ |
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See accompanying notes to the unaudited consolidated financial statements.
1
PENNSYLVANIA REAL ESTATE INVESTMENT TRUST
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
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Three Months Ended March 31, |
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(in thousands of dollars) |
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2021 |
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2020 |
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REVENUE: |
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Real estate revenue: |
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Lease revenue |
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$ |
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$ |
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Expense reimbursements |
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Other real estate revenue |
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Total real estate revenue |
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Other income |
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Total revenue |
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EXPENSES: |
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Operating expenses: |
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Property operating expenses: |
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CAM and real estate taxes |
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Utilities |
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Other property operating expenses |
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Total property operating expenses |
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Depreciation and amortization |
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General and administrative expenses |
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Provision for employee separation expenses |
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Project costs and other expenses |
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Total operating expenses |
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Interest expense, net |
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Reorganization expenses |
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Total expenses |
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Loss before equity in (loss) income of partnerships, gain on sales of real estate, net, and loss on sales of interests in non operating real estate |
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Equity in (loss) income of partnerships |
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Gain on sales of real estate, net |
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Loss on sales of interests in non operating real estate |
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Net loss |
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Less: net loss attributable to noncontrolling interest |
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Net loss attributable to PREIT |
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Less: preferred share dividends |
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( |
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Net loss attributable to PREIT common shareholders |
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$ |
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$ |
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See accompanying notes to the unaudited consolidated financial statements.
2
PENNSYLVANIA REAL ESTATE INVESTMENT TRUST
CONSOLIDATED STATEMENTS OF OPERATIONS (CONTINUED)
(Unaudited)
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Three Months Ended March 31, |
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(in thousands, except per share amounts) |
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2021 |
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2020 |
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Net loss |
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$ |
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$ |
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Noncontrolling interest |
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Preferred share dividends |
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Dividends on unvested restricted shares |
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Net loss used to calculate loss per share—basic and diluted |
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$ |
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$ |
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Basic and diluted loss per share: |
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$ |
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$ |
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(in thousands of shares) |
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Weighted average shares outstanding—basic |
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Effect of common share equivalents(1) |
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Weighted average shares outstanding—diluted |
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(1) |
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See accompanying notes to the unaudited consolidated financial statements.
3
PENNSYLVANIA REAL ESTATE INVESTMENT TRUST
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(Unaudited)
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Three Months Ended March 31, |
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(in thousands of dollars) |
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2021 |
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2020 |
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Comprehensive loss: |
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Net loss |
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$ |
( |
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$ |
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Unrealized gain (loss) on derivatives |
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( |
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Amortization of settled swaps |
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Total comprehensive loss |
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Less: comprehensive loss attributable to noncontrolling interest |
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Comprehensive loss attributable to PREIT |
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$ |
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$ |
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See accompanying notes to the unaudited consolidated financial statements.
4
PENNSYLVANIA REAL ESTATE INVESTMENT TRUST
CONSOLIDATED STATEMENTS OF EQUITY
Three Months Ended
March 31, 2021 and 2020
(Unaudited)
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PREIT Shareholders |
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Preferred Shares $ |
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Shares of Beneficial |
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Capital Contributed |
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Accumulated Other |
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Distributions |
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Non- |
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(in thousands of dollars, except per share amounts) |
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Total Equity |
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Series B |
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Series C |
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Series D |
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Interest, $ |
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in Excess of Par |
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Comprehensive Loss |
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in Excess of Net Income |
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controlling interest |
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Balance January 1, 2021 |
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$ |
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$ |
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$ |
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$ |
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$ |
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$ |
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$ |
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$ |
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$ |
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Net loss |
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( |
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— |
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— |
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— |
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— |
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— |
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— |
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( |
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Other comprehensive income |
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— |
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— |
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— |
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— |
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— |
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— |
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Shares issued under employee compensation plan, net of shares retired |
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( |
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— |
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— |
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— |
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( |
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— |
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— |
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— |
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Amortization of deferred compensation |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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Balance March 31, 2021 |
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$ |
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$ |
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$ |
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$ |
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$ |
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$ |
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$ |
( |
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$ |
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$ |
( |
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PREIT Shareholders |
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Preferred Shares $ |
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Shares of Beneficial |
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Capital Contributed |
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Accumulated Other |
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Distributions |
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Non- |
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(in thousands of dollars, except per share amounts) |
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Total Equity |
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Series B |
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Series C |
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Series D |
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Interest, $ |
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in Excess of Par |
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Comprehensive Loss |
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in Excess of Net Income |
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controlling interest |
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Balance January 1, 2020 |
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$ |
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$ |
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$ |
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$ |
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$ |
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$ |
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$ |
( |
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$ |
( |
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$ |
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Net loss |
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( |
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— |
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— |
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— |
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— |
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— |
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— |
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( |
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( |
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Other comprehensive loss |
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( |
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— |
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— |
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— |
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— |
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— |
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( |
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— |
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( |
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Shares issued under employee compensation plans, net of shares retired |
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( |
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— |
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— |
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— |
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( |
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— |
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— |
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— |
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Amortization of deferred compensation |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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Dividends paid to common shareholders ($ |
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( |
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— |
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— |
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— |
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— |
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— |
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— |
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( |
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— |
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Dividends paid to Series B preferred shareholders ($ |
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( |
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— |
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— |
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— |
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— |
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— |
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— |
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( |
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— |
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Dividends paid to Series C preferred shareholders ($ |
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( |
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— |
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— |
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— |
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— |
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— |
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— |
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( |
) |
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— |
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Dividends paid to Series D preferred shareholders ($ |
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( |
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— |
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— |
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— |
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— |
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— |
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— |
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( |
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— |
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Noncontrolling interests: |
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Distributions paid to Operating Partnership unit holders ($ |
|
|
( |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
Balance March 31, 2020 |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
|
See accompanying notes to the unaudited consolidated financial statements.
5
PENNSYLVANIA REAL ESTATE INVESTMENT TRUST
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
|
|
|
Three Months Ended March 31, |
|
|||||
|
(in thousands of dollars) |
|
2021 |
|
|
2020 |
|
||
|
Cash flows from operating activities: |
|
|
|
|
|
|
|
|
|
Net loss |
|
$ |
( |
) |
|
$ |
( |
) |
|
Adjustments to reconcile net loss to net cash provided by operating activities: |
|
|
|
|
|
|
|
|
|
Depreciation |
|
|
|
|
|
|
|
|
|
Amortization |
|
|
|
|
|
|
|
|
|
Straight-line rent adjustments |
|
|
|
|
|
|
( |
) |
|
Amortization of deferred compensation |
|
|
|
|
|
|
|
|
|
Paid-in-kind interest |
|
|
|
|
|
|
|
|
|
Gain on hedge ineffectiveness |
|
|
( |
) |
|
|
|
|
|
Gain on sales of interests in real estate and non-operating real estate, net |
|
|
|
|
|
|
( |
) |
|
Equity in loss (income) of partnerships |
|
|
|
|
|
|
( |
) |
|
Cash distributions from partnerships |
|
|
|
|
|
|
|
|
|
Net change in other assets |
|
|
|
|
|
|
|
|
|
Net change in other liabilities |
|
|
( |
) |
|
|
( |
) |
|
Net cash provided by operating activities |
|
|
|
|
|
|
|
|
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
|
Distribution of refinancing proceeds from equity method investee |
|
|
|
|
|
|
|
|
|
Investments in real estate improvements |
|
|
( |
) |
|
|
( |
) |
|
Additions to construction in progress |
|
|
( |
) |
|
|
( |
) |
|
Investments in partnerships |
|
|
( |
) |
|
|
( |
) |
|
Capitalized leasing costs |
|
|
|
|
|
|
( |
) |
|
Additions to leasehold improvements and corporate fixed assets |
|
|
( |
) |
|
|
( |
) |
|
Net cash used in investing activities |
|
|
( |
) |
|
|
( |
) |
|
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
|
Net borrowings under the Restructured Revolver |
|
|
|
|
|
|
|
|
|
Repayments of finance lease liabilities |
|
|
( |
) |
|
|
( |
) |
|
Principal installments on mortgage loans |
|
|
( |
) |
|
|
( |
) |
|
Payment of deferred financing costs |
|
|
( |
) |
|
|
( |
) |
|
Value of shares of beneficial interest issued |
|
|
|
|
|
|
|
|
|
Dividends paid to common shareholders |
|
|
|
|
|
|
( |
) |
|
Dividends paid to preferred shareholders |
|
|
|
|
|
|
( |
) |
|
Distributions paid to Operating Partnership unit holders and noncontrolling interest |
|
|
|
|
|
|
( |
) |
|
Value of shares retired under equity incentive plans, net of shares issued |
|
|
( |
) |
|
|
( |
) |
|
Net cash (used in) provided by financing activities |
|
|
( |
) |
|
|
|
|
|
Net change in cash, cash equivalents, and restricted cash |
|
|
|
|
|
|
( |
) |
|
Cash, cash equivalents, and restricted cash, beginning of period |
|
|
|
|
|
|
|
|
|
Cash, cash equivalents, and restricted cash, end of period |
|
$ |
|
|
|
$ |
|
|
See accompanying notes to the unaudited consolidated financial statements.
6
PENNSYLVANIA REAL ESTATE INVESTMENT TRUST
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2021
1. BASIS OF PRESENTATION
Nature of Operations
Pennsylvania Real Estate Investment Trust (“PREIT” or the “Company”) prepared the accompanying unaudited consolidated financial statements pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) have been condensed or omitted pursuant to such rules and regulations, although we believe that the included disclosures are adequate to make the information presented not misleading. Our unaudited consolidated financial statements should be read in conjunction with the audited financial statements and the notes thereto included in PREIT’s Annual Report on Form 10-K for the year ended December 31, 2020. In our opinion, all adjustments, consisting only of normal recurring adjustments, necessary to present fairly our consolidated financial position, the consolidated results of our operations, consolidated statements of comprehensive loss, consolidated statements of equity and our consolidated statements of cash flows are included. The results of operations for the interim periods presented are not necessarily indicative of the results for the full year.
PREIT, a Pennsylvania business trust founded in 1960 and one of the first equity real estate investment trusts (“REITs”) in the United States, has a primary investment focus on retail shopping malls located in the eastern half of the United States, primarily in the Mid-Atlantic region. As of March 31, 2021, our portfolio consists of a total of
We hold our interest in our portfolio of properties through our operating partnership, PREIT Associates, L.P. (“PREIT Associates” or the “Operating Partnership”). We are the sole general partner of the Operating Partnership and, as of March 31, 2021, we held a
Pursuant to the terms of the partnership agreement of the Operating Partnership, each of the limited partners has the right to redeem such partner’s units of limited partnership interest in the Operating Partnership (“OP Units”) for cash or, at our election, we may acquire such OP Units in exchange for our common shares on a
We provide management, leasing and real estate development services through
We evaluate operating results and allocate resources on a property-by-property basis, and do not distinguish or evaluate our consolidated operations on a geographic basis. Due to the nature of our operating properties, which involve retail shopping, dining, entertainment and certain non-traditional tenant operations, we have concluded that our individual properties have similar economic characteristics and meet all other aggregation criteria. Accordingly, we have aggregated our individual properties into
Financial Restructuring
On October 7, 2020, the Company and certain of the Company’s wholly owned direct and indirect subsidiaries (collectively, the “Company Parties”) entered into a Restructuring Support Agreement (the “RSA”), which contemplated agreed-upon terms for a financial restructuring of the then-existing debt and certain other obligations of the Company Parties (collectively with the following events, the “Financial Restructuring”). The RSA was amended on October 16, 2020, and again on October 23, 2020, to, among other things, extend the date by which the Company Parties were required to commence the solicitation of votes on their joint prepackaged chapter 11 plan of reorganization (the “Plan”) and, thereafter, the voluntary chapter 11 cases. On November 1, 2020, the Company and the other Company Parties under the RSA (the “Debtors”) filed their respective voluntary petitions under chapter 11 of title 11 of the United States Code, 11 U.S.C. §§ 101-1532 (the “Bankruptcy Code”) in the United States Bankruptcy Court for the District of Delaware (the “Bankruptcy Court”), commencing the chapter 11
7
cases to confirm and consummate the Plan in order to effectuate the Debtors’ financial restructuring. The Debtors’ chapter 11 cases were jointly administered for procedural convenience under the caption In re Pennsylvania Real Estate Investment Trust, et al., Case No. 20-12737 (KBO). Under the Plan, the Debtors would be recapitalized and their debt maturities extended. The Debtors continued to operate their businesses as debtors in possession under the jurisdiction of the Bankruptcy Court and in accordance with the applicable provisions of the Bankruptcy Code and orders of the Bankruptcy Court. On November 30, 2020, the Bankruptcy Court entered an order (the “Confirmation Order”), confirming the Joint Prepackaged Chapter 11 Plan of Reorganization of Pennsylvania Real Estate Investment Trust and Certain of Its Direct and Indirect Subsidiaries (with Additional Technical Modifications As of November 20, 2020) (the “Confirmed Plan”). On December 10, 2020 (the “Effective Date”), each condition precedent to consummation of the Confirmed Plan, enumerated in Section 8.2 thereof, was satisfied or waived in accordance with the Confirmed Plan and the Confirmation Order, and therefore the Effective Date occurred and the Debtors emerged from bankruptcy. On the Effective Date, the Company entered into the credit agreements, which are described in Note 4. The final decree closing the bankruptcy case was entered by the Bankruptcy Court on March 11, 2021.
COVID-19 Related Risks and Uncertainties
The COVID-19 global pandemic that began in early 2020 has adversely impacted and continues to impact our business, financial condition, liquidity and operating results, as well as our tenants’ businesses. The prolonged and increased spread of COVID-19 has also led to unprecedented global economic disruption and volatility in financial markets. Some of our tenants’ financial health and business viability have been adversely impacted and their creditworthiness has deteriorated. We anticipate that our future business, financial condition, liquidity and results of operations, including in 2021 and potentially in future periods, will continue to be materially impacted by the COVID-19 pandemic. It remains highly uncertain how long the global pandemic, economic challenges and restrictions on day-to-day life and business operations will last based on the emergence of new strains of the virus and the current virus spread rate in the United States, which have resulted in a number of jurisdictions that previously relaxed restrictions implementing new or renewed restrictions. Given these factors, so long as the lingering effects of COVID-19 remain, the virus may continue to impact us or our tenants, or our ability or the ability of our tenants to resume more normal operations.
COVID-19 closures of our properties began on March 12, 2020 and continued through the reopening of our last property on July 3, 2020. These closures impacted most of our properties for the full second quarter of 2020 with traffic and tenant reopenings increasing through the third and fourth quarters of 2020. New or renewed restrictions in the jurisdictions where our properties are located may be implemented in response to evolving conditions and overall uncertainty about the timing and widespread availability, acceptance, and efficacy of vaccines, including in response to new variants. As such, as the pandemic continues and potentially intensifies or we experience resurgences, it is possible that additional closures will occur. During the mall closure period in the second quarter of 2020, the Company furloughed a significant portion of its property and corporate employee base and later made permanent headcount reductions, which contributed to decreased general and administrative expenses in the third and fourth quarters of 2020.
All of our properties have remained open since July 3, 2020 and are employing safety and sanitation measures designed to address the risks posed by COVID-19, with some of our tenants still operating at reduced capacity. The significance of COVID-19 on our business, however, will continue to depend on, among other things, the extent and duration of the pandemic, the severity of the disease and the number of people infected with the virus, the timing and widespread availability, acceptance, and efficacy of vaccines, further effects on the economy of the pandemic and of the measures taken by governmental authorities and other third parties restricting daily activities and the length of time that such measures remain in place or are renewed, implementation of governmental programs to assist businesses and consumers impacted by the COVID-19 pandemic, and the effect of any relaxation of current restrictions, all of which could vary by geographic region in which our properties are located. In the first quarter of 2021, we experienced further uncertainty as to whether government authorities will maintain the relaxation of current restrictions on businesses in the regions in which our properties are located, if these restrictions have been relaxed at all, and whether government authorities will issue recommendations or impose requirements on landlords like us to further enhance health and safety protocols, or whether we will voluntarily adopt any of these requirements ourselves, which could result in increased operating costs and demands on our property management teams to ensure compliance with any of these requirements.
Fair Value
Fair value accounting applies to reported balances that are required or permitted to be measured at fair value under existing accounting pronouncements. Fair value measurements are determined based on the assumptions that market participants would use in pricing the asset or liability. As a basis for considering market participant assumptions in fair value measurements, these accounting requirements establish a fair value hierarchy that distinguishes between market participant assumptions based on market data obtained from sources independent of the reporting entity (observable inputs that are classified within Levels 1 and 2 of the hierarchy) and the reporting entity’s own assumptions about market participant assumptions (unobservable inputs classified within Level 3 of the hierarchy).
8
Level 1 inputs utilize quoted prices (unadjusted) in active markets for identical assets or liabilities that we have the ability to access.
Level 2 inputs are inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 inputs might include quoted prices for similar assets and liabilities in active markets, as well as inputs that are observable for the asset or liability (other than quoted prices), such as interest rates, foreign exchange rates, and yield curves that are observable at commonly quoted intervals.
Level 3 inputs are unobservable inputs for the asset or liability, and are typically based on an entity’s own assumptions, as there is little, if any, related market activity.
In instances where the determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level input that is significant to the fair value measurement in its entirety. Our assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability. We utilize the fair value hierarchy in our accounting for derivatives (Level 2) and financial instruments (Level 2) and in our reviews for impairment of real estate assets (Level 3) and goodwill (Level 3).
Impairment of Assets
Real estate investments and related intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the property might not be recoverable, which is referred to as a “triggering event.” The ongoing impact of COVID-19 on the economy and market conditions, together with the resulting closures of our properties and the delayed and/or limited reopening of some tenants was deemed to be a triggering event as of June 30, 2020, September 30, 2020 and December 31, 2020, which led to impairment reviews and assessment of the undiscounted future cash flows for each of the respective quarters of 2020. During the first quarter of 2021, certain of our properties had triggering events due to various indicators of impairment, however, we did not identify any impairments based on our assessment of the undiscounted future cash flows. In connection with our review of our long-lived assets for impairment, we utilize qualitative and quantitative factors in order to estimate fair value. The significant qualitative factors that we use include age and condition of the property, market conditions in the property’s trade area, competition with other shopping centers within the property’s trade area and the creditworthiness and performance of the property’s tenants. The significant quantitative factors that we use include historical and forecasted financial and operating information relating to the property, such as net operating income, estimated holding periods, occupancy statistics, vacancy projections and tenants’ sales levels.
If there is a triggering event in relation to a property to be held and used, we will estimate the aggregate future cash flows, net of estimated capital expenditures, to be generated by the property, undiscounted and without interest charges. In addition, this estimate may consider a probability weighted cash flow estimation approach when alternative courses of action to recover the carrying amount of a long-lived asset are under consideration or when a range of possible values is estimated.
The determination of undiscounted cash flows requires significant estimates by our management, including the expected course of action at the balance sheet date that would lead to such cash flows. Subsequent changes in estimated undiscounted cash flows arising from changes in the anticipated action to be taken with respect to the property could affect the determination of whether an impairment exists, and the effects of such changes could materially affect our net income. If the estimated undiscounted cash flows are less than the carrying value of the property, the carrying value is written down to its fair value. We intend to hold and operate our properties long-term, which reduces the likelihood that our carrying value is not recoverable. A shortened holding period would increase the likelihood that the carrying value is not recoverable.
Assessment of our ability to recover certain lease-related costs must be made when we have a reason to believe that a tenant might not be able to perform under the terms of the lease as originally expected. This requires us to make estimates as to the recoverability of such costs.
An other-than-temporary impairment of an investment in an unconsolidated joint venture is recognized when the carrying value of the investment is not considered recoverable based on evaluation of the severity and duration of the decline in value. To the extent impairment has occurred, the excess carrying value of the asset over its estimated fair value is recorded as a reduction to income.
Share-Based Compensation
On March 31, 2021, the Company approved the 2021-2023 Equity Award Program design (the “Program”). Having approved the Program, the Company made long term incentive plan awards in the form of performance-based restricted share units (“PSUs”) and time-based restricted share units (“RSUs”). The grants of PSUs and RSUs were made pursuant to the Company’s Amended and Restated 2018 Equity Incentive Plan (as amended, the “2018 Equity Incentive Plan”), as amended by the Plan Amendment (defined below).
On March 31, 2021, the Board approved the first amendment to the 2018 Equity Incentive Plan (“Plan Amendment”), which permits, among other clarifying changes, that restricted stock units granted under the 2018 Equity Incentive Plan may be made subject to vesting restrictions other than performance goals (i.e., RSUs). As a result of the Plan Amendment and as incorporated into the awards made under the Program settlement of RSUs or PSUs may be made in cash or shares, as determined by the Executive Compensation and Human Resources Committee (the “Committee”) of the Board of Trustees. On March 31, 2021, the Company granted
Under the Program, the number of common shares to be issued by the Company with respect to the PSUs, if any, depends on the Company’s achievement of certain specified operating performance measures and a modification based on total shareholder return (“TSR”) for the three-year period beginning January 1, 2021 and ending on the earlier of December 31, 2023 or the date of a change in control of the Company (the “Measurement Period”).
9
The preliminary number of common shares to be issued by the Company with respect to the PSUs awarded is based on a multiple determined by achievement of certain specified operating performance measures during the Measurement Period. These performance measures, the core mall total occupancy and the corporate debt yield, are each weighted
With respect to the portion of the long-term incentive awards made in the form of RSUs, the RSUs generally will vest in three equal annual installments for all grants except director grants and two equal installments for the Company’s directors commencing on March 31, 2022, subject to continued employment. During the period that the RSUs have not vested, the holder will have no rights as a shareholder with respect to the RSUs; however, dividends, if any, on the Company’s common shares are deemed to be paid with respect to RSUs and credited to the RSU accounts and applied to “acquire” more RSUs at the 20-day average closing price per common share ending on the dividend payment date.
New Accounting Developments
In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides optional guidance for a limited period of time to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting for contracts, hedging relationships, and other transactions that reference the London Interbank Offered Rate (“LIBOR”). Companies may generally elect to apply the guidance for periods that include March 12, 2020 through December 31, 2022. In January 2021, the FASB issued ASU 2021-01 to provide additional guidance around Topic 848 primarily as it relates to the ASU’s effect on derivative contracts. The Company is evaluating the anticipated impact of this standard on its condensed consolidated financial statements as well as timing of adoption.
2. REAL ESTATE ACTIVITIES
Investments in real estate as of March 31, 2021 and December 31, 2020 were comprised of the following:
|
(in thousands of dollars) |
|
March 31, 2021 |
|
|
December 31, 2020 |
|
||
|
Buildings, improvements and construction in progress |
|
$ |
|
|
|
$ |
|
|
|
Land, including land held for development |
|
|
|
|
|
|
|
|
|
Total investments in real estate |
|
|
|
|
|
|
|
|
|
Accumulated depreciation |
|
|
( |
) |
|
|
( |
) |
|
Net investments in real estate |
|
$ |
|
|
|
$ |
|
|
Capitalization of Costs
The following table summarizes our capitalized interest, compensation, including commissions, and real estate taxes for the three months ended March 31, 2021 and 2020:
|
|
|
Three Months Ended March 31, |
|
|||||
|
(in thousands of dollars) |
|
2021 |
|
|
2020 |
|
||
|
Development/Redevelopment Activities: |
|
|
|
|
|
|
|
|
|
Interest (1) |
|
$ |
|
|
|
$ |
|
|
|
Compensation |
|
|
|
|
|
|
|
|
|
Real estate taxes |
|
|
|
|
|
|
|
|
|
Leasing Activities: |
|
|
|
|
|
|
|
|
|
Compensation, including commissions (2) |
|
|
— |
|
|
|
|
|
|
(1) |
Includes interest capitalized on investments in partnerships under development. |
|
(2) |
The definition of initial direct costs under ASC 842 includes only those incremental costs of a lease that would not have been incurred if the lease had not been obtained. Commissions paid for successful leasing transactions continue to be capitalized. |
Dispositions
Valley View Mall Derecognition
In August 2020, a court order assigned a receiver to operate Valley View Mall in La Crosse, Wisconsin on behalf of the lender of the mortgage loan secured by the property. Although we have not yet conveyed the property because foreclosure proceedings are ongoing, we no longer
10
control or operate the property as a result of court order assigning the receiver. In September 2020, a court order was issued to conduct a foreclosure sale of the property and as a result we have no further operating liabilities from the property. As a result of our loss of control of the property, we derecognized the property and recorded an offsetting contract asset and recognized a gain on derecognition of property of $
3. INVESTMENTS IN PARTNERSHIPS
The following table presents summarized financial information of the equity investments in our unconsolidated partnerships as of March 31, 2021 and December 31, 2020:
|
(in thousands of dollars) |
|
March 31, 2021 |
|
|
December 31, 2020 |
|
||
|
ASSETS: |
|
|
|
|
|
|
|
|
|
Investments in real estate, at cost: |
|
|
|
|
|
|
|
|
|
Operating properties |
|
$ |
|
|
|
$ |
|
|
|
Construction in progress |
|
|
|
|
|
|
|
|
|
Total investments in real estate |
|
|
|
|
|
|
|
|
|
Accumulated depreciation |
|
|
( |
) |
|
|
( |
) |
|
Net investments in real estate |
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
|
|
|
|
|
|
|
|
Deferred costs and other assets, net |
|
|
|
|
|
|
|
|
|
Total assets |
|
|
|
|
|
|
|
|
|
LIABILITIES AND PARTNERS’ INVESTMENT: |
|
|
|
|
|
|
|
|
|
Mortgage loans payable, net |
|
|
|
|
|
|
|
|
|
FDP Term Loan, net |
|
|
|
|
|
|
|
|
|
Partnership Loan |
|
|
|
|
|
|
|
|
|
Other liabilities |
|
|
|
|
|
|
|
|
|
Total liabilities |
|
|
|
|
|
|
|
|
|
Net investment |
|
|
( |
) |
|
|
( |
) |
|
Partners’ share |
|
|
( |
) |
|
|
( |
) |
|
PREIT’s share |
|
|
( |
) |
|
|
( |
) |
|
Excess investment (1) |
|
|
|
|
|
|
|
|
|
Net investments and advances |
|
$ |
( |
) |
|
$ |
( |
) |
|
Investment in partnerships, at equity |
|
$ |
|
|
|
$ |
|
|
|
Distributions in excess of partnership investments |
|
|
( |
) |
|
|
( |
) |
|
Net investments and advances |
|
$ |
( |
) |
|
$ |
( |
) |
_____________________
|
(1) |
Excess investment represents the unamortized difference between our investment and our share of the equity in the underlying net investment in the unconsolidated partnerships. The excess investment is amortized over the life of the properties, and the amortization is included in “Equity in (loss) income of partnerships.” |
We record distributions from our equity investments using the nature of the distribution approach.
11
The following table summarizes our share of equity in (loss) income of partnerships for the three months ended March 31, 2021 and 2020:
|
|
|
Three Months Ended March 31, |
|
|||||
|
(in thousands of dollars) |
|
2021 |
|
|
2020 |
|
||
|
Real estate revenue |
|
$ |
|
|
|
$ |
|
|
|
Expenses: |
|
|
|
|
|
|
|
|
|
Property operating and other expenses |
|
|
( |
) |
|
|
( |
) |
|
Interest expense (1) |
|
|
( |
) |
|
|
( |
) |
|
Depreciation and amortization |
|
|
( |
) |
|
|
( |
) |
|
Total expenses |
|
|
( |
) |
|
|
( |
) |
|
Net (loss) income |
|
|
( |
) |
|
|
|
|
|
Less: Partners’ share |
|
|
|
|
|
|
( |
) |
|
PREIT’s share |
|
|
( |
) |
|
|
|
|
|
Amortization of excess investment |
|
|
( |
) |
|
|
|
|
|
Equity in (loss) income of partnerships |
|
$ |
( |
) |
|
$ |
|
|
(1) Net of capitalized interest expense of $
Fashion District Philadelphia
FDP Loan Agreement
PM Gallery LP, a Delaware limited partnership and joint venture entity owned indirectly by us and The Macerich Company (“Macerich”), previously entered into a $
The FDP Loan Agreement provides for (i) a maturity date of
Joint Venture
In connection with the execution of the FDP Loan Agreement, the governing structure of PM Gallery LP was modified such that, effective as of January 1, 2021, Macerich is responsible for the entity’s operations and, subject to limited exceptions, controls major decisions. The Company considered the changes to the governing structure of PM Gallery LP and determined the investment qualifies as a variable interest entity and will continue to be accounted for under the equity method of accounting. Our maximum exposure to losses is limited to the extent of our investment, which is a 50% ownership.
Mortgage Loan Activity
During the three months ended March 31, 2021, the Company’s unconsolidated subsidiary received an extension of its mortgage securing Pavilion at Market East for an additional three months to May 2021.
12
4. FINANCING ACTIVITY
Credit Agreements
On December 10, 2020 we entered into
As of March 31, 2021, we had borrowed $
On April 13, 2021, we entered into Agency Resignation, Appointment, Acceptance and Waiver Agreements pursuant to which Wells Fargo Bank resigned as Administrative Agent and Wilmington Savings Fund Society, FSB was appointed successor Administrative Agent under the First Lien Credit Agreement, the Second Lien Credit Agreement and, in each case, the related loan documents. There is currently no successor letter of credit issuer under the First Lien Revolving Facility, accordingly, the Company cannot currently access the letters of credit sub-facility.
Interest expense and deferred financing fee amortization related to the Credit Agreements and the Restructured Credit Agreements for the three months ended March 31, 2021 and 2020 were as follows:
|
|
|
Three Months Ended March 31, |
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|||||
|
(in thousands of dollars) |
|
2021 |
|
|
2020 |
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|
||
|
Revolving Facilities: |
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|
|
|
|
|
|
|
|
|
Interest expense |
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$ |
|
|
|
$ |
|
|
|
|
Deferred financing amortization |
|
|
|
|
|
|
|
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|
Term Loans: |
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|
Interest expense (1) |
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Deferred financing amortization |
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|
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|
|
|
|
(1) |
For the three months ended March 31, 2021, $ |
Our obligations under the Credit Agreements are guaranteed by certain of our subsidiaries. Our obligations under the Credit Agreements and the guaranties are secured by mortgages and deeds of trust on a portfolio of
The Credit Agreements each provide for a maturity of
13
First Lien Credit Agreement
Amounts borrowed under the First Lien Credit Agreement may be either Base Rate Loans or LIBOR Loans. Base Rate Loans bear interest at the highest of (a) the Prime Rate, (b) the Federal Funds Rate plus
Letters of credit and the proceeds of revolving loans may be used (i) to refinance existing indebtedness under the Bridge Credit Agreement, (ii) for working capital and general corporate purposes (subject to certain exceptions set forth in the First Lien Credit Agreement, including limitations on investments in non-Borrowing Base Properties), and (iii) to fund professional fee payments and other fees and expenses subject to the provisions of the Plan and related confirmation order and for other uses permitted by the provisions of the First Lien Credit Agreement, Plan and confirmation order, in each case consistent with an approved annual business plan. We may terminate or reduce the amount of the revolving commitments at any time and from time to time without penalty or premium, subject to the terms of the First Lien Credit Agreement.
The First Lien Credit Agreement contains, among other restrictions, certain additional affirmative and negative covenants and other terms, many of which substantially align with those in the Second Lien Credit Agreement and are summarized below under “Similar Terms of the Credit Agreements.”
Second Lien Credit Agreement
The proceeds of loans under the Second Lien Credit Agreement may only be used to refinance existing indebtedness under the 2018 Credit Agreement and the
The Second Lien Credit Agreement contains, among other restrictions, certain additional affirmative and negative covenants and other terms, many of which substantially align with those in the First Lien Credit Agreement and are summarized below under “Similar Terms of the Credit Agreements.”
On February 8, 2021, the Company entered into the first amendment to the Second Lien Credit Agreement (“First Amendment”). The First Amendment provided for elimination of approximately $
Similar Terms of the Credit Agreements
Each of the Credit Agreements contains certain affirmative and negative covenants and other provisions, as described in detail below, which substantially align with those contained in the other Credit Agreements.
Covenants
Each of the Credit Agreements contains, among other restrictions, certain affirmative and negative covenants, including, without limitation, requirements that we:
|
• |
maintain liquidity of at least $ |
|
• |
maintain a minimum senior debt yield of |
14
|
• |
maintain a minimum corporate debt yield of (a) |
|
• |
provide to the administrative agent, among other things, PREIT and its subsidiaries’ quarterly and annual financial statements, annual budget, reports on projected sources and uses of cash, and an updated annual business plan, as well as quarterly and annual operating statements, rent rolls, and certain other collections and tenant reports and information as the administrative agent may reasonably request with respect to each Borrowing Base Property; |
|
• |
maintain PREIT’s status as a REIT; |
|
• |
use commercially reasonable efforts to obtain subordination, non-disturbance and attornment agreements from each tenant under certain Major Leases as well as ground lease estoppel certificates from each ground lessor of a Borrowing Base Property; |
|
• |
comply with the requirements of the various security documents and, at the administrative agent’s request, promptly notify the administrative agent of any acquisition of any owned real property that is not subject to a mortgage and grant liens on such real property to secure our obligations under the applicable Credit Agreement; |
|
• |
not amend any existing sale agreements with respect to Borrowing Base Properties to result in a reduction of cash consideration by 20% or more; and |
|
• |
not retain more than $ |
Each of the Credit Agreements also limits our ability, subject to certain exceptions, to make certain restricted payments (including payments of dividends and voluntary prepayments of certain indebtedness which includes, with respect to the First Lien Credit Agreement, voluntary prepayments under the Second Lien Credit Agreement), make certain types of investments and acquisitions, issue redeemable securities, incur additional indebtedness, incur liens on our assets, enter into agreements with a negative pledge, make certain intercompany transfers, merge, consolidate or sell all or substantially all of our assets or the equity interests in our subsidiaries, amend our organizational documents or material contracts, enter into transactions with affiliates, or enter into derivatives contracts. We are also prohibited from selling certain properties unless certain conditions are satisfied with respect to the terms of the sale agreement for such property or, in the case of Borrowing Base Properties, payment of certain release prices.
The First Lien Credit Agreement and, after our Senior Debt Obligations are discharged, the Second Lien Credit Agreement, each prohibit us from (i) entering into Major Leases, (ii) assigning leases, (iii) discounting any rent under leases where the leased premises is at least
As of March 31, 2021, we were in compliance with all financial covenants under the Credit Agreements, several of which only come into effect on June 30, 2021.
Restructured Credit Agreements
Prior to completion of the Financial Restructuring, we had entered into
15
Consolidated Mortgage Loans
The estimated fair values of our consolidated mortgage loans based on year-end interest rates and market conditions at March 31, 2021 and December 31, 2020 were as follows:
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|
|
March 31, 2021 |
|
|
December 31, 2020 |
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||||||||||
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(in millions of dollars) |
|
Carrying Value |
|
|
Fair Value |
|
|
Carrying Value |
|
|
Fair Value |
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||||
|
Mortgage loans(1) |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|||||||||||||||
|
(1) |
The carrying value of mortgage loans is net of unamortized debt issuance costs of $ |
The consolidated mortgage loans contain various customary default provisions. As of March 31, 2021, we were not in default on any of the consolidated mortgage loans, except for our mortgage secured by Valley View Mall.
Mortgage Loan Activity
Woodland Amendment
On February 8, 2021, we entered into an amendment to our mortgage loan secured by the Woodland Mall in Grand Rapids, Michigan, which provides for an extension of the maturity date until December 10, 2021, with an option to extend an additional year if certain criteria are met. Among other things, the amendment also (i) reduces the cap on guarantor liability for PREIT Associates, L.P. to $10.0 million; (ii) restricts the lenders from exercising their rights and remedies under the guaranty until December 10, 2022, unless there is a bankruptcy filing with respect to the borrowers or guarantor; (iii) adjusts the interest rate; (iv) provides for the pledge of additional collateral as security for the borrowers’ obligations (including the anchor parcel at Woodland Mall which was released as collateral from our senior secured credit facilities); and (v) requires the borrowers to pay to the lenders a $5.0 million remargin payment. The Company capitalized $0.3 million of lender fees as additional debt issuance costs in connection with the amendment.
Forbearance Agreements
During 2020, we executed forbearance and loan modification agreements for Cherry Hill Mall, Cumberland Mall, Dartmouth Mall, Francis Scott Key Mall, Viewmont Mall, and Woodland Mall. These arrangements allowed us to defer principal payments, and in some cases interest as well, between May and August 2020 depending on the terms of each agreement. At the end of the deferral period, repayment of deferred amounts spanned from four to six months. The repayment periods ranged from August 2020 through February 2021 pursuant to the terms of the specific agreements. Certain of these forbearance and loan modification agreements also imposed certain additional informational reporting requirements during the applicable modification periods. As of March 31, 2021, we had repaid all principal and interest deferrals.
Valley View Mall
In the second quarter of 2020, we received a notice of transfer of servicing for the mortgage loan secured by Valley View Mall, which had a $
Note Payable
In April 2020, in light of the impact of COVID-19 on our business and limited capital resources, we applied for and received proceeds from a potentially forgivable loan in the amount of $
16
5. CASH FLOW INFORMATION
Cash paid for interest was $
In our statement of cash flows, we report cash flows on our revolving facilities on a net basis. We had
Accrued construction costs increased by $
The following table provides a summary of cash, cash equivalents, and restricted cash reported within the statement of cash flows as of March 31, 2021 and 2020.
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|
|
March 31, |
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|||||
|
(in thousands of dollars) |
|
2021 |
|
|
2020 |
|
||
|
Cash and cash equivalents |
|
$ |
|
|
|
$ |
|
|
|
Restricted cash included in other assets |
|
|
|
|
|
|
|
|
|
Total cash, cash equivalents, and restricted cash shown in the statement of cash flows |
|
$ |
|
|
|
$ |
|
|
Our restricted cash consists of cash held in escrow by banks for real estate taxes and other purposes.
6. DERIVATIVES
In the normal course of business, we are exposed to financial market risks, including interest rate risk on our interest bearing liabilities. We attempt to limit these risks by following established risk management policies, procedures and strategies, including the use of financial instruments such as derivatives. We do not use financial instruments for trading or speculative purposes.
Cash Flow Hedges of Interest Rate Risk
For derivatives that have been designated and that qualify as cash flow hedges of interest rate risk, the gain or loss on the derivative is recorded in “Accumulated other comprehensive (loss) income” and subsequently reclassified into “Interest expense, net” in the same periods during which the hedged transaction affects earnings. Through December 10, 2020, all of our derivatives were designated and qualified as cash flow hedges of interest rate risk.
On December 10, 2020 as a result of the Financial Restructuring, we de-designated
On December 22, 2020, we re-designated
During the three months ended March 31, 2021 we had
We recognize all derivatives at fair value as either assets or liabilities in the accompanying consolidated balance sheets. Our derivative assets are recorded in “Deferred costs and other assets” and our derivative liabilities are recorded in “Fair value of derivative instruments.”
17
Over the next twelve months we estimate that $
Non-designated Hedges
Derivatives not designated as hedges are not speculative; they are also used to manage the Company’s exposure to interest rate movements and other identified risks but do not meet the strict hedge accounting requirements. For swaps that were not re-designated subsequent to December 10, 2020, changes in the fair value of derivatives are recorded directly in earnings as interest expense in the consolidated statement of operations. During the three months ended March 31, 2021 we had
Interest Rate Swaps
As of March 31, 2021, we had interest rate swap agreements designated in qualifying hedging relationships outstanding with a weighted average base interest rate of
The following table summarizes the terms and estimated fair values of our interest rate swap derivative instruments as of March 31, 2021 and December 31, 2020 based on the year they mature. The notional values provide an indication of the extent of our involvement in these instruments, but do not represent exposure to credit, interest rate or market risks.
|
Maturity Date |
|
Aggregate Notional Value at March 31, 2021 (in millions of dollars) |
|
|
Aggregate Fair Value at March 31, 2021 (1) (in millions of dollars) |
|
|
Aggregate Fair Value at December 31, 2020 (1) (in millions of dollars) |
|
|
Weighted Average Interest Rate |
|
||||
|
Derivatives in Cash Flow Hedging Relationships |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest Rate Swaps |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2021 |
|
$ |
|
|
|
$ |
( |
) |
|
$ |
( |
) |
|
|
|
% |
|
2023 |
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
|
% |
|
Non-designated Hedges |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest Rate Swaps |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2021 |
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
|
% |
|
Total |
|
$ |
|
|
|
$ |
( |
) |
|
$ |
( |
) |
|
|
|
% |
|
(1) |
As of March 31, 2021 and December 31, 2020, derivative valuations in their entirety were classified in Level 2 of the fair value hierarchy and we did not have any significant recurring fair value measurements related to derivative instruments using significant unobservable inputs (Level 3). |
The tables below present the effect of derivative financial instruments on accumulated other comprehensive (loss) income and on our consolidated statements of operations for the three months ended March 31, 2021 and 2020:
|
|
|
Three Months Ended March 31, |
|
|||||||||||||
|
|
|
Amount of Gain or (Loss) Recognized in Other Comprehensive Income on Derivative Instruments |
|
|
Amount of Gain or (Loss) Reclassified from Accumulated Other Comprehensive Income into Interest Expense |
|
||||||||||
|
(in millions of dollars) |
|
2021 |
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
||||
|
Derivatives in Cash Flow Hedging Relationships |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate products |
|
$ |
|
|
|
$ |
( |
) |
|
$ |
|
|
|
$ |
|
|
|
|
|
Three Months Ended March 31, |
|
|||||
|
(in millions of dollars) |
|
2021 |
|
|
2020 |
|
||
|
Total interest expense presented in the consolidated statements of operations in which the effects of cash flow hedges are recorded |
|
$ |
( |
) |
|
$ |
( |
) |
|
Amount of (loss) gain reclassified from accumulated other comprehensive income into interest expense |
|
$ |
|
|
|
$ |
|
|
The impact of our non-designated swaps resulted in a loss of approximately $
18
Credit-Risk-Related Contingent Features
We have agreements with some of our derivative counterparties that contain a provision pursuant to which, if our entity that originated such derivative instruments defaults on any of its indebtedness, including default where repayment of the indebtedness has not been accelerated by the lender, then we could also be declared to be in default on our derivative obligations. As of March 31, 2021, we were not in default on any of our derivative obligations.
We have an agreement with a derivative counterparty that incorporates the loan covenant provisions of our loan agreement with a lender affiliated with the derivative counterparty. Failure to comply with the loan covenant provisions would result in our being in default on any derivative instrument obligations covered by the agreement.
As of March 31, 2021, the fair value of derivatives in a liability position, which excludes accrued interest but includes any adjustment for nonperformance risk related to these agreements, was $
7. LEASES
As Lessee
We have entered into ground leases for portions of the land at Springfield Town Center and Plymouth Meeting Mall. We have also entered into an office lease for our headquarters location, as well as vehicle, solar panel and equipment leases as a lessee. The initial terms of these agreements generally range from
Our leases do not provide a readily determinable implicit interest rate; therefore, we estimate our incremental borrowing rate to calculate the present value of remaining lease payments. In determining our incremental borrowing rate, we considered the lease term, market interest rates and estimates regarding our implied credit rating using market data with adjustments to determine an appropriate incremental borrowing rate.
The following table presents additional information pertaining to the Company’s leases:
|
|
|
Three Months Ended March 31, |
|
|||||||||||||||||||||||||||||
|
|
|
2021 |
|
|
2020 |
|
||||||||||||||||||||||||||
|
(in thousands of dollars) |
|
Solar Panel Leases |
|
|
Ground Leases |
|
|
Office, equipment, and vehicle leases |
|
|
Total |
|
|
Solar Panel Leases |
|
|
Ground Leases |
|
|
Office, equipment, and vehicle leases |
|
|
Total |
|
||||||||
|
Finance lease cost: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of right-of-use assets |
|
$ |
|
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
|
|
Interest on lease liabilities |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
Operating lease costs |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Variable lease costs |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total lease costs |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Other information related to leases as of and for the three months ended March 31, 2021 and 2020 are as follows:
|
(in thousands of dollars) |
|
2021 |
|
|
2020 |
|
||
|
Cash paid for the amounts included in the measurement of lease liabilities |
|
|
|
|
|
|
|
|
|
Operating cash flows used for finance leases |
|
$ |
|
|
|
$ |
|
|
|
Operating cash flows used for operating leases |
|
$ |
|
|
|
$ |
|
|
|
Financing cash flows used for finance leases |
|
$ |
|
|
|
$ |
|
|
|
Weighted average remaining lease term-finance leases (months) |
|
|
|
|
|
|
|
|
|
Weighted average remaining lease term-operating leases (months) |
|
|
|
|
|
|
|
|
|
Weighted average discount rate-finance leases |
|
|
|
% |
|
|
|
% |
|
Weighted average discount rate-operating leases |
|
|
|
% |
|
|
|
% |
19
Future payments against lease liabilities as of March 31, 2021 are as follows:
|
(in thousands of dollars) |
|
Finance leases |
|
|
Operating leases |
|
|
Total |
|
|||
|
April 1 to December 31, 2021 |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
2023 |
|
|
|
|
|
|
|
|
|
|
|
|
|
2024 |
|
|
|
|
|
|
|
|
|
|
|
|
|
2025 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Thereafter |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total undiscounted lease payments |
|
|
|
|
|
|
|
|
|
|
|
|
|
Less imputed interest |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
Total lease liabilities |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
As Lessor
As of March 31, 2021, the fixed contractual lease payments, including minimum rents and fixed CAM amounts, to be received over the next five years pursuant to the terms of noncancelable operating leases with initial terms greater than one year are included in the table below. The amounts presented assume that no leases are renewed and no renewal options are exercised. Additionally, the table does not include variable lease payments that may be received under certain leases for percentage rents or the reimbursement of operating costs, such as common area expenses, utilities, insurance and real estate taxes. These variable lease payments are recognized in the period when the applicable expenditures are incurred or, in the case of percentage rents, when the sales data is made available.
|
(in thousands of dollars) |
|
|
|
|
|
April 1 to December 31, 2021 |
|
$ |
|
|
|
2022 |
|
|
|
|
|
2023 |
|
|
|
|
|
2024 |
|
|
|
|
|
2025 |
|
|
|
|
|
Thereafter |
|
|
|
|
|
|
|
$ |
|
|
8. COMMITMENTS AND CONTINGENCIES
Contractual Obligations
As of March 31, 2021, we had unaccrued contractual and other commitments related to our capital improvement projects and development projects of $
Preferred Dividend Arrearages
Dividends on the Series B, Series C and Series D preferred shares are cumulative and therefore will continue to accrue at an annual rate of $
Property Damage from Natural and Other Disasters
During the three months ended March 31, 2020, Cherry Hill Mall in Cherry Hill, New Jersey experienced a power outage due to the failure of an underground high voltage cable, which required the use of backup generator power. We recorded net costs of approximately $
20
Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
The following analysis of our consolidated financial condition and results of operations should be read in conjunction with our unaudited consolidated financial statements and the notes thereto included elsewhere in this report. The disclosures in this report are complementary to those made in our Annual Report on Form 10-K for the year ended December 31, 2020.
OVERVIEW
PREIT, a Pennsylvania business trust founded in 1960 and one of the first equity real estate investment trusts (“REITs”) in the United States, has a primary investment focus on shopping malls located in the eastern half of the United States, primarily in the Mid-Atlantic region.
We currently own interests in 26 retail properties, of which 25 are operating properties and one is a development property. The 25 operating properties include 20 shopping malls and five other retail properties, have a total of 19.8 million square feet and are located in nine states. We and partnerships in which we hold an interest own 15.4 million square feet at these properties (excluding space owned by anchors or third parties).
There are 18 operating retail properties in our portfolio that we consolidate for financial reporting purposes. These consolidated properties have a total of 14.9 million square feet, of which we own 11.8 million square feet. The seven operating retail properties that are owned by unconsolidated partnerships with third parties have a total of 4.9 million square feet of which 3.6 million square feet are owned by such partnerships. When we refer to “Same Store” properties, we are referring to properties that have been owned for the full periods presented and exclude properties acquired or disposed of, under redevelopment or designated as a non-core property during the periods presented. Core properties include all operating retail properties except for Exton Square Mall and Fashion District Philadelphia. Valley View Mall was previously designated as a non-core property. As discussed further in Notes 2 and 4 to our consolidated financial statements, a foreclosure sale judgment with respect to Valley View Mall was ordered by the court after the property operations were assumed by a receiver on behalf of the lender under the mortgage loan secured by Valley View Mall and we no longer operate the property. “Core Malls” also excludes these properties as well as power centers and Gloucester Premium Outlets.
We have one property in our portfolio that is classified as under development; however, we do not currently have any activity occurring at this property.
Our primary business is owning, operating and redeveloping shopping malls, which we do primarily through our operating partnership, PREIT Associates, L.P. (“PREIT Associates” or the “Operating Partnership”). We believe our distinctive real estate is at the forefront of enabling communities to flourish through the built environment by providing opportunities to create vibrant multi-use destinations. In general, our malls include carefully curated retail and lifestyle offerings, including national and regional department stores, large format retailers and other anchors, mixed with destination dining and entertainment experiences. In recent years, we have increased the portion of our mall properties that are leased to non-traditional mall tenants, including life sciences, healthcare, supermarkets and self-storage facilities.
We provide management, leasing and real estate development services through PREIT Services, LLC (“PREIT Services”), which generally develops and manages properties that we consolidate for financial reporting purposes, and PREIT-RUBIN, Inc. (“PRI”), which generally develops and manages properties that we do not consolidate for financial reporting purposes, including properties owned by partnerships in which we own an interest, and properties that are owned by third parties in which we do not have an interest. PRI is a taxable REIT subsidiary, as defined by federal tax laws, which means that it is able to offer additional services to tenants without jeopardizing our continuing qualification as a REIT under federal tax law.
Our revenue consists primarily of fixed rental income, additional rent in the form of expense reimbursements, and percentage rent (rent that is based on a percentage of our tenants’ sales or a percentage of sales in excess of thresholds that are specified in the leases) derived from our income producing properties. We also receive income from our real estate partnership investments and from the management and leasing services PRI provides.
The COVID-19 global pandemic that began in early 2020 has adversely impacted and continues to impact our business, financial condition, liquidity and operating results, as well as our tenants’ businesses. The prolonged and increased spread of COVID-19 has also led to unprecedented global economic disruption and volatility in financial markets. Some of our tenants’ financial health and business viability have been adversely impacted and their creditworthiness has deteriorated. We anticipate that our future business, financial condition, liquidity and results of operations, including in 2021 and potentially in future periods, will continue to be materially impacted by the COVID-19 pandemic. It remains highly uncertain how long the global pandemic, economic challenges and restrictions on day-to-day life and business operations will last based on the emergence of new strains of the virus and the current virus spread rate in the United States, which have resulted in a number of jurisdictions that previously relaxed restrictions implementing new or renewed restrictions. Given these factors, so long as the lingering effects of COVID-19 remain, the virus may continue to impact us or our tenants, or our ability or the ability of our tenants to resume more normal operations.
COVID-19 closures of our properties began on March 12, 2020 and continued through the reopening of our last property on July 3, 2020. These closures impacted most of our properties for the full second quarter of 2020 with traffic and tenant reopenings increasing through the first quarter of 2021. New or renewed restrictions in the jurisdictions where our properties are located may be implemented in response to evolving conditions and overall uncertainty about the timing and widespread availability, acceptance, and efficacy of vaccines, including in response to new variants. As such, as the pandemic continues and potentially intensifies or we experience resurgences, it is possible that additional closures will occur.
21
All of our properties have remained open since the third quarter of 2020 and are employing safety and sanitation measures designed to address the risks posed by COVID-19, with some of our tenants still operating at reduced capacity. Following the pandemic-related closures, approximately 4% of our tenants failed to re-open (inclusive of tenants that filed for bankruptcy protection in the aftermath). As a result of the challenging environment created by COVID-19, primarily beginning in the second quarter of 2020, many of our tenants have sought rent relief and deferral and several have failed to pay rent due. Although we continue to make progress in collecting COVID-19-period rents, we have also initiated legal proceedings against certain tenants for failure to pay. As of March 31, 2021, we had cash receipts of 81% of billed first quarter 2021 rents, an increase from cash receipts of 73% and 61% of billed rents as of the end of each of the fourth and third quarters of 2020, respectively. Including collections of prior quarters rents, we collected 119% of our billed first quarter 2021 rents. We believe that our rent collections are probable, but expect that collections will continue to be below our tenants’ rent obligations as long as the effects of COVID-19 affect the financial strength of our tenants. The significance of COVID-19 on our business, however, will continue to depend on, among other things, the extent and duration of the pandemic, the severity of the disease and the number of people infected with the virus, the timing and widespread availability, acceptance, and efficacy of vaccines, further effects on the economy of the pandemic and of the measures taken by governmental authorities and other third parties restricting daily activities and the length of time that such measures remain in place or are renewed, implementation of governmental programs to assist businesses and consumers impacted by the COVID-19 pandemic, and the effect of any relaxation of current restrictions, all of which could vary by geographic region in which our properties are located. In the first quarter of 2021, we experienced further uncertainty as to whether government authorities will maintain the relaxation of current restrictions on businesses in the regions in which our properties are located, if these restrictions have been relaxed at all, and whether government authorities will issue recommendations or impose requirements on landlords like us to further enhance health and safety protocols, or whether we will voluntarily adopt any of these requirements ourselves, which could result in increased operating costs and demands on our property management teams to ensure compliance with any of these requirements.
Net loss for the three months ended March 31, 2021 was $44.0 million compared to net loss of $13.5 million for the three months ended March 31, 2020. This $30.5 million increase in net loss was primarily due to: (a) a decrease in real estate revenue of $8.7 million resulting from the ongoing impact of COVID-19 on our tenants; (b) an increase in general and administrative expenses of $1.1 million; (c) an increase in interest expense of $13.9 million driven by higher overall outstanding debt balances and higher interest rates in connection with our debt modifications in 2020; (d) a decrease in equity partnership income of $4.3 million due to the same reasons as described above; and (e) a non-recurring gain on sale of real estate of $2.0 million, which had a favorable impact on the prior year period; partially offset by lower depreciation and amortization expense of $0.4 million.
We evaluate operating results and allocate resources on a property-by-property basis, and do not distinguish or evaluate our consolidated operations on a geographic basis. Due to the nature of our operating properties, which involve retail shopping, dining and entertainment, we have concluded that our individual properties have similar economic characteristics and meet all other aggregation criteria. Accordingly, we have aggregated our individual properties into one reportable segment. In addition, no single tenant accounts for 10% or more of our consolidated revenue, and none of our properties are located outside the United States.
Current Economic and Industry Conditions and Impact of COVID-19
Conditions in the economy have caused fluctuations and variations in business and consumer confidence, retail sales, and consumer spending on retail goods, destination dining and entertainment. Further, traditional mall tenants, including department store anchors and smaller format retail tenants face significant challenges resulting from changing consumer expectations, the convenience of e-commerce shopping, competition from fast fashion retailers, the expansion of outlet centers, and declining mall traffic, among other factors. In recent years, there has been an increased level of tenant bankruptcies and store closings by tenants who have been significantly impacted by these factors. All of these factors have been exacerbated by the impact of the COVID-19 pandemic in early 2020 and continuing in 2021.
The table below sets forth information related to our tenants in bankruptcy for our consolidated and unconsolidated properties (excluding tenants in bankruptcy at sold properties):
|
|
|
Pre-bankruptcy |
|
|
Units Closed |
|
||||||||||||||||||||||
|
Year |
|
Number of Tenants (1) |
|
|
Number of locations impacted |
|
|
GLA(2) |
|
|
PREIT’s Share of Annualized Gross Rent(3) (in thousands) |
|
|
Number of locations closed |
|
|
GLA(2) |
|
|
PREIT’s Share of Annualized Gross Rent(3) (in thousands) |
|
|||||||
|
2021 (through March 31, 2021) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated properties |
|
|
3 |
|
|
|
8 |
|
|
|
329,660 |
|
|
$ |
1,384 |
|
|
|
3 |
|
|
|
11,507 |
|
|
$ |
280 |
|
|
Unconsolidated properties |
|
|
1 |
|
|
|
1 |
|
|
|
4,046 |
|
|
|
57 |
|
|
|
1 |
|
|
|
4,046 |
|
|
|
57 |
|
|
Total |
|
|
3 |
|
|
|
9 |
|
|
|
333,706 |
|
|
$ |
1,441 |
|
|
|
4 |
|
|
|
15,553 |
|
|
$ |
337 |
|
|
2020 (Full Year) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated properties |
|
|
17 |
|
|
|
91 |
|
|
|
2,068,153 |
|
|
$ |
18,604 |
|
|
|
39 |
|
|
|
389,696 |
|
|
$ |
6,771 |
|
|
Unconsolidated properties |
|
|
18 |
|
|
|
31 |
|
|
|
468,164 |
|
|
|
3,747 |
|
|
|
13 |
|
|
|
162,378 |
|
|
|
2,093 |
|
|
Total |
|
|
23 |
|
|
|
122 |
|
|
|
2,536,317 |
|
|
$ |
22,351 |
|
|
|
52 |
|
|
|
552,074 |
|
|
$ |
8,865 |
|
|
(1) |
Total represents unique tenants and includes both tenant-owned and landlord-owned stores. As a result, amounts may not total. |
|
(2) |
Gross Leasable Area (“GLA”) in square feet. |
22
|
(3) |
Includes our share of tenant gross rent from partnership properties based on PREIT’s ownership percentage in the respective equity method investments as of March 31, 2021. |
Anchor Replacements
In recent years, through property dispositions, proactive store recaptures, lease terminations and other activities, we have made efforts to reduce our risks associated with certain department store concentrations. In the first quarter of 2020, Dick’s Sporting Goods at Valley Mall opened and at Plymouth Meeting Mall, we opened Michael’s in 2020 and Shake Shack in 2021.
In response to anchor store closings and other trends in the retail space, we have been changing the mix of tenants at our properties. We believe our distinctive real estate is at the forefront of enabling communities to flourish through the built environment by providing opportunities to create vibrant multi-use destinations. In general, our malls include carefully curated retail and lifestyle offerings, including national and regional department stores, large format retailers and other anchors, mixed with destination dining and entertainment experiences. In recent years, we have been reducing the percentage of traditional mall tenants and increasing the share of space dedicated to non-traditional mall tenants, including life sciences, healthcare, supermarkets and self-storage facilities. Approximately 28% of our mall space is committed to non-traditional tenants offering services such as dining and entertainment, health and wellness, off-price retail and fast fashion. This initiative has slowed down due to the impacts of the COVID-19 pandemic. Some of these changes may result in the redevelopment of all or a portion of our properties. See “— Capital Improvements, Redevelopment and Development Projects.”
To fund the capital necessary to replace anchors and to maintain a reasonable level of leverage, we expect to use a variety of means available to us, subject to and in accordance with the terms of our Credit Agreements. These steps might include (i) making additional borrowings under our Credit Agreements (assuming availability and continued compliance with the financial covenants thereunder), (ii) obtaining construction loans on specific projects, (iii) selling properties or interests in properties with values in excess of their mortgage loans (if applicable) and applying the excess proceeds to fund capital expenditures or for debt reduction, or (iv) obtaining capital from joint ventures or other partnerships or arrangements involving our contribution of assets with institutional investors, private equity investors or other REITs.
Capital Improvements, Redevelopment and Development Projects
We might engage in various types of capital improvement projects at our operating properties. Such projects vary in cost and complexity, and can include building out new or existing space for individual tenants, upgrading common areas or exterior areas such as parking lots, or redeveloping the entire property, among other projects. Project costs are accumulated in “Construction in progress” on our consolidated balance sheet until the asset is placed into service, and amounted to $44.2 million as of March 31, 2021.
As of March 31, 2021, we had unaccrued contractual and other commitments related to our capital improvement projects and development projects at our consolidated and unconsolidated properties of $9.4 million, including $4.8 million of commitments related to the redevelopment of Fashion District Philadelphia, in the form of tenant allowances and contracts with general service providers and other professional service providers.
In 2014, we entered into a 50/50 joint venture with The Macerich Company (“Macerich”) to redevelop Fashion District Philadelphia. As we redevelop Fashion District Philadelphia, operating results in the short term, as measured by sales, occupancy, real estate revenue, property operating expenses, Net Operating Income (“NOI”) and depreciation, will continue to be affected until the newly constructed space is completed, leased and occupied.
In January 2018, we and Macerich entered into a $250.0 million term loan (as amended in July 2019 to increase the total maximum potential borrowings to $350.0 million) to fund the ongoing redevelopment of Fashion District Philadelphia and to repay capital contributions to the venture previously made by the partners. A total of $51.0 million was drawn during the third quarter of 2019 and we received aggregate distributions of $25.0 million as our share of the draws. On December 10, 2020, PM Gallery LP, together with certain other subsidiaries owned indirectly by us and Macerich (including the fee and leasehold owners of the properties that are part of the Fashion District Philadelphia project), entered into an Amended and Restated Term Loan Agreement (the “FDP Loan Agreement”). In connection with the execution of the FDP Loan Agreement, a $100.0 million principal payment was made (and funded indirectly by Macerich, the “Partnership Loan”) to pay down the existing loan, reducing the outstanding principal under the FDP Loan Agreement from $301.0 million to $201.0 million. The joint venture must repay the Partnership Loan plus 15% accrued interest to Macerich, in its capacity as the lender, prior to the resumption of 50/50 cash distributions to us and Macerich. In connection with the execution of the FDP Loan Agreement, the governing structure of PM Gallery LP was modified such that, effective as of January 1, 2021, Macerich is responsible for the entity’s operations and, subject to limited exceptions, controls major decisions. The Company considered the changes to the governing structure of PM Gallery LP and determined the investment qualifies as a variable interest entity and would continue to be accounted for under the equity method of accounting.
The FDP Loan Agreement provides for (i) a maturity date of January 22, 2023, with the potential for a one-year extension upon the borrowers’ satisfaction of certain conditions, (ii) an interest rate at the borrowers’ option with respect to each advance of either (A) the Base Rate (defined as the highest of (a) the Prime Rate, (b) the Federal Funds Rate plus 0.50%, and (c) the LIBOR Market Index Rate plus 1.00%) plus 2.50% or (B) LIBOR for the applicable period plus 3.50%, (iii) a full recourse guarantee of 50% of the borrowers’ obligations by PREIT Associates, L.P., on a several basis, (iv) a full recourse guarantee of certain of the borrowers’ obligations by The Macerich Partnership, L.P., up to a maximum of $50.0 million, on a several basis, (v) a pledge of the equity interests of certain indirect subsidiaries of PREIT and Macerich, as well as of PREIT-RUBIN, Inc. and one of its subsidiaries, that have a direct or indirect ownership interest in the borrowers, (vi) a non-recourse carve-out guaranty and a hazardous materials indemnity by each of PREIT Associates, L.P. and The Macerich Partnership, L.P., and (vii)
23
mortgages of the borrowers’ fee and leasehold interests in the properties that are part of the Fashion District Philadelphia project and certain other properties. The FDP Loan Agreement contains certain covenants typical for loans of its type.
We also own one development property, but we do not expect to make any significant investment at this property in the short term.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
Critical Accounting Policies are those that require the application of management’s most difficult, subjective, or complex judgments, often because of the need to make estimates about the effect of matters that are inherently uncertain and that might change in subsequent periods. In preparing the unaudited consolidated financial statements, management has made estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements, and the reported amounts of revenue and expenses during the reporting periods. In preparing the unaudited consolidated financial statements, management has utilized available information, including our past history, industry standards and the current economic environment, among other factors, in forming its estimates and judgments, giving due consideration to materiality. Management has also considered events and changes in property, market and economic conditions, estimated future cash flows from property operations and the risk of loss on specific accounts or amounts in determining its estimates and judgments. Actual results may differ from these estimates. In addition, other companies may utilize different estimates, which may affect comparability of our results of operations to those of companies in a similar business. The estimates and assumptions made by management in applying critical accounting policies have not changed materially during 2021 and 2020, except as otherwise noted, and none of these estimates or assumptions have proven to be materially incorrect or resulted in our recording any significant adjustments relating to prior periods. We will continue to monitor the key factors underlying our estimates and judgments, but no change is currently expected.
For additional information regarding our Critical Accounting Policies, see “Critical Accounting Policies and Estimates” in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2020.
Asset Impairment
Real estate investments and related intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the property might not be recoverable. A property to be held and used is considered impaired only if management’s estimate of the aggregate future cash flows, less estimated capital expenditures, to be generated by the property, undiscounted and without interest charges, are less than the carrying value of the property. This estimate takes into consideration factors such as expected future operating income, trends and prospects, as well as the effects of demand, competition and other factors.
If there is a triggering event in relation to a property to be held and used, we will estimate the aggregate future cash flows, less estimated capital expenditures, to be generated by the property, undiscounted and without interest charges. In addition, this estimate may consider a probability weighted cash flow estimation approach when alternative courses of action to recover the carrying amount of a long-lived asset are under consideration or when a range of possible values is estimated.
The determination of undiscounted cash flows requires significant estimates by management, including the expected course of action at the balance sheet date that would lead to such cash flows. Subsequent changes in estimated undiscounted cash flows arising from changes in the anticipated action to be taken with respect to the property could impact the determination of whether an impairment exists and whether the effects could materially affect our net income. To the extent estimated undiscounted cash flows are less than the carrying value of the property, the loss will be measured as the excess of the carrying amount of the property over the estimated fair value of the property. Our intent is to hold and operate our properties long-term, which reduces the likelihood that our carrying value is not recoverable. A shortened holding period would increase the likelihood that the carrying value is not recoverable.
Assessment of our ability to recover certain lease related costs must be made when we have a reason to believe that the tenant might not be able to perform under the terms of the lease as originally expected. This requires us to make estimates as to the recoverability of such costs.
An other-than-temporary impairment of an investment in an unconsolidated joint venture is recognized when the carrying value of the investment is not considered recoverable based on evaluation of the severity and duration of the decline in value. To the extent impairment has occurred, the excess carrying value of the asset over its estimated fair value is charged to income.
Revenue and Receivables
We derive over 95% of our revenue from tenant rent and other tenant-related activities. Tenant rent includes base rent, percentage rent, expense reimbursements (such as reimbursements of costs of common area maintenance (“CAM”), real estate taxes and utilities), and the amortization of above-market and below-market lease intangibles.
We accrue revenue under leases, provided that it is probable that we will collect substantially all of the lease revenue that is due under the terms of the lease both at inception and on an ongoing basis. When collectability of lease revenue is not probable, leases are prospectively accounted for on a cash basis and any difference between the revenue that has been accrued and the cash collected from the tenant over the life of the lease is recognized as a current period adjustment to lease revenue. We review the collectability of our tenant receivables related to tenant rent including base rent, straight-line rent, expense reimbursements and other revenue or income by specifically analyzing billed and unbilled revenues, including straight-line rent receivable, and considering historical collection issues, tenant creditworthiness and current economic and industry trends. Our revenue recognition and receivables collectability analysis places particular emphasis on past-due accounts and considers
24
the nature and age of the receivables, the payment history and financial condition of the payor, the basis for any disputes or negotiations with the payor, and other information that could affect collectability.
We record base rent on a straight-line basis, which means that the monthly base rent revenue according to the terms of our leases with our tenants is adjusted so that an average monthly rent is recorded for each tenant over the term of its lease. When tenants vacate prior to the end of their lease, we accelerate amortization of any related unamortized straight-line rent balances, and unamortized above-market and below-market intangible balances are amortized as a decrease or increase to real estate revenue, respectively.
Percentage rent represents rental revenue that the tenant pays based on a percentage of its sales, either as a percentage of its total sales or as a percentage of sales over a certain threshold. In the latter case, we do not record percentage rent until the sales threshold has been reached.
Revenue for rent received from tenants prior to their due dates is deferred until the period to which the rent applies.
In addition to base rent, certain lease agreements contain provisions that require tenants to reimburse a fixed or pro rata share of certain CAM costs, real estate taxes and utilities. Tenants generally make monthly expense reimbursement payments based on a budgeted amount determined at the beginning of the year. Effective January 1, 2019, we recognize fixed CAM revenue prospectively on a straight-line basis.
Certain lease agreements contain co-tenancy clauses that can change the amount of rent or the type of rent that tenants are required to pay, or, in some cases, can allow the tenant to terminate their lease, in the event that certain events take place, such as a decline in property occupancy levels below certain defined levels or the vacating of an anchor store. Co-tenancy clauses do not generally have any retroactive effect when they are triggered. The effect of co-tenancy clauses is applied on a prospective basis to recognize the new rent that is in effect.
Payments made to tenants as inducements to enter into a lease are treated as deferred costs that are amortized as a reduction of rental revenue over the term of the related lease.
Lease termination fee revenue is recognized in the period when a termination agreement is signed, collectability is assured, and the tenant has vacated the space. In the event that a tenant is in bankruptcy when the termination agreement is signed, termination fee income is deferred and recognized when it is received.
We also generate revenue by providing management services to third parties, including property management, brokerage, leasing and development. Management fees generally are a percentage of managed property revenue or cash receipts. Leasing fees are earned upon the consummation of new leases. Development fees are earned over the time period of the development activity and are recognized on the percentage of completion method. These activities are collectively included in “Other income” in the consolidated statements of operations.
Revenue from the reimbursement of marketing expenses is generated through tenant leases that require tenants to reimburse a defined amount of property marketing expenses. Our contractual performance obligations are fulfilled as marketing expenditures are made. Tenant payments are received monthly as required by the respective lease terms. We defer income recognition if the reimbursements exceed the aggregate marketing expenditures made through that date. Deferred marketing reimbursement revenue is recorded in tenants’ deposits and deferred rent on the consolidated balance sheet. The marketing reimbursements are recognized as revenue at the time that the marketing expenditures occur.
Property management revenue from management and development activities is generated through contracts with third party owners of real estate properties or with certain of our joint ventures, and is recorded in other income in the consolidated statements of operations. In the case of management fees, our performance obligations are fulfilled over time as the management services are performed and the associated revenues are recognized on a monthly basis when the customer is billed. In the case of development fees, our performance obligations are fulfilled over time as we perform certain stipulated development activities as set forth in the respective development agreements and the associated revenues are recognized on a monthly basis when the customer is billed.
Derivatives
In the normal course of business, we are exposed to financial market risks, including interest rate risk on our interest-bearing liabilities. We attempt to limit these risks by following established risk management policies, procedures and strategies, including the use of derivative financial instruments. We do not use derivative financial instruments for trading or speculative purposes.
Currently, we use interest rate swaps to manage our interest rate risk. The valuation of these instruments is determined using widely accepted valuation techniques, including discounted cash flow analysis on the expected cash flows of each derivative. This analysis reflects the contractual terms of the derivatives, including the period to maturity, and uses observable market-based inputs.
Derivative financial instruments are recorded on the consolidated balance sheet as assets or liabilities based on the fair value of the instrument. Changes in the fair value of derivative financial instruments are recognized currently in earnings, unless the derivative financial instrument meets the criteria for hedge accounting. If the derivative financial instruments meet the criteria for a cash flow hedge, the gains and losses in the fair value of the instrument are deferred in other comprehensive (loss) income. Gains and losses on a cash flow hedge are reclassified into earnings when the forecasted transaction affects earnings. A contract that is designated as a hedge of an anticipated transaction that is no longer likely to occur is immediately recognized in earnings.
The anticipated transaction to be hedged must expose us to interest rate risk, and the hedging instrument must reduce the exposure and meet the requirements for hedge accounting. We must formally designate the instrument as a hedge and document and assess the effectiveness of the hedge at inception and on a quarterly basis. Interest rate hedges that are designated as cash flow hedges are designed to mitigate the risks associated with future cash outflows on debt.
25
We recognize all derivatives at fair value as either assets or liabilities in the accompanying consolidated balance sheets. Our derivative assets are recorded in “Deferred costs and other assets” and our derivative liabilities are recorded in “Fair value of derivative instruments.” Derivatives not designated as hedges are not speculative and are also used to manage the Company’s exposure to interest rate movements and other identified risks but do not meet the strict hedge accounting requirements. For certain interest rate swaps that were not re-designated subsequent to December 10, 2020, changes in the fair value of derivatives are recorded directly in earnings as interest expense in the consolidated statement of operations.
We incorporate credit valuation adjustments to appropriately reflect both our own nonperformance risk and the respective counterparty’s nonperformance risk in the fair value measurements. In adjusting the fair value of our derivative contracts for the effect of nonperformance risk, we have considered the impact of netting and any applicable credit enhancements. Although we have determined that the majority of the inputs used to value our derivatives fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with our derivatives utilize Level 3 inputs, such as estimates of current credit spreads, to evaluate the likelihood of default by us and our counterparties. As of March 31, 2021, we have assessed the significance of the effect of the credit valuation adjustments on the overall valuation of our derivative positions and have determined that the credit valuation adjustments are not significant to the overall valuation of our derivatives. As a result, we have determined that our derivative valuations in their entirety are classified in Level 2 of the fair value hierarchy.
New Accounting Developments
See Note 1 to our unaudited consolidated financial statements for descriptions of new accounting developments.
OFF BALANCE SHEET ARRANGEMENTS
We have no material off-balance sheet items other than (i) the partnerships described in Note 3 to our unaudited consolidated financial statements and in the “Overview” section above, (ii) unaccrued contractual commitments related to our capital improvement and development projects at our consolidated and unconsolidated properties, and (iii) specifically with respect to our joint venture formed with Macerich, our operating partnership, PREIT Associates, has jointly and severally guaranteed its 50% share of the FDP Term Loan (see Note 3 to our unaudited consolidated financial statements), which currently has $201.0 million outstanding (our share of which is $100.5 million). If our Fashion District Philadelphia joint venture were unable to satisfy its obligations under the FDP Term Loan and we were required to satisfy its payment obligations under the guarantee, this could have a material impact on our liquidity and available capital resources. The FDP Term Loan balance will become due in 2023.
RESULTS OF OPERATIONS
Overview
Net loss for the three months ended March 31, 2021 was $44.0 million compared to net loss of $13.5 million for the three months ended March 31, 2020. This $30.5 million increase in net loss was primarily due to: (a) a decrease in real estate revenue of $8.7 million resulting from the ongoing impact of COVID-19 on our tenants; (b) an increase in general and administrative expenses of $1.1 million; (c) an increase in interest expense of $13.9 million driven by higher overall outstanding debt balances and higher interest rates in connection with our debt modifications in 2020; (d) a decrease in equity partnership income of $4.3 million due to the same reasons as described above; and (e) a non-recurring gain on sale of real estate of $2.0 million, which had a favorable impact on the prior year period; partially offset by lower depreciation and amortization expense of $0.4 million.
Occupancy
The table below sets forth certain occupancy statistics for our properties as of March 31, 2021 and 2020:
|
|
|
Occupancy(1) at March 31, |
|
|||||||||||||||||||||
|
|
|
Consolidated Properties |
|
|
Unconsolidated Properties |
|
|
Combined(2) |
|
|||||||||||||||
|
|
|
2021 |
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
||||||
|
Retail portfolio weighted average (3): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total excluding anchors |
|
|
86.0 |
% |
|
|
89.1 |
% |
|
|
80.3 |
% |
|
|
82.3 |
% |
|
|
84.3 |
% |
|
|
87.2 |
% |
|
Total including anchors |
|
|
87.5 |
% |
|
|
90.0 |
% |
|
|
81.4 |
% |
|
|
85.7 |
% |
|
|
86.0 |
% |
|
|
89.0 |
% |
|
Core Malls weighted average: (4) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total excluding anchors |
|
|
87.9 |
% |
|
|
90.8 |
% |
|
|
79.3 |
% |
|
|
86.2 |
% |
|
|
87.0 |
% |
|
|
90.3 |
% |
|
Total including anchors |
|
|
89.5 |
% |
|
|
93.2 |
% |
|
|
85.7 |
% |
|
|
90.6 |
% |
|
|
89.2 |
% |
|
|
92.9 |
% |
|
(1) |
Occupancy for all periods presented includes all tenants irrespective of the term of their agreement. |
|
(2) |
Combined occupancy is calculated by using occupied gross leasable area (“GLA”) for consolidated and unconsolidated properties and dividing by total GLA for consolidated and unconsolidated properties. |
|
(3) |
Retail portfolio includes all retail properties including Fashion District Philadelphia. |
|
(4) |
Core Malls excludes Fashion District Philadelphia, Exton Square Mall, power centers and Gloucester Premium Outlets. |
26
Leasing Activity
The table below sets forth summary leasing activity information with respect to our consolidated and unconsolidated properties for the three months ended March 31, 2021:
|
|
|
|
|
Number |
|
|
GLA |
|
|
Term |
|
|
Initial Rent per square foot ("psf") |
|
|
Previous Rent psf |
|
|
Initial Gross Rent Renewal Spread(1) |
|
|
Average Rent Renewal Spread(2) |
|
|
Annualized Tenant Improvements psf(3) |
|
||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|
% |
|
|
% |
|
|
|
|
|
|||
|
Non Anchor |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
New Leases |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Under 10k square feet ("sf") |
|
|
|
|
26 |
|
|
|
64,414 |
|
|
|
6.1 |
|
|
$ |
44.84 |
|
|
N/A |
|
|
N/A |
|
|
N/A |
|
|
N/A |
|
|
$ |
5.00 |
|
||||
|
Over 10k sf |
|
|
|
|
4 |
|
|
|
176,946 |
|
|
|
21.4 |
|
|
|
8.21 |
|
|
N/A |
|
|
N/A |
|
|
N/A |
|
|
N/A |
|
|
|
0.64 |
|
||||
|
Total New Leases |
|
|
|
|
30 |
|
|
|
241,360 |
|
|
|
17.3 |
|
|
$ |
17.99 |
|
|
N/A |
|
|
N/A |
|
|
N/A |
|
|
N/A |
|
|
$ |
1.06 |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Renewal Leases |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Under 10k sf |
|
|
|
|
72 |
|
|
|
122,341 |
|
|
|
4.2 |
|
|
$ |
69.17 |
|
|
$ |
75.06 |
|
|
$ |
(5.89 |
) |
|
|
(7.8 |
%) |
|
|
(1.7 |
%) |
|
$ |
- |
|
|
Over 10k sf |
|
|
|
|
2 |
|
|
|
38,131 |
|
|
|
5.0 |
|
|
|
16.01 |
|
|
|
16.03 |
|
|
|
(0.02 |
) |
|
|
(0.1 |
%) |
|
|
0.2 |
% |
|
|
- |
|
|
Total Fixed Rent |
|
|
|
|
74 |
|
|
|
160,472 |
|
|
|
4.4 |
|
|
|
56.54 |
|
|
|
61.03 |
|
|
|
(4.49 |
) |
|
|
(7.4 |
%) |
|
|
(1.6 |
%) |
|
|
- |
|
|
Total Percentage in Lieu |
|
|
|
|
37 |
|
|
|
151,276 |
|
|
|
1.5 |
|
|
|
23.55 |
|
|
|
24.22 |
|
|
|
(0.68 |
) |
|
|
(2.8 |
%) |
|
N/A |
|
|
|
- |
|
|
|
Total Renewal Leases |
|
|
|
|
111 |
|
|
|
311,748 |
|
|
|
3.0 |
|
|
|
40.53 |
|
|
$ |
43.17 |
|
|
$ |
(2.64 |
) |
|
|
(6.1 |
%) |
|
N/A |
|
|
$ |
- |
|
|
|
Total Non Anchor (4) |
|
|
|
|
141 |
|
|
|
553,108 |
|
|
|
9.2 |
|
|
$ |
30.69 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Anchor |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
New Leases |
|
|
|
|
1 |
|
|
|
104,107 |
|
|
|
10.0 |
|
|
$ |
2.40 |
|
|
$ |
- |
|
|
$ |
- |
|
|
N/A |
|
|
N/A |
|
|
$ |
0.48 |
|
||
|
Renewal Leases |
|
|
|
|
3 |
|
|
|
482,475 |
|
|
|
4.5 |
|
|
|
3.91 |
|
|
$ |
3.95 |
|
|
$ |
(0.04 |
) |
|
|
(1.0 |
%) |
|
N/A |
|
|
|
- |
|
|
|
Total |
|
|
|
|
4 |
|
|
|
586,582 |
|
|
|
5.9 |
|
|
$ |
3.64 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
Initial gross rent renewal spread is computed by comparing the initial rent per square foot in the new lease to the final rent per square foot amount in the expiring lease. For purposes of this computation, the rent amount includes minimum rent, common area maintenance (“CAM”) charges, estimated real estate tax reimbursements and marketing charges, but excludes percentage rent. In certain cases, a lower rent amount may be payable for a period of time until specified conditions in the lease are satisfied. |
|
(2) |
Average rent renewal spread is computed by comparing the average rent per square foot over the new lease term to the final rent per square foot amount in the expiring lease. For purposes of this computation, the rent amount includes minimum rent and fixed CAM charges, but excludes pro rata CAM charges, estimated real estate tax reimbursements, marketing charges and percentage rent. |
|
(3) |
These leasing costs are presented as annualized amounts per square foot and are spread uniformly over the initial lease term. |
|
(4) |
Includes 11 leases and 44,197 square feet of GLA with respect to our unconsolidated partnerships. We own a 25% to 50% interest in each of our unconsolidated properties and do not control such properties. Our percentage ownership is not necessarily indicative of the legal and economic implications of our ownership interest. See “— Non-GAAP Supplemental Financial Measures” for further details on our ownership interests in our unconsolidated properties. |
The following table sets forth our results of operations for the three months ended March 31, 2021 and 2020.
|
|
|
Three Months Ended March 31, |
|
|
% Change 2020 to 2021 |
||||||||
|
(in thousands of dollars) |
|
2021 |
|
|
2020 |
|
|
|
|||||
|
Real estate revenue |
|
$ |
65,278 |
|
|
$ |
73,950 |
|
|
|
(11.7 |
) |
% |
|
Property operating expenses |
|
|
(33,159 |
) |
|
|
(32,537 |
) |
|
|
1.9 |
|
% |
|
Other income |
|
|
125 |
|
|
|
293 |
|
|
|
(57.3 |
) |
% |
|
Depreciation and amortization |
|
|
(29,839 |
) |
|
|
(30,269 |
) |
|
|
(1.4 |
) |
% |
|
General and administrative expenses |
|
|
(11,831 |
) |
|
|
(10,695 |
) |
|
|
10.6 |
|
% |
|
Provision for employee separation expenses |
|
|
(92 |
) |
|
|
(73 |
) |
|
|
26.0 |
|
% |
|
Project costs and other expenses |
|
|
(101 |
) |
|
|
(95 |
) |
|
|
6.3 |
|
% |
|
Interest expense, net |
|
|
(30,731 |
) |
|
|
(16,858 |
) |
|
|
82.3 |
|
% |
|
Reorganization expenses |
|
|
(197 |
) |
|
|
- |
|
|
|
0.0 |
|
% |
|
Equity in (loss) income of partnerships |
|
|
(3,433 |
) |
|
|
819 |
|
|
|
(519.2 |
) |
% |
|
Gain on sales of real estate, net |
|
|
- |
|
|
|
1,962 |
|
|
|
(100.0 |
) |
% |
|
Loss on sales of interests in non operating real estate |
|
|
- |
|
|
|
(46 |
) |
|
|
(100.0 |
) |
% |
|
Net loss |
|
$ |
(43,980 |
) |
|
$ |
(13,549 |
) |
|
|
224.6 |
|
% |
27
The amounts in the preceding tables reflect our consolidated properties and our unconsolidated properties. Our unconsolidated properties are presented under the equity method of accounting in the line item “Equity in (loss) income of partnerships.”
Real Estate Revenue
We include all rental income earned pursuant to tenant leases under the “Lease revenue” line item in the consolidated statements of operations. Utility reimbursements are presented separately in “Expense reimbursements.” We review the collectability of both billed and unbilled lease revenues each reporting period, taking into consideration the tenant’s payment history, credit profile and other factors, including the tenant’s operating performance. For any tenant receivable balance deemed to be uncollectible, we record an offset for credit losses directly to Lease revenue in the consolidated statements of operations.
The following table reports the breakdown of real estate revenues based on the terms of the lease contracts for the three months ended March 31, 2021 and 2020:
|
|
|
Three Months Ended March 31, |
|
|||||
|
(in thousands of dollars) |
|
2021 |
|
|
2020 |
|
||
|
Contractual lease payments: |
|
|
|
|
|
|
|
|
|
Base rent |
|
$ |
45,918 |
|
|
$ |
51,048 |
|
|
CAM reimbursement income |
|
|
8,359 |
|
|
|
10,168 |
|
|
Real estate tax income |
|
|
6,944 |
|
|
|
8,496 |
|
|
Percentage rent |
|
|
(12 |
) |
|
|
19 |
|
|
Lease termination revenue |
|
|
36 |
|
|
|
9 |
|
|
|
|
|
61,245 |
|
|
|
69,740 |
|
|
Less: credit losses |
|
|
(1,337 |
) |
|
|
(2,019 |
) |
|
Lease revenue |
|
|
59,908 |
|
|
|
67,721 |
|
|
Expense reimbursements |
|
|
3,899 |
|
|
|
4,305 |
|
|
Other real estate revenue |
|
|
1,471 |
|
|
|
1,924 |
|
|
Total real estate revenue |
|
$ |
65,278 |
|
|
$ |
73,950 |
|
Real Estate Revenue
Real estate revenue decreased by $8.7 million, or 12%, in the three months ended March 31, 2021 compared to the three months ended March 31, 2020, primarily due to:
|
|
• |
a decrease of $3.7 million in same store base rent due to a $1.9 million decrease related to tenant bankruptcies in 2020 and 2021 and a $1.8 million decrease from net new store openings and lease modifications over the previous twelve months; |
|
|
• |
a decrease of $2.1 million at non-same store properties Valley View Mall and Exton Square Mall due to the derecognition of Valley View Mall during the third quarter of 2020 as a result of a receiver being assigned to manage the property and COVID-19 related store closures and lease modifications at Exton Square Mall; |
|
|
• |
a decrease of $1.5 million in same store common area expense reimbursements primarily related to bankruptcies and COVID-19 related store closings and rental concessions made to some tenants under which the terms of their leases were modified such that they no longer pay expense reimbursements; |
|
|
• |
a decrease of $1.4 million in same store real estate tax reimbursements due to bankruptcy’s and COVID-19 related store closings and rental concessions made to some tenants under which the terms of their leases were modified such that they no longer pay expense reimbursements, and a decrease in same store real estate tax expense (see “-Property Operating Expenses”); |
|
|
• |
a decrease of $0.4 million in same store other real estate revenue including $0.2 million in partnership marketing revenues; and |
|
|
• |
a decrease of $0.3 million in same store utility reimbursements due to lower occupancy at some properties; partially offset by |
|
|
• |
a decrease of $0.7 million in same store credit losses due to decreased accounts receivable balances from the resolution of COVID-19 related issues with tenants across our portfolio. |
28
Property Operating Expenses
Property operating expenses increased by $0.6 million, or 2%, in the three months ended March 31, 2021 compared to the three months ended March 31, 2020, primarily due to:
|
|
• |
an increase of $1.2 million in same store common area maintenance expense, including a $1.1 million increase in snow removal expense due to higher snowfall amounts during the three months ending March 31, 2021 across the Mid-Atlantic States where many of our properties are located; |
|
|
• |
an increase of $0.2 million in same store tenant utility expense due to a combination of higher electricity usage and electricity rates; and |
|
|
• |
an increase of $0.2 million in same store property legal expense; partially offset by |
|
|
• |
a decrease of $0.6 million at non-same store properties Valley View Mall and Exton Square Mall due to the derecognition of Valley View Mall during the third quarter of 2020 as a result of a receiver being assigned to manage the property; and |
|
|
• |
a decrease of $0.4 million in same store real estate tax expense due to a decrease in the real estate tax assessment value at some properties. |
Depreciation and Amortization
Depreciation and amortization expense decreased by $0.4 million, or 1%, in the three months ended March 31, 2021 compared to the three months ended March 31, 2020, primarily due to:
|
|
• |
a decrease of $0.4 million at non-same store properties Exton Square Mall and Valley View due to the derecognition of Valley View Mall during the third quarter of 2020 as a result of a receiver being assigned to manage the property. |
General and administrative expenses
General and administrative expenses increased by $1.1 million, or 10.6%, in the three months ended March 31, 2021 compared to the three months ended March 31, 2020 primarily due to higher incentive compensation expenses and professional fees incurred in 2021 related to finalizing our Financial Restructuring.
Interest expense
Interest expense increased by $13.9 million, or 82.3%, in the three months ended March 31, 2021 compared to the three months ended March 31, 2020. This increase was primarily due to higher weighted average debt balances and higher weighted average interest rates. Our weighted average effective borrowing rate was 5.7% for the three months ended March 31, 2021 compared to 4.2% for the three months ended March 31, 2020. Our weighted average debt balance was $1,864.4 million for the three months ended March 31, 2021, compared to $1,714.2 million for the three months ended March 31, 2020.
Reorganization Expenses
For the three months ended March 31, 2021, we incurred costs and fees of $0.2 million in connection with our efforts to finalize our Financial Restructuring that were directly attributable to our bankruptcy proceedings, which we classified within reorganization expenses in the consolidated statement of operations.
Equity in (loss) income of partnerships
Equity in (loss) income of partnerships was a loss in the three months ended March 31, 2021 compared to income in the prior year period, reflecting a change of $4.3 million, or 519.2%, for the three months ended March 31, 2021 compared to the three months ended March 31, 2020, primarily due to lower real estate revenues across all of our partnership properties due to COVID-19 and higher property operating expense and higher interest expense primarily at Fashion District Philadelphia.
Gain on sales of real estate
In January 2020, we completed the sale of an outparcel at Woodland Mall in Grand Rapids, Michigan for total consideration of $5.2 million. In March 2020, we completed the sale of two outparcels at Magnolia Mall in Florence, South Carolina for total consideration of $2.9 million. In connection with the March sale, we recorded a gain of $2.0 million. There were no gains on sales of real estate in the three months ended March 31, 2021.
29
NON-GAAP SUPPLEMENTAL FINANCIAL MEASURES
Overview
The preceding discussion analyzes our financial condition and results of operations in accordance with generally accepted accounting principles, or GAAP, for the periods presented. We also use Net Operating Income (“NOI”) and Funds from Operations (“FFO”) which are non-GAAP financial measures, to supplement our analysis and discussion of our operating performance:
|
|
• |
We believe that NOI is helpful to management and investors as a measure of operating performance because it is an indicator of the return on property investment and provides a method of comparing property performance over time. When we use and present NOI, we also do so on a same store (“Same Store NOI”) and non-same store (“Non Same Store NOI”) basis to differentiate between properties that we have owned for the full periods presented and properties acquired, sold or under redevelopment during those periods. Furthermore, our use and presentation of NOI combines NOI from our consolidated properties and NOI attributable to our share of unconsolidated properties in order to arrive at total NOI. We believe that this is also helpful information because it reflects the pro rata contribution from our unconsolidated properties that are owned through investments accounted for under GAAP as equity in income of partnerships. See “Unconsolidated Properties and Proportionate Financial Information” below. |
|
|
• |
We believe that FFO is also helpful to management and investors as a measure of operating performance because it excludes various items included in net loss that do not relate to or are not indicative of operating performance, such as gains on sales of operating real estate and depreciation and amortization of real estate, among others. In addition to FFO and FFO per diluted share and OP Unit, when applicable, we also present FFO, as adjusted and FFO per diluted share and OP Unit, as adjusted, which we believe is helpful to management and investors because they adjust FFO to exclude items that management does not believe are indicative of operating performance, such as gain on debt extinguishment and insurance recoveries. |
|
|
• |
We use both NOI and FFO, or related terms like Same Store NOI and, when applicable, Funds From Operations, as adjusted, for determining incentive compensation amounts under certain of our performance-based executive compensation programs. |
NOI and FFO are commonly used non-GAAP financial measures of operating performance in the real estate industry, and we use them as supplemental non-GAAP measures to compare our performance between different periods and to compare our performance to that of our industry peers. Our computation of NOI, FFO and other non-GAAP financial measures, such as Same Store NOI, Non Same Store NOI, NOI attributable to our share of unconsolidated properties, and FFO, as adjusted, may not be comparable to other similarly titled measures used by our industry peers. None of these measures are measures of performance in accordance with GAAP, and they have limitations as analytical tools. They should not be considered as alternative measures of our net loss, operating performance, cash flow or liquidity. They are not indicative of funds available for our cash needs, including our ability to make cash distributions. Please see below for a discussion of these non-GAAP measures and their respective reconciliation to the most directly comparable GAAP measure.
Unconsolidated Properties and Proportionate Financial Information
The non-GAAP financial measures presented below incorporate financial information attributable to our share of unconsolidated properties. This proportionate financial information is non-GAAP financial information, but we believe that it is helpful information because it reflects the pro rata contribution from our unconsolidated properties that are owned through investments accounted for under GAAP using the equity method of accounting. Under such method, earnings from these unconsolidated partnerships are recorded in our statements of operations prepared in accordance with GAAP under the caption entitled “Equity in (loss) income of partnerships.”
To derive the proportionate financial information reflected in the tables below as “unconsolidated,” we multiplied the percentage of our economic interest in each partnership on a property-by-property basis by each line item. Under the partnership agreements relating to our current unconsolidated partnerships with third parties, we own a 25% to 50% economic interest in such partnerships, and there are generally no provisions in such partnership agreements relating to special non-pro rata allocations of income or loss, and there are no preferred or priority returns of capital or other similar provisions. While this method approximates our indirect economic interest in our pro rata share of the revenue and expenses of our unconsolidated partnerships, we do not have a direct legal claim to the assets, liabilities, revenues or expenses of the unconsolidated partnerships beyond our rights as an equity owner in the event of any liquidation of such entity. Our percentage ownership is not necessarily indicative of the legal and economic implications of our ownership interest. Accordingly, NOI and FFO results based on our share of the results of unconsolidated partnerships do not represent cash generated from our investments in these partnerships.
We have determined that we hold a noncontrolling interest in each of our unconsolidated partnerships, and account for such partnerships using the equity method of accounting, because:
|
|
• |
Except for one property that we co-manage with our partner, all of the other entities are managed on a day-to-day basis by one of our other partners as the managing general partner in each of the respective partnerships. In the case of the co-managed property, all decisions in the ordinary course of business are made jointly. |
|
|
• |
The managing general partner is responsible for establishing the operating and capital decisions of the partnership, including budgets, in the ordinary course of business. |
30
|
|
• |
All major decisions of each partnership, such as the sale, refinancing, expansion or rehabilitation of the property, require the approval of all partners. |
|
|
• |
Voting rights and the sharing of profits and losses are generally in proportion to the ownership percentages of each partner. |
We hold legal title to a property owned by one of our unconsolidated partnerships through a tenancy in common arrangement. For this property, such legal title is held by us and another entity, and each has an undivided interest in title to the property. With respect to this property, under the applicable agreements between us and the entity with ownership interests, we and such other entity have joint control because decisions regarding matters such as the sale, refinancing, expansion or rehabilitation of the property require the approval of both us and the other entity owning an interest in the property. Hence, we account for this property like our other unconsolidated partnerships using the equity method of accounting. The balance sheet items arising from this property appear under the caption “Investments in partnerships, at equity.”
For further information regarding our unconsolidated partnerships, see note 3 to our unaudited consolidated financial statements.
Net Operating Income (“NOI”)
NOI (a non-GAAP measure) is derived from real estate revenue (determined in accordance with GAAP, including lease termination revenue), minus property operating expenses (determined in accordance with GAAP), plus our pro rata share of revenue and property operating expenses of our unconsolidated partnership investments. NOI does not represent cash generated from operating activities in accordance with GAAP and should not be considered to be an alternative to net loss (determined in accordance with GAAP) as an indication of our financial performance or to be an alternative to cash flow from operating activities (determined in accordance with GAAP) as a measure of our liquidity. It is not indicative of funds available for our cash needs, including our ability to make cash distributions. We believe NOI is helpful to management and investors as a measure of operating performance because it is an indicator of the return on property investment, and provides a method of comparing property performance over time. We believe that net loss is the most directly comparable GAAP measure to NOI. NOI excludes other income, depreciation and amortization, general and administrative expenses, provision for employee separation expenses, project costs and other expenses, interest expense, reorganization expenses, equity in loss/income of partnerships, gain/loss on sale of real estate and gain/loss on sales of non-operating real estate.
Same Store NOI is calculated using retail properties owned for the full periods presented and excludes properties acquired or disposed of, under redevelopment, or designated as non-core during the periods presented. Non Same Store NOI is calculated using the retail properties excluded from the calculation of Same Store NOI.
The table below reconciles net loss to NOI of our consolidated properties for the three months ended March 31, 2021 and 2020:
|
|
|
Three Months Ended March 31, |
|
|||||
|
(in thousands of dollars) |
|
2021 |
|
|
2020 |
|
||
|
Net loss |
|
$ |
(43,980 |
) |
|
$ |
(13,549 |
) |
|
Other income |
|
|
(125 |
) |
|
|
(293 |
) |
|
Depreciation and amortization |
|
|
29,839 |
|
|
|
30,269 |
|
|
General and administrative expenses |
|
|
11,831 |
|
|
|
10,695 |
|
|
Provision for employee separation expenses |
|
|
92 |
|
|
|
73 |
|
|
Project costs and other expenses |
|
|
101 |
|
|
|
95 |
|
|
Interest expense, net |
|
|
30,731 |
|
|
|
16,858 |
|
|
Reorganization expenses |
|
|
197 |
|
|
|
- |
|
|
Equity in loss (income) of partnerships |
|
|
3,433 |
|
|
|
(819 |
) |
|
Gain on sales of real estate, net |
|
|
- |
|
|
|
(1,962 |
) |
|
Loss on sales of non-operating real estate |
|
|
- |
|
|
|
46 |
|
|
NOI from consolidated properties |
|
$ |
32,119 |
|
|
$ |
41,413 |
|
The table below reconciles equity in (loss) income of partnerships to NOI of our share of unconsolidated properties for the three months ended March 31, 2021 and 2020:
|
|
|
Three Months Ended March 31, |
|
|||||
|
(in thousands of dollars) |
|
2021 |
|
|
2020 |
|
||
|
Equity in (loss) income of partnerships |
|
$ |
(3,433 |
) |
|
$ |
819 |
|
|
Other income |
|
|
- |
|
|
|
(14 |
) |
|
Depreciation and amortization |
|
|
3,187 |
|
|
|
3,610 |
|
|
Interest and other expenses |
|
|
5,288 |
|
|
|
3,029 |
|
|
NOI from equity method investments at ownership share |
|
$ |
5,042 |
|
|
$ |
7,444 |
|
31
The table below presents total NOI and total NOI excluding lease termination revenue for the three months ended March 31, 2021 and 2020:
|
|
|
Same Store |
|
|
Non Same Store |
|
|
Total (non-GAAP) |
|
|||||||||||||||
|
(in thousands of dollars) |
|
2021 |
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
||||||
|
NOI from consolidated properties |
|
$ |
32,707 |
|
|
$ |
40,430 |
|
|
$ |
(588 |
) |
|
$ |
983 |
|
|
$ |
32,119 |
|
|
$ |
41,413 |
|
|
NOI from equity method investments at ownership share |
|
|
5,060 |
|
|
|
7,435 |
|
|
|
(18 |
) |
|
|
9 |
|
|
|
5,042 |
|
|
|
7,444 |
|
|
Total NOI |
|
|
37,767 |
|
|
|
47,865 |
|
|
|
(606 |
) |
|
|
992 |
|
|
|
37,161 |
|
|
|
48,857 |
|
|
Less: lease termination revenue |
|
|
36 |
|
|
|
9 |
|
|
|
- |
|
|
|
- |
|
|
|
36 |
|
|
|
9 |
|
|
Total NOI excluding lease termination revenue |
|
$ |
37,731 |
|
|
$ |
47,856 |
|
|
$ |
(606 |
) |
|
$ |
992 |
|
|
$ |
37,125 |
|
|
$ |
48,848 |
|
Total NOI decreased by $11.7 million in the three months ended March 31, 2021 compared to the three months ended March 31, 2020 due to (a) a $10.1 million decrease in Same Store NOI and (b) a decrease of $1.6 million in Non Same Store NOI. The decrease in Same Store NOI is primarily due the reasons described in “— Real Estate Revenue” and “— Property Operating Expenses”. The decrease in NOI from Non Same Store properties is due to the conveyance of Wyoming Valley Mall and derecognition of Valley View Mall in the third quarter of 2020. See “— Real Estate Revenue” and “— Property Operating Expenses” above for further information about the factors affecting NOI from our consolidated properties.
Funds From Operations (“FFO”)
The National Association of Real Estate Investment Trusts (“NAREIT”) defines Funds From Operations (“FFO”), which is a non-GAAP measure commonly used by REITs, as net income (computed in accordance with GAAP) excluding (i) depreciation and amortization of real estate, (ii) gains and losses on sales of certain real estate assets, (iii) gains and losses from change in control and (iv) impairment write-downs of certain real estate assets and investments in entities when the impairment is directly attributable to decreases in the value of depreciable real estate held by the entity. We compute FFO in accordance with standards established by NAREIT, which may not be comparable to FFO reported by other REITs that do not define the term in accordance with the current NAREIT definition, or that interpret the current NAREIT definition differently than we do. NAREIT’s established guidance provides that excluding impairment write downs of depreciable real estate is consistent with the NAREIT definition.
FFO is a commonly used measure of operating performance and profitability among REITs. We use FFO and FFO per diluted share and unit of limited partnership interest in our operating partnership (“OP Unit”) in measuring our performance against our peers and as one of the performance measures for determining incentive compensation amounts earned under certain of our performance-based executive compensation programs.
FFO does not include gains and losses on sales of operating real estate assets or impairment write downs of depreciable real estate (including development land parcels), which are included in the determination of net loss in accordance with GAAP. Accordingly, FFO is not a comprehensive measure of our operating cash flows. In addition, since FFO does not include depreciation on real estate assets, FFO may not be a useful performance measure when comparing our operating performance to that of other non-real estate commercial enterprises. We compensate for these limitations by using FFO in conjunction with other GAAP financial performance measures, such as net loss and net cash used in operating activities, and other non-GAAP financial performance measures, such as NOI. FFO does not represent cash generated from operating activities in accordance with GAAP and should not be considered to be an alternative to net loss (determined in accordance with GAAP) as an indication of our financial performance or to be an alternative to cash flow from operating activities (determined in accordance with GAAP) as a measure of our liquidity, nor is it indicative of funds available for our cash needs, including our ability to make cash distributions. We believe that net loss is the most directly comparable GAAP measurement to FFO.
When applicable, we also present FFO, as adjusted, and FFO per diluted share and OP Unit, as adjusted, which are non-GAAP measures, for the three months ended March 31, 2021 and 2020, to show the effect of such items as gain or loss on debt extinguishment (including accelerated amortization of financing costs), impairment of assets, provision for employee separation expense, insurance recoveries or losses, net, gain on derecognition of property, loss on hedge ineffectiveness and reorganization expenses which had an effect on our results of operations, but are not, in our opinion, indicative of our ongoing operating performance.
We believe that FFO is helpful to management and investors as a measure of operating performance because it excludes various items included in net loss that do not relate to or are not indicative of operating performance, such as gains on sales of operating real estate and depreciation and amortization of real estate, among others. We believe that Funds From Operations, as adjusted, is helpful to management and investors as a measure of operating performance because it adjusts FFO to exclude items that management does not believe are indicative of our operating performance, such as provision for employee separation expense, gain on hedge ineffectiveness and reorganization expenses.
32
The following table presents a reconciliation of net loss determined in accordance with GAAP to FFO attributable to common shareholders and OP Unit holders, FFO attributable to common shareholders and OP Unit holders per diluted share and OP Unit, FFO attributable to common shareholders and OP Unit holders, as adjusted and FFO attributable to common shareholders and OP Unit holders, as adjusted per diluted share and OP Unit, for the three months ended March 31, 2021 and 2020:
|
|
|
Three Months Ended March 31, |
|
|||||
|
(in thousands, except per share amounts) |
|
2021 |
|
|
2020 |
|
||
|
Net loss |
|
$ |
(43,980 |
) |
|
$ |
(13,549 |
) |
|
Depreciation and amortization on real estate: |
|
|
|
|
|
|
|
|
|
Consolidated properties |
|
|
29,491 |
|
|
|
29,944 |
|
|
PREIT’s share of equity method investments |
|
|
3,187 |
|
|
|
3,610 |
|
|
Gain on sales of interest in real estate, net |
|
|
— |
|
|
|
(1,962 |
) |
|
Preferred share dividends declared and paid (1) |
|
|
— |
|
|
|
(6,844 |
) |
|
Funds from operations attributable to common shareholders and OP Unit holders |
|
|
(11,302 |
) |
|
|
11,199 |
|
|
Provision for employee separation expense |
|
|
92 |
|
|
|
73 |
|
|
Gain on hedge ineffectiveness |
|
|
(1,303 |
) |
|
|
— |
|
|
Reorganization expenses |
|
|
197 |
|
|
|
— |
|
|
Funds from operations, as adjusted, attributable to common shareholders and OP Unit holders |
|
$ |
(12,316 |
) |
|
$ |
11,272 |
|
|
Funds from operations attributable to common shareholders and OP Unit holders per diluted share and OP Unit (1) |
|
$ |
(0.14 |
) |
|
$ |
0.14 |
|
|
Funds from operations, as adjusted, attributable to common shareholders and OP Unit holders per diluted share and OP Unit (1) |
|
$ |
(0.15 |
) |
|
$ |
0.14 |
|
|
Weighted average number of shares outstanding |
|
|
77,647 |
|
|
|
76,774 |
|
|
Weighted average effect of full conversion of OP Units |
|
|
1,976 |
|
|
|
2,023 |
|
|
Effect of common share equivalents |
|
|
691 |
|
|
|
520 |
|
|
Total weighted average shares outstanding, including OP Units |
|
|
80,314 |
|
|
|
79,317 |
|
(1) Does not include the impact of $6.8 million of accrued, undeclared and unpaid preferred share dividends for the three months ended March 31, 2021. The Company cannot declare and pay cash dividends on common shares while there exists a preferred dividend arrearage.
FFO attributable to common shareholders and OP Unit holders was negative $11.3 million for the three months ended March 31, 2021, a decrease of $22.5 million, or 200.9%, compared to $11.2 million for the three months ended March 31, 2020. This decrease was primarily due to:
|
|
• |
a $7.7 million decrease in Same Store NOI primarily due to a decrease in net new store openings and lease modifications over the previous twelve months, along with associated rent abatements and reduced percent of sales revenue coupled with additional tenant bankruptcies in 2020 and 2021; |
|
|
• |
a $1.6 million decrease in Non Same Store NOI primarily due to the derecognition of Valley View Mall during the third quarter of 2020 as a result of a receiver being assigned to manage the property and COVID-19 related store closures and lease modifications at Exton Square Mall; |
|
|
• |
a $1.1 million increase in general and administrative expense primarily due to higher incentive compensation and costs associated with finalizing our financial restructuring; |
|
|
• |
a $13.9 million increase in net interest expense; and |
|
|
• |
a $4.3 million decrease in equity in (loss) income of partnerships; partially offset by |
|
|
• |
a decrease in preferred share dividends declared and paid of $6.8 million, as a result of our us not declaring preferred dividends. |
FFO attributable to common shareholders and OP Unit holders per diluted share and OP Unit was $(0.14) and $0.14 for the three months ended March 31, 2021 and 2020, respectively.
FFO, as adjusted, attributable to common shareholders and OP Unit holders per diluted share and OP Unit was $(0.15) and $0.14 for the three months ended March 31, 2021 and 2020, respectively.
LIQUIDITY AND CAPITAL RESOURCES
This “Liquidity and Capital Resources” section contains certain “forward-looking statements” that relate to expectations and projections that are not historical facts. These forward-looking statements reflect our current views about our future liquidity and capital resources, and are subject to risks and uncertainties that might cause our actual liquidity and capital resources to differ materially from the forward-looking statements. Additional factors that might affect our liquidity and capital resources include those discussed herein and in the section entitled
33
“Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2020 filed with the SEC. We do not intend to update or revise any forward-looking statements about our liquidity and capital resources to reflect new information, future events or otherwise.
Capital Resources
We currently expect to meet certain of our short-term liquidity requirements, including operating expenses, recurring capital expenditures, tenant improvements and leasing commissions, generally through our available working capital and our First Lien Revolving Facility, subject to the terms and conditions of our First Lien Credit Agreement. See “Credit Agreements—Similar terms of the Credit Agreements” below for covenant information. We expect to spend approximately $9.4 million related to our capital improvements and development projects in 2021. We believe that our net cash provided by operations will be sufficient to allow us to make any distributions necessary to enable us to continue to qualify as a REIT under the Internal Revenue Code of 1986, as amended. Our Credit Agreements limit our ability to declare and pay dividends on our common and preferred shares, subject to certain exceptions. We have deferred payments on our preferred shares and suspended payments on our common shares since the third quarter of 2020. Other than as may be required to maintain our status as a REIT, we do not anticipate that we will pay any cash dividends to holders of our common or preferred shares for the foreseeable future.
As a result of the existing cumulative unpaid dividends on our preferred shares and our bankruptcy filing, we are no longer able to register the offer and sale of securities on Form S-3. This creates additional limitations on our ability to raise capital in the capital markets, potentially increasing our costs of raising capital in the future. Our ability to raise capital in the capital markets may also be impacted by market fluctuations more generally, including as a result of the COVID-19 pandemic and related economic downturn.
We have availability under our revolving facility of $75.2 million as of March 31, 2021. We are actively seeking to raise additional capital, including through asset dispositions identified through our portfolio property reviews. Disposing of these properties can enable us to redeploy or recycle our capital to other uses. In many cases, we are marketing land parcels for development for a variety of different nontraditional, non-retail uses, including hotel, multifamily residential and healthcare uses, which we believe can also help position our portfolio within differentiated mixed-use environments. During 2020 and through the end of the first quarter of 2021, we executed agreements of sale for five land parcels for anticipated multifamily development and one land parcels for anticipated hotel development that are expected to provide an aggregate of up to approximately $89.7 million in proceeds, which will primarily be used to repay amounts outstanding under our Credit Agreements. These agreements include the sale of land parcels for multifamily residential development, the sale of operating outparcels and the sale of land parcels for hotel development. Each of the transactions is subject to numerous closing conditions, including the completion of due diligence and securing of entitlements, which in several cases has been delayed due to the effects of COVID-19 on business operations and availability of financing. Closing of the transactions cannot be assured or the timing of their completion yet estimated with certainty.
The following are some of the factors that could affect our cash flows and require the funding of future cash distributions, recurring capital expenditures, tenant improvements or leasing commissions with sources other than operating cash flows:
|
|
• |
adverse changes or prolonged downturns in general, local or retail industry economic, financial, credit or capital market or competitive conditions, as a result of the COVID-19 pandemic or otherwise, leading to a reduction in real estate revenue or cash flows or an increase in expenses; |
|
|
• |
continued deterioration in our tenants’ business operations and financial stability, particularly in light of the COVID-19 pandemic, including anchor or non-anchor tenant bankruptcies, leasing delays or terminations, or lower sales, causing deferrals or declines in rent, percentage rent and cash flows; |
|
|
• |
inability to achieve targets for, or decreases in, property occupancy and rental rates, resulting in lower or delayed real estate revenue and operating income; |
|
|
• |
increases in operating costs, including increases that cannot be passed on to tenants, resulting in reduced operating income and cash flows; and |
|
|
• |
increases in interest rates, resulting in higher borrowing costs. |
In addition, we are continuing to monitor the COVID-19 pandemic and the related restrictions and changes to behavior intended to reduce its spread, and its impact on our tenants, their supply chains and customers and the retail industry. Thus far, the pandemic and the actions taken to address it and the related overall worsening of economic conditions have had an adverse effect on our business, operations, liquidity and financial condition.
As of March 31, 2021, all of our malls had re-opened while adhering to social distancing and sanitation and safety protocols designed to address the risks posed by COVID-19, however, many of our tenants continue to operate at reduced capacity. The pandemic’s effect, primarily beginning in the second quarter of 2020, had a significant impact on our operations, financial condition, liquidity and results of operations in 2020 and the first quarter of 2021 and its impact is expected to continue through future periods. As of March 31, 2021, we had cash receipts of 81% of billed first quarter 2021 rents, an increase from cash receipts of 73% and 61% of billed rents as of the end of each of the fourth and third quarters of 2020, respectively. Including collections of prior quarters’ rents, we collected 119% of our billed first quarter 2021 rents. We believe that our rent collections are probable, but expect that collections will continue to be below our tenants’ rent obligations as long as lingering effects of COVID-19, including new or renewed restrictions and business closures, affect the return of customers to malls and the financial strength of our tenants. While we continue to record rental revenue, the reduced collection levels have impacted our liquidity position and may continue to do so. The extent and duration of such effects are uncertain, continuously changing and difficult to predict. Additionally,
34
the future outbreak of any other highly infectious or contagious diseases may materially and adversely affect our business, financial condition, liquidity and operating results.
We expect to meet certain of our longer-term requirements, such as obligations to fund redevelopment and development projects, certain capital requirements, renovations, expansions and other non-recurring capital improvements, through a variety of capital sources, subject to the terms and conditions of our Credit Agreements, as further described below.
LIBOR Alternative
In July 2017, the Financial Conduct Authority (“FCA”), which is the authority that regulates LIBOR, announced it intends to stop compelling banks to submit rates for the calculation of LIBOR after 2021. The Alternative Reference Rates Committee (“ARRC”) has identified the Secured Overnight Financing Rate (“SOFR”) as the rate that represents best practice as the alternative to USD-LIBOR for use in derivatives and other financial contracts that are currently indexed to USD-LIBOR. We are not able to predict when LIBOR will cease to be available or when there will be sufficient liquidity in the SOFR markets. Any changes adopted by FCA or other governing bodies in the method used for determining LIBOR may result in a sudden or prolonged increase or decrease in reported LIBOR. If that were to occur, our interest payments could change, perhaps substantially. In addition, uncertainty about the extent and manner of future changes may result in interest rates and/or payments that are higher or lower than if LIBOR were to remain available in its current form.
We have material contracts that are indexed to LIBOR and are monitoring and evaluating the related risks, which include interest on loans or amounts received and paid on derivative instruments. These risks arise in connection with transitioning contracts to a new alternative rate, including any resulting value transfer that may occur. The value of loans, securities, and derivative instruments tied to LIBOR could also be affected if LIBOR is limited or discontinued. For some instruments, the method of transitioning to an alternative rate may be challenging, as they may require negotiation with the respective counterparty.
If a contract is not transitioned to an alternative rate and LIBOR is discontinued, the impact on our contracts is likely to vary by contract. If LIBOR is discontinued or if the methods of calculating LIBOR change from their current form, interest rates on our current or future indebtedness may be adversely affected.
While we expect LIBOR to be available in substantially its current form until the end of 2021, it is possible that LIBOR will become unavailable prior to that point. This could occur, for example, if a requisite number of banks decline to make submissions to the LIBOR administrator. In that case, the risks associated with the transition to an alternative reference rate would be accelerated and magnified.
Credit Agreements
We have entered into two secured credit agreements (collectively, as amended, the “Credit Agreements”): (a) the First Lien Credit Agreement, which, as described in more detail below, includes (i) the $130.0 million First Lien Revolving Facility, and (ii) the $384.5 million First Lien Term Loan Facility, and (b) the Second Lien Credit Agreement, which, as described in more detail below, includes the $535.2 million Second Lien Term Loan Facility. The First Lien Term Loan Facility and the Second Lien Term Loan Facility are collectively referred to as the “Term Loans.” The Credit Agreements refinanced our previously existing credit agreements in effect prior to the effective date, including our secured term loan under the Credit Agreement dated as of August 11, 2020 (as amended, the “Bridge Credit Agreement”), our Seven-Year Term Loan Agreement entered into on January 8, 2014 (as amended, the “7-Year Term Loan”), and our 2018 Amended and Restated Credit Agreement entered into on May 24, 2018 (as amended, the “2018 Credit Agreement”).
As of March 31, 2021, we had borrowed $933.6 million under the Term Loans and $54.8 million under the First Lien Revolving Facility. The carrying value of the Term Loans on our consolidated balance sheet as of March 31, 2021 is net of $11.9 million of unamortized debt issuance costs. The maximum amount that was available to be borrowed by us under the First Lien Revolving Facility as of December 31, 2020 was $75.2 million.
Our obligations under the Credit Agreements are guaranteed by certain of our subsidiaries. Our obligations under the Credit Agreements and the guaranties are secured by mortgages and deeds of trust on a portfolio of 12 of our subsidiaries’ properties, including nine malls and three additional parcels. The obligations are further secured by a lien on substantially all of our personal property pursuant to collateral agreements and a pledge of substantially all of the equity interests held by us and the guarantors, pursuant to pledge agreements, in each case subject to limited exceptions.
The maturity date of the Credit Agreements is December 10, 2022 (or such earlier date that the obligations under the applicable Credit Agreement have been accelerated), unless extended by one year until December 10, 2023 at our option (the “Maturity Date”). Any such extension would be subject to our fulfillment of certain conditions including maintaining minimum liquidity of $35.0 million, a minimum corporate debt yield of 8.0% and a maximum loan-to-value ratio of 105% for the total first lien and second lien loans and letters of credit and the Borrowing Base Properties as determined by an appraisal (provided that we may obtain a second appraisal of each Borrowing Base Property prepared by a nationally recognized appraisal firm and use the highest appraised value), and provided that no default or event of default exists and our representations and warranties are true in all material respects.
First Lien Credit Agreement
On December 10, 2020, we entered into an Amended and Restated First Lien Credit Agreement (the “First Lien Credit Agreement”) with Wells Fargo Bank, National Association (“Wells Fargo Bank”) and the other financial institutions signatory thereto and their assignees, for secured
35
loan facilities consisting of: (i) a secured first lien revolving credit facility allowing for borrowings up to $130.0 million, including a sub-facility for letters of credit to be issued thereunder in an aggregate stated amount of up to $10.0 million (collectively, the “First Lien Revolving Facility”), and (ii) a $384.5 million secured first lien term loan facility (the “First Lien Term Loan Facility”).
Amounts borrowed under the First Lien Credit Agreement may be either Base Rate Loans or LIBOR Loans. Base Rate Loans bear interest at the highest of (a) the Prime Rate, (b) the Federal Funds Rate plus 0.50% and (c) the LIBOR Market Index Rate plus 1.0%, provided that the Base Rate will not be less than 1.50% per annum, in each case plus (w) for revolving loans, 2.50% per annum, and (x) for term loans, 4.74% per annum. LIBOR Loans bear interest at LIBOR plus (y) for revolving loans, 3.50% per annum, and (z) for term loans, 5.74% per annum, in each case, provided that LIBOR will not be less than 0.50% per annum. Interest is due to be paid in cash on the last day of each applicable interest period (with rolling 30-day interest periods) and on the Maturity Date. We must pay certain fees to the administrative agent for the account of the lenders in connection with the First Lien Credit Agreement, including an unused fee for the account of the revolving lenders, which will accrue (i) 0.35% per annum on the daily amount of the unused revolving commitments when that amount is greater than or equal to 50% of the aggregate amount of revolving commitments, and (ii) 0.25% when that amount is less than 50% of the aggregate amount of revolving commitments. Accrued and unpaid unused fees will be payable quarterly in arrears during the term of the First Lien Credit Agreement and on the Revolving Termination Date (or any earlier date of termination of the revolving commitments or reduction of the revolving commitments to zero).
Letters of credit and the proceeds of revolving loans may be used (i) to refinance existing indebtedness under the Bridge Credit Agreement, (ii) for working capital and general corporate purposes (subject to certain exceptions set forth in the First Lien Credit Agreement, including limitations on investments in non-Borrowing Base Properties), and (iii) to fund professional fee payments and other fees and expenses subject to the provisions of the Plan and related confirmation order and for other uses permitted by the provisions of the First Lien Credit Agreement, Plan and confirmation order, in each case consistent with an approved annual business plan. The proceeds of term loans may only be used to refinance existing indebtedness under the 2018 Credit Agreement and the 7-Year Term Loan. We may terminate or reduce the amount of the revolving commitments at any time and from time to time without penalty or premium, subject to the terms of the First Lien Credit Agreement.
Second Lien Credit Agreement
On December 10, 2020, we also entered into a Second Lien Credit Agreement (the “Second Lien Credit Agreement”) with Wells Fargo Bank and the other financial institutions signatory thereto and their assignees for a $535.2 million secured second lien term loan facility (the “Second Lien Term Loan Facility”).
Amounts borrowed under the Second Lien Credit Agreement may be either Base Rate Loans or LIBOR Loans. Base Rate Loans bear interest at the highest of (a) the Prime Rate, (b) the Federal Funds Rate plus 0.50% and (c) the LIBOR Market Index Rate plus 1.0%, provided that the Base Rate will not be less than 1.50% per annum, in each case plus 7.00% per annum. LIBOR Loans bear interest at LIBOR plus 8.00% per annum, provided that LIBOR will not be less than 0.50% per annum. Interest is due to be paid in kind on the last day of each applicable interest period (with rolling 30-day interest periods) by adding the accrued and unpaid amount thereof to the principal balance of the loans under the Second Lien Credit Agreement and then accruing interest on the increased principal amount (provided that after the discharge of our Senior Debt Obligations, interest will be paid in cash). We must pay certain fees to the administrative agent for the account of the lenders in connection with the Second Lien Credit Agreement.
The proceeds of loans under the Second Lien Credit Agreement may only be used to refinance existing indebtedness under the 2018 Credit Agreement and the 7-Year Term Loan.
On February 8, 2021, the Company entered into the first amendment to the Second Lien Credit Agreement (“First Amendment”). The First Amendment provided for elimination of approximately $5.3 million of the disputed default interest that was capitalized into the principal balance of the Second Lien Term Loan Facility, reducing the outstanding principal amount of loans outstanding under the Second Lien Credit Agreement, retroactively as of December 10, 2020, to $535.2 million. The First Amendment also eliminated the disputed PIK interest that was capitalized through the date of the amendment.
On April 13, 2021, we entered into Agency Resignation, Appointment, Acceptance and Waiver Agreements pursuant to which Wells Fargo Bank resigned as Administrative Agent and Wilmington Savings Fund Society, FSB was appointed successor Administrative Agent under the First Lien Credit Agreement, the Second Lien Credit Agreement and, in each case, the related loan documents. There is currently no successor letter of credit issuer under the First Lien Revolving Facility, accordingly, the Company cannot currently access the letters of credit sub-facility.
See our Annual Report on Form 10-K for the year ended December 31, 2020 for additional information on the Credit Agreements.
FDP Loan Agreement
As described in note 4 of our consolidated financial statements, PM Gallery LP, a Delaware limited partnership and joint venture entity owned indirectly by us and The Macerich Company (“Macerich”), previously entered into a $250.0 million term loan in January 2018 (as amended in July 2019 to increase the total maximum potential borrowings to $350.0 million) to fund the ongoing redevelopment of Fashion District Philadelphia and to repay capital contributions to the venture previously made by the partners. On December 10, 2020, PM Gallery LP, together with certain other subsidiaries owned indirectly by us and Macerich (including the fee and leasehold owners of the properties that are part of the Fashion District Philadelphia project), entered into an Amended and Restated Term Loan Agreement (the “FDP Loan Agreement”). In connection with the execution of the FDP Loan Agreement, a $100.0 million principal payment was made (and funded indirectly by
36
Macerich) to pay down the existing loan, reducing the outstanding principal under the FDP Loan Agreement from $301.0 million to $201.0 million. In connection with the execution of the FDP Loan Agreement, the governing structure of PM Gallery LP was modified such that, effective as of January 1, 2021, Macerich is responsible for the entity’s operations and, subject to limited exceptions, controls major decisions.
The FDP Loan Agreement provides for (i) a maturity date of January 22, 2023, with the potential for a one-year extension upon the borrowers’ satisfaction of certain conditions, (ii) an interest rate at the borrowers’ option with respect to each advance of either (A) the Base Rate (defined as the highest of (a) the Prime Rate, (b) the Federal Funds Rate plus 0.50%, and (c) the LIBOR Market Index Rate plus 1.00%) plus 2.50% or (B) LIBOR for the applicable period plus 3.50%, (iii) a full recourse guarantee of 50% of the borrowers’ obligations by PREIT Associates, L.P., on a several basis, (iv) a full recourse guarantee of certain of the borrowers’ obligations by The Macerich Partnership, L.P., up to a maximum of $50.0 million, on a several basis, (v) a pledge of the equity interests of certain indirect subsidiaries of PREIT and Macerich, as well as of PREIT-RUBIN, Inc. and one of its subsidiaries, that have a direct or indirect ownership interest in the borrowers, (vi) a non-recourse carve-out guaranty and a hazardous materials indemnity by each of PREIT Associates, L.P. and The Macerich Partnership, L.P., and (vii) mortgages of the borrowers’ fee and leasehold interests in the properties that are part of the Fashion District Philadelphia project and certain other properties. The FDP Loan Agreement contains certain covenants typical for loans of its type.
Preferred Shares
We have 3,450,000 7.375% Series B Cumulative Redeemable Perpetual Preferred Shares (the “Series B Preferred Shares”) outstanding, 6,900,000 7.20% Series C Cumulative Redeemable Perpetual Preferred Shares (the “Series C Preferred Shares”) outstanding and 5,000,000 6.875% Series D Cumulative Redeemable Perpetual Preferred Shares (the “Series D Preferred Shares”) outstanding. Upon 30 days’ notice, we may redeem any or all of the Series B Preferred Shares at $25.00 per share plus any accrued and unpaid dividends. We may not redeem the Series C Preferred Shares and the Series D Preferred Shares before January 27, 2022 and September 15, 2022, respectively, except to preserve our status as a REIT or upon the occurrence of a Change of Control, as defined in the Trust Agreement addendums designating the Series C and Series D Preferred Shares, respectively. On and after January 27, 2022 and September 15, 2022, we may redeem any or all of the Series C Preferred Shares or the Series D Preferred Shares, respectively, at $25.00 per share plus any accrued and unpaid dividends. In addition, upon the occurrence of a Change of Control, we may redeem any or all of the Series C Preferred Shares or the Series D Preferred Shares for cash within 120 days after the first date on which such Change of Control occurs at $25.00 per share plus any accrued and unpaid dividends. The Series B Preferred Shares, the Series C Preferred Shares and the Series D Preferred Shares have no stated maturity, are not subject to any sinking fund or mandatory redemption and will remain outstanding indefinitely unless we redeem or otherwise repurchase them or they are converted.
In 2020, the Company suspended payment of its preferred share dividends. Dividends on the Series B, Series C and Series D preferred shares are cumulative and therefore will continue to accrue at an annual rate of $1.8436 per share, $1.80 per share and $1.7188 per share, respectively. As of March 31, 2021, the cumulative amount of unpaid dividends on our issued and outstanding preferred shares totaled $20.5 million. This consisted of unpaid dividends per share on the Series B, Series C and Series D preferred shares of $1.38 per share, $1.35 per share and $1.29 per share, respectively.
Both the First Lien Credit Agreement and the Second Lien Credit Agreement prohibit any redemption of preferred shares so long as such agreements remain in effect.
Mortgage Loan Activity—Consolidated Properties
On February 8, 2021, we entered into an amendment to our mortgage loan secured by the Woodland Mall in Grand Rapids, Michigan, which provides for an extension of the maturity date until December 10, 2021, with an option to extend an additional year if certain criteria are met. Among other things, the amendment also (i) reduces the cap on guarantor liability for PREIT Associates, L.P. to $10.0 million; (ii) restricts the lenders from exercising their rights and remedies under the guaranty until December 10, 2022, unless there is a bankruptcy filing with respect to the borrowers or guarantor; (iii) adjusts the interest rate; (iv) provides for the pledge of additional collateral as security for the borrowers’ obligations (including the anchor parcel at Woodland Mall which was released as collateral from our senior secured credit facilities); and (v) requires the borrowers to pay to the lenders a $5.0 million remargin payment. We capitalized $0.3 million of lender fees as additional debt issuance costs in connection with the amendment.
During the year ended December 31, 2020, we entered into forbearance and loan modification agreements for our consolidated properties Cherry Hill Mall, Cumberland Mall, Dartmouth Mall, Francis Scott Key Mall, Viewmont Mall, and Woodland Mall and for our unconsolidated partnership properties Metroplex and Springfield Mall. These arrangements allowed us to defer principal payments, and in some cases interest as well, on the mortgages between May and August of 2020 depending on the terms of the contract. At the end of each deferment period, the repayment period spans from four to six months to pay back the deferred amounts. The repayment periods ranged from August 2020 through February 2021 depending on the terms of the specific agreements. As of March 31, 2021, we had repaid all principal and interest deferrals.
In the second quarter of 2020, we defaulted on the mortgage loan secured by Valley View Mall due to a missed payment on June 1, 2020, and not paying the balloon payment of $27.3 million. In the third quarter of 2020, the operations of the property were transferred to a receiver and foreclosure was filed. We recorded a gain on derecognition of property during the third quarter 2020 and have recorded the mortgage balance and an offsetting contract asset on our consolidated balance sheets as of March 31, 2021 and December 31, 2020, both of which will be eliminated when the property foreclosure sale is completed.
37
Mortgage Loans
Our mortgage loans, which are secured by nine of our consolidated properties, are due in installments over various terms extending to the year 2025. Our nine properties include Valley View Mall, which was assigned to a receiver in the third quarter 2020. Although we have not yet conveyed Valley View Mall because foreclosure proceedings are ongoing, we no longer control or operate the property as a result of a court order assigning the receiver. The mortgage principal balance of Valley View Mall was $27.2 million at March 31, 2021 and December 31, 2020, which we will continue to recognize until the foreclosure process is completed. Six of these mortgage loans bear interest at fixed interest rates that range from 3.88% to 5.95% and had a weighted average interest rate of 4.09% at March 31, 2021. Three of our mortgage loans bear interest at variable rates and had a weighted average interest rate of 3.13% at March 31, 2021. The weighted average interest rate of all consolidated mortgage loans was 3.81% at March 31, 2021. Mortgage loans for properties owned by unconsolidated partnerships are accounted for in “Investments in partnerships, at equity” and “Distributions in excess of partnership investments,” and are not included in the table below.
The following table outlines the timing of principal payments and balloon payments pursuant to the terms of our mortgage loans on our consolidated properties as of March 31, 2021:
|
(in thousands of dollars) |
|
Total |
|
|
Remainder of 2021 |
|
|
2022-2023 |
|
|
2024-2025 |
|
||||
|
Principal payments |
|
$ |
46,803 |
|
|
$ |
15,942 |
|
|
$ |
20,050 |
|
|
$ |
10,811 |
|
|
Balloon payments |
|
|
829,182 |
|
|
|
208,548 |
|
|
|
409,288 |
|
|
|
211,346 |
|
|
Total |
|
|
875,985 |
|
|
$ |
224,490 |
|
|
$ |
429,338 |
|
|
$ |
222,157 |
|
|
Less: unamortized debt issuance costs |
|
|
1,059 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Carrying value of mortgage notes payable |
|
$ |
874,926 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Contractual Obligations
The following table presents our aggregate contractual obligations as of March 31, 2021 for the periods presented:
|
(in thousands of dollars) |
|
Total |
|
|
Remainder of 2021 |
|
|
2022-2023 |
|
|
2024-2025 |
|
|
Thereafter |
|
|||||
|
Mortgage loans |
|
$ |
875,985 |
|
|
$ |
224,490 |
|
(1) |
$ |
429,338 |
|
|
$ |
222,157 |
|
|
$ |
— |
|
|
Term Loans |
|
|
1,013,821 |
|
|
|
— |
|
|
|
1,013,821 |
|
(2) |
|
— |
|
|
|
— |
|
|
First Lien Revolving Facility |
|
|
54,830 |
|
|
|
— |
|
|
|
54,830 |
|
|
|
— |
|
|
|
— |
|
|
Interest on indebtedness(3) |
|
|
126,227 |
|
|
|
49,602 |
|
|
|
61,302 |
|
|
|
15,323 |
|
|
|
— |
|
|
Operating leases |
|
|
10,136 |
|
|
|
694 |
|
|
|
1,905 |
|
|
|
1,667 |
|
|
|
5,870 |
|
|
Ground leases |
|
|
52,838 |
|
|
|
1,298 |
|
|
|
3,168 |
|
|
|
3,103 |
|
|
|
45,269 |
|
|
Finance leases |
|
|
6,663 |
|
|
|
742 |
|
|
|
1,971 |
|
|
|
1,878 |
|
|
|
2,072 |
|
|
Development and redevelopment commitments(4) |
|
|
9,416 |
|
|
|
9,416 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Total |
|
$ |
2,149,916 |
|
|
$ |
286,242 |
|
|
$ |
1,566,335 |
|
|
$ |
244,128 |
|
|
$ |
53,211 |
|
|
(1) |
The 2021 balance includes $27.2 million for our mortgage loan secured by Valley View Mall, which was in default as of March 31, 2021. We do not expect to pay the principal balance remaining. |
|
(2) |
Includes our First Lien Term Loan of $384.1 million and the anticipated maturity date balance of our Second Lien Term Loan Facility of $629.7 million, which includes estimated capitalized PIK interest based on current interest rates. |
|
(3) |
Includes interest payments expected to be made on consolidated debt, including those in connection with interest rate swap agreements. |
|
(4) |
The timing of the payments of these amounts is uncertain. We expect that a significant majority of such payments (of which we include 100% of our obligations related to Fashion District Philadelphia, which opened in September 2019) will be made prior to December 31, 2021, but cannot provide any assurance that changed circumstances at these projects will not delay the settlement of these obligations. |
Interest Rate Derivative Agreements
As of March 31, 2021, we had interest rate swap agreements designated in qualifying hedging relationships outstanding with a weighted average base interest rate of 2.57% on a notional amount of $439.8 million, maturing on various dates through May 2023. As of March 31, 2021, our non-designated swaps outstanding with a weighted average base interest rate of 1.85% on a notional amount of $175.0 million, maturing on various dates through December 2021. We originally entered into these interest rate swap agreements in order to hedge the interest payments associated with our issuances of variable interest rate long term debt. The interest rate swap agreements are net settled monthly.
For derivatives that have been designated and that qualify as cash flow hedges of interest rate risk, the gain or loss on the derivative is recorded in “Accumulated other comprehensive (loss) income” and subsequently reclassified into “Interest expense, net” in the same periods during which the hedged transaction affects earnings. Through December 10, 2020, all of our derivatives were designated and qualified as cash flow hedges of interest rate risk.
On December 10, 2020 as a result of the Financial Restructuring, we de-designated seven of our interest rate swaps which were previously designated cash flow hedges against the 2018 Credit Facility and 7-year Term Loan, as the hedged forecasted transactions were no longer
38
probable to occur during the hedged time period due to the Financial Restructuring as described in Note 1. As such, the Company accelerated the reclassification of a portion of the amounts in other comprehensive (loss) income to earnings which resulted in a loss of $2.8 million that was recorded within interest expense, net in the consolidated statement of operations. Additionally, on December 10, 2020, the Company voluntarily de-designated the remaining thirteen interest swaps that were also previously designated as cash flow hedges against the 2018 Credit Facility and 7-year Term Loan. Upon de-designation, the accumulated other comprehensive (loss) income balance of each of these de-designated derivatives will be separately reclassified to earnings as the originally hedged forecasted transactions affect earnings. Through December 10, 2020, the changes in fair value of the derivatives were recorded to accumulated other comprehensive (loss) income in the consolidated balance sheets.
On December 22, 2020, we re-designated nine interest rate swaps with a notional amount of $375.0 million as cash flow hedges of interest rate risk against the First Lien Term Loan Facility. These interest rate swaps qualified for hedge accounting treatment with changes in the fair value of the derivatives recorded through accumulated other comprehensive (loss) income.
During the three months ended March 31, 2021 we had three designated swaps mature. As of March 31, 2021, we had 10 total derivatives which were designated as cash flow hedges.
We recognize all derivatives at fair value as either assets or liabilities in the accompanying consolidated balance sheets. Our derivative assets are recorded in “Deferred costs and other assets” and our derivative liabilities are recorded in “Fair value of derivative instruments.”
Over the next twelve months we estimate that $10.3 million will be reclassified as an increase to interest expense in connection with our designated derivatives. The recognition of these amounts could be accelerated in the event that we repay amounts outstanding on the debt instruments and do not replace them with new borrowings
Derivatives not designated as hedges are not speculative and are also used to manage the Company’s exposure to interest rate movements and other identified risks but do not meet the strict hedge accounting requirements. For swaps that were not re-designated subsequent to December 10, 2020, changes in the fair value of derivatives are recorded directly in earnings as interest expense in the consolidated statement of operations. During the three months ended March 31, 2021 we had four non-designated swaps mature. As of March 31, 2021, we had seven total derivatives which were non-designated.
CASH FLOWS
Net cash provided by operating activities totaled $16.2 million for the three months ended March 31, 2021 compared to net cash provided by operating activities of $14.4 million for the three months ended March 31, 2020. This increase in cash provided by operating activities was due to changes in working capital between periods primarily as a result of strong collections of outstanding accounts receivable in the current year first quarter, which are included in change in other assets in our statement of cash flows.
Cash flows used in investing activities were $3.0 million for the three months ended March 31, 2021 compared to cash flows used in investing activities of $28.8 million for the three months ended March 31, 2020. Cash flows used in investing activities for the three months ended March 31, 2021 included $1.0 million of additions to construction in progress and $1.9 million of investments in real estate improvements.
Cash flows used in investing activities for the three months ended March 31, 2020 included $8.0 million of proceeds from asset sales including the sale of three outparcels. Cash flows used in investing activities included additions to construction in progress of $20.2 million, investments in partnerships of $9.3 million (primarily at Fashion District Philadelphia), and real estate improvements of $2.4 million (primarily related to ongoing improvements at our properties).
Cash flows used in financing activities were $10.6 million for the three months ended March 31, 2021 compared to cash flows provided by financing activities of $6.4 million for the three months ended March 31, 2020. Cash flows used in financing activities for the three months ended March 31, 2021 included $9.5 million of principal payments on mortgage loans, along with $0.3 million of deferred financing costs paid for our Woodland Mall mortgage extension. We also had $0.6 million of shares retired under our equity compensation plan, net of shares issued.
Cash flows used in financing activities for the first three months of 2020 included aggregate dividends and distributions of $23.7 million, and principal installments on mortgage loans of $3.5 million, partially offset by $34.0 million of net borrowings under our 2018 Revolving Facility.
39
ENVIRONMENTAL
We are aware of certain environmental matters at some of our properties. We have, in the past, performed remediation of such environmental matters, and we are not aware of any significant remaining potential liability relating to these environmental matters or of any obligation to satisfy requirements for further remediation. We may be required in the future to perform testing relating to these matters. We have insurance coverage for certain environmental claims up to $10.0 million per occurrence and up to $10.0 million in the aggregate over our two year policy term. See our Annual Report on Form 10-K for the year ended December 31, 2020, in the section entitled “Item 1A. Risk Factors— Risks Related to Our Business and Our Properties—We might incur costs to comply with environmental laws, which could have an adverse effect on our results of operations.”
COMPETITION AND TENANT CREDIT RISK
Competition in the retail real estate market is intense. We compete with other public and private retail real estate companies, including companies that own or manage malls, power centers, strip centers, lifestyle centers, factory outlet centers, theme/festival centers and community centers, as well as other commercial real estate developers and real estate owners, particularly those with properties near our properties, on the basis of several factors, including location and rent charged. We compete with these companies to attract customers to our properties, as well as to attract anchor and non-anchor store and other tenants. Our malls and our other operating properties face competition from similar retail, destination dining and entertainment centers, including more recently developed or renovated centers that are near our properties. We also face competition from a variety of different retail formats, including internet retailers, discount or value retailers, home shopping networks, mail order operators, catalogs, and telemarketers. Our tenants face competition from companies at the same and other properties and from other retail formats as well, including internet retailers. This competition could have a material adverse effect on our ability to lease space and on the amount of rent and expense reimbursements that we receive.
The existence or development of competing retail properties and the related increased competition for tenants might, subject to the terms and conditions of the Credit Agreements, require us to make capital improvements to properties that we would have deferred or would not have otherwise planned to make and might also affect the total sales, occupancy and net operating income of such properties. Any such capital improvements, undertaken individually or collectively, would involve costs and expenses that could adversely affect our results of operations.
If we seek to make acquisitions, competitors (such as institutional investors, other REITs and other owner-operators of retail properties) might drive up the price we must pay for properties, parcels, other assets or other companies or might themselves succeed in acquiring those properties, parcels, assets or companies. In addition, our potential acquisition targets might find our competitors to be more attractive suitors if they have greater resources, are willing to pay more, or have a more compatible operating philosophy. We might not succeed in acquiring retail properties or development sites that we seek, or, if we pay a higher price for a property and/or generate lower cash flow from an acquired property than we expect, our investment returns will be reduced, which will adversely affect the value of our securities.
We receive a substantial portion of our operating income as rent under leases with tenants. At any time, any tenant having space in one or more of our properties could experience a downturn in its business that might weaken its financial condition. Such tenants might enter into or renew leases with relatively shorter terms. Such tenants might also defer or fail to make rental payments when due, delay or defer lease commencement, voluntarily vacate the premises or declare bankruptcy, which could result in the termination of the tenant’s lease or preclude the collection of rent in connection with the space for a period of time, and could result in material losses to us and harm to our results of operations. Also, it might take time to terminate leases of underperforming or nonperforming tenants and we might incur costs to remove such tenants. Some of our tenants occupy stores at multiple locations in our portfolio, and so the effect of any bankruptcy or store closings of those tenants might be more significant to us than the bankruptcy or store closings of other tenants. In addition, under many of our leases, our tenants pay rent based, in whole or in part, on a percentage of their sales. Accordingly, declines in these tenants’ sales directly affect our results of operations. Also, if tenants are unable to comply with the terms of their leases, or otherwise seek changes to the terms, including changes to the amount of rent, we might modify lease terms in ways that are less favorable to us. Given current conditions in the economy, certain industries and the capital markets, in some instances retailers that have sought protection from creditors under bankruptcy law have had difficulty in obtaining debtor-in-possession financing, which has decreased the likelihood that such retailers will emerge from bankruptcy protection and has limited their alternatives. All of these factors have been exacerbated by the impact of the COVID-19 pandemic in 2020 and 2021.
SEASONALITY
There is seasonality in the retail real estate industry. Retail property leases often provide for the payment of all or a portion of rent based on a percentage of a tenant’s sales revenue, or sales revenue over certain levels. Income from such rent is recorded only after the minimum sales levels have been met. The sales levels are often met in the fourth quarter, during the November/December holiday season. Also, many new and temporary leases are entered into later in the year in anticipation of the holiday season and a higher number of tenants vacate their space early in the year. As a result, our occupancy and cash flows are generally higher in the fourth quarter and lower in the first and second quarters. Our concentration in the retail sector increases our exposure to seasonality and has resulted, and is expected to continue to result, in a greater percentage of our cash flows being received in the fourth quarter.
40
INFLATION
Inflation can have many effects on financial performance. Retail property leases often provide for the payment of rent based on a percentage of sales, which might increase with inflation. Leases might also provide for tenants to bear all or a portion of operating expenses, which might reduce the impact of such increases on us. However, rent increases might not keep up with inflation, or if we recover a smaller proportion of property operating expenses, we might bear more costs if such expenses increase because of inflation.
FORWARD LOOKING STATEMENTS
This Quarterly Report on Form 10-Q for the quarter ended March 31, 2021 , together with other statements and information publicly disseminated by us, contain certain forward-looking statements that can be identified by the use of words such as “anticipate,” “believe,” “estimate,” “expect,” “project,” “intend,” “may” or similar expressions. Forward-looking statements relate to expectations, beliefs, projections, future plans, strategies, anticipated events, trends and other matters, including our expectations regarding the impact of COVID-19 on our business, that are not historical facts. These forward-looking statements reflect our current views about future events, achievements, results, cost reductions, dividend payments and the impact of COVID-19 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 the following:
|
|
• |
the effectiveness of our financial restructuring and any additional strategies that we may employ to address our liquidity and capital resources in the future; |
|
|
• |
our ability to achieve forecasted revenue and pro forma leverage ratio and generate free cash flow to further reduce indebtedness; |
|
|
• |
the COVID-19 global pandemic and the public health and governmental response, which have and may continue to exacerbate many of the risks listed herein; |
|
|
• |
changes in the retail and real estate industries, including bankruptcies, consolidation and store closings, particularly among anchor tenants; |
|
|
• |
current economic conditions, including current high rates of unemployment and its effects on consumer confidence and spending, and the corresponding effects on tenant business performance, prospects, solvency and leasing decisions; |
|
|
• |
our inability to collect rent due to the bankruptcy or insolvency of tenants or otherwise; |
|
|
• |
our ability to maintain and increase property occupancy, sales and rental rates; |
|
|
• |
increases in operating costs that cannot be passed on to tenants; |
|
|
• |
the effects of online shopping and other uses of technology on our retail tenants; |
|
|
• |
risks related to our development and redevelopment activities, including delays, cost overruns and our inability to reach projected occupancy or rental rates; |
|
|
• |
social unrest and acts of vandalism or violence at malls, including our properties, or at other similar spaces, and the potential effect on traffic and sales; |
|
|
• |
our ability to sell properties that we seek to dispose of or our ability to obtain prices we seek; |
|
|
• |
potential losses on impairment of certain long-lived assets, such as real estate, including losses that we might be required to record in connection with any disposition of assets; |
|
|
• |
our substantial debt and our ability to remain in compliance with our financial covenants under our debt facilities; |
|
|
• |
our ability to raise capital, including through sales of properties or interests in properties, subject to the terms of our Credit Agreements; and |
|
|
• |
potential dilution from any capital raising transactions or other equity issuances. |
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 herein and in our Annual Report on Form 10-K for the year ended December 31, 2020 in the section entitled “Item 1A. Risk Factors” and any subsequent reports we file with the SEC. We do not intend to update or revise any forward-looking statements to reflect new information, future events or otherwise.
41
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
The analysis below presents the sensitivity of the market value of our financial instruments to selected changes in market interest rates. As of March 31, 2021, our consolidated debt portfolio consisted of $874.9 million of fixed and variable rate mortgage loans (net of debt issuance costs), $54.8 million outstanding under our First Lien Revolver, which bore interest at a rate of 4.0%, $384.1 million borrowed under our First Lien Term Loan Facility, which bore interest at a rate of 6.2%, and $549.5 million borrowed under our Second Lien Term Loan Facility, which bore interest at a rate of 8.5%.
Our mortgage loans, which are secured by nine of our consolidated properties, are due in installments over various terms extending to October 2025. Our nine properties include Valley View Mall, which was assigned to a receiver in the third quarter 2020. Although we have not yet conveyed Valley View Mall because foreclosure proceedings are ongoing, we no longer control or operate the property as a result of court order assigning the receiver. The mortgage principal balance of Valley View Mall was $27.2 million at March 31, 2021 and December 31, 2020, which we will continue to recognize until the foreclosure process is completed. Six of our mortgage loans bear interest at fixed interest rates that range from 3.88% to 5.95%, and had a weighted average interest rate of 4.09% at March 31, 2021. Three of our mortgage loans bear interest at variable rates, a portion of which has been swapped to fixed rates, and had a weighted average interest rate of 3.13% at March 31, 2021. The weighted average interest rate of all consolidated mortgage loans was 3.81% at March 31, 2021. Mortgage loans for properties owned by unconsolidated partnerships are accounted for in “Investments in partnerships, at equity” and “Distributions in excess of partnership investments” on the consolidated balance sheets and are not included in the table below.
Our interest rate risk is monitored using a variety of techniques. The table below presents the principal amounts of the expected annual maturities due in the respective years and the weighted average interest rates for the principal payments in the specified periods:
|
|
|
Fixed Rate Debt |
|
|
Variable Rate Debt |
|
|||||||||||
|
(in thousands of dollars) For the Year Ending December 31, |
|
Principal Payments |
|
|
Weighted Average Interest Rate(1) |
|
|
Principal Payments |
|
|
|
Weighted Average Interest Rate(1) |
|
||||
|
2021 |
|
$ |
38,996 |
|
|
|
4.00 |
% |
|
$ |
185,494 |
|
|
|
|
3.59 |
% |
|
2022 |
|
|
302,729 |
|
|
|
3.96 |
% |
|
|
1,055,376 |
|
(2) |
|
|
7.35 |
% |
|
2023 |
|
|
59,697 |
|
|
|
3.99 |
% |
|
|
— |
|
|
|
|
— |
|
|
2024 |
|
|
6,405 |
|
|
|
4.03 |
% |
|
|
— |
|
|
|
|
— |
|
|
2025 and thereafter |
|
|
215,752 |
|
|
|
4.04 |
% |
|
|
— |
|
|
|
|
— |
|
|
(1) |
Based on the weighted average interest rates in effect as of March 31, 2021 and does not include the effect of our interest rate swap derivative instruments as described below. |
|
(2) |
Includes term loan debt of $933.6 million under our First Lien Term Loan Facility and Second Lien Term Loan Facility with a weighted average interest rate of 7.57% as of March 31, 2021. |
As of March 31, 2021, we had $1,240.9 million of variable rate debt. To manage interest rate risk and limit overall interest cost, we may employ interest rate swaps, options, forwards, caps and floors, or a combination thereof, depending on the underlying exposure. Interest rate differentials that arise under swap contracts are recognized in interest expense over the life of the contracts. If interest rates rise, the resulting cost of funds is expected to be lower than that which would have been available if debt with matching characteristics was issued directly. Conversely, if interest rates fall, the resulting costs would be expected to be, and in some cases have been, higher. We may also employ forwards or purchased options to hedge qualifying anticipated transactions. Gains and losses are deferred and recognized in net loss in the same period that the underlying transaction occurs, expires or is otherwise terminated. See Note 6 of the notes to our unaudited consolidated financial statements for further information.
As of March 31, 2021, we had interest rate swap agreements outstanding with a weighted average base interest rate of 2.36% on a notional amount of $614.8 million, maturing on various dates through May 2023. See Item 2. Management’s Discussion and Analysis—Liquidity and Capital Resources—Interest Rate Derivative Agreements for a discussion of changes to the designation of certain of our interest rate swap agreements in 2021.
Changes in market interest rates have different effects on the fixed and variable rate portions of our debt portfolio. A change in market interest rates applicable to the fixed portion of the debt portfolio affects the fair value, but it has no effect on interest incurred or cash flows. A change in market interest rates applicable to the variable portion of the debt portfolio affects the interest incurred and cash flows, but does not affect the fair value. The following sensitivity analysis related to our debt portfolio, which includes the effects of our interest rate swap agreements, assumes an immediate 100 basis point change in interest rates from their actual March 31, 2021 levels, with all other variables held constant.
A 100 basis point increase in market interest rates would have resulted in a decrease in our net financial instrument position of $33.0 million at March 31, 2021. A 100 basis point decrease in market interest rates would have resulted in an increase in our net financial instrument position of $14.0 million at March 31, 2021. Based on the variable rate debt included in our debt portfolio at March 31, 2021, a 100 basis point increase in
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interest rates would have resulted in an additional $6.3 million in interest expense annually. A 100 basis point decrease would have reduced interest incurred by $6.3 million annually.
Because the information presented above includes only those exposures that existed as of March 31, 2021, it does not consider changes, exposures or positions which have arisen or could arise after that date. The information presented herein has limited predictive value. As a result, the ultimate realized gain or loss or expense with respect to interest rate fluctuations will depend on the exposures that arise during the period, our hedging strategies at the time and interest rates.
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ITEM 4. CONTROLS AND PROCEDURES.
We are committed to providing accurate and timely disclosure in satisfaction of our SEC reporting obligations. In 2002, we established a Disclosure Committee to formalize our disclosure controls and procedures. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that:
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information that we are required to disclose in our reports under the Securities Exchange Act of 1934 (the “Exchange Act”) is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms; and |
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material information required to be disclosed in our reports filed under the Exchange Act is accumulated and communicated to management, including our principal executive and principal financial officers, as appropriate, to allow timely decisions regarding required disclosure. |
Our Chief Executive Officer and Chief Financial Officer evaluated our disclosure controls and procedures as of the end of the period covered by this quarterly report on Form 10-Q. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that as of March 31, 2021, our disclosure controls and procedures were not effective due to a material weakness in our internal control over financial reporting.
The ineffectiveness of our internal control over financial reporting was due to the following material weakness in our internal control over financial reporting which we identified and previously reported in Item 9A of our Annual Report on Form 10-K for the year ended December 31, 2020: (i) attracting and retaining sufficient personnel with requisite financial expertise, (ii) the assessment of the risk of fraud, including risks of management override of controls and proper segregation of duties, and (iii) assessing changes in the external environment and the potential impact of those changes on the design, operating effectiveness and monitoring of internal controls over financial reporting.
Management’s Remediation Plan
The Company and its Board of Trustees are committed to maintaining a strong internal control environment. In order to remediate the material weakness described above, we intend to implement additional policies and procedures and take necessary actions, which are expected to include:
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Implementing policies and procedures to enhance independent review and documentation of journal entries, including segregation of duties; |
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Enhancing our procedures in certain management review controls, including the thresholds utilized for review and the response to outliers; |
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Hiring additional finance and accounting staff; |
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Developing policies and procedures to enhance the precision of management review of financial statement information and control impact of changes in the external environment; and |
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Reevaluating our monitoring activities for relevant controls. |
Management is continuing the process of implementing and monitoring the effectiveness of these and other processes, procedures and controls and will make any further changes deemed appropriate. Management believes our planned remedial efforts will effectively remediate the identified material weakness, but remediation will only be deemed complete after the applicable remedial controls operate for a sufficient period of time and management is able to conclude, through testing, that the controls are operating effectively. As we continue to evaluate and work to improve our internal control over financial reporting, management may determine it is necessary to take additional measures to address control deficiencies or determine it necessary to modify the remediation plan described above.
Changes in Internal Control over Financial Reporting
Other than the material weakness identified in the fourth quarter of 2020, and designing changes intended to remediate the material weakness, there were no changes in our internal control over financial reporting during the quarter ended March 31, 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II—OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
In the normal course of business, we have become and might in the future become involved in legal actions relating to our business, including but not limited to commercial disputes, rent collection actions and other matters related to the ownership and operation of our properties and the properties that we manage for third parties. In management’s opinion, the resolution of any such pending legal actions is not expected to have a material adverse effect on our consolidated financial position or results of operations.
On November 1, 2020, we and certain of our wholly owned subsidiaries commenced voluntary cases under chapter 11 of title 11 of the United States Bankruptcy Code in the United States Bankruptcy Court for the District of Delaware under the caption In re Pennsylvania Real Estate Investment Trust, et al. and filed our prepackaged chapter 11 plan of reorganization with the Bankruptcy Court. On November 30, 2020, the Bankruptcy Court entered an order confirming the Plan. The Plan became effective and we subsequently emerged from bankruptcy on December 10, 2020. The final decree closing the bankruptcy case was entered by the Bankruptcy Court on March 11, 2021. Refer to Note 1 to our unaudited consolidated financial statements —Financial Restructuring for a detailed description of these matters.
ITEM 1A. RISK FACTORS.
In addition to the other information set forth in this report, you should carefully consider the risks that could materially affect our business, financial condition or results of operations, which are discussed under the caption “Risk Factors” in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2020.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
Issuer Purchases of Equity Securities
We did not acquire any shares in the three months ended March 31, 2021.
Limitations upon the Payment of Dividends
The Credit Agreements provide generally that we may only make dividend payments in the minimum amount necessary to maintain our status as a REIT. We must maintain our status as a REIT at all times.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
Preferred Dividend Arrearage
Dividends on the Series B, Series C and Series D preferred shares are cumulative and therefore will continue to accrue at an annual rate of $0.4609 per share, $0.45 per share and $0.4297 per share, respectively. As of May 7, 2021, the cumulative amount of unpaid dividends on our issued and outstanding preferred shares totaled $20.5 million. This consisted of unpaid dividends per share on the Series B, Series C and Series D preferred shares of $1.38 per share, $1.35 per share and $1.29 per share, respectively.
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ITEM 6. EXHIBITS.
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3.1 |
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3.2 |
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3.3 |
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3.4 |
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3.5 |
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3.6 |
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3.7 |
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3.8 |
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10.1 |
First Amendment to Second Lien Credit Agreement, dated as of February 8, 2021, by and among PREIT Associates, L.P., PREIT-RUBIN, Inc., Pennsylvania Real Estate Investment Trust, and the financial institutions party thereto and their assignees, filed as Exhibit 10.1 to PREIT’s Current Report on Form 8-K filed on February 12, 2021, is incorporated herein by reference. |
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10.2* |
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10.3* |
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10.4+ |
Amendment No. 1 to Pennsylvania Real Estate Investment Trust Amended and Restated 2018 Equity Incentive Plan, filed as Exhibit 10.1 to PREIT’s Current Report on Form 8-K filed on April 5, 2021, is incorporated herein by reference. |
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10.5+* |
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10.6+* |
Form of Restricted Share Unit and Dividend Equivalent Rights Award Agreement. |
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10.7+* |
Form of Performance Share Unit and Dividend Equivalent Rights Award Agreement. |
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31.1* |
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31.2* |
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32.1** |
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32.2** |
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101.INS* |
Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. |
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101.SCH* |
Inline XBRL Taxonomy Extension Schema Document. |
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101.CAL* |
Inline XBRL Taxonomy Extension Calculation Linkbase Document. |
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101.DEF* |
Inline XBRL Taxonomy Extension Definition Linkbase Document. |
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101.LAB* |
Inline XBRL Taxonomy Extension Label Linkbase Document. |
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101.PRE* |
Inline XBRL Taxonomy Extension Presentation Linkbase Document. |
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104* |
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101.INS). |
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Filed herewith |
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Furnished herewith |
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Management contract or compensatory plan or arrangement. |
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SIGNATURE OF REGISTRANT
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
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PENNSYLVANIA REAL ESTATE INVESTMENT TRUST |
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Date: |
May 7, 2021 |
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By: |
/s/ Joseph F. Coradino |
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Joseph F. Coradino |
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Chairman and Chief Executive Officer |
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By: |
/s/ Mario C. Ventresca, Jr. |
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Mario C. Ventresca, Jr. |
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Executive Vice President and Chief Financial Officer |
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By: |
/s/ Sathana Semonsky |
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Sathana Semonsky |
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Vice President and Chief Accounting Officer |
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Exhibit 10.2
AGENCY RESIGNATION, APPOINTMENT,
ACCEPTANCE AND WAIVER AGREEMENT
This AGENCY RESIGNATION, APPOINTMENT, ACCEPTANCE AND WAIVER AGREEMENT, dated as of April 13, 2021 (this “Agreement”), is entered into among Wells Fargo Bank, National Association (“Wells Fargo”), as resigning Administrative Agent (as defined below) (in such capacity, the “Resigning Agent”), Wilmington Savings Fund Society, FSB (“WSFS”), as the successor Administrative Agent (as defined below), PREIT Associates, L.P., a Delaware limited partnership (“PREIT”), PREIT-RUBIN, INC., a Pennsylvania corporation (“PREIT-RUBIN”), Pennsylvania Real Estate Investment Trust, a Pennsylvania business trust (the “Parent”; together with PREIT and PREIT-RUBIN, each individually, a “Borrower, and collectively, the “Borrower”) and those Lenders (as defined below) which are parties hereto (constituting Requisite Lenders under the Credit Agreement). All signatories of this Agreement will be referred to jointly as the “Parties”.
WHEREAS, reference is made to that certain Amended and Restated First Lien Credit Agreement, dated as of December 10, 2020 (as amended, restated, amended and restated, supplemented or otherwise modified from time to time, the “Credit Agreement”), by and among PREIT, PREIT-RUBIN, the Parent, the lenders from time to time party thereto (the “Lenders”) and Wells Fargo, as administrative agent (in such capacity, and in its capacity as administrative agent under the other Loan Documents, the “Administrative Agent”). Unless otherwise indicated, all capitalized terms used herein and not otherwise defined herein shall have the respective meanings assigned to such terms in the Credit Agreement;
WHEREAS, reference is made to that certain Amended and Restated Guaranty, dated as of December 10, 2020 (as amended, amended and restated, supplemented or otherwise modified through the date hereof, the “Guaranty”) entered into by the Guarantors party thereto in favor of the Administrative Agent, for its benefit and the benefit of the other Guarantied Parties;
WHEREAS, reference is made to that certain Amended and Restated Collateral Agreement, dated as of December 10, 2020 (as amended, amended and restated, supplemented or otherwise modified through the date hereof, the “Collateral Agreement”), entered into by PREIT, PREIT-RUBIN, the Parent and certain Subsidiaries of the Borrower in favor of the Administrative Agent, for its benefit and the benefit of the Secured Parties;
WHEREAS, reference is made to that certain Amended and Restated Pledge Agreement, dated as of December 10, 2020 (as amended, amended and restated, supplemented or otherwise modified through the date hereof, the “Pledge Agreement”) entered into by and among PREIT, PREIT-RUBIN, the Parent, certain Subsidiaries of the Borrower and the Administrative Agent, for its benefit and the benefit of the Lenders;
WHEREAS, reference is made to that certain Intercreditor Agreement, dated as of December 10, 2020 (as amended, amended and restated, supplemented or otherwise modified through the date hereof, the “Intercreditor Agreement”), by and among the Borrower, the Grantors party thereto, Well Fargo, as administrative agent, collateral agent and Representative (as defined therein) for the First Lien Secured Parties (as defined therein), Wells Fargo, as administrative agent, collateral agent and Representative (as defined therein) for the Second Lien Secured Parties (as defined therein), and each additional Senior Representative (as defined therein) and Second Priority Representative (as defined therein) from time to time party thereto;
WHEREAS, on February 10, 2021, in accordance with Section 11.8 of the Credit Agreement, the Resigning Agent provided written notice to the Borrower and the Lenders of its resignation as the Administrative Agent under the Credit Agreement, the Guaranty, the Collateral Agreement, the Pledge Agreement and the other Loan Documents;
WHEREAS, the Lenders signatory hereto constitute the Requisite Lenders under the Credit Agreement and, pursuant to Section 11.8 of the Credit Agreement, the Requisite Lenders desire to appoint WSFS to act as the Administrative Agent under the Credit Agreement, the Guaranty, the Collateral Agreement, the Pledge Agreement and the other Loan Documents (in such capacities, the “Successor Agent”); and
WHEREAS, the Successor Agent has agreed to accept its appointment and to serve as the Administrative Agent.
NOW, THEREFORE, the Parties agree with regard to each of the following:
1.Resignation of Resigning Agent. On the Effective Date (as defined in Section 14) and without any further act or deed on the part of the Resigning Agent, any of the parties to the Credit Agreement, the Requisite Lenders or any other Person, the Resigning Agent shall be discharged from its duties and obligations as Administrative Agent under the Credit Agreement and the other Loan Documents, other than its duties and obligations under Section 12.9 of the Credit Agreement; provided, that the provisions of Article XI and Sections 12.2 and 12.10 of the Credit Agreement (as they exist on the date hereof and without giving effect to any amendment, waiver or other future modification thereto that is in any manner adverse to the Resigning Agent or its Affiliates) shall continue in effect for the benefit of the Resigning Agent, its sub-agents and their respective Affiliates in respect of any actions taken or omitted to be taken by any of them while the Resigning Agent was acting as Administrative Agent under the Credit Agreement and the other Loan Documents.
2.Appointment of Successor Agent; Acceptance of Appointment by Successor Agent. Effective as of the Effective Date, (a) the Requisite Lenders hereby appoint, in accordance with Section 11.8 of the Credit Agreement, the Successor Agent as the Administrative Agent under the Credit Agreement, the Guaranty, the Collateral Agreement, the Pledge Agreement and the other Loan Documents, (b) the Successor Agent hereby accepts its appointment as the Administrative Agent under the Credit Agreement, the Guaranty, the Collateral Agreement, the Pledge Agreement and the other Loan Documents; and (c) the Successor Agent, as the Administrative Agent shall succeed to, and be vested with, all of the rights, powers, privileges and duties of the Resigning Agent (other than any rights to indemnity payments owed to the Resigning Agent) under the Credit Agreement, the Guaranty, the Collateral Agreement, the Pledge Agreement and the other Loan Documents.
3.Borrower Acknowledgment. The Borrower hereby acknowledges and consents to the appointment of the Successor Agent as the “Administrative Agent” under the Credit Agreement, the Guaranty, the Collateral Agreement, the Pledge Agreement and the other Loan Documents.
4.Resignation Effective Date. Each of the Borrower and the Requisite Lenders acknowledges and agrees that the effective date of resignation of the Resigning Agent shall be the Effective Date for all purposes under the Credit Agreement and the other Loan Documents.
5.Delineation of Responsibilities.
(a)The Parties agree that neither Wells Fargo, in its individual capacity and in its capacity as the Resigning Agent, nor any of its Affiliates, shall bear any responsibility or liability for any
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actions taken or omitted to be taken by the Successor Agent from and after the Effective Date pursuant to this Agreement, the Credit Agreement or the other Loan Documents or any of the transactions contemplated thereby.
(b)The Parties (other than the Resigning Agent) agree that WSFS, in its individual capacity and in its capacity as the Successor Agent, shall bear no responsibility or liability for any actions taken or omitted to be taken by Wells Fargo, in its capacity as the Resigning Agent pursuant to this Agreement, the Credit Agreement or the other Loan Documents or the transactions contemplated thereby.
(c)The Resigning Agent agrees, at the Borrower’s expense, to execute and deliver such instruments (including, for the avoidance of doubt, the Perfection and Assignment Documents (as defined below)) as may be prepared by the Borrower (or its designee) and/or by the Successor Agent (or its designee) and are in form and substance reasonably satisfactory to the Borrower and, as applicable, the Resigning Agent, and shall do such other things as the Successor Agent may reasonably request so as to more fully and certainly vest and confer upon the Successor Agent the rights, powers, privileges and duties described in Section 2 above. It is understood and agreed that the Resigning Agent shall not be required to take any action or exercise any right, power or privilege (including, without limitation, the exercise of any rights or remedies) under the Loan Documents unless expressly and reasonably requested in writing by the Successor Agent. The Resigning Agent shall be entitled to rely upon, and shall not incur any liability for relying upon, any notice, request, certificate, consent, statement, instrument, document or other writing believed by it to be genuine and to have been signed or sent by the proper person. The Resigning Agent may also rely upon any statement made to it orally or by telephone and believed by it to have been made by the proper person, and shall not incur any liability for relying thereon. The Resigning Agent may, at the Borrower’s expense, consult with legal counsel, independent accountants and other experts selected by it, and shall not be liable for any action taken or not taken by it in accordance with the advice of any such counsel, accountants or experts. Notwithstanding the foregoing, the Resigning Agent shall be reasonably satisfied that the delivery of any information requested of it would not breach any confidentiality restrictions binding on it and, provided further, that nothing in this paragraph shall require the Resigning Agent to incur any expenses or liabilities for which it would not be entitled to reimbursement or indemnification under this Agreement or the Loan Documents.
6.Covenants of Successor Agent. The Successor Agent agrees to be bound by the provisions of the Credit Agreement and the other Loan Documents and will perform in accordance with its terms all the obligations which by the terms of the Credit Agreement and the other Loan Documents are required to be performed by it as the Successor Agent.
7.Intercreditor Agreement. The Successor Agent acknowledges and agrees that it shall hereby be vested with all the rights and obligations of the “First Lien Administrative Agent” under, and shall be bound by the terms of, the Intercreditor Agreement in its capacity as administrative agent and collateral agent for the holders of the First Lien Obligations (as defined in the Intercreditor Agreement). The Successor Agent shall constitute the “First Lien Administrative Agent” under (and as defined in) the Intercreditor Agreement. Notwithstanding anything herein to the contrary, the lien and security interest granted to the Resigning Agent, as resigning First Lien Administrative Agent (as defined in the Intercreditor Agreement) or the Successor Agent, as successor First Lien Administrative Agent (as defined in the Intercreditor Agreement) for the benefit of the secured parties hereunder, pursuant to this Agreement and the exercise of any right or remedy by the First Lien Administrative Agent (as defined in the Intercreditor Agreement) and the other secured parties hereunder are subject to the provisions of the Intercreditor Agreement. In the event of any conflict or inconsistency between the provisions of the Intercreditor Agreement and this Agreement, the provisions of the Intercreditor Agreement shall control.
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8.Perfection and Assignment of Collateral Documents. The Successor Agent hereby appoints the Resigning Agent as its agent (in such capacity, the “Sub-Agent”) solely for the purpose of perfecting and continuing the perfection of the Successor Agent’s Liens in that part of the Collateral that is in the possession or control of the Resigning Agent (or in the possession or control of its agents or bailees), or is the subject of any perfection instruments in favor of the Resigning Agent or other agreements or documents pertaining to the Collateral in favor of the Resigning Agent (such Collateral, the “Pledged Collateral”) until the Perfection Date. Wells Fargo hereby accepts such appointment as the Sub-Agent; provided however, that with respect to each Loan Document, Wells Fargo shall only act as Sub-Agent until such time as the Successor Agent is substituted thereunder (whether by operation of law, or by subsequent amendment, assignment, filing or other instrument) or, in the case of any possessory Collateral held by Wells Fargo after the Effective Date, until the Perfection Date. Notwithstanding anything herein to the contrary, the Sub-Agent agrees to continue to hold collateral security on behalf of the Secured Parties pursuant to the Loan Documents until such time as the Perfection and Assignment Documents (as defined below), including those set forth on Schedule I hereto, have been executed, delivered and, as applicable, recorded (the “Perfection Date”). Without limiting the generality of the foregoing, any and all references to “Wells Fargo Bank, National Association” on any publicly filed document, to the extent such filing relates to Liens and security interests assigned to the Successor Agent for the benefit of the Secured Parties hereby and until the Perfection Date, with respect to such Liens and security interests, constitute a reference to “Wells Fargo Bank, National Association” as the Sub-Agent hereunder and the nominee and collateral representative of the Successor Agent. It is understood that neither the Resigning Agent nor Sub-Agent shall have any duties or responsibilities to the Successor Agent, any Lender or the Loan Parties except as expressly provided herein. All of such Liens and security interests in the Pledged Collateral shall in all respects be continuing and in effect following execution and delivery of this Agreement and are hereby ratified and reaffirmed by the Loan Parties. Each of the Lenders acknowledge and agree that the Successor Agent shall have no obligation for (a) perfecting, maintaining, monitoring, preserving or protecting the security interest or Lien granted under the Credit Agreement, any other Loan Document, or any agreement instrument contemplated hereby or thereby; (b) the filing, re-filing, recording, re-recording, or continuing of any document, financing statement, mortgage, assignment, notice, instrument of further assurance, or other instrument in any public office at any time or times; or (c) providing, maintaining, monitoring, or preserving insurance on or the payment of taxes with respect to any Collateral.
9.Perfection and Assignment Documents. The Resigning Agent agrees to (i)(A) execute and deliver such instruments as may be prepared by the Successor Agent or its designee and are in form and substance reasonably satisfactory to the Resigning Agent and the Successor Agent, and (B) do such other things as the Successor Agent may reasonably request, in each case, so as to more fully and certainly vest and confirm upon the Successor Agent the rights, powers, privileges, obligations, duties and protections described in Section 2 hereof, and (ii)(A) assign or otherwise transfer to the Successor Agent all (1) UCC financing statements and (2) other perfection documentation (including, without limitation, an assignment of record of all publicly recorded perfection instruments), in each case, (x) with respect to liens encumbering the Collateral securing the Obligations and (y) pursuant to such instruments as may be prepared by the Successor Agent or its designee in form and substance reasonably satisfactory to the Resigning Agent and the Successor Agent and (B) physically deliver to the Successor Agent all possessory Pledged Collateral, if any, held by the Resigning Agent with respect to liens encumbering the Pledged Collateral securing the Obligations. All of the instruments and documentation described in this Section 9 (collectively, the “Perfection and Assignment Documents”) shall be prepared and (if applicable) recorded publicly, at the sole cost and expense of the Loan Parties.
10.Further Assurances; Expenses. Each of the Loan Parties agrees (i) to promptly take such action, as may be reasonably requested in writing by the Successor Agent, as is necessary to carry out the intent of this Agreement, including, without limitation, the execution and delivery of any
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Perfection and Assignment Document that are in form and substance reasonably satisfactory to the Borrower and (ii) that each of the Resigning Agent and the Successor Agent shall promptly receive from the Borrower all reasonable and documented out-of-pocket fees, costs and expenses of the Resigning Agent and the Successor Agent, as applicable (but limited in the case of legal fees, costs and expenses to all reasonable and documented out-of-pocket legal fees, costs and expenses of one counsel for each of the Resigning Agent and the Successor Agent) in connection with (x) the preparation, execution, and delivery of this Agreement and the Perfection and Assignment Documents, and (y) the filing and/or recordation of the Perfection and Assignment Documents.
11.Definition of Administrative Agent in Credit Agreement and other Loan Documents. The Parties hereby further agree and acknowledge that, from and after the Effective Date, (a) the Successor Agent shall be, and shall be deemed to be, the “Administrative Agent” under the Credit Agreement and the other Loan Documents and (b) the Successors Agent’s only role under the Credit Agreement and the other Loan Documents is that of Administrative Agent and nothing herein shall be construed to deem the Successor Agent a Lender under the Credit Agreement, or to impose on the Successor Agent actions, duties or obligations of Lenders thereunder (including any obligation to fund Loans). In furtherance of the foregoing, all defined terms referencing or appointing the Resigning Agent as Administrative Agent in the Credit Agreement or the other Loan Documents shall be deemed amended from and after the Effective Date to reference the Successor Agent as the Administrative Agent.
12.Payments. Notwithstanding any other provision herein or in any other Loan Documents to the contrary, on and after the Effective Date, all payments of principal, interest, fees and other Obligations payable by the Borrower under the Loan Documents to the Administrative Agent shall be payable to the Successor Agent, as and when such amounts become due and payable pursuant to the Loan Documents. In the event that, after the Effective Date, the Resigning Agent receives any payment or any other amount owing to any Lender or the Successor Agent under the Credit Agreement or any other Loan Document, or receives any instrument, agreement, report, financial statement, insurance policy, notice or other document, the Resigning Agent agrees to promptly forward the same to the Successor Agent and to hold the same in trust for the Successor Agent until so forwarded. The Parties hereto agree that any provision of any of the Loan Documents directing the Loan Parties to make payment to the Resigning Agent shall be hereby amended to direct the Loan Parties to make payment to the account designated by the Successor Agent to the Borrower from time to time.
13.Amendments to Credit Agreement.
(a)Effective as of the Effective Date, the Loan Parties, the Requisite Lenders and the Successor Agent hereby agree that the Credit Agreement shall be amended as follows:
(i)The following defined terms in Section 1.1 of the Credit Agreement are hereby amended and restated in their entirety as follows:
“Fee Letter” means that certain fee letter dated as of April 13, 2021, by and among the Parent, PREIT, PREIT-RUBIN and WSFS and each other fee letter entered into with an Arranger in connection with the facilities under this Agreement.
“Federal Funds Rate” means, for any period, a fluctuating interest rate per annum equal for each day during such period to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System, as published for such day (or, if such day is not a Business Day, for the immediately preceding Business Day) by the Federal Reserve Bank of New
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York, or, if such rate is not so published for any day which is a Business Day, the average of the quotations for such day on such transactions received by the Administrative Agent from two (2) Federal Funds brokers of recognized standing selected by the Administrative Agent. If the Federal Funds Rate determined as provided above would be less than zero, the Federal Funds Rate shall be deemed to be zero.
“Issuing Bank” means, any Revolving Lender which is requested by the Borrower, and which agrees in its sole discretion, to issue Letters of Credit pursuant to Section 2.5 (and/or any Affiliate of the foregoing Persons performing obligations on its behalf and reasonably acceptable to the Borrower).”
“LIBOR” means, with respect to any LIBOR Loan for any Interest Period, the rate of interest obtained by dividing (i) the rate of interest per annum determined on the basis of the rate as set by the ICE Benchmark Administration (“ICE”) (or the successor thereto if ICE is no longer making such rate available) for deposits in Dollars for a period equal to the applicable Interest Period as published on the applicable Bloomberg screen page (or any applicable successor page) at approximately 11:00 a.m. (London time) two (2) Business Days prior to the first day of the applicable Interest Period by (ii) a percentage equal to 1 minus the Eurodollar Reserve Percentage. If, for any reason, the rate referred to in the preceding clause (i) does not appear on the applicable Bloomberg screen page (or any applicable successor page), then the rate to be used for such clause (i) shall be determined by the Administrative Agent to be the arithmetic average of the rate per annum at which deposits in Dollars would be offered by first class banks in the London interbank market to the Administrative Agent at approximately 11:00 a.m. (London time) two (2) Business Days prior to the first day of the applicable Interest Period for a period equal to such Interest Period. Any change in the maximum rate of reserves described in the preceding clause (ii) shall result in a change in LIBOR on the date on which such change in such maximum rate becomes effective. Notwithstanding the foregoing, (i) in no event shall LIBOR be less than 0.50%, and (ii) if a Benchmark Transition Event or an Early Opt-in Election, as applicable, and its related Benchmark Replacement Date have occurred with respect to LIBOR, then “LIBOR” means the applicable Benchmark Replacement to the extent that such Benchmark Replacement has become effective pursuant to Exhibit N.
“Prime Rate” means, at any time, the rate of interest per annum publicly announced from time to time by the Administrative Agent as its prime rate. Each change in the Prime Rate shall be effective as of the opening of business on the day such change in such prime rate occurs. The rate announced publicly by the Administrative Agent as its prime rate is an index or base rate and shall not necessarily be its lowest or best rate charged to its customers or other banks.
“Principal Office” means the office of the Administrative Agent located at 500 Delaware Avenue, Wilmington, DE 19801, or any other subsequent office that the Administrative Agent shall have specified by written notice to the Borrower and the Lenders as the Principal Office referred to herein, to which payments due are to be made and at which Loans will be disbursed.
6
(ii)Sections 4.2(a) and 4.2(b) of the Credit Agreement are hereby amended by deleting the respective references to the parenthetical “(or such shorter period as may be acceptable to the Administrative Agent in its sole discretion)”.
(iii)Section 11.4 of the Credit Agreement is hereby amended and restated in its entirety as follows:
“Each Titled Agent, as a Lender or as a Specified Derivatives Provider, as the case may be, shall have the same rights and powers under this Agreement and any other Loan Document and under any Specified Derivatives Contract, as the case may be, as any other Lender or Specified Derivatives Provider and may exercise the same as though it were not a Titled Agent, as the case may be; and the term “Lender” or “Lenders” shall, unless otherwise expressly indicated, include a Titled Agent, in each case, in its individual capacity. The Titled Agents and their respective Affiliates may each accept deposits from, maintain deposits or credit balances for, invest in, lend money to, act as trustee under indentures of, serve as financial advisor to, and generally engage in any kind of business with any Borrower, any other Loan Party or any other Affiliate thereof as if it were any other bank and without any duty to account therefor to the other Lenders or any other Specified Derivatives Providers. Further, the Titled Agents and their respective Affiliates may each accept fees and other consideration from the Borrower for services in connection with this Agreement or any other Specified Derivatives Contract, or otherwise without having to account for the same to the Issuing Banks, the other Lenders or any other Specified Derivatives Providers. The Issuing Banks and the Lenders acknowledge that, pursuant to such activities, the Titled Agents and their respective Affiliates may receive information regarding the Borrower, other Loan Parties, other Subsidiaries and other Affiliates (including information that may be subject to confidentiality obligations in favor of such Person) and acknowledge that the Titled Agents and their respective Affiliates shall be under no obligation to provide such information to them.”
14.Conditions to Effectiveness. This Agreement shall be effective as of the date hereof (the “Effective Date”), which is the date on which (i) the Resigning Agent and the Successor Agent shall have received this Agreement, executed and delivered by a duly authorized officer of the Resigning Agent, the Successor Agent, the Requisite Lenders and the Borrower, (ii) the Successor Agent shall have received a counterpart of the Successor Agent Fee Letter (defined below) duly executed by the Borrower and the Successor Agent and (iii) each of the Resigning Agent and the Successor Agent have received from Borrower all reasonable and documented out-of-pocket fees, costs and expenses of such parties or their Affiliates invoiced at least one (1) Business Day prior to the Effective Date, in each case, in connection with (x) the preparation, execution, and delivery of this Agreement and the Perfection and Assignment Documents, and (y) the filing and/or recordation the Perfection and Assignment Documents. Until such date, the Resigning Agent shall continue to have full authority to act as Administrative Agent in accordance with the terms of the Credit Agreement and the other Loan Documents.
15.Representations and Warranties of the Resigning Agent. The Resigning Agent hereby represents and warrants the following to the Successor Agent:
(a)Loan Status. Schedule II sets out the outstanding principal amount of, and accrued interest payable on, the Loans as of the Effective Date;
7
(b)Current Lenders. Schedule III sets forth, based on the Register, as of the Effective Date, a schedule of the Lenders and the outstanding balances owing to each such Lender under the Credit Agreement.
(c)Documents. Schedule IV is a list of the material Loan Documents delivered to the Successor Agent as of the Effective Date. There are no amendments, supplements, waivers or consents to the Loan Documents to the knowledge of the Resigning Agent in the possession of the Resigning Agent except as set forth on Schedule IV;
(d)Authority. The Resigning Agent is duly authorized to execute and perform its obligations under this Agreement; and
(e)Possessory Pledged Collateral. Schedule I hereto sets forth all of the possessory Pledged Collateral (including, without limitation, all stock certificates and promissory notes), if any, held by the Resigning Agent for the benefit of the Lenders.
16.Representations and Warranties of the Lenders. Each Lender signatory hereto represents and warrants to the Successor Agent and to the Resigning Agent that, as of the Effective Date, all information pertaining to such Lender set forth on Schedule III hereof is true and correct.
17.Representations and Warranties of the Loan Parties. As of the Effective Date, the Borrower hereby represents and warrants the following to each other Party hereto:
(i)this Agreement has been duly authorized, executed and delivered by the Borrower and is a legal, valid, and binding agreement of the Borrower, enforceable according to its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium or other laws affecting creditors’ rights generally and subject to general principles of equity, regardless of whether considered in a proceeding in equity or at law;
(ii)the Borrower has full power and authority, and has taken all action necessary to execute and deliver this Agreement and to fulfill its obligations hereunder and to consummate the transactions contemplated hereby; and
(iii)the execution, delivery and performance by the Borrower of this Agreement does not violate or conflict with its organizational or governance documents or any agreement or other document binding on it or to which its properties are subject.
18.Successor Agent Fees and Expenses. On the Effective Date, the Successor Agent shall be entitled to those fees and expenses set forth in that certain Fee Letter dated as of the date hereof between the Borrower and the Successor Agent (as amended, amended and restated, supplemented or otherwise modified through the date hereof, the “Successor Agent Fee Letter”) in accordance with the terms thereof and all references to “Fee Letter” in the Credit Agreement and the other Loan Documents shall be deemed to refer to the Successor Agent Fee Letter. In addition, commencing on the Effective Date, the Resigning Agent shall cease to be entitled to receive the fees payable to it in its capacity as administrative agent and collateral agent pursuant to the Fee Letter (as defined in the Credit Agreement prior to giving effect to this Agreement) and the Fee Letter (as defined in the Credit Agreement prior to giving effect to this Agreement) is terminated and of no further force or effect; provided, that the Resigning Agent shall remain entitled to receive any unpaid fees, expenses and other amounts that have accrued as of the Effective Date and are owed by the Borrower to it in its capacity as administrative agent and as the collateral agent pursuant to the Fee Letter (as defined in the Credit Agreement prior to giving effect to this Agreement). Notwithstanding anything contained in this Section 18 (including, for the
8
avoidance of doubt, the proviso in the immediately preceding sentence), the Resigning Agent hereby agrees to pay the Borrower a pro rata refund of the most recent annual administrative fee paid by the Borrower to the Resigning Agent pursuant to the Fee Letter (as defined in the Credit Agreement prior to giving effect to this Amendment) for the remaining days of the year on which such fee is based which have not yet elapsed.
19.Miscellaneous.
(a)Severability. Any provision of this Agreement held to be invalid, illegal or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such invalidity, illegality or unenforceability without affecting the validity, legality and enforceability of the remaining provisions hereof; and the invalidity of a particular provision in a particular jurisdiction shall not invalidate such provision in any other jurisdiction.
(b)Continuing Effect; No Other Waivers or Amendments. Except to the extent expressly set forth herein, this Agreement shall not constitute an amendment to or waiver of any provision of the Credit Agreement or the other Loan Documents and shall not be construed as a consent to any action on the part of the Borrower that would require an amendment, waiver or consent of any Lender. Except to the extent expressly set forth herein, the provisions of the Credit Agreement and the other Loan Documents are and shall remain in full force and effect in accordance with their terms. This Agreement shall be considered a Loan Document. After the Effective Date, the provisions of Article XI and Sections 12.2 and 12.10 of the Credit Agreement (as they exist on the date hereof and without giving effect to any amendment, waiver or other future modification thereto that is in any manner adverse to the Resigning Agent or its Affiliates) shall inure to the benefit of the Resigning Agent and its Affiliates as to any actions taken or omitted to be taken while it was Administrative Agent under the Credit Agreement and the other Loan Documents. The Resigning Agent and its Affiliates shall retain all claims and rights to indemnification under the Credit Agreement and the other Loan Documents for acts, omissions, events or circumstances occurring or existing on or prior to the Effective Date in its capacity as Resigning Agent under the Credit Agreement and the other Loan Documents.
(c)Notice. The following address is to be used for purposes of communications to the Successor Agent pursuant to the Credit Agreement and the other Loan Documents:
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Address: |
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Wilmington Savings Fund Society, FSB |
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500 Delaware Avenue |
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Wilmington, DE 19801 |
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Attn: Patrick Healy |
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Email: AdminAgencyMO@wsfsbank.com |
(d)Counterparts. This Agreement may be executed in any number of separate counterparts by the Parties (including via electronic mail in “.pdf” or “.tif” format), each of which counterparts when so executed shall be an original, but all the counterparts shall together constitute one and the same instrument.
(e)GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH LAWS OF THE STATE OF NEW YORK, UNITED STATES AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES UNDER THIS AGREEMENT SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS. THE COURTS OF THE STATE OF NEW YORK AND OF THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK, AND ANY APPELLATE COURT FROM ANY THEREOF,
9
SHALL HAVE EXCLUSIVE JURISDICTION OVER ANY DISPUTE HEREUNDER TO WHICH JURISDICTION THE PARTIES HERETO SUBMIT.
(f)Headings. Section headings used herein are for convenience of reference only, are not part of this Agreement and shall not affect the construction of, or to be taken into consideration in interpreting, this Agreement.
(g)Successors and Assigns; Lenders Bound. This Agreement shall be binding upon, and inure to the benefit of, the Parties, the other Lenders and their respective successors and permitted assigns. Without limiting the foregoing, each reference in this Agreement to the undersigned Lenders (including as parties hereto) shall be deemed to be a reference to such Lenders individually and on behalf of all Lenders.
(h)WAIVERS. EACH PARTY HERETO IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PERSON HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PERSON WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 19(h).
[Signature Pages to Follow]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed and delivered by their respective duly authorized officers as of the date first above written.
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WELLS FARGO BANK, NATIONAL ASSOCIATION, |
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as Resigning Agent |
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By: |
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/s/ Brandon H. Barry |
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Name: |
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Title: Director |
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Title: |
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Director |
[Signature Page to Agency Resignation, Appointment, Acceptance and Waiver Agreement –
Amended and Restated First Lien Credit Agreement]
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WILMINGTON SAVINGS FUND SOCIETY, FSB, |
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as Successor Agent |
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By: |
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/s/ Raye Goldsborough |
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Name: |
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Raye Goldsborough |
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Title: |
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Vice President |
[Signature Page to Agency Resignation, Appointment, Acceptance and Waiver Agreement –
Amended and Restated First Lien Credit Agreement]
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PREIT ASSOCIATES, L.P. |
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By: |
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Pennsylvania Real Estate Investment Trust, |
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its general partner |
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By: |
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/s/ Andrew Ioannou |
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Name: |
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Andrew Ioannou |
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Title: |
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Executive Vice President, Finance & Acquisitions and Treasurer |
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PREIT-RUBIN, INC. |
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By: |
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/s/ Andrew Ioannou |
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Name: |
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Andrew Ioannou |
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Title: |
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Executive Vice President, Finance & Acquisitions and Treasurer |
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PENNSYLVANIA REAL ESTATE INVESTMENT TRUST |
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By: |
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/s/ Andrew Ioannou |
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Name: |
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Andrew Ioannou |
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Title: |
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Executive Vice President, Finance & Acquisitions and Treasurer |
[Signature Page to Agency Resignation, Appointment, Acceptance and Waiver Agreement –
Amended and Restated First Lien Credit Agreement
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REQUISITE LENDERS: |
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DEUTSCHE BANK AG CAYMAN ISLANDS BRANCH, as Lender |
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By: |
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/s/ Howard Lee |
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Name: |
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Howard Lee |
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Title: |
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Assistant Vice President |
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By: |
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/s/ Hoi Yeun Chin |
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Name: |
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Hoi Yeun Chin |
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Title: |
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Assistant Vice President |
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[Signature Page to Agency Resignation, Appointment, Acceptance and Waiver Agreement –
Amended and Restated First Lien Credit Agreement]
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REQUISITE LENDERS: |
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Bank of America N.A., as Lender |
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By: |
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/s/ Lauren Lountzis |
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Name: |
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Lauren Lountzis |
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Title: |
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Officer |
[Signature Page to Agency Resignation, Appointment, Acceptance and Waiver Agreement –
Amended and Restated First Lien Credit Agreement]
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REQUISITE LENDERS: |
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Nut Tree Drawdown Master Fund, LP |
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Nut Tree Master Fund, LP., as Lender |
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By: |
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/s/ Jed Nussbaum |
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Name: |
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Jed Nussbaum |
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Title: |
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Managing Partner |
[Signature Page to Agency Resignation, Appointment, Acceptance and Waiver Agreement –
Amended and Restated First Lien Credit Agreement]
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REQUISITE LENDERS: |
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REDWOOD MASTER FUND, LTD. |
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By: Redwood Capital Management, LLC, its Investment Manager |
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as Lender |
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By: |
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/s/ Ruben Kliksberg |
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Name: |
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Ruben Kliksberg |
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Title: |
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Chief Executive Officer |
[Signature Page to Agency Resignation, Appointment, Acceptance and Waiver Agreement –
Amended and Restated First Lien Credit Agreement]
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REQUISITE LENDERS: |
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Cetus Capital VI, L.P., |
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as Lender |
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By: |
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/s/ Robert E. Davis |
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Name: |
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Robert E. Davis |
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Title: |
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Managing Director |
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OFM II, L.P., |
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as Lender |
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By: |
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/s/ Robert E. Davis |
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Name: |
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Robert E. Davis |
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Title: |
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Managing Director |
[Signature Page to Agency Resignation, Appointment, Acceptance and Waiver Agreement –
Amended and Restated First Lien Credit Agreement]
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REQUISITE LENDERS: |
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REDWOOD DRAWDOWN MASTER FUND II, L.P. |
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By: Redwood Capital Management, LLC, its Investment Manager |
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as Lender |
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By: |
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/s/ Ruben Kliksberg |
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Name: |
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Ruben Kliksberg |
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Title: |
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Chief Executive Officer |
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[Signature Page to Agency Resignation, Appointment, Acceptance and Waiver Agreement –
Amended and Restated First Lien Credit Agreement]
SCHEDULE I
Possessory Pledged Collateral
None.
SCHEDULE II
Loan Status
Revolving Loans:
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Outstanding principal amount of Loans: |
$54,830,455.75 |
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Accrued interest for the Interest Period beginning March 1, 2021 (one month LIBOR interest period): |
$188,860.46 |
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Current interest rate: |
4.00% |
Term Loans:
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Outstanding principal amount of Loans: |
$384,092,396.74 |
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Accrued interest for the Interest Period beginning March 1, 2021 (one month LIBOR interest period): |
$2,063,856.48 |
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Current interest rate: |
6.24% |
***All amounts provided as of the close of business on March 31, 2021)***
SCHEDULE III
Current Lenders1
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Revolving Lender |
MEI |
Actual Amount |
% of Global |
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Wells Fargo Bank, NA - TRADE DESK |
US1L058422 |
$ 1,517,237.00 |
1.167105384615% |
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Bank of America, N.A. |
US1L009318 |
$ 4,124,644.38 |
3.172803369231% |
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Citicorp North America Inc |
US1L021594 |
$ 6,798,551.94 |
5.229655338462% |
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Citizens Bank, NA f/k/a RBS Citizens NA |
US1L116139 |
$ 23,110,615.43 |
17.777396484615% |
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Deutsche Bank AG * Cayman Islands |
DE1L157170 |
$ 18,061,675.87 |
13.893596823077% |
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MUFG Union Bank NA |
US1L329203 |
$ 14,326,609.87 |
11.020469130769% |
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Nut Tree Drawdown Master Fund, LP |
KY0M006255 |
$ 1,233,050.71 |
0.948500546154% |
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Nut Tree Master Fund, LP |
KY0M0039B5 |
$ 6,987,287.35 |
5.374836423077% |
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PNC Bank, National Association |
US1L014409 |
$ 14,152,508.50 |
10.886545000000% |
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Redwood Drawdown Master Fund II LP |
KY0M005D00 |
$ 12,140,000.00 |
9.338461538462% |
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Redwood Master Fund, Ltd. |
KY1L014424 |
$ 27,547,818.95 |
21.190629961538% |
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TOTAL: |
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$ 130,000,000.00 |
100.000000000000% |
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Term Lender |
MEI |
Actual Amount |
% of Global |
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Wells Fargo Bank, National Association |
US1L058422 |
$ 4,482,763.01 |
1.167105375698% |
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Bank of America, N.A. |
US1L009318 |
$ 12,186,496.52 |
3.172803373207% |
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Cetus Capital VI, L.P. |
US0M017H65 |
$ 8,555,000.00 |
2.227328651286% |
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Citicorp North America Inc |
US1L021594 |
$ 20,086,708.52 |
5.229655335666% |
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Citizens Bank, NA f/k/a RBS Citizens NA |
US1L116139 |
$ 68,281,628.24 |
17.777396485727% |
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Deutsche Bank AG * Cayman Islands |
DE1L157170 |
$ 38,864,249.03 |
10.118463515514% |
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MUFG Union Bank NA |
US1L329203 |
$ 42,328,784.01 |
11.020469129112% |
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Nut Tree Drawdown Master Fund, LP |
KY0M006255 |
$ 3,643,118.48 |
0.948500545942% |
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Nut Tree Master Fund, LP |
KY0M0039B5 |
$ 20,644,338.06 |
5.374836428739% |
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OFM II, L.P. |
US0M0118R9 |
$ 5,945,000.00 |
1.547804655978% |
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PNC Bank, National Association |
US1L014409 |
$ 41,814,391.61 |
10.886544999303% |
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Redwood Drawdown Master Fund II LP |
KY0M005D00 |
$ 35,890,000.00 |
9.344105820531% |
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Redwood Master Fund, Ltd. |
KY1L014424 |
$ 81,369,919.26 |
21.184985683297% |
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TOTAL: |
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$ 384,092,396.74 |
100.000000000000% |
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1 |
As of April 1, 2021. |
SCHEDULE IV
Loan Documents
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1. |
Amended and Restated First Lien Credit Agreement, dated as of December 10, 2020, by and among PREIT, PREIT-RUBIN, the Parent, each of the financial institutions a party thereto, and Wells Fargo Bank, as Administrative Agent for itself and the Secured Parties; |
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2. |
Amended and Restated Guaranty, dated as of December 10, 2020 entered into by and among the Guarantors party thereto in favor of Wells Fargo, as Administrative Agent, for its benefit and the benefit of the other Guarantied Parties. |
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3. |
Amended and Restated Collateral Agreement, dated as of December 10, 2020 entered into by and among PREIT, PREIT-RUBIN, the Parent, and certain Subsidiaries of the Borrower in favor of Wells Fargo, as Administrative Agent, for its benefit and the benefit of the Secured Parties. |
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4. |
Amended and Restated Pledge Agreement, dated as of December 10, 2020, by and among PREIT, PREIT-RUBIN, the Parent, certain Subsidiaries of the Borrower and Wells Fargo, as Administrative Agent for itself and the benefit of the Lenders. |
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5. |
Intercreditor Agreement, dated as of December 10, 2020, among the Borrower, the other Grantors from time to time party thereto, Well Fargo, as administrative agent, collateral agent and Representative (as defined therein) for the First Lien Secured Parties (as defined therein), Wells Fargo, as administrative agent, collateral agent and Representative (as defined therein) for the Second Lien Secured Parties (as defined therein), and each additional Senior Representative (as defined therein) and Second Priority Representative (as defined therein) from time to time party thereto; |
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6. |
Amended and Restated Deed of Trust, Assignment of Leases and Rents, Security Agreement and Fixture Filing given by PR Prince George’s Plaza, LLC, a Delaware limited liability company, in favor of Samuel M. Shiel, Esq., as trustee, for the benefit of Administrative Agent and the Lenders covering certain real property located in the City of Hyattsville, Prince Georges County, Maryland and more particularly described in the Prince Georges Security Instrument. |
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7. |
Amended and Restated Deed of Trust, Assignment of Leases and Rents, Security Agreement and Fixture Filing given by PR Valley Limited Partnership, a Pennsylvania limited partnership, PR Valley Anchor-M Limited Partnership, a Pennsylvania limited partnership, and PR Valley Anchor-S, LLC, a Maryland limited liability company, in favor of Samuel M. Shiel, Esq. as trustee, for the benefit of Administrative Agent and the Lenders covering certain real property located in the City of Hagerstown, Washington County, Maryland and more particularly described in the Valley Mall Security Instrument. |
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8. |
Amended and Restated Deed of Trust, Absolute Assignment of Leases and Rents, Security Agreement and Fixture Filing given by PR Jacksonville Limited Partnership, a Pennsylvania limited partnership, in favor of TRSTE, Inc., a Virginia corporation, as trustee, for the benefit of Administrative Agent and the Lenders covering certain real property located in the City of Jacksonville, Onslow County, North Carolina and more particularly described in the Jacksonville Security Instrument. |
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9. |
Amended and Restated Fee and Leasehold Mortgage with Absolute Assignment of Leases and Rents, Security Agreement and Fixture Filing given by PR Magnolia LLC, a Delaware limited |
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liability company, in favor of Administrative Agent and the Lender covering certain real property located in the City of Florence, Florence County, South Carolina and more particularly described in the Magnolia Security Instrument. |
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10. |
Amended and Restated Credit Line Fee and Leasehold Deed of Trust, Absolute Assignment of Leases and Rents, Security Agreement and Fixture Filing given by PR Springfield Town Center LLC, a Delaware limited liability company, in favor of TRSTE, Inc., a Virginia corporation, as trustee, for the benefit of Administrative Agent and the Lenders covering certain real property located in Fairfax County, Virginia and more particularly described in the Springfield Security Instrument. |
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11. |
Amended and Restated Mortgage of Real Property, Security Agreement of Personal Property, Assignment of Rents and Profits and Fixtures Financing Statement given by PR Valley View OP-DSG/CEC, LLC, a Delaware limited liability company, in favor of Administrative Agent and the Lenders covering certain real property located in the City of La Crosse, La Crosse County, Wisconsin and more particularly described in the Valley View Security Instrument. |
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12. |
Amended and Restated Mortgage with Absolute Assignment of Leases and Rents, Security Agreement and Fixture Filing given by Bala Cynwyd Associates, L.P., a Pennsylvania limited partnership, in favor of Administrative Agent and the Lenders covering certain real property located in the Township of Cherry Hill, Camden County, New Jersey and more particularly described in the Cherry Hill Security Instrument. |
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13. |
Amended and Restated Mortgage with Absolute Assignment of Leases and Rents, Security Agreement and Fixture Filing given by Moorestown Mall LLC, a Delaware limited liability company, PR Moorestown Anchor-L&T, LLC, a New Jersey limited liability company, and PR Moorestown Anchor-M, LLC, a New Jersey limited liability company, in favor of Administrative Agent and the Lenders covering certain real property located in the Township of Moorestown, Burlington County, New Jersey and more particularly described in the Moorestown Security Instrument. |
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14. |
Amended and Restated Open End Mortgage, Assignment of Leases and Rents, Security Instrument and Fixture Filing given by PR Exton Square Property L.P., a Delaware limited partnership, and PR Exton Outparcel Limited Partnership, a Pennsylvania limited partnership, in favor of Administrative Agent and the Lenders covering certain real property located in the Township of West Whiteland, Chester County, Pennsylvania and more particularly described in the Exton Security Instrument. |
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15. |
Amended and Restated Open End Fee and Leasehold Mortgage, Assignment of Leases and Rents, Security Instrument and Fixture Filing given by PR CC Limited Partnership, a Pennsylvania limited partnership, and PR Capital City Limited Partnership, a Pennsylvania limited partnership, in favor of Administrative Agent and the Lenders covering certain real property located in the City of Camp Hill, Cumberland County, Pennsylvania and more particularly described in the Capital City Security Instrument. |
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16. |
Amended and Restated Open End Fee and Leasehold Mortgage, Assignment of Leases and Rents, Security Instrument and Fixture Filing given by PR Plymouth Anchor-M, L.P., a Delaware limited partnership, PR Plymouth Meeting Limited Partnership, a Pennsylvania limited partnership, Plymouth Ground Associates LP, a Pennsylvania limited partnership, and PR AEKI Plymouth, L.P., a Delaware limited partnership, in favor of Administrative Agent and the Lenders |
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covering certain real property located in the City of Plymouth Meeting, Montgomery County, Pennsylvania and more particularly described in the Plymouth Security Instrument. |
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17. |
Amended and Restated Deposit Account Control Agreement (Springing Agreement) by and among PREIT Associates, L.P., PNC Bank, the Administrative Agent, as first lien agent and the Agent, as second lien agent (Account Name: PREIT Associates, LP Disbursement Acct., Acct. #4260634331). |
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18. |
Amended and Restated Deposit Account Control Agreement (Springing Agreement) by and among PREIT Associates, L.P., PNC Bank, the Administrative Agent, as first lien agent and the Agent, as second lien agent (Account Name: PALP Concentration Acct., Acct. #4227691457). |
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19. |
Amended and Restated Deposit Account Control Agreement (Springing Agreement) by and among PREIT Associates, L.P., PNC Bank, the Agent, as first lien agent and the Agent, as second lien agent (Account Name: Jacksonville Ops. Acct., Acct. #4228210555). |
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20. |
Amended and Restated Deposit Account Control Agreement (Springing Agreement) by and among PREIT Associates, L.P., PNC Bank, the Administrative Agent, as first lien agent and the Agent, as second lien agent (Account Name: Valley Ops Acct, Acct. #4228312025). |
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21. |
Amended and Restated Deposit Account Control Agreement (Springing Agreement) by and among Bala Cynwyd Associates LP, PNC Bank, the Administrative Agent, as first lien agent and the Agent, as second lien agent (Account Name: One Cherry Hill Ops. Acct., Acct. #4228459895). |
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22. |
Amended and Restated Deposit Account Control Agreement (Springing Agreement) by and among PR Capital City Limited Partnership, PNC Bank, the Administrative Agent, as first lien agent and the Agent, as second lien agent (Account Name: Capital City Ops. Acct., Acct. #4228274479). |
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23. |
Amended and Restated Deposit Account Control Agreement (Springing Agreement) by and among PR Exton Square Property, L.P., PNC Bank, the Administrative Agent, as first lien agent and the Agent, as second lien agent (Account Name: Exton Ops. Acct., Acct. #4227688004). |
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24. |
Amended and Restated Deposit Account Control Agreement (Springing Agreement) by and among PR Magnolia LLC, PNC Bank, the Administrative Agent, as first lien agent and the Agent, as second lien agent (Account Name: Magnolia Mall Ops. Acct., Acct. #4227691422). |
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25. |
Amended and Restated Deposit Account Control Agreement (Springing Agreement) by and among Moorestown Mall LLC, PNC Bank, the Administrative Agent, as first lien agent and the Agent, as second lien agent (Account Name: Moorestown Ops., Acct. #4227688012). |
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26. |
Amended and Restated Deposit Account Control Agreement (Springing Agreement) by and among PR Plymouth Meeting Limited Partnership, PNC Bank, the Administrative Agent, as first lien agent and the Agent, as second lien agent (Account Name: Plymouth Meeting Ops. Acct., Acct. #4227691107). |
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27. |
Amended and Restated Deposit Account Control Agreement (Springing Agreement) by and among PR Prince George’s Plaza, LLC, PNC Bank, the Administrative Agent, as first lien agent and the Agent, as second lien agent (Account Name: M@PG Ops. Acct, Acct. #4228317715). |
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28. |
Amended and Restated Deposit Account Control Agreement (Springing Agreement) by and among PR Springfield Town Center LLC, PNC Bank, the Administrative Agent, as first lien agent and the Agent, as second lien agent (Account Name: PR Springfield Town Center LLC, Acct. #4007809409). |
Exhibit 10.3
AGENCY RESIGNATION, APPOINTMENT,
ACCEPTANCE AND WAIVER AGREEMENT
This AGENCY RESIGNATION, APPOINTMENT, ACCEPTANCE AND WAIVER AGREEMENT, dated as of April 13, 2021 (this “Agreement”), is entered into among Wells Fargo Bank, National Association (“Wells Fargo”), as resigning Administrative Agent (as defined below) (in such capacity, the “Resigning Agent”), Wilmington Savings Fund Society, FSB (“WSFS”), as the successor Administrative Agent (as defined below), PREIT Associates, L.P., a Delaware limited partnership (“PREIT”), PREIT-RUBIN, INC., a Pennsylvania corporation (“PREIT-RUBIN”), Pennsylvania Real Estate Investment Trust, a Pennsylvania business trust (the “Parent”; together with PREIT and PREIT-RUBIN, each individually, a “Borrower, and collectively, the “Borrower”) and those Lenders (as defined below) which are parties hereto (constituting Requisite Lenders under the Credit Agreement). All signatories of this Agreement will be referred to jointly as the “Parties”.
RECITALS
WHEREAS, reference is made to that certain Second Lien Credit Agreement, dated as of December 10, 2020 (as amended by that certain First Amendment to Second Lien Credit Agreement dated as of February 8, 2021 by and among PREIT, PREIT-RUBIN, Parent, the Lenders party thereto and the Administrative Agent, and as further amended, restated, amended and restated, supplemented or otherwise modified from time to time, the “Credit Agreement”), by and among PREIT, PREIT-RUBIN, the Parent, the lenders from time to time party thereto (the “Lenders”) and Wells Fargo, as administrative agent (in such capacity, and in its capacity as administrative agent under the other Loan Documents, the “Administrative Agent”). Unless otherwise indicated, all capitalized terms used herein and not otherwise defined herein shall have the respective meanings assigned to such terms in the Credit Agreement;
WHEREAS, reference is made to that certain Guaranty, dated as of December 10, 2020 (as amended, amended and restated, supplemented or otherwise modified through the date hereof, the “Guaranty”) entered into by the Guarantors party thereto in favor of the Administrative Agent, for its benefit and the benefit of the other Guarantied Parties;
WHEREAS, reference is made to that certain Collateral Agreement, dated as of December 10, 2020 (as amended, amended and restated, supplemented or otherwise modified through the date hereof, the “Collateral Agreement”), entered into by PREIT, PREIT-RUBIN, the Parent and certain Subsidiaries of the Borrower in favor of the Administrative Agent, for its benefit and the benefit of the Secured Parties;
WHEREAS, reference is made to that certain Pledge Agreement, dated as of December 10, 2020 (as amended, amended and restated, supplemented or otherwise modified through the date hereof, the “Pledge Agreement”) entered into by and among PREIT, PREIT-RUBIN, the Parent, certain Subsidiaries of the Borrower and the Administrative Agent, for its benefit and the benefit of the Lenders;
WHEREAS, reference is made to that certain Intercreditor Agreement, dated as of December 10, 2020 (as amended, amended and restated, supplemented or otherwise modified through the date hereof, the “Intercreditor Agreement”), by and among the Borrower, the Grantors party thereto, Well Fargo, as administrative agent, collateral agent and Representative (as defined therein) for the First Lien Secured Parties (as defined therein), Wells Fargo, as administrative agent, collateral agent and Representative (as defined therein) for the Second Lien Secured Parties (as defined therein), and each additional Senior Representative (as defined therein) and Second Priority Representative (as defined therein) from time to time party thereto;
WHEREAS, on February 10, 2021, in accordance with Section 11.8 of the Credit Agreement, the Resigning Agent provided written notice to the Borrower and the Lenders of its resignation as the Administrative Agent under the Credit Agreement, the Guaranty, the Collateral Agreement, the Pledge Agreement and the other Loan Documents;
WHEREAS, the Lenders signatory hereto constitute the Requisite Lenders under the Credit Agreement and, pursuant to Section 11.8 of the Credit Agreement, the Requisite Lenders desire to appoint WSFS to act as the Administrative Agent under the Credit Agreement, the Guaranty, the Collateral Agreement, the Pledge Agreement and the other Loan Documents (in such capacities, the “Successor Agent”); and
WHEREAS, the Successor Agent has agreed to accept its appointment and to serve as the Administrative Agent.
NOW, THEREFORE, the Parties agree with regard to each of the following:
1.Resignation of Resigning Agent. On the Effective Date (as defined in Section 14) and without any further act or deed on the part of the Resigning Agent, any of the parties to the Credit Agreement, the Requisite Lenders or any other Person, the Resigning Agent shall be discharged from its duties and obligations as Administrative Agent under the Credit Agreement and the other Loan Documents, other than its duties and obligations under Section 12.9 of the Credit Agreement; provided, that the provisions of Article XI and Sections 12.2 and 12.10 of the Credit Agreement (as they exist on the date hereof and without giving effect to any amendment, waiver or other future modification thereto that is in any manner adverse to the Resigning Agent or its Affiliates) shall continue in effect for the benefit of the Resigning Agent, its sub-agents and their respective Affiliates in respect of any actions taken or omitted to be taken by any of them while the Resigning Agent was acting as Administrative Agent under the Credit Agreement and the other Loan Documents.
2.Appointment of Successor Agent; Acceptance of Appointment by Successor Agent. Effective as of the Effective Date, (a) the Requisite Lenders hereby appoint, in accordance with Section 11.8 of the Credit Agreement, the Successor Agent as the Administrative Agent under the Credit Agreement, the Guaranty, the Collateral Agreement, the Pledge Agreement and the other Loan Documents, (b) the Successor Agent hereby accepts its appointment as the Administrative Agent under the Credit Agreement, the Guaranty, the Collateral Agreement, the Pledge Agreement and the other Loan Documents; and (c) the Successor Agent, as the Administrative Agent shall succeed to, and be vested with, all of the rights, powers, privileges and duties of the Resigning Agent (other than any rights to indemnity payments owed to the Resigning Agent) under the Credit Agreement, the Guaranty, the Collateral Agreement, the Pledge Agreement and the other Loan Documents.
3.Borrower Acknowledgment. The Borrower hereby acknowledges and consents to the appointment of the Successor Agent as the “Administrative Agent” under the Credit Agreement, the Guaranty, the Collateral Agreement, the Pledge Agreement and the other Loan Documents.
4.Resignation Effective Date. Each of the Borrower and the Requisite Lenders acknowledges and agrees that the effective date of resignation of the Resigning Agent shall be the Effective Date for all purposes under the Credit Agreement and the other Loan Documents.
5.Delineation of Responsibilities.
(a)The Parties agree that neither Wells Fargo, in its individual capacity and in its capacity as the Resigning Agent, nor any of its Affiliates, shall bear any responsibility or liability for any
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actions taken or omitted to be taken by the Successor Agent from and after the Effective Date pursuant to this Agreement, the Credit Agreement or the other Loan Documents or any of the transactions contemplated thereby.
(b)The Parties (other than the Resigning Agent) agree that WSFS, in its individual capacity and in its capacity as the Successor Agent, shall bear no responsibility or liability for any actions taken or omitted to be taken by Wells Fargo, in its capacity as the Resigning Agent pursuant to this Agreement, the Credit Agreement or the other Loan Documents or the transactions contemplated thereby.
(c)The Resigning Agent agrees, at the Borrower’s expense, to execute and deliver such instruments (including, for the avoidance of doubt, the Perfection and Assignment Documents (as defined below)) as may be prepared by the Borrower (or its designee) and/or by the Successor Agent (or its designee) and are in form and substance reasonably satisfactory to the Borrower and, as applicable, the Resigning Agent, and shall do such other things as the Successor Agent may reasonably request so as to more fully and certainly vest and confer upon the Successor Agent the rights, powers, privileges and duties described in Section 2 above. It is understood and agreed that the Resigning Agent shall not be required to take any action or exercise any right, power or privilege (including, without limitation, the exercise of any rights or remedies) under the Loan Documents unless expressly and reasonably requested in writing by the Successor Agent. The Resigning Agent shall be entitled to rely upon, and shall not incur any liability for relying upon, any notice, request, certificate, consent, statement, instrument, document or other writing believed by it to be genuine and to have been signed or sent by the proper person. The Resigning Agent may also rely upon any statement made to it orally or by telephone and believed by it to have been made by the proper person, and shall not incur any liability for relying thereon. The Resigning Agent may, at the Borrower’s expense, consult with legal counsel, independent accountants and other experts selected by it, and shall not be liable for any action taken or not taken by it in accordance with the advice of any such counsel, accountants or experts. Notwithstanding the foregoing, the Resigning Agent shall be reasonably satisfied that the delivery of any information requested of it would not breach any confidentiality restrictions binding on it and, provided further, that nothing in this paragraph shall require the Resigning Agent to incur any expenses or liabilities for which it would not be entitled to reimbursement or indemnification under this Agreement or the Loan Documents.
6.Covenants of Successor Agent. The Successor Agent agrees to be bound by the provisions of the Credit Agreement and the other Loan Documents and will perform in accordance with its terms all the obligations which by the terms of the Credit Agreement and the other Loan Documents are required to be performed by it as the Successor Agent.
7.Intercreditor Agreement. The Successor Agent acknowledges and agrees that it shall hereby be vested with all the rights and obligations of the “Second Lien Administrative Agent” under, and shall be bound by the terms of, the Intercreditor Agreement in its capacity as administrative agent and collateral agent for the holders of the Second Lien Obligations (as defined in the Intercreditor Agreement). The Successor Agent shall constitute the “Second Lien Administrative Agent” under (and as defined in) the Intercreditor Agreement. Notwithstanding anything herein to the contrary, the lien and security interest granted to the Resigning Agent, as resigning Second Lien Administrative Agent (as defined in the Intercreditor Agreement) or the Successor Agent, as successor Second Lien Administrative Agent (as defined in the Intercreditor Agreement) for the benefit of the secured parties hereunder, pursuant to this Agreement and the exercise of any right or remedy by the Second Lien Administrative Agent (as defined in the Intercreditor Agreement) and the other secured parties hereunder are subject to the provisions of the Intercreditor Agreement. In the event of any conflict or inconsistency between the provisions of the Intercreditor Agreement and this Agreement, the provisions of the Intercreditor Agreement shall control.
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8.Perfection and Assignment of Collateral Documents. The Successor Agent hereby appoints the Resigning Agent as its agent (in such capacity, the “Sub-Agent”) solely for the purpose of perfecting and continuing the perfection of the Successor Agent’s Liens in that part of the Collateral that is in the possession or control of the Resigning Agent (or in the possession or control of its agents or bailees), or is the subject of any perfection instruments in favor of the Resigning Agent or other agreements or documents pertaining to the Collateral in favor of the Resigning Agent (such Collateral, the “Pledged Collateral”) until the Perfection Date. Wells Fargo hereby accepts such appointment as the Sub-Agent; provided however, that with respect to each Loan Document, Wells Fargo shall only act as Sub-Agent until such time as the Successor Agent is substituted thereunder (whether by operation of law, or by subsequent amendment, assignment, filing or other instrument) or, in the case of any possessory Collateral held by Wells Fargo after the Effective Date, until the Perfection Date. Notwithstanding anything herein to the contrary, the Sub-Agent agrees to continue to hold collateral security on behalf of the Secured Parties pursuant to the Loan Documents until such time as the Perfection and Assignment Documents (as defined below), including those set forth on Schedule I hereto, have been executed, delivered and, as applicable, recorded (the “Perfection Date”). Without limiting the generality of the foregoing, any and all references to “Wells Fargo Bank, National Association” on any publicly filed document, to the extent such filing relates to Liens and security interests assigned to the Successor Agent for the benefit of the Secured Parties hereby and until the Perfection Date, with respect to such Liens and security interests, constitute a reference to “Wells Fargo Bank, National Association” as the Sub-Agent hereunder and the nominee and collateral representative of the Successor Agent. It is understood that neither the Resigning Agent nor Sub-Agent shall have any duties or responsibilities to the Successor Agent, any Lender or the Loan Parties except as expressly provided herein. All of such Liens and security interests in the Pledged Collateral shall in all respects be continuing and in effect following execution and delivery of this Agreement and are hereby ratified and reaffirmed by the Loan Parties. Each of the Lenders acknowledge and agree that the Successor Agent shall have no obligation for (a) perfecting, maintaining, monitoring, preserving or protecting the security interest or Lien granted under the Credit Agreement, any other Loan Document, or any agreement instrument contemplated hereby or thereby; (b) the filing, re-filing, recording, re-recording, or continuing of any document, financing statement, mortgage, assignment, notice, instrument of further assurance, or other instrument in any public office at any time or times; or (c) providing, maintaining, monitoring, or preserving insurance on or the payment of taxes with respect to any Collateral.
9.Perfection and Assignment Documents. The Resigning Agent agrees to (i)(A) execute and deliver such instruments as may be prepared by the Successor Agent or its designee and are in form and substance reasonably satisfactory to the Resigning Agent and the Successor Agent, and (B) do such other things as the Successor Agent may reasonably request, in each case, so as to more fully and certainly vest and confirm upon the Successor Agent the rights, powers, privileges, obligations, duties and protections described in Section 2 hereof, and (ii)(A) assign or otherwise transfer to the Successor Agent all (1) UCC financing statements and (2) other perfection documentation (including, without limitation, an assignment of record of all publicly recorded perfection instruments), in each case, (x) with respect to liens encumbering the Collateral securing the Obligations and (y) pursuant to such instruments as may be prepared by the Successor Agent or its designee in form and substance reasonably satisfactory to the Resigning Agent and the Successor Agent and (B) physically deliver to the Successor Agent all possessory Pledged Collateral, if any, held by the Resigning Agent with respect to liens encumbering the Pledged Collateral securing the Obligations. All of the instruments and documentation described in this Section 9 (collectively, the “Perfection and Assignment Documents”) shall be prepared and (if applicable) recorded publicly, at the sole cost and expense of the Loan Parties.
10.Further Assurances; Expenses. Each of the Loan Parties agrees (i) to promptly take such action, as may be reasonably requested in writing by the Successor Agent, as is necessary to carry out the intent of this Agreement, including, without limitation, the execution and delivery of any
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Perfection and Assignment Document that are in form and substance reasonably satisfactory to the Borrower and (ii) that each of the Resigning Agent and the Successor Agent shall promptly receive from the Borrower all reasonable and documented out-of-pocket fees, costs and expenses of the Resigning Agent and the Successor Agent, as applicable (but limited in the case of legal fees, costs and expenses to all reasonable and documented out-of-pocket legal fees, costs and expenses of one counsel for each of the Resigning Agent and the Successor Agent) in connection with (x) the preparation, execution, and delivery of this Agreement and the Perfection and Assignment Documents, and (y) the filing and/or recordation of the Perfection and Assignment Documents.
11.Definition of Administrative Agent in Credit Agreement and other Loan Documents. The Parties hereby further agree and acknowledge that, from and after the Effective Date, (a) the Successor Agent shall be, and shall be deemed to be, the “Administrative Agent” under the Credit Agreement and the other Loan Documents and (b) the Successors Agent’s only role under the Credit Agreement and the other Loan Documents is that of Administrative Agent and nothing herein shall be construed to deem the Successor Agent a Lender under the Credit Agreement, or to impose on the Successor Agent actions, duties or obligations of Lenders thereunder (including any obligation to fund Loans). In furtherance of the foregoing, all defined terms referencing or appointing the Resigning Agent as Administrative Agent in the Credit Agreement or the other Loan Documents shall be deemed amended from and after the Effective Date to reference the Successor Agent as the Administrative Agent.
12.Payments. Notwithstanding any other provision herein or in any other Loan Documents to the contrary, on and after the Effective Date, all payments of principal, interest, fees and other Obligations payable by the Borrower under the Loan Documents to the Administrative Agent shall be payable to the Successor Agent, as and when such amounts become due and payable pursuant to the Loan Documents. In the event that, after the Effective Date, the Resigning Agent receives any payment or any other amount owing to any Lender or the Successor Agent under the Credit Agreement or any other Loan Document, or receives any instrument, agreement, report, financial statement, insurance policy, notice or other document, the Resigning Agent agrees to promptly forward the same to the Successor Agent and to hold the same in trust for the Successor Agent until so forwarded. The Parties hereto agree that any provision of any of the Loan Documents directing the Loan Parties to make payment to the Resigning Agent shall be hereby amended to direct the Loan Parties to make payment to the account designated by the Successor Agent to the Borrower from time to time.
13.Amendments to Credit Agreement.
(a)Effective as of the Effective Date, the Loan Parties, the Requisite Lenders and the Successor Agent hereby agree that the Credit Agreement shall be amended as follows:
(i)The following defined terms in Section 1.1 of the Credit Agreement are hereby amended and restated in their entirety as follows:
“Fee Letter” means that certain fee letter dated as of April 13, 2021, by and among the Parent, PREIT, PREIT-RUBIN and WSFS and each other fee letter entered into with an Arranger in connection with the facilities under this Agreement.
“Federal Funds Rate” means, for any period, a fluctuating interest rate per annum equal for each day during such period to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System, as published for such day (or, if such day is not a Business Day, for the immediately preceding Business Day) by the Federal Reserve Bank of New
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York, or, if such rate is not so published for any day which is a Business Day, the average of the quotations for such day on such transactions received by the Administrative Agent from two (2) Federal Funds brokers of recognized standing selected by the Administrative Agent. If the Federal Funds Rate determined as provided above would be less than zero, the Federal Funds Rate shall be deemed to be zero.
“LIBOR” means, with respect to any LIBOR Loan for any Interest Period, the rate of interest obtained by dividing (i) the rate of interest per annum determined on the basis of the rate as set by the ICE Benchmark Administration (“ICE”) (or the successor thereto if ICE is no longer making such rate available) for deposits in Dollars for a period equal to the applicable Interest Period as published on the applicable Bloomberg screen page (or any applicable successor page) at approximately 11:00 a.m. (London time) two (2) Business Days prior to the first day of the applicable Interest Period by (ii) a percentage equal to 1 minus the Eurodollar Reserve Percentage. If, for any reason, the rate referred to in the preceding clause (i) does not appear on the applicable Bloomberg screen page (or any applicable successor page), then the rate to be used for such clause (i) shall be determined by the Administrative Agent to be the arithmetic average of the rate per annum at which deposits in Dollars would be offered by first class banks in the London interbank market to the Administrative Agent at approximately 11:00 a.m. (London time) two (2) Business Days prior to the first day of the applicable Interest Period for a period equal to such Interest Period. Any change in the maximum rate of reserves described in the preceding clause (ii) shall result in a change in LIBOR on the date on which such change in such maximum rate becomes effective. Notwithstanding the foregoing, (i) in no event shall LIBOR be less than 0.50%, and (ii) if a Benchmark Transition Event or an Early Opt-in Election, as applicable, and its related Benchmark Replacement Date have occurred with respect to LIBOR, then “LIBOR” means the applicable Benchmark Replacement to the extent that such Benchmark Replacement has become effective pursuant to Exhibit N.
“Prime Rate” means, at any time, the rate of interest per annum publicly announced from time to time by the Administrative Agent as its prime rate. Each change in the Prime Rate shall be effective as of the opening of business on the day such change in such prime rate occurs. The rate announced publicly by the Administrative Agent as its prime rate is an index or base rate and shall not necessarily be its lowest or best rate charged to its customers or other banks.
“Principal Office” means the office of the Administrative Agent located at 500 Delaware Avenue, Wilmington, DE 19801, or any other subsequent office that the Administrative Agent shall have specified by written notice to the Borrower and the Lenders as the Principal Office referred to herein, to which payments due are to be made and at which Loans will be disbursed.”
(ii)Sections 4.2(a) and 4.2(b) of the Credit Agreement are hereby amended by deleting the respective references to the parenthetical “(or such shorter period as may be acceptable to the Administrative Agent in its sole discretion)”.
(iii)Section 11.4 of the Credit Agreement is hereby amended and restated in its entirety as follows:
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“Each Titled Agent, as a Lender or as a Specified Derivatives Provider, as the case may be, shall have the same rights and powers under this Agreement and any other Loan Document and under any Specified Derivatives Contract, as the case may be, as any other Lender or Specified Derivatives Provider and may exercise the same as though it were not a Titled Agent, as the case may be; and the term “Lender” or “Lenders” shall, unless otherwise expressly indicated, include a Titled Agent, in each case, in its individual capacity. The Titled Agents and their respective Affiliates may each accept deposits from, maintain deposits or credit balances for, invest in, lend money to, act as trustee under indentures of, serve as financial advisor to, and generally engage in any kind of business with any Borrower, any other Loan Party or any other Affiliate thereof as if it were any other bank and without any duty to account therefor to the other Lenders or any other Specified Derivatives Providers. Further, the Titled Agents and their respective Affiliates may each accept fees and other consideration from the Borrower for services in connection with this Agreement or any other Specified Derivatives Contract, or otherwise without having to account for the same to the Issuing Banks, the other Lenders or any other Specified Derivatives Providers. The Issuing Banks and the Lenders acknowledge that, pursuant to such activities, the Titled Agents and their respective Affiliates may receive information regarding the Borrower, other Loan Parties, other Subsidiaries and other Affiliates (including information that may be subject to confidentiality obligations in favor of such Person) and acknowledge that the Titled Agents and their respective Affiliates shall be under no obligation to provide such information to them.”
14.Conditions to Effectiveness. This Agreement shall be effective as of the date hereof (the “Effective Date”), which is the date on which (i) the Resigning Agent and the Successor Agent shall have received this Agreement, executed and delivered by a duly authorized officer of the Resigning Agent, the Successor Agent, the Requisite Lenders and the Borrower, (ii) the Successor Agent shall have received a counterpart of the Successor Agent Fee Letter (defined below) duly executed by the Borrower and the Successor Agent and (iii) each of the Resigning Agent and the Successor Agent have received from Borrower all reasonable and documented out-of-pocket fees, costs and expenses of such parties or their Affiliates invoiced at least one (1) Business Day prior to the Effective Date, in each case, in connection with (x) the preparation, execution, and delivery of this Agreement and the Perfection and Assignment Documents, and (y) the filing and/or recordation the Perfection and Assignment Documents. Until such date, the Resigning Agent shall continue to have full authority to act as Administrative Agent in accordance with the terms of the Credit Agreement and the other Loan Documents.
15.Representations and Warranties of the Resigning Agent. The Resigning Agent hereby represents and warrants the following to the Successor Agent:
(a)Loan Status. Schedule II sets out the outstanding principal amount of, and accrued interest payable on, the Loans as of the Effective Date;
(b)Current Lenders. Schedule III sets forth, based on the Register, as of the Effective Date, a schedule of the Lenders and the outstanding balances owing to each such Lender under the Credit Agreement.
(c)Documents. Schedule IV is a list of the material Loan Documents delivered to the Successor Agent as of the Effective Date. There are no amendments, supplements, waivers or consents to the Loan Documents to the knowledge of the Resigning Agent in the possession of the Resigning Agent except as set forth on Schedule IV;
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(d)Authority. The Resigning Agent is duly authorized to execute and perform its obligations under this Agreement; and
(e)Possessory Pledged Collateral. Schedule I hereto sets forth all of the possessory Pledged Collateral (including, without limitation, all stock certificates and promissory notes), if any, held by the Resigning Agent for the benefit of the Lenders.
16.Representations and Warranties of the Lenders. Each Lender signatory hereto represents and warrants to the Successor Agent and to the Resigning Agent that, as of the Effective Date, all information pertaining to such Lender set forth on Schedule III hereof is true and correct.
17.Representations and Warranties of the Loan Parties. As of the Effective Date, the Borrower hereby represents and warrants the following to each other Party hereto:
(i)this Agreement has been duly authorized, executed and delivered by the Borrower and is a legal, valid, and binding agreement of the Borrower, enforceable according to its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium or other laws affecting creditors’ rights generally and subject to general principles of equity, regardless of whether considered in a proceeding in equity or at law;
(ii)the Borrower has full power and authority, and has taken all action necessary to execute and deliver this Agreement and to fulfill its obligations hereunder and to consummate the transactions contemplated hereby; and
(iii)the execution, delivery and performance by the Borrower of this Agreement does not violate or conflict with its organizational or governance documents or any agreement or other document binding on it or to which its properties are subject.
18.Successor Agent Fees and Expenses. On the Effective Date, the Successor Agent shall be entitled to those fees and expenses set forth in that certain Fee Letter dated as of the date hereof between the Borrower and the Successor Agent (as amended, amended and restated, supplemented or otherwise modified through the date hereof, the “Successor Agent Fee Letter”) in accordance with the terms thereof and all references to “Fee Letter” in the Credit Agreement and the other Loan Documents shall be deemed to refer to the Successor Agent Fee Letter. In addition, commencing on the Effective Date, the Resigning Agent shall cease to be entitled to receive the fees payable to it in its capacity as administrative agent and collateral agent pursuant to the Fee Letter (as defined in the Credit Agreement prior to giving effect to this Agreement) and the Fee Letter (as defined in the Credit Agreement prior to giving effect to this Agreement) is terminated and of no further force or effect; provided, that the Resigning Agent shall remain entitled to receive any unpaid fees, expenses and other amounts that have accrued as of the Effective Date and are owed by the Borrower to it in its capacity as administrative agent and as the collateral agent pursuant to the Fee Letter (as defined in the Credit Agreement prior to giving effect to this Agreement). Notwithstanding anything contained in this Section 18 (including, for the avoidance of doubt, the proviso in the immediately preceding sentence), the Resigning Agent hereby agrees to pay the Borrower a pro rata refund of the most recent annual administrative fee paid by the Borrower to the Resigning Agent pursuant to the Fee Letter (as defined in the Credit Agreement prior to giving effect to this Amendment) for the remaining days of the year on which such fee is based which have not yet elapsed.
8
19.Miscellaneous.
(a)Severability. Any provision of this Agreement held to be invalid, illegal or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such invalidity, illegality or unenforceability without affecting the validity, legality and enforceability of the remaining provisions hereof; and the invalidity of a particular provision in a particular jurisdiction shall not invalidate such provision in any other jurisdiction.
(b)Continuing Effect; No Other Waivers or Amendments. Except to the extent expressly set forth herein, this Agreement shall not constitute an amendment to or waiver of any provision of the Credit Agreement or the other Loan Documents and shall not be construed as a consent to any action on the part of the Borrower that would require an amendment, waiver or consent of any Lender. Except to the extent expressly set forth herein, the provisions of the Credit Agreement and the other Loan Documents are and shall remain in full force and effect in accordance with their terms. This Agreement shall be considered a Loan Document. After the Effective Date, the provisions of Article XI and Sections 12.2 and 12.10 of the Credit Agreement (as they exist on the date hereof and without giving effect to any amendment, waiver or other future modification thereto that is in any manner adverse to the Resigning Agent or its Affiliates) shall inure to the benefit of the Resigning Agent and its Affiliates as to any actions taken or omitted to be taken while it was Administrative Agent under the Credit Agreement and the other Loan Documents. The Resigning Agent and its Affiliates shall retain all claims and rights to indemnification under the Credit Agreement and the other Loan Documents for acts, omissions, events or circumstances occurring or existing on or prior to the Effective Date in its capacity as Resigning Agent under the Credit Agreement and the other Loan Documents.
(c)Notice. The following address is to be used for purposes of communications to the Successor Agent pursuant to the Credit Agreement and the other Loan Documents:
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Address: |
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Wilmington Savings Fund Society, FSB |
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500 Delaware Avenue |
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Wilmington, DE 19801 |
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Attn: Patrick Healy |
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Email: AdminAgencyMO@wsfsbank.com |
(d)Counterparts. This Agreement may be executed in any number of separate counterparts by the Parties (including via electronic mail in “.pdf” or “.tif” format), each of which counterparts when so executed shall be an original, but all the counterparts shall together constitute one and the same instrument.
(e)GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH LAWS OF THE STATE OF NEW YORK, UNITED STATES AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES UNDER THIS AGREEMENT SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS. THE COURTS OF THE STATE OF NEW YORK AND OF THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK, AND ANY APPELLATE COURT FROM ANY THEREOF, SHALL HAVE EXCLUSIVE JURISDICTION OVER ANY DISPUTE HEREUNDER TO WHICH JURISDICTION THE PARTIES HERETO SUBMIT.
(f)Headings. Section headings used herein are for convenience of reference only, are not part of this Agreement and shall not affect the construction of, or to be taken into consideration in interpreting, this Agreement.
9
(g)Successors and Assigns; Lenders Bound. This Agreement shall be binding upon, and inure to the benefit of, the Parties, the other Lenders and their respective successors and permitted assigns. Without limiting the foregoing, each reference in this Agreement to the undersigned Lenders (including as parties hereto) shall be deemed to be a reference to such Lenders individually and on behalf of all Lenders.
(h)WAIVERS. EACH PARTY HERETO IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PERSON HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PERSON WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 19(h).
[Signature Pages to Follow]
10
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed and delivered by their respective duly authorized officers as of the date first above written.
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WELLS FARGO BANK, NATIONAL ASSOCIATION, |
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as Resigning Agent |
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By: |
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/s/ Brandon H. Barry |
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Name: |
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Brandon H. Barry |
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Title: |
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Director |
[Signature Page to Agency Resignation, Appointment, Acceptance and Waiver Agreement –
Second Lien Credit Agreement]
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WILMINGTON SAVINGS FUND SOCIETY, FSB, |
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as Successor Agent |
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By: |
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/s/ Raye Goldsborough |
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Name: |
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Raye Goldsborough |
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Title: |
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Vice President |
[Signature Page to Agency Resignation, Appointment, Acceptance and Waiver Agreement –
Second Lien Credit Agreement]
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PREIT ASSOCIATES, L.P. |
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By: |
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Pennsylvania Real Estate Investment Trust, |
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its general partner |
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By: |
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/s/ Andrew Ioannou |
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Name: |
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Andrew Ioannou |
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Title: |
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Executive Vice President, Finance & |
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Acquisitions and Treasurer |
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PREIT-RUBIN, INC. |
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By: |
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/s/ Andrew Ioannou |
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Name: |
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Andrew Ioannou |
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Title: |
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Executive Vice President, Finance & |
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Acquisitions and Treasurer |
|
PENNSYLVANIA REAL ESTATE INVESTMENT TRUST |
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By: |
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/s/ Andrew Ioannou |
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Name: |
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Andrew Ioannou |
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Title: |
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Executive Vice President, Finance & |
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Acquisitions and Treasurer |
[Signature Page to Agency Resignation, Appointment, Acceptance and Waiver Agreement –
Second Lien Credit Agreement]
|
REQUISITE LENDERS: |
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DEUTSCHE BANK AG CAYMAN ISLANDS BRANCH, |
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as Lender |
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By: |
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/s/ Howard Lee |
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Name: |
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Howard Lee |
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Title: |
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Assistant Vice President |
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By: |
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/s/ Hoi Yeun Chin |
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Name: |
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Hoi Yeun Chin |
|
Title: |
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Assistant Vice President |
[Signature Page to Agency Resignation, Appointment, Acceptance and Waiver Agreement –
Second Lien Credit Agreement]
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REQUISITE LENDERS: |
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Bank of America N.A., as Lender |
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By: |
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/s/ Lauren Lountzis |
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Name: |
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Lauren Lountzis |
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Title: |
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Officer |
[Signature Page to Agency Resignation, Appointment, Acceptance and Waiver Agreement –
Second Lien Credit Agreement]
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REQUISITE LENDERS: |
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Nut Tree Drawdown Master Fund, LP |
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Nut Tree Master Fund, LP., as Lender |
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By: |
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/s/ Jed Nussbaum |
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Name: |
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Jed Nussbaum |
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Title: |
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Managing Partner |
[Signature Page to Agency Resignation, Appointment, Acceptance and Waiver Agreement –
Second Lien Credit Agreement]
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REQUISITE LENDERS: |
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REDWOOD MASTER FUND, LTD. |
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By: Redwood Capital Management, LLC, its Investment Manager |
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as Lender |
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By: |
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/s/ Ruben Kliksberg |
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Name: |
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Ruben Kliksberg |
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Title: |
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Chief Executive Officer |
[Signature Page to Agency Resignation, Appointment, Acceptance and Waiver Agreement –
Second Lien Credit Agreement]
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REQUISITE LENDERS: |
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REDWOOD DRAWDOWN MASTER FUND II, L.P. |
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By: Redwood Capital Management, LLC, its Investment Manager |
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as Lender |
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By: |
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/s/ Ruben Kliksberg |
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Name: |
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Ruben Kliksberg |
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Title: |
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Chief Executive Officer |
[Signature Page to Agency Resignation, Appointment, Acceptance and Waiver Agreement –
Second Lien Credit Agreement]
SCHEDULE I
Possessory Pledged Collateral
None.
SCHEDULE II
Loan Status
Term Loans:
|
Outstanding principal amount of Loans: |
$546,701,514.79 |
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Accrued interest for the Interest Period beginning March 10, 2021 (one month LIBOR interest period): |
$2,839,810.65 |
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Current interest rate: |
8.50% |
***All amounts provided as of the close of business on March 31, 2021)***
SCHEDULE III
Current Lenders
|
Lender |
MEI |
Actual Amount |
% of Global |
|
Wells Fargo Bank, National Association |
US1L058422 |
$ 9,102,280.96 |
1.664945260577% |
|
Bank of America, N.A. |
US1L009318 |
$ 17,324,245.25 |
3.168867248640% |
|
Citicorp North America Inc |
US1L021594 |
$ 28,638,961.90 |
5.238500557475% |
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Citizens Bank, NA f/k/a RBS Citizens NA |
US1L116139 |
$ 97,168,744.16 |
17.773637264811% |
|
Deutsche Bank AG * Cayman Islands |
DE1L157170 |
$ 76,034,117.21 |
13.907793403354% |
|
MUFG Union Bank NA |
US1L329203 |
$ 60,295,494.35 |
11.028960542237% |
|
Nut Tree Drawdown Master Fund, LP |
KY0M006255 |
$ 5,209,648.87 |
0.952923803769% |
|
Nut Tree Master Fund, LP |
KY0M0039B5 |
$ 29,521,343.67 |
5.399901568105% |
|
PNC Bank, National Association |
US1L014409 |
$ 59,566,714.09 |
10.895655577776% |
|
Redwood Drawdown Master Fund II LP |
KY0M005D00 |
$ 50,034,507.05 |
9.152070315594% |
|
Redwood Master Fund, Ltd. |
KY1L014424 |
$ 113,805,457.28 |
20.816744457662% |
|
TOTAL: |
|
$ 546,701,514.79 |
100.000000000000% |
SCHEDULE IV
Loan Documents
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1. |
Second Lien Credit Agreement, dated as of December 10, 2020, by and among PREIT, PREIT-RUBIN, the Parent, the lenders from time to time party thereto and Wells Fargo, as Administrative Agent for itself and the Secured Parties. |
|
|
2. |
First Amendment to Second Lien Credit Agreement dated as of February 8, 2021 by and among PREIT, PREIT-RUBIN, Parent, the Lenders party thereto and the Administrative Agent. |
|
|
3. |
Guaranty, dated as of December 10, 2020 entered into by the Guarantors party thereto in favor of the Administrative Agent, for its benefit and the benefit of the other Guarantied Parties. |
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4. |
Collateral Agreement, dated as of December 10, 2020 entered into by PREIT, PREIT-RUBIN, the Parent and certain Subsidiaries of the Borrower in favor of the Administrative Agent, for its benefit and the benefit of the Secured Parties. |
|
|
5. |
Pledge Agreement, dated as of December 10, 2020, by and among PREIT, PREIT-RUBIN, the Parent, certain Subsidiaries of the Borrower and the Administrative Agent, for its benefit and the benefit of the Lenders. |
|
|
6. |
Intercreditor Agreement, dated as of December 10, 2020, among the Borrower, the other Grantors party thereto, Well Fargo, as administrative agent, collateral agent and Representative (as defined therein) for the First Lien Secured Parties (as defined therein), Wells Fargo, as administrative agent, collateral agent and Representative (as defined therein) for the Second Lien Secured Parties (as defined therein), and each additional Senior Representative (as defined therein) and Second Priority Representative (as defined therein) from time to time party thereto. |
|
|
7. |
Second Lien Deed of Trust, Assignment of Leases and Rents, Security Agreement and Fixture Filing given by PR Prince George’s Plaza, LLC, a Delaware limited liability company, in favor of Samuel M. Shiel, Esq. as trustee, for the benefit of Administrative Agent and the Lenders covering certain real property located in the City of Hyattsville, Prince Georges County, Maryland and more particularly described in the Prince Georges Security Instrument. |
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8. |
Second Lien Deed of Trust, Assignment of Leases and Rents, Security Agreement and Fixture Filing given by PR Valley Limited Partnership, a Pennsylvania limited partnership, PR Valley Anchor-M Limited Partnership, a Pennsylvania limited partnership, and PR Valley Anchor-S, LLC, a Maryland limited liability company, in favor of Samuel M. Shiel, Esq. as trustee, for the benefit of Administrative Agent and the Lenders covering certain real property located in the City of Hagerstown, Washington County, Maryland and more particularly described in the Valley Mall Security Instrument. |
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|
9. |
Second Lien Deed of Trust, Absolute Assignment of Leases and Rents, Security Agreement and Fixture Filing given by PR Jacksonville Limited Partnership, a Pennsylvania limited partnership, in favor of TRSTE, Inc., a Virginia corporation, as trustee, for the benefit of Administrative Agent and the Lenders covering certain real property located in the City of Jacksonville, Onslow County, North Carolina and more particularly described in the Jacksonville Security Instrument. |
|
|
10. |
Second Lien Fee and Leasehold Mortgage with Absolute Assignment of Leases and Rents, Security Agreement and Fixture Filing by PR Magnolia LLC, a Delaware limited liability |
|
|
company, in favor of Administrative Agent and the Lender covering certain real property located in the City of Florence, Florence County, South Carolina and more particularly described in the Magnolia Security Instrument. |
|
|
11. |
Second Lien Credit Line Fee and Leasehold Deed of Trust, Absolute Assignment of Leases and Rents, Security Agreement and Fixture Filing given by PR Springfield Town Center LLC, a Delaware limited liability company, in favor of TRSTE, Inc., a Virginia corporation, as trustee, for the benefit of Administrative Agent and the Lenders covering certain real property located in Fairfax County, Virginia and more particularly described in the Springfield Security Instrument. |
|
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12. |
Second Lien Mortgage of Real Property, Security Agreement of Personal Property, Assignment of Rents and Profits and Fixtures Financing Statement given by PR Valley View OP-DSG/CEC, LLC, a Delaware limited liability company, in favor of Administrative Agent and the Lenders covering certain real property located in the City of La Crosse, La Crosse County, Wisconsin and more particularly described in the Valley View Security Instrument. |
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|
13. |
Second Lien Mortgage with Absolute Assignment of Leases and Rents, Security Agreement and Fixture Filing given by Bala Cynwyd Associates, L.P., a Pennsylvania limited partnership, in favor of Administrative Agent and the Lenders covering certain real property located in the Township of Cherry Hill, Camden County, New Jersey and more particularly described in the Cherry Hill Security Instrument. |
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|
14. |
Second Lien Mortgage with Absolute Assignment of Leases and Rents, Security Agreement and Fixture Filing given by Moorestown Mall LLC, a Delaware limited liability company, PR Moorestown Anchor-L&T, LLC, a New Jersey limited liability company, and PR Moorestown Anchor-M, LLC, a New Jersey limited liability company, in favor of Administrative Agent and the Lenders covering certain real property located in the Township of Moorestown, Burlington County, New Jersey and more particularly described in the Moorestown Security Instrument. |
|
|
15. |
Second Lien Open End Mortgage, Assignment of Leases and Rents, Security Instrument and Fixture Filing given by PR Exton Square Property L.P., a Delaware limited partnership, and PR Exton Outparcel Limited Partnership, a Pennsylvania limited partnership, in favor of Administrative Agent and the Lenders covering certain real property located in the Township of West Whiteland, Chester County, Pennsylvania and more particularly described in the Exton Security Instrument. |
|
|
16. |
Second Lien Open End Fee and Leasehold Mortgage, Assignment of Leases and Rents, Security Instrument and Fixture Filing given by PR CC Limited Partnership, a Pennsylvania limited partnership, and PR Capital City Limited Partnership, a Pennsylvania limited partnership, in favor of Administrative Agent and the Lenders covering certain real property located in the City of Camp Hill, Cumberland County, Pennsylvania and more particularly described in the Capital City Security Instrument. |
|
|
17. |
Second Lien Open End Fee and Leasehold Mortgage, Assignment of Leases and Rents, Security Instrument and Fixture Filing given by PR Plymouth Anchor-M, L.P., a Delaware limited partnership, PR Plymouth Meeting Limited Partnership, a Pennsylvania limited partnership, Plymouth Ground Associates LP, a Pennsylvania limited partnership, and PR AEKI Plymouth, L.P., a Delaware limited partnership, in favor of Administrative Agent and the Lenders covering certain real property located in the City of Plymouth Meeting, Montgomery County, Pennsylvania and more particularly described in the Plymouth Security Instrument. |
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|
18. |
Amended and Restated Deposit Account Control Agreement (Springing Agreement) by and among PREIT Associates, L.P., PNC Bank, the Administrative Agent, as first lien agent and the Agent, as second lien agent (Account Name: PREIT Associates, LP Disbursement Acct., Acct. #4260634331). |
|
|
19. |
Amended and Restated Deposit Account Control Agreement (Springing Agreement) by and among PREIT Associates, L.P., PNC Bank, the Administrative Agent, as first lien agent and the Agent, as second lien agent (Account Name: PALP Concentration Acct., Acct. #4227691457). |
|
|
20. |
Amended and Restated Deposit Account Control Agreement (Springing Agreement) by and among PREIT Associates, L.P., PNC Bank, the Administrative Agent, as first lien agent and the Agent, as second lien agent (Account Name: Jacksonville Ops. Acct., Acct. #4228210555). |
|
|
21. |
Amended and Restated Deposit Account Control Agreement (Springing Agreement) by and among PREIT Associates, L.P., PNC Bank, the Administrative Agent, as first lien agent and the Agent, as second lien agent (Account Name: Valley Ops Acct, Acct. #4228312025). |
|
|
22. |
Amended and Restated Deposit Account Control Agreement (Springing Agreement) by and among Bala Cynwyd Associates LP, PNC Bank, the Administrative Agent, as first lien agent and the Agent, as second lien agent (Account Name: One Cherry Hill Ops. Acct., Acct. #4228459895). |
|
|
23. |
Amended and Restated Deposit Account Control Agreement (Springing Agreement) by and among PR Capital City Limited Partnership, PNC Bank, the Administrative Agent, as first lien agent and the Agent, as second lien agent (Account Name: Capital City Ops. Acct., Acct. #4228274479). |
|
|
24. |
Amended and Restated Deposit Account Control Agreement (Springing Agreement) by and among PR Exton Square Property, L.P., PNC Bank, the Administrative Agent, as first lien agent and the Agent, as second lien agent (Account Name: Exton Ops. Acct., Acct. #4227688004). |
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|
25. |
Amended and Restated Deposit Account Control Agreement (Springing Agreement) by and among PR Magnolia LLC, PNC Bank, the Agent, as first lien agent and the Administrative Agent, as second lien agent (Account Name: Magnolia Mall Ops. Acct., Acct. #4227691422). |
|
|
26. |
Amended and Restated Deposit Account Control Agreement (Springing Agreement) by and among Moorestown Mall LLC, PNC Bank, the Agent, as first lien agent and the Administrative Agent, as second lien agent (Account Name: Moorestown Ops., Acct. #4227688012). |
|
|
27. |
Amended and Restated Deposit Account Control Agreement (Springing Agreement) by and among PR Plymouth Meeting Limited Partnership, PNC Bank, the Agent, as first lien agent and the Administrative Agent, as second lien agent (Account Name: Plymouth Meeting Ops. Acct., Acct. #4227691107). |
|
|
28. |
Amended and Restated Deposit Account Control Agreement (Springing Agreement) by and among PR Prince George’s Plaza, LLC, PNC Bank, the Administrative Agent, as first lien agent and the Agent, as second lien agent (Account Name: M@PG Ops. Acct, Acct. #4228317715). |
|
|
29. |
Amended and Restated Deposit Account Control Agreement (Springing Agreement) by and among PR Springfield Town Center LLC, PNC Bank, the Agent, as first lien agent and the Administrative Agent, as second lien agent (Account Name: PR Springfield Town Center LLC, Acct. #4007809409). |
NAI-1516759453v2
Exhibit 10.5
PENNSYLVANIA REAL ESTATE INVESTMENT TRUST
2021 - 2023 EQUITY AWARD PROGRAM
(Established under the Pennsylvania Real Estate Investment Trust
Amended and Restated 2018 Equity Incentive Plan)
ACTIVE.126582533.09
TABLE OF CONTENTS
Page
|
Purposes |
1 |
|
|
2. |
Definitions |
1 |
|
3. |
Award Agreement |
4 |
|
4. |
Performance Share Units |
4 |
|
5. |
Restricted Share Units |
8 |
|
6. |
DERs |
8 |
|
7. |
Holding Period |
9 |
|
8. |
Beneficiary Designation |
10 |
|
9. |
Delivery to Guardian |
10 |
|
10. |
Source of Shares |
10 |
|
11. |
Capital Adjustments |
10 |
|
12. |
Tax Withholding |
10 |
|
13. |
Administration |
10 |
|
14. |
Amendment and Termination |
11 |
|
15. |
Headings |
11 |
|
16. |
Incorporation of Plan by Reference |
11 |
|
APPENDIX A |
1 |
|
|
APPENDIX B |
1 |
|
|
APPENDIX C |
1 |
|
|
APPENDIX D |
1 |
|
- i -
ACTIVE.126582533.09
PENNSYLVANIA REAL ESTATE INVESTMENT TRUST
2021 - 2023 EQUITY AWARD PROGRAM
(Established under the Pennsylvania Real Estate Investment Trust
Amended and Restated 2018 Equity Incentive Plan)
PREAMBLE
WHEREAS, Pennsylvania Real Estate Investment Trust (the “Trust”) established, and its shareholders approved, the Pennsylvania Real Estate Investment Trust Amended and Restated 2018 Equity Incentive Plan (the “Plan”), primarily in order to award equity-based benefits to certain officers and other key employees of the Trust and its “Related Corporations” and “Subsidiary Entities” (both as defined in the Plan);
WHEREAS, the Trust’s Executive Compensation and Human Resources Committee (the “Committee”) is responsible for the administration of the Plan and may, pursuant to the powers granted to it thereunder, adopt rules and regulations for the administration of the Plan and determine the terms and conditions of each award granted thereunder;
WHEREAS, the Committee desires to establish a program for the 2021 through 2023 period under the Plan for the benefit of certain officers and other key employees of the Trust and PREIT Services, LLC (the “Program”), whereby such officers and key employees would receive time-based Restricted Share Units or RSUs under the Plan; and
WHEREAS, in addition to the grant of time-based Restricted Share Units, the Committee desires to award Performance Share Units or PSUs under the Plan.
NOW, THEREFORE, effective as of January 1, 2021, the Pennsylvania Real Estate Investment Trust 2021-2023 Equity Award Program is hereby adopted under the Plan by the Committee, with the following terms and conditions:
1.Purposes. The purposes of this Program are to motivate certain officers and key employees of the Trust and its Related Corporations to reach and exceed challenging performance goals, and to focus the attention of the eligible officers and key employees on the critical financial indicators used to measure the success of the Trust and of other companies in the same business as the Trust.
(a)“Award” means an award of Performance Share Units or Restricted Share Units to a Participant.
(b)“Award Agreement” means a written document evidencing the grant to a Participant of an Award, as described in Section 10.1 of the Plan.
(c)“Base Units” means PSU Base Units and RSU Base Units, collectively.
- 1 -
ACTIVE.126582533.09
(d) “Board” means the Board of Trustees of the Trust.
(e)“Business Combination” means “Business Combination” as such term is defined in the definition of “Change in Control” in the Plan.
(f)“Cause” means “Cause” as such term is defined in a Participant’s Employment Agreement or, if the Participant is not a party to an Employment Agreement, then (solely for purposes of this Program) as set forth below –
(1)Fraud in connection with the Participant’s employment;
(2)Theft, misappropriation or embezzlement of funds of the Trust or its affiliates or of a successor company or affiliate thereof by the Participant;
(3)The Participant’s act resulting in termination pursuant to the provisions of the Trust’s Code of Business Conduct and Ethics for Employees and Officers (as modified, amended or supplemented from time to time) or of any similar code maintained by a successor company;
(4)Indictment of the Participant for a crime involving moral turpitude;
(5)The Participant’s breach of his or her obligations under a confidentiality agreement or non-competition agreement entered into with the Trust or an Affiliate or with a successor company or an affiliate thereof;
(6)Failure of the Participant to perform his or her duties to the Employer (other than on account of illness, accident, vacation or leave of absence) that persists – after written demand for substantial performance which specifically identifies the manner in which the Participant has failed to perform – for more than 30 calendar days after such notice to him or her; or
(7)The Participant’s repeated abuse of alcohol or drugs.
(g)“Change in Control” means “Change in Control” as such term is defined in the Plan.
(h)“Code” means the Internal Revenue Code of 1986, as amended, or any successor statute, as applicable.
(i)“Committee” means the Executive Compensation and Human Resources Committee of the Board, which Committee has developed the Program and has the responsibility to administer the Program under Section 3 of the Plan and Section 13 hereof.
(j)“DER” means “DER” (dividend equivalent right) as such term is defined in the Plan.
(k)“Disability Termination” means the termination of a Participant’s employment under the disability provisions of the Participant’s Employment Agreement or, if
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the Participant is not a party to an Employment Agreement, then as a result of a “Disability” as defined in the Plan.
(l)“Effective Date” means January 1, 2021.
(m)“Employer” means, collectively and individually (as applicable), the Trust and PREIT Services, LLC, and any other “Related Corporation” or “Subsidiary Entity” (both as defined in the Plan) that becomes an Employer under the Plan with the consent of the Trust.
(n)“Employment Agreement” means the written agreement entered into by a Participant and an Employer (if any) setting forth the terms and conditions of the Participant’s employment, as amended at any applicable time.
(o)“Good Reason” means “Good Reason” as such term is defined in a Participant’s Employment Agreement or, if the Participant is not a party to an Employment Agreement, then the relocation of the Participant’s principal business office to a new principal business office that is more than 50 miles from the Participant’s primary residence and at least 20 miles further from such residence that the Participant’s current principal business office, without the consent of the Participant.
(p)“Measurement Period” means the period beginning on the Effective Date and ending on the earlier of December 31, 2023, such earlier date declared by the Committee in connection with a termination of the Program or the date of a Change in Control (provided that, if the Change in Control arises from a Business Combination, the Measurement Period shall end on the date of the closing or effectiveness of the Business Combination, as applicable).
(q)“Participant” means each individual who has received an Award under the Program.
(r)“Performance Goals” means “Performance Goals” as such term is defined in the Plan.
(s)“Performance Share Unit” or “PSU” means a restricted share unit issued under the Plan subject to the Performance Goals set forth in the Program.
(t) “Plan” means the Pennsylvania Real Estate Investment Trust Amended and Restated 2018 Equity Incentive Plan, as it may be amended from time to time.
(u)“Program” means the Pennsylvania Real Estate Investment Trust 2021-2023 Equity Award Program (established under the Plan), as it may be amended from time to time.
(v)“PSU Base Units” means the number of Performance Share Units as set forth in an Award Agreement (increased by any additional Performance Share Units “purchased” pursuant to Section 6 hereof) by which the number of Shares that may be delivered to a Participant is measured.
(w)“Restricted Share Unit” or “RSU” means a restricted share unit issued under the Plan subject to time-based vesting.
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(x)“RSU Base Units” means the number of Restricted Share Units as set forth in an Award Agreement (increased by any additional Restricted Share Units “purchased” pursuant to Section 6 hereof) by which the number of Shares that may be delivered to a Participant is measured.
(y) “Shares” means “Shares” as such term is defined in the Plan.
(z)“Share Value” means, as applicable and except as provided in the following sentence, the average of the closing prices of one Share on the New York Stock Exchange (the “NYSE”) (or, if not then listed on the NYSE, on the principal market or quotation system on which then traded) for: (i) the 20 days on which Shares were traded prior to the Effective Date (for the value of a Share on the Effective Date); (ii) the 20 days on which Shares were traded prior to and including the last day of the Measurement Period (for the value of a Share on the last day of the Measurement Period); (iii) the 20 days on which Shares were traded prior to and including the last day of the applicable RSU vesting date; or (iv) the 20 days on which the Shares were traded prior to and including the applicable dividend payment date (for the “purchase” of additional PSUs or RSUs or notional shares upon the payment of a dividend by the Trust). In the event of a Business Combination approved by the shareholders of the Trust on or prior to December 31, 2023, Share Value upon the closing of such Business Combination shall mean the final price per Share agreed upon by the parties to the Business Combination.
(aa)“Trust” means Pennsylvania Real Estate Investment Trust, a Pennsylvania business trust.
(bb)“Trustee” means a member of the Board.
3.Award Agreement. Each Participant shall be issued Award Agreements setting forth the initial number of PSU Base Units and RSU Base Units. The award of such Base Units shall entitle the Participant to receive the number of Shares determined under Sections 4 and 5 hereof. Each Award Agreement, and any Shares which may be delivered thereunder, are subject to the terms of this Program and the terms of the Plan.
(a)PSU Base Units Earned. The number of Shares to be issued by the Trust, if any, with respect to any award of PSU Base Units shall be determined based on the Trust’s achievement of the Operating Performance Goals (as defined below) for the Measurement Period as described in Section 4(b) hereof and a modification based on the Trust’s TRS (as defined below) performance for the Measurement Period, as described in and determined pursuant to Section 4(c) hereof. Also, except as otherwise provided in subsection (e) below, a Participant must be employed by an Employer on the last day of the Measurement Period in order to receive any Shares subject to Performance Goals under the Program. See Appendix A attached hereto for examples illustrating the operation of this Section.
(b)Operating Performance Goals. The Committee established in writing the objective operating Performance Goals to use under the Program (the “Operating Performance Goals”), consisting of “Core Mall Total Occupancy” and “Corporate Debt Yield” metrics, each weighted 50%, and minimum, target and maximum ranges for each metric, by action taken on
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March 30, 2021. For each Operating Performance Goal, the multiplier related to the level of achievement during the Measurement Period is as follows:
|
Level of Achievement of |
Multiplier(1) |
|
Below Minimum |
0 |
|
Minimum |
0.5 |
|
Target |
1.0 |
|
Maximum |
2.0 |
(1) Multiplier between performance measure goals determined by linear interpolation.
Once the applicable multiplier for each Operating Performance Goal is determined, the payout percentage of PSU Base Units (the “Payout Percentage”) shall be determined as follows: (1) the applicable multiplier of the Core Mall Total Occupancy metric multiplied by 50%, plus (2) applicable multiplier of the Corporate Debt Yield metric multiplied by 50%.
Once the Payout Percentage is determined, it is multiplied by the number of a Participant’s PSU Base Units subject to the Program at the end of the Measurement Period, with the product being the preliminary number of Shares subject to modification as described in Section 4(c) hereof. To be clear, if, for the Measurement Period, the Trust does not achieve at least the minimum achievement for at least one of the Operating Performance Goals, the Trust shall not deliver to the Participants any Shares subject to Performance Goals under the Program.
(c)TRS Modifier. The preliminary number of Shares to be awarded, if any, as determined in accordance with Section 4(b) above, shall be adjusted, upwards or downwards, depending on the Trust’s performance, based on its “TRS” (as defined below), over the Measurement Period relative to the TRS performance of other real estate investment trusts comprising a leading index of retail real estate investment trusts (such adjustment as a percentage of the preliminary number of Shares, the “TRS Modifier”). The TRS Modifier shall be determined based on the whole percentile (expressed as a percentage equal to the percentile rounded up for fractions of one-half or greater) at which the Trust’s TRS for the Measurement Period places the Trust among the component members of the “FTSE Retail REIT Index” (as defined below) for the Measurement Period, each ranked pursuant to such TRS. Once the Trust’s percentile position within the FTSE Retail REIT Index is determined, the TRS Modifier shall be determined as follows:
|
|
• |
if the Trust’s TRS is equal to or below the 25th percentile on the FTSE Retail REIT Index, the TRS Modifier shall be 80%; |
|
|
• |
if the Trust’s TRS is above the 25th percentile but less than the 50th percentile on the FTSE Retail REIT Index, the TRS Modifier shall be determined by linear interpolation between 80% at the 25th percentile (as set forth in the prior bullet), and 100% at the 50th percentile (as set forth in the subsequent bullet); |
|
|
• |
if the Trust’s TRS is equal to the 50th percentile on the FTSE Retail REIT Index, the TRS Modifier shall be 100%; |
|
|
• |
if the Trust’s TRS is above the 50th percentile and below the 75th percentile on the FTSE Retail REIT Index, the TRS Modifier shall be determined by linear interpolation between 100% at the 50th percentile (as set forth in the prior bullet), and 120% at the 75th percentile (as set forth in the subsequent bullet); and |
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|
|
• |
if the Trust’s TRS is equal to or above the 75th percentile on the FTSE Retail REIT Index, the TRS Modifier shall be 120%. |
Once the TRS Modifier is determined, it is multiplied by the preliminary number of Shares determined pursuant to Section 4(b) hereof, with the product being the number of Shares awarded. The number of Shares that may be delivered shall not exceed 200% of the Participant’s PSU Base Units subject to the Program. Shares will be delivered under the Program to the extent that Shares remain available under the Plan. If the total number of Shares to be delivered exceeds the number of Shares available under the Plan, then the number of Shares for each Participant will be reduced on a pro rata basis based on each individual Participant’s PSU Base Units as compared to the total of all Participants’ PSU Base Units, each determined as of the last day of the Measurement Period.
(d)Definitions for this Section. The following terms shall be defined as set forth below:
(1) “FTSE Retail REIT Index” means the FTSE NAREIT US ALL Equity REIT Index – Retail Subset Index (as it may be renamed from time to time) or, in the event such index shall cease to be published, such other index as the Committee shall determine to be comparable thereto.
(2) “TRS” means total return to shareholders for the Measurement Period for the Trust and for the other component members of the FTSE Retail REIT Index. TRS is calculated by (i) adding ending Share Value to value of dividends paid during the Measurement Period, assuming for purposes of the calculation that such dividends were reinvested, (ii) dividing the result by the beginning Share Value and (iii) subtracting one from such quotient. “Component members” of the FTSE Retail REIT Index means those entities used for purposes of compiling the FTSE Retail REIT Index as of the first day of the Measurement Period, which are listed in Appendix D attached hereto, and that remain publicly held companies as of the last day of the Measurement Period, whether or not they are still included in the FTSE Retail REIT Index on such last day.
(e)Termination of Employment. Upon a Participant’s termination of employment on or prior to the last day of the Measurement Period, the following shall occur:
(1)Termination without Cause, for Good Reason, or on Account of Disability or Death. If, on or prior to the last day of the Measurement Period, (i) the Participant terminates his or her employment with the Employer for Good Reason, (ii) the Employer terminates the Participant’s employment for reasons other than for Cause, (iii) the Participant incurs a Disability Termination, or (iv) the Participant dies, the Participant (or the Participant’s beneficiary(ies), if applicable) shall be eligible to receive Shares in respect of the Participant’s PSU Base Units under the Program (or not) as though the Participant had remained employed by the Employer through the end of the Measurement Period.
(2)Termination for Any Other Reason. If, on or prior to the last day of the Measurement Period, the Participant’s employment with the Employer terminates for any reason other than a reason described in paragraph (1) above, the Participant shall forfeit all of his
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or her the PSU Base Units (and all of the Shares that may have become deliverable with respect to such PSU Base Units) under the Program.
(f)Determination of Performance; Share Delivery. Within 60 days after the end of the Measurement Period, the Committee shall provide each Participant with a written determination of whether the Trust did or did not attain the Performance Goals for the Measurement Period (and, if applicable, the extent to which each Performance Goal was attained) and the calculations used to make such determination. If Shares are to be delivered in respect of a Participant’s PSU Base Units under the Program, they shall be delivered to Participants no later than the March 15 following the end of the Measurement Period, unless the Measurement Period ends as a result of a Change in Control, in which case the Shares will be delivered to the Participants within five days following the end of the Measurement Period. Notwithstanding anything in the Program to the contrary, the Committee, in its sole discretion, may elect to settle Performance Share Units in cash based on the Fair Market Value of a Share on the settlement date.
(g)Elective Deferrals. Except in the event of delivery on account of a Change in Control, if Shares are to be delivered in respect of a Participant’s PSU Base Units under the Program, a Participant may elect to defer delivery (and the Trust shall defer issuance) of all or a portion of the Shares until, as specified in the Participant’s deferral election agreement, (i) the Participant’s separation from service from the Trust’s controlled group of entities and/or (ii) a date chosen by the Participant. The Participant may also elect in the deferral election agreement to receive Shares upon the occurrence of an “unforeseeable emergency,” as defined in section 409A(a)(2)(B)(ii) of the Code, to the extent not prohibited by that section of the Code and regulations issued thereunder. If a Change in Control or the Participant’s death occurs during the deferral period, the Participant’s Shares (and cash attributable to DERs) shall be delivered in a single sum to the Participant or to the Participant’s beneficiary(ies) (as applicable) on the 30th day after the Change in Control (provided that, if the Change in Control arises from a Business Combination, the Change in Control shall be deemed to occur on the date of the closing or effectiveness of the Business Combination, as applicable) or the Participant’s death (as applicable).
A Participant’s deferral election agreement must be submitted to the Committee no later than June 30, 2023 in order to be effective; otherwise, Shares (and cash attributable to DERs) deliverable to the Participant in respect of his or her Base Units if any, will be delivered no later than March 15, 2024. Unless the delivery of deferred Shares is occasioned by either of the events described in the last sentence of the preceding paragraph, if deferred Shares are to be delivered to a Participant who is a “specified employee,” as defined in section 409A(a)(2)(B)(i) of the Code, upon his or her separation from service from the Trust’s controlled group of entities, the Trust shall issue and deliver such deferred Shares (and cash attributable to DERs) on the date that is six months after the date of his or her separation from service. A deferral election agreement shall be substantially in the form set forth in Appendix B attached hereto.
Notwithstanding the foregoing, if a Participant’s PSU Base Units are settled in cash under Section 4(f) and a Participant has submitted a deferral election agreement deferring all or a portion of the Shares that may become deliverable in respect of the Participant’s Performance Share Units, payment of the cash attributable to such Shares shall be deferred until
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the date specified in the Participant’s deferral election agreement. Further, the deferred cash amount shall not accrue interest or be credited with any earnings.
The Committee intends to administer the Program, including the delivery of Shares under an election made pursuant to this subsection and the underlying deferral election agreement, in accordance with section 409A of the Code and regulations and other guidance issued thereunder, but makes no representation with respect to the qualification of the Program or the Awards granted hereunder.
(a)Vesting. Restricted Share Units awarded to each Participant shall vest in equal annual installments as set forth in the Award Agreement. The Committee may, in accordance with the Plan and to the extent permitted by section 409A of the Code (if applicable), at any time accelerate the time at which the restrictions on all or any part of the Restricted Share Units will lapse. All unvested RSUs awarded to a Participant shall become fully vested upon a Change in Control.
(b)Settlement of Restricted Share Units. Upon the RSU vesting date, the Trust shall transfer to the Participant one Share for each RSU Base Unit becoming vested on such date (the date of any such transfer shall be the “settlement date” for purposes of this Agreement); provided, however, the Trust may withhold shares otherwise transferable to the Participant to the extent necessary to satisfy withholding taxes due by reason of the vesting of the Restricted Share Units, in accordance with Section 12. The Participant shall have no rights as a shareholder with respect to the Restricted Share Units awarded hereunder prior to the date of issuance to the Participant of a certificate or certificates for such shares. Notwithstanding anything in the Program to the contrary, the Committee, in its sole discretion, may elect to settle Restricted Share Units in cash based on the Fair Market Value of a Share on the RSU vesting date.
(c)Termination of Employment. If the Participant’s employment terminates on account of his or her death or Disability, any otherwise unvested RSU Base Units that are held by the Participant at the time of such a termination of service shall then become fully vested and the Participant (or the Participant’s beneficiary(ies), if applicable) shall be eligible to receive Shares (or cash, if applicable) in respect of the Participant’s RSU Base Units under the Program.
6.DERs. Participants shall be awarded DERs with respect to their number of PSU Base Units and RSU Base Units. Each DER will be expressed as a specific dollar amount (the “Dollar Amount”) equal to the dollar amount of the dividend paid on an actual Share on a specific date (the “Dividend Date”) multiplied by the Participant’s number of PSU Base Units and RSU Base Units.
(a)For PSU Base Units, until the end of the Measurement Period, the Committee will apply the Dollar Amount to “purchase” a number of additional PSUs, respectively, equal to the Dollar Amount divided by the Share Value. The delivery of Shares in respect of such additional PSUs shall also be subject to the attainment of the Performance Goals set forth in Section 4. DERs shall also be awarded on such additional PSUs and applied in the same manner (thereby increasing the Participant’s PSU Base Units on a cumulative basis). PSUs deemed purchased with DERs hereunder may be whole or fractional units. The “purchase price”
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of the additional PSUs credited pursuant to the terms of the Program shall equal the Share Value as defined herein.
(b)For RSU Base Units, the Committee will apply the Dollar Amount to “purchase” a number of additional RSUs, respectively, equal to the Dollar Amount divided by the Share Value. Any additional RSUs credited to the foregoing provisions of this section shall be subject to satisfaction of the same vesting, payment and other terms and conditions as the original RSUs to which they relate. DERs shall also be awarded on such additional RSUs and applied in the same manner (thereby increasing the Participant’s RSU Base Units on a cumulative basis). RSUs deemed purchased with DERs hereunder may be whole or fractional units. The “purchase price” of the additional RSUs credited pursuant to the terms of the Program shall equal the Share Value as defined herein.
(c)Participants who make a deferral election under Section 4(g) shall also be awarded DERs under the Plan with respect to their deferred Shares. Each such DER will be expressed as a Dollar Amount equal to the dollar amount of the dividend paid on an actual Share on a Dividend Date during the deferral period multiplied by the number of Shares still deferred by the Participant as of the Dividend Date. The Committee will apply the Dollar Amount to “purchase” notional shares (on which DERs thereafter will also be awarded and applied in the same manner). Notional shares deemed purchased with DERs hereunder may be whole or fractional share. DERs expressed as a Dollar Amount will continue to be applied to “purchase” notional shares on Dividend Dates until all of the Participant’s deferred Shares are delivered to the Participant (or to his or her beneficiary(ies), if applicable), as elected in his or her deferral election agreement. A Participant’s notional shares “purchased” with DERs awarded with respect to his or her deferred Shares shall be 100% vested at all times. Notwithstanding the foregoing, this subsection (c) shall not apply if a Participant’s PSU Base Units are settled in cash under Section 4(f).
(d)The Trust shall establish a bookkeeping account (the “DER Account”) for each such Participant and credit to such account the number of whole and fractional additional PSUs and RSUs, and notional shares deemed purchased with the Dollar Amounts. The Participant’s additional PSUs and RSUs, and notional shares shall be subject to the adjustments described in Section 11 hereof. All whole additional PSUs and RSUs (for which Shares become deliverable) and whole notional shares credited to a Participant’s DER Account shall be replaced by issued Shares on a one-to-one basis on the delivery date referred to in Section 4(f), 4(g) or 5(b), as applicable, and the fractional additional PSUs and RSUs (for which Shares become deliverable under this Section) and fractional notional shares credited to a Participant’s DER Account shall be aggregated and replaced by issued Shares on a one-for-one basis (and with cash in lieu of a fractional Share based on the closing price of a Share on the replacement date), and delivered to the Participant (or to his or her beneficiary(ies), if applicable) on the date the associated Shares are delivered to the Participant. Notwithstanding anything in the Program to the contrary, the Committee, in its sole discretion, may elect to settle a Participant’s DER Account in cash.
7.Holding Period. The Chief Executive Officer of the Trust and each Executive Vice President and Senior Vice President who receives Shares pursuant to RSUs and/or PSUs granted under this Program shall hold such Shares for a minimum of one year from the date such Shares are received.
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(a)Each Participant shall designate the person(s) as the beneficiary(ies) to whom any benefit under the Plan is to be paid in the event of the Participant’s death before the Participant receives any or all of such benefit. Each beneficiary designation shall be substantially in the form set forth in Appendix C attached hereto and shall be effective only when filed with the Committee during the Participant’s lifetime.
(b)Any beneficiary designation may be changed by a Participant without the consent of any previously designated beneficiary or any other person by the filing of a new beneficiary designation with the Committee. The filing of a new beneficiary designation shall cancel all beneficiary designations previously filed.
(c)If any Participant fails to designate a beneficiary in the manner provided above, or if the beneficiary designated by a Participant predeceases the Participant, the Committee shall direct such Participant’s Shares to be delivered to the Participant’s surviving spouse or, if the Participant has no surviving spouse, then to the Participant’s estate.
9.Delivery to Guardian. If Shares are issuable under this Program to a minor, a person declared incompetent, or a person incapable of handling the disposition of property, the Committee may direct the delivery of the Shares to the guardian, legal representative, or person having the care and custody of the minor, incompetent or incapable person. The Committee may require proof of incompetence, minority, incapacity or guardianship as the Committee may deem appropriate prior to the delivery. The delivery shall completely discharge the Committee, the Trustees and the Employer from all liability with respect to the Shares delivered.
10.Source of Shares. This Program shall be unfunded, and the delivery of Shares shall be pursuant to the Plan. Each Participant and beneficiary shall be a general and unsecured creditor of the Employer to the extent of the Shares determined hereunder, and the Participant shall have no right, title or interest in any specific asset that the Employer may set aside, earmark or identify as reserved for the delivery of Shares under the Program. The Employer’s obligation under the Program shall be merely that of an unfunded and unsecured promise to deliver Shares in the future, provided the applicable Performance Goal is met as applicable. Except as expressly provided herein, no person shall be entitled to the privileges of ownership in respect of Shares that are subject to Awards hereunder until such Shares have been issued to that person.
11.Capital Adjustments. Calculations required under the Program, the number of Base Units awarded under the Program, and the number of Shares that may be delivered under the Program in respect of such Base Units shall be adjusted to reflect any increase or decrease in the number of issued Shares resulting from a subdivision (share-split), consolidation (reverse split), share dividend, merger, spinoff or other similar event or transaction affecting the Trust during the Measurement Period.
12.Tax Withholding. The delivery of Shares (and cash, if applicable) to a Participant or beneficiary under this Program shall be subject to applicable tax withholding pursuant to Section 10.6 of the Plan.
13.Administration. This Program shall be administered by the Committee pursuant to the powers granted to it in Section 3 of the Plan.
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14.Amendment and Termination. The Committee reserves the right to amend the Program, by written resolution, at any time and from time to time in any fashion, provided any such amendment does not conflict with the terms of the Plan, and to terminate it at will. However, no amendment or termination of the Program shall adversely affect any Award Agreement already issued under the Program without the written consent of the affected Participant(s).
15.Headings. The headings of the Sections and subsections of the Program are for reference only. In the event of a conflict between a heading and the content of a Section or subsection, the content of the Section or subsection shall control.
16.Incorporation of Plan by Reference. Because the Program is established under the Plan in order to provide for, and determine the terms and conditions of, the granting of certain Awards thereunder, the terms and conditions of the Plan are hereby incorporated by reference and made a part of this Program. If any terms of the Program conflict with the terms of the Plan, the terms of the Plan shall control.
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PENNSYLVANIA REAL ESTATE INVESTMENT TRUST
2021-2023 EQUITY AWARD PROGRAM
(Established under the Pennsylvania Real Estate Investment Trust
Amended and Restated 2018 Equity Incentive Plan)
EXAMPLE OF BASE UNIT AWARDS*
“A” is a participant in the Pennsylvania Real Estate Investment Trust 2021-2023 Equity Award Program (the “Program”).
The Share Value of a beneficial interest (a “Share”) in the “Trust” (as defined in the Program) on January 1, 2021 is $2, and the Share Value of a Share on December 31, 2023 is $5. For the three-year period beginning January 1, 2021 and ending December 31, 2023 (the “Measurement Period”), dividends total $0.10 per Share (and are paid in an equal amount over the last ten quarters of the measurement period – i.e., $.01 dividend per Share per quarter).
Award
Participant A receives a Performance Share Unit award for 250 “PSU Base Units” (as defined in the Program).
Dividends and Crediting Additional PSUs
Additional Performance Share Units are deemed purchased and credited on a quarterly basis using dividends deemed to be paid on the units. The purchase price of the additional Performance Share Units credited pursuant to the terms of the Program is the 20-day average share price prior to and including the date of the dividend.
|
|
* The example set forth in this Appendix A is illustrative only and is not intended to be precise or definitive. |
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The following table illustrates how dividends are deemed to be paid on the PSU Base Units and how additional Performance Share Units are credited and added to the aggregate number of PSU Base Units held by Participant A:
|
Date
|
Aggregate PSU Base Units |
Deemed Dividend |
20-Day Average Share Price |
Additional PSUs Credited
|
|
1/1/21 |
250.0 |
- |
- |
- |
|
3/15/21 |
250.0 |
- |
- |
- |
|
6/15/21 |
250.0 |
$2.50 |
$2.00 |
1.3 |
|
9/15/21 |
251.3 |
$2.51 |
$2.50 |
1.0 |
|
12/15/21 |
252.3 |
$2.52 |
$3.00 |
0.8 |
|
3/15/22 |
253.1 |
$2.53 |
$3.00 |
0.8 |
|
6/15/22 |
253.9 |
$2.54 |
$3.50 |
0.7 |
|
9/15/22 |
254.6 |
$2.55 |
$4.00 |
0.6 |
|
12/15/22 |
255.2 |
$2.55 |
$4.00 |
0.6 |
|
3/15/23 |
255.8 |
$2.56 |
$4.50 |
0.6 |
|
6/15/23 |
256.4 |
$2.56 |
$4.50 |
0.6 |
|
9/15/23 |
257 |
$2.57 |
$5.00 |
0.5 |
|
12/15/23 |
257.5 |
$2.57 |
$5.00 |
0.5 |
|
12/31/23 |
258 |
- |
- |
- |
Achievement of Performance Goals and Payout of Shares
Performance Goals
Following the expiration of the Measurement Period, the Committee (as defined in the Program) determines the level of achievement and applicable multiplier of each of the target Operating Performance Goals (as defined in the Program) (which are based on core mall total occupancy and corporate debt yield metrics). For each Operating Performance Goal, the multiplier related to the level of achievement during the Measurement Period is as follows:
|
Level of Achievement of |
Multiplier(1) |
|
Below Minimum |
0 |
|
Minimum |
0.5 |
|
Target |
1.0 |
|
Maximum |
2.0 |
(1) Multiplier between performance measure goals determined by linear interpolation.
Once the applicable multiplier for each Operating Performance Goal is determined, the Payout Percentage (as defined in the Program) shall be determined as follows: (1) the applicable multiplier of the Core Mall Total Occupancy metric multiplied by 50%, plus (2) applicable multiplier of the Corporate Debt Yield metric multiplied by 50%.
If, as of December 31, 2023, the Trust’s achievement of at least one Operating Performance Goal is at or above Minimum achievement level, the 258 PSU Base Units held by Participant A as of December 31, 2023, would be multiplied by the applicable Payout
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Percentage, with the product being the Preliminary Shares to be issued to Participant A subject to modification as discussed below based on the Trust’s relative TRS (defined below). If the Trust’s achievement of all Operating Performance Goals is below the Minimum achievement level, no Preliminary Shares will be issued.
As examples: (1) if the Trust’s achievement under both Operating Performance Goals is at Target, Participant A would receive 258 Preliminary Shares; (2) if the Trust’s achievement under both Operating Performance Goals is below the Minimum, Participant A would receive 0 Preliminary Shares; (3) if the Trust’s achievement is at Target for one Operating Performance Goal and at Maximum for the other Operating Performance Goal, Participant A would receive 387 Preliminary Shares; and (4) if the Trust’s achievement under both Operating Performance Goals is at Maximum, Participant A would receive 516 Preliminary Shares. The number of Preliminary Shares determined under the Operating Performance Goals would then be subject to modification based on the Trust’s TRS as discussed below, but in no case will the number of Shares delivered exceed 200% of Participant A’s PSU Base Units.
TRS Modifier
After the determination of the number of Preliminary Shares, the Committee determines where the Trust’s performance, based on its TRS (as defined in the Program), places the Trust among the component members of the “FTSE Retail REIT Index” (as defined in the Program) (the “Index”), ranked pursuant to each member’s TRS over the Measurement Period. The TRS Modifier (as defined in the Program) will be determined based on the following:
|
Percentile |
TRS Modifier
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25th or below |
80% |
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Between 25th and 50th |
80% - 100%* |
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50th |
100% |
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Between 50th and 75th |
100% - 120%* |
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75th or above |
120% |
* If the TRS is above the 25th percentile but below the 50%, or above the 50th percentile but below the 75th percentile, then the percent of the number preliminary shares earned will be determined by linear interpolation between the 25th and 50th percentiles and 50th and 75th percentiles, as applicable.
Assume the Trust’s TRS for the Measurement Period is determined to be 20% as of December 31, 2023. Participant A’s Preliminary Shares would be multiplied by the applicable TRS Modifier, with the product being the number of Shares to be delivered. In no event shall the total number of Shares delivered exceed 200% of Participant A’s Base Units.
For example, if Participant A has 258 Preliminary Shares, and the Trust’s TRS places the Trust at the 50th percentile on the Index, Participant A would receive 258 Shares. If the Trust’s TRS places the Trust at the 24th percentile, Participant A would receive 206 Shares (and cash for the 0.4 Share). If the Trust’s TRS places the Trust at the 90th percentile, Participant A would receive 309 Shares (and cash for the 0.6 Share).
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Settlement in Cash - If the Committee elects to settle the PSU Base Units in cash, the Participant would be paid an amount equal to the number of Shares times the Fair Market Value of a Share on the settlement date.
For example, if Participant A has 258 Preliminary Shares, and the Trust’s TRS places the Trust at the 50th percentile on the Index, Participant A would receive $1,290 ($5.00 x 258 of Shares). If the Trust’s TRS places the Trust at the 24th percentile, Participant A would receive $1,032 ($5.00 x 206.4 of Shares). If the Trust’s TRS places the Trust at the 90th percentile, Participant A would receive $1,548 ($5.00 x 309.6 of Shares).
A - 4
ACTIVE.126582533.09
PENNSYLVANIA REAL ESTATE INVESTMENT TRUST
2021-2023 EQUITY AWARD PROGRAM
(Established under the Pennsylvania Real Estate Investment Trust
Amended and Restated 2018 Equity Incentive Plan)
DEFERRAL ELECTION AGREEMENT*
The Pennsylvania Real Estate Investment Trust 2021-2023 Equity Award Program, effective as of January 1, 2021 (the “Program”), provides a select group of management or highly compensated employees with the ability to defer a portion of their compensation earned under the Program. The purpose of this Deferral Election Agreement is to allow you to defer the delivery of all or a portion of the Shares or cash issuable in respect of the Performance Share Units issued to you under the Program that are otherwise deliverable to you under the Program until one of the events selected below occurs.
AFTER YOU SIGN THIS DEFERRAL ELECTION AGREEMENT AND IT IS ACCEPTED BY PENNSYLVANIA REAL ESTATE INVESTMENT TRUST (THE “TRUST”), YOU MAY NOT REVOKE IT AFTER JUNE 30, 2023. IF YOU DECIDE SUBSEQUENTLY TO CHOOSE A LATER DELIVERY DATE, YOU MUST SUBMIT A NEW DEFERRAL ELECTION AGREEMENT AT LEAST 12 MONTHS PRIOR TO YOUR ORIGINAL DELIVERY DATE AND YOUR NEW DELIVERY DATE MUST BE AT LEAST FIVE YEARS AFTER YOUR ORIGINAL DELIVERY DATE. YOU MAY NOT, UNDER ANY CIRCUMSTANCES, ACCELERATE THE DELIVERY OF YOUR SHARES AFTER THIS DEFERRAL ELECTION AGREEMENT HAS BECOME EFFECTIVE (OTHER THAN AS A RESULT OF AN UNFORESEEABLE EMERGENCY, IF ELECTED BELOW).
You need only complete this Deferral Election Agreement if you wish to defer the delivery of Shares or cash that become deliverable to you under the Program. Capitalized terms in this Deferral Election Agreement are defined in the Program.
1.Participation Election
* Because of the complexities involved in the application of federal, state and local tax laws to specific circumstances and the uncertainties as to possible future changes in the tax laws, you should consult your personal tax advisor regarding your own situation before completing this Deferral Election Agreement.
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ACTIVE.126582533.09
2.Delivery Date Election
I hereby elect to have the Trust deliver the percentage set forth above of the Shares or cash that may become deliverable to me in respect of my Performance Share Units under the Program upon the following event [check only one box]:
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(A) On the 10th calendar day after my separation from service from the Trust’s controlled group of entities (the date which is six months after such separation from service if I am a “specified employee” at that time – see Section 4(g) of the Program). |
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(B) On the following date: ___________ __, 20__ [must be after December 31, 2024]. |
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(C) Upon the earlier of the 10th calendar day after my separation from service (as described in event (A) above) or the following date: ___________ __, 20__ [must be after December 31, 2024]. |
3.Acceleration in the Event of an Unforeseeable Emergency
In addition to the election I made in 2 above, if I check the following box, I also elect to have the Trust deliver Shares or cash, as applicable, to the extent permitted by applicable law, to me:
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Upon an “Unforeseeable Emergency,” as defined in Section 4(g) of the Program. (This term is defined quite restrictively in the Internal Revenue Code. See the footnote on the previous page regarding consulting with your own tax advisor before completing this Deferral Election Agreement.) |
4.Change in Control or Death
If a Change in Control or my death occurs before all of the Shares or cash are delivered to me, such Shares or cash shall be delivered in a single distribution to me or to my beneficiary(ies) designated in my Beneficiary Designation Form (as applicable) on the 30th day after such Change in Control (provided that, if the Change in Control arises from a Business Combination, the Change in Control shall be deemed to occur on the date of the closing or effectiveness of the Business Combination, as applicable) or death (as applicable). In addition, the Trust may distribute the Shares or cash to me prior to the date selected under Section 2 above to the extent such delivery is consistent with Section 409A of the Internal Revenue Code.
5.Cash in lieu of Shares.
I acknowledge and agree that the Committee, in its discretion, may elect to settle Performance Share Units in cash.
6.Insufficient Share Possibility
Because of the finite number of Shares available under the Pennsylvania Real Estate Investment Trust Amended and Restated 2018 Equity Incentive Plan, I understand that it is possible that not enough Shares will be available under the Plan to deliver all of the Shares otherwise required to
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ACTIVE.126582533.09
be delivered to me (or to my beneficiary(ies)) on the deferral date(s) chosen in 2 and 3 above. I acknowledge and agree that in the event that an insufficient number of Shares are available under the Plan, cash will be delivered to me in lieu of Shares.
* * * * *
By signing this Deferral Election Agreement, I agree to the terms and conditions of the Program as the Program now exists, and as it may be amended from time to time (provided that no amendment of the Program will adversely affect my rights under the Program without my written consent).
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Signature of Participant |
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Date |
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ACCEPTED: |
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Executive Compensation and Human Resources Committee |
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of Pennsylvania Real Estate Investment Trust |
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By: |
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Date: |
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B - 3
ACTIVE.126582533.09
PENNSYLVANIA REAL ESTATE INVESTMENT TRUST
2021-2023 EQUITY AWARD PROGRAM
(Established under the Pennsylvania Real Estate Investment Trust
Amended and Restated 2018 Equity Incentive Plan)
BENEFICIARY DESIGNATION FORM
This Form is for your use under the Pennsylvania Real Estate Investment Trust 2021-2023 Equity Award Program (the “Program”) to name a beneficiary to whom any benefit under the Program is to be paid in the event of your death. You should complete the Form, sign it, have it signed by your Employer, and date it.
* * * *
I designate the following as my beneficiary(ies) to receive any benefits payable under the Program by reason of my death. I understand that if my designated beneficiary predeceases me, any benefits shall be paid to my surviving spouse or, if none, to my estate. I further understand that the last beneficiary designation filed by me during my lifetime and accepted by my Employer cancels all prior beneficiary designations previously filed by me under the Program.
I hereby state that ____________________________ [insert name], residing at ________________________________________________________________ [insert address], whose Social Security number is __________________, is designated as my beneficiary.
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Signature of Participant |
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Date |
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ACCEPTED: |
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[insert name of Employer] |
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By: |
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Date: |
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C - 1
ACTIVE.126582533.09
FTSE Retail REIT Index
(FTSE NAREIT US All Equity REIT Index – Retail Subset)
(Component Members as of January 1, 2021)
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1. |
Acadia Realty Trust |
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2. |
Agree Realty Corporation |
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3. |
Alpine Income Property Trust Inc |
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4. |
American Finance Trust, Inc. |
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5. |
Brixmor Property Group Inc. |
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6. |
Brookfield Property REIT Inc Class A |
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7. |
Cedar Realty Trust, Inc. |
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8. |
Essential Properties Realty Trust |
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9. |
Federal Realty Investment Trust |
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10. |
Four Corners Property Trust, Inc. |
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11. |
Getty Realty Corp |
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12. |
Kimco Realty Corporation |
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13. |
Kite Realty Group Trust |
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14. |
Macerich Company |
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15. |
National Retail Properties, Inc. |
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16. |
NETSTREIT Corp. |
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17. |
Pennsylvania Real Estate Investment Trust |
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18. |
Postal Realty Trust, Inc. Class A |
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19. |
Realty Income Corporation |
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20. |
Regency Centers Corporation |
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21. |
Retail Opportunity Investments Corp. |
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22. |
Retail Properties of America, Inc. Class A |
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23. |
Retail Value, Inc. |
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24. |
RPT Realty |
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25. |
Saul Centers, Inc. |
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26. |
Seritage Growth Properties Class A |
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27. |
Simon Property Group, Inc. |
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28. |
SITE Centers Corp. |
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29. |
Spirit Realty Capital, Inc. |
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30. |
STORE Capital Corporation |
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31. |
Tanger Factory Outlet Centers, Inc. |
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32. |
Urban Edge Properties |
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33. |
Urstadt Biddle Properties Inc. |
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34. |
Urstadt Biddle Properties Inc. Class A |
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35. |
Washington Prime Group Inc. |
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36. |
Weingarten Realty Investors |
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37. |
Wheeler Real Estate Investment Trust, Inc. |
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38. |
Whitestone REIT |
D - 1
ACTIVE.126582533.09
Exhibit 10.6
PENNSYLVANIA REAL ESTATE INVESTMENT TRUST
AMENDED AND RESTATED
2018 EQUITY INCENTIVE PLAN
RESTRICTED SHARE UNIT AND DIVIDEND EQUIVALENT RIGHTS
AWARD AGREEMENT
ISSUED PURSUANT TO THE
2021-2023 EQUITY AWARD PROGRAM
This RESTRICTED SHARE UNIT AND DIVIDEND EQUIVALENT RIGHTS AWARD AGREEMENT (this “Award Agreement”) is effective as of the 31st day of March, 2021 and is between Pennsylvania Real Estate Investment Trust, a Pennsylvania business trust (the “Trust”), and _________________________________ (the “Grantee”), a “Key Employee” under the Pennsylvania Real Estate Investment Trust Amended and Restated 2018 Equity Incentive Plan (the “Plan”).
WHEREAS, the Trust’s Executive Compensation and Human Resources Committee established the Pennsylvania Real Estate Investment Trust 2021-2023 Equity Award Program (the “Program”) under the Plan for specified Key Employees;
WHEREAS, the Program provides for the award of Restricted Share Units, as well as dividend equivalent rights or “DERs” with respect to such Restricted Share Units;
WHEREAS, DERs awarded with respect to Restricted Share Units will be expressed as a dollar amount, which will be applied to “purchase” additional Restricted Share Units and notional shares of the Trust, as applicable (on which DERs will also be awarded).
NOW THEREFORE, in consideration of the mutual covenants hereinafter set forth and for other good and valuable consideration, the legal sufficiency of which is hereby acknowledged, the parties hereto, intending to be legally bound hereby, agree as follows:
1.Restricted Share Units.
(a)The Grantee is hereby awarded a number of “RSU Base Units” equal to ______ Restricted Share Units. The Grantee’s RSU Base Units will increase in number pursuant to the “purchase” of additional Restricted Share Units with DERs, as described in subsection (c) below.
(b)The Grantee is hereby awarded a DER with respect to each of his or RSU Base Units, as such number of units may be adjusted from time to time in accordance with the Program.
(c)DERs awarded with respect to RSU Base Units will be expressed as a specific dollar amount equal in value to the amount of dividends paid on an actual Share on a specific date (the “Dividend Date”) during the applicable vesting period, multiplied by the Grantee’s outstanding RSU Base Units as of the Dividend Date. The
ACTIVE.126676400.04
Committee will apply the dollar amount to “purchase” full and fractional Restricted Share Units at “Share Value” (as defined in the Program), which will be subject to Section 5 of the Program, and on which DERs thereafter will also be awarded.
(d)This Award Agreement is in all respects limited and conditioned as hereinafter provided, and is subject in all respects to the terms and conditions of the Program and the Plan now in effect and as they may be amended from time to time; provided, that no amendment may adversely affect this Award Agreement without the written consent of the Grantee.
2.Vesting. The Grantee shall vest in the Restricted Share Units in accordance with the vesting schedule below provided that the Grantee is employed by the Employer on the applicable RSU Vesting Date:
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RSU Vesting Date |
Number of Restricted Share Units |
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__________, 2022 |
________ Restricted Share Units |
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__________, 2023 |
________ Restricted Share Units |
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[__________, 2024 |
________ Restricted Share Units]1 |
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1 |
The vesting schedule will be modified as appropriate for individual awards. |
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ACTIVE.126676400.04
In addition, (i) all DERs awarded but unvested on an RSU Vesting Date shall become fully vested as of such RSU Vesting Date, and (ii) all of a Grantee’s unvested Base RSUs shall become fully vested upon a “Change in Control” (as defined in the Plan). Subject to the terms of the Plan, the “Committee” (as defined in the Plan) may at any time accelerate the time at which the restrictions on all or any part of the Base RSUs will lapse.
3.Termination of Service. If the Grantee’s service with the “Employer” (as defined in the Program) terminates on account of his or her death or “Disability” (as defined in the Plan), any otherwise unvested Base RSUs that are held by the Grantee at the time of such a termination of service shall then become fully vested and will be released from any otherwise applicable transfer restrictions. However, if the Grantee’s service with the Employer is terminated for any reason other than death or Disability, all unvested Base RSUs held by the Grantee at the time of such termination of service shall be forfeited.
4.Settlement of Base RSUs. As soon as practicable after an RSU Vesting Date, the Trust shall transfer to the Grantee one Share for each Base RSU becoming vested on such date (the date of any such transfer shall be the “settlement date” for purposes of this Agreement); provided, however, the Trust may withhold Shares otherwise transferable to the Grantee to the extent necessary to satisfy withholding taxes due by reason of the vesting of the Restricted Share Units, in accordance with Section 8. The Grantee shall have no rights as a shareholder with respect to the Base RSUs awarded hereunder prior to the date of issuance to the Grantee of a certificate or certificates for such shares. Notwithstanding the foregoing, the Committee, in its sole discretion, may elect to settle Base RSUs in cash based on the Fair Market Value of a Share on the applicable RSU Vesting Date.
5. Share Delivery. Shares delivered pursuant to the Program shall be registered in the Grantee’s name (or, if the Grantee so requests, in the name of the Grantee and the Grantee’s spouse, jointly with right of survivorship).
6.No Rights as a Shareholder. The Grantee shall not have any rights as a shareholder with respect to any Shares subject to the Base RSUs awarded under this Agreement prior to the date of issuance to the Grantee of a certificate or certificates for such Shares.
7.Transferability. The Grantee may not, except by will or by the laws of descent and distribution, assign or transfer his or her Restricted Share Units or notional Shares. The Grantee may assign or transfer, in whole or in part, Shares delivered hereunder pursuant to the Program, subject to any restrictions imposed by applicable law or the Trust’s insider trading policies.
8.Withholding of Taxes. Payments made with respect to this Award will be subject to tax withholding to the extent required by law and in accordance with the terms of the Plan.
9.Share Retention Requirements. For purposes of the share retention requirements set forth in Section X of the Trust’s Corporate Governance Guidelines (the “Share Retention Requirements”), the Shares issued to the Grantee under the Program shall be treated as though they were restricted shares that became vested upon issuance. If the Grantee has not met the Share Retention Requirements when the Shares are issued, the Grantee shall be required to retain 100% of such Shares until such Share Retention Requirements have been satisfied. However, any share retention requirement that results from this provision shall immediately lapse upon the Participant’s termination of employment with the Employer.
10.Additional Holding Period. In addition to any restrictions imposed pursuant to Paragraph 9, if the Grantee is the Chief Executive Officer of the Trust, an Executive Vice President or a Senior Vice President, the Grantee hereby agrees that he or she shall hold any Shares received pursuant to RSUs granted under this Award for a minimum of one year from the date such Shares are received, even if the Grantee is otherwise in compliance with the Share Retention Requirements.
11.Recoupment Policy. The Grantee hereby agrees that any Shares delivered under this Award Agreement shall be subject to the Trust’s “Recoupment Policy” (if applicable to the Grantee) as in effect on the date the Restricted Share Units are granted under this Award Agreement, and as subsequently amended.
12.Governing Law. This Award Agreement shall be construed in accordance with, and its interpretation shall be governed by, applicable federal law and otherwise by the laws of the Commonwealth of Pennsylvania (without reference to the principles of the conflict of laws).
13.Controlling Documents. The terms and conditions of the Program and the Plan are incorporated herein by reference, made a part hereof, and shall control in the event of any conflict with any other terms of this Award Agreement.
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ACTIVE.126676400.04
14.Electronic Delivery of Documents. The Grantee hereby authorizes the Trust to deliver electronically any prospectuses or other documentation related to this Award, the Plan and any other compensation or benefit plan or arrangement in effect from time to time (including, without limitation, reports, proxy statements or other documents that are required to be delivered to participants in such plans or arrangements pursuant to federal or state laws, rules or regulations). For this purpose, electronic delivery will include, without limitation, delivery by means of e-mail or e-mail notification that such documentation is available on the Trust’s Intranet site. Upon written request, the Trust will provide to the Grantee a paper copy of any document also delivered to the Grantee electronically. The authorization described in this paragraph may be revoked by the Grantee at any time by written notice to the Trust.
15.Code Section 409A. Base RSUs payable under this Agreement are intended to be exempt from Code Section 409A under the exemption for short-term deferrals. Accordingly, Base RSUs will be settled no later than the Short-Term Deferral Period (as defined in the Plan) (i.e., no later than the 15th day of the third month following the end of the Grantee’s taxable year in which a Base RSU is no longer subject to a substantial risk of forfeiture).
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ACTIVE.126676400.04
IN WITNESS WHEREOF, the Trust has caused this Award Agreement to be duly executed by its duly authorized officer and the Grantee has hereunto set his or her hand and seal, all as of this 31st day of March, 2021.
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PENNSYLVANIA REAL ESTATE |
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INVESTMENT TRUST |
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By: |
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Grantee |
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ACTIVE.126676400.04
PENNSYLVANIA REAL ESTATE INVESTMENT TRUST
2021-2023 EQUITY AWARD PROGRAM
(Established under the Pennsylvania Real Estate Investment Trust
Amended and Restated 2018 Equity Incentive Plan)
BENEFICIARY DESIGNATION FORM
This Form is for your use under the Pennsylvania Real Estate Investment Trust 2021-2023 Equity Award Program (the “Program”) to name a beneficiary to whom any benefit under the Program is to be paid in the event of your death. You should complete the Form, sign it, have it signed by your Employer, and date it.
* * * *
I designate the following as my beneficiary(ies) to receive any benefits payable under the Program by reason of my death. I understand that if my designated beneficiary predeceases me, any benefits shall be paid to my surviving spouse or, if none, to my estate. I further understand that the last beneficiary designation filed by me during my lifetime and accepted by my Employer cancels all prior beneficiary designations previously filed by me under the Program.
I hereby state that ____________________________ [insert name], residing at ________________________________________________________________ [insert address], whose Social Security number is __________________, is designated as my beneficiary.
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Signature of Participant |
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Date |
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ACCEPTED: |
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[insert name of Employer] |
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By: |
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Date: |
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ACTIVE.126676400.04
Exhibit 10.7
PENNSYLVANIA REAL ESTATE INVESTMENT TRUST
AMENDED AND RESTATED
2018 EQUITY INCENTIVE PLAN
PERFORMANCE SHARE UNIT AND DIVIDEND EQUIVALENT RIGHTS
AWARD AGREEMENT
ISSUED PURSUANT TO THE
2021-2023 EQUITY AWARD PROGRAM
This PERFORMANCE SHARE UNIT AND DIVIDEND EQUIVALENT RIGHTS AWARD AGREEMENT (this “Award Agreement”) is effective as of the 31st day of March, 2021 and is between Pennsylvania Real Estate Investment Trust, a Pennsylvania business trust (the “Trust”), and _________________________________ (the “Grantee”), a “Key Employee” under the Pennsylvania Real Estate Investment Trust Amended and Restated 2018 Equity Incentive Plan (the “Plan”).
WHEREAS, the Trust’s Executive Compensation and Human Resources Committee established the Pennsylvania Real Estate Investment Trust 2021-2023 Equity Award Program (the “Program”) under the Plan for specified Key Employees;
WHEREAS, the Program provides for the award of Performance Share Units, as well as dividend equivalent rights or “DERs” with respect to such Performance Share Units;
WHEREAS, the Program designates Operating Performance Goals (as defined in the Program) and a TRS Modifier (as defined in the Program) that determine if and the extent to which Shares will become deliverable to a participant in the Program based on his or her Performance Share Units;
WHEREAS, the Committee has the authority to settle the Performance Share Units as well as any dividend equivalent rights or “DERs” with respect to such Performance Share Units in Shares or cash;
WHEREAS, the Grantee may defer delivery of his or her Shares (if deliverable) until a later date and, if so deferred, the Grantee will be awarded additional DERs with respect to such Shares, provided that if the Committee elects to settle the Performance Share Units in cash, a Grantee’s deferral election will apply to the cash settlement and no additional DERs will be awarded during the deferral period; and
WHEREAS, DERs awarded with respect to Performance Share Units and deferred Shares will be expressed as a dollar amount, which will be applied to “purchase” additional Performance Share Units and notional shares of the Trust, as applicable (on which DERs will also be awarded).
ACTIVE.126676356.03
NOW THEREFORE, in consideration of the mutual covenants hereinafter set forth and for other good and valuable consideration, the legal sufficiency of which is hereby acknowledged, the parties hereto, intending to be legally bound hereby, agree as follows:
1.Performance Share Units.
(a)The Grantee is hereby awarded a number of “PSU Base Units” equal to ______ Performance Share Units. The Grantee’s PSU Base Units will increase in number pursuant to the “purchase” of additional Performance Share Units with DERs, as described in subsections (b) and (e) below.
(b)The Grantee is hereby awarded a DER with respect to each of his or PSU Base Units, as such number of units may be adjusted from time to time in accordance with the Program. If the Grantee makes a deferral election under Section 4(g) of the Program, the Grantee shall also be awarded DERs with respect to each deferred Share; provided, that if the Committee elects to settle the PSU Base Units in cash and a Grantee makes a deferral election under Section 4(g) of the Program, no DERs shall be awarded during the deferral period.
(c)The Trust hereby promises to deliver to the Grantee the number of Shares that Grantee becomes entitled to under Section 4 of the Program (if any). Unless the Grantee elects to make a deferral election pursuant to Section 4(g) of the Program, in which case Shares will be delivered in accordance with such election, the Shares shall be delivered no later than the March 15 following the end of the “Measurement Period” (as defined in the Program), unless the Measurement Period ends as a result of a “Change in Control” (as defined in the Program), in which case the Shares will be delivered to the Grantee within five days following the end of the Measurement Period (the “Delivery Date”). This Award Agreement is in all respects limited and conditioned as hereinafter provided, and is subject in all respects to the terms and conditions of the Program and the Plan now in effect and as they may be amended from time to time; provided, that no amendment may adversely affect this Award Agreement without the written consent of the Grantee. Notwithstanding the foregoing, the Committee, in its sole discretion, may elect to settle PSU Base Units in cash based on the Fair Market Value of a Share on the settlement date.
(d)Pursuant to Section 4(e) of the Program, if the Grantee’s employment with the “Employer” (as defined in the Program) (i) is terminated by the Employer for reasons other than for “Cause” (as defined in the Program), (ii) is terminated by the Grantee for “Good Reason” (as defined in the Program), (iii) terminates on account of the Grantee’s death, or (iv) terminates as a “Disability Termination” (as defined in the Program), in each case on or before the last day of the Measurement Period, the Grantee shall nevertheless be eligible to receive Shares subject to the PSU Base Units the Grantee was granted under the Program (or not) as though the Grantee had remained employed by the Employer through the end of the Measurement Period. If the Grantee’s employment with the Employer terminates for any other reason, the Grantee shall forfeit all of his or her PSU Base Units (and all of the Shares that may have become deliverable with respect to such PSU Base Units) under the Program.
(e)DERs awarded with respect to PSU Base Units will be expressed as a specific dollar amount equal in value to the amount of dividends paid on an actual Share on a specific date (the “Dividend Date”) during the Measurement Period, multiplied by the Grantee’s
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ACTIVE.126676356.03
PSU Base Units as of the Dividend Date. The Committee will apply the dollar amount to “purchase” full and fractional Performance Share Units at “Share Value” (as defined in the Program), which will be subject to Section 4 of the Program, and on which DERs thereafter will also be awarded. The Grantee’s additional Performance Share Units will be replaced by issued Shares (and by cash, to the extent the Grantee has a right to receive a fractional Share) and delivered to the Grantee (if at all) in accordance with Section 4 of the Program.
DERs awarded with respect to deferred Shares will also be expressed as a specific dollar amount equal in value to the amount of dividends paid on an actual Share on a Dividend Date during the deferral period, multiplied by the number of Shares still deferred by the Grantee as of the Dividend Date. The Committee will apply the dollar amount to “purchase” full and fractional notional shares at the closing price on the Dividend Date, on which DERs thereafter will also be awarded. The Grantee’s notional shares will be recorded in a bookkeeping account, and will be 100% vested. The Grantee’s notional shares will be replaced by issued Shares (and by cash, to the extent the Grantee holds a fractional notional share) and delivered to the Grantee (if at all) in accordance with Section 4 of the Program.
2.Share Delivery. Shares delivered pursuant to the Program shall be registered in the Grantee’s name (or, if the Grantee so requests, in the name of the Grantee and the Grantee’s spouse, jointly with right of survivorship).
3.Transferability. The Grantee may not, except by will or by the laws of descent and distribution, assign or transfer his or her Performance Share Units or notional Shares. The Grantee may assign or transfer, in whole or in part, Shares delivered hereunder pursuant to the Program, subject to any restrictions imposed by applicable law or the Trust’s insider trading policies.
4.Withholding of Taxes. Payments made with respect to this Award will be subject to tax withholding to the extent required by law and in accordance with the terms of the Plan.
5.Share Retention Requirements. For purposes of the share retention requirements set forth in Section X of the Trust’s Corporate Governance Guidelines (the “Share Retention Requirements”), the Shares issued to the Grantee under the Program shall be treated as though they were restricted shares that became vested upon issuance. If the Grantee has not met the Share Retention Requirements when the Shares are issued, the Grantee shall be required to retain 100% of such Shares until such Share Retention Requirements have been satisfied. However, any share retention requirement that results from this provision shall immediately lapse upon the Participant’s termination of employment with the Employer.
6.Additional Holding Period. In addition to any restrictions imposed pursuant to Paragraph 5, if the Grantee is the Chief Executive Officer of the Trust, an Executive Vice President or a Senior Vice President, the Grantee hereby agrees that he or she shall hold any Shares received pursuant to PSUs granted under this Award for a minimum of one year from the date such Shares are received, even if the Grantee is otherwise in compliance with the Share Retention Requirements.
7.Recoupment Policy. The Grantee hereby agrees that any Shares delivered under this Award Agreement shall be subject to the Trust’s “Recoupment Policy” (if applicable to the
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ACTIVE.126676356.03
Grantee) as in effect on the date the Performance Share Units are granted under this Award Agreement, and as subsequently amended.
8.Governing Law. This Award Agreement shall be construed in accordance with, and its interpretation shall be governed by, applicable federal law and otherwise by the laws of the Commonwealth of Pennsylvania (without reference to the principles of the conflict of laws).
9.Controlling Documents. The terms and conditions of the Program and the Plan are incorporated herein by reference, made a part hereof, and shall control in the event of any conflict with any other terms of this Award Agreement.
10.Electronic Delivery of Documents. The Grantee hereby authorizes the Trust to deliver electronically any prospectuses or other documentation related to this Award, the Plan and any other compensation or benefit plan or arrangement in effect from time to time (including, without limitation, reports, proxy statements or other documents that are required to be delivered to participants in such plans or arrangements pursuant to federal or state laws, rules or regulations). For this purpose, electronic delivery will include, without limitation, delivery by means of e-mail or e-mail notification that such documentation is available on the Trust’s Intranet site. Upon written request, the Trust will provide to the Grantee a paper copy of any document also delivered to the Grantee electronically. The authorization described in this paragraph may be revoked by the Grantee at any time by written notice to the Trust.
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ACTIVE.126676356.03
IN WITNESS WHEREOF, the Trust has caused this Award Agreement to be duly executed by its duly authorized officer and the Grantee has hereunto set his or her hand and seal, all as of this 31st day of March, 2021.
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PENNSYLVANIA REAL ESTATE |
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INVESTMENT TRUST |
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By: |
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Grantee |
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ACTIVE.126676356.03
PENNSYLVANIA REAL ESTATE INVESTMENT TRUST
2021-2023 EQUITY AWARD PROGRAM
(Established under the Pennsylvania Real Estate Investment Trust
Amended and Restated 2018 Equity Incentive Plan)
BENEFICIARY DESIGNATION FORM
This Form is for your use under the Pennsylvania Real Estate Investment Trust 2021-2023 Equity Award Program (the “Program”) to name a beneficiary to whom any benefit under the Program is to be paid in the event of your death. You should complete the Form, sign it, have it signed by your Employer, and date it.
* * * *
I designate the following as my beneficiary(ies) to receive any benefits payable under the Program by reason of my death. I understand that if my designated beneficiary predeceases me, any benefits shall be paid to my surviving spouse or, if none, to my estate. I further understand that the last beneficiary designation filed by me during my lifetime and accepted by my Employer cancels all prior beneficiary designations previously filed by me under the Program.
I hereby state that ____________________________ [insert name], residing at ________________________________________________________________ [insert address], whose Social Security number is __________________, is designated as my beneficiary.
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Signature of Participant |
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ACCEPTED: |
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[insert name of Employer] |
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ACTIVE.126676356.03
Exhibit 31.1
CERTIFICATION
I, Joseph F. Coradino, certify that:
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I have reviewed this Quarterly Report on Form 10-Q of Pennsylvania Real Estate Investment Trust; |
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2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
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3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
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4. |
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
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(a) |
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
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(b) |
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
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(c) |
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
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(d) |
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
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5. |
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of trustees (or persons performing the equivalent functions): |
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(a) |
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
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(b) |
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: May 7, 2021
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/s/ Joseph F. Coradino |
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Name: |
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Joseph F. Coradino |
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Title: |
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Chairman and Chief Executive Officer |
Exhibit 31.2
CERTIFICATION
I, Mario C. Ventresca, Jr., certify that:
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I have reviewed this Quarterly Report on Form 10-Q of Pennsylvania Real Estate Investment Trust; |
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Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
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3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
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4. |
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
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(a) |
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
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(b) |
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
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(c) |
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
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(d) |
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
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The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of trustees (or persons performing the equivalent functions): |
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(a) |
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
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(b) |
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: May 7, 2021
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/s/ Mario C. Ventresca, Jr. |
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Name: |
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Mario C. Ventresca, Jr. |
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Title: |
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Executive Vice President and Chief Financial Officer |
Exhibit 32.1
Certification of Chief Executive Officer
Pursuant to Section 906 of Sarbanes-Oxley Act of 2002
I, Joseph F. Coradino, the Chief Executive Officer of Pennsylvania Real Estate Investment Trust (the “Company”), hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:
(1) the Form 10-Q of the Company for the quarter ended March 31, 2021 as filed with the Securities and Exchange Commission on the date hereof (the “Form 10-Q”), fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and
(2) the information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company.
Date: May 7, 2021
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/s/ Joseph F. Coradino |
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Name: |
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Joseph F. Coradino |
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Title: |
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Chairman and Chief Executive Officer |
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Exhibit 32.2
Certification of Chief Financial Officer
Pursuant to Section 906 of Sarbanes-Oxley Act of 2002
I, Mario C. Ventresca, Jr., the Executive Vice President and Chief Financial Officer of Pennsylvania Real Estate Investment Trust (the “Company”), hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:
(1) the Form 10-Q of the Company for the quarter ended March 31, 2021 as filed with the Securities and Exchange Commission on the date hereof (the “Form 10-Q”), fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and
(2) the information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company.
Date: May 7, 2021
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/s/ Mario C. Ventresca, Jr. |
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Name: |
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Mario C. Ventresca, Jr. |
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Title: |
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Executive Vice President and Chief Financial Officer |
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CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (Unaudited) - USD ($) $ in Thousands |
3 Months Ended | |
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Mar. 31, 2021 |
Mar. 31, 2020 |
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| Comprehensive loss: | ||
| Net loss | $ (43,980) | $ (13,549) |
| Unrealized gain (loss) on derivatives | 2,601 | (19,751) |
| Amortization of settled swaps | 3 | 5 |
| Total comprehensive loss | (41,376) | (33,295) |
| Less: comprehensive loss attributable to noncontrolling interest | 1,170 | 1,021 |
| Comprehensive loss attributable to PREIT | $ (40,206) | $ (32,274) |
CONSOLIDATED STATEMENTS OF EQUITY (Unaudited) - USD ($) $ in Thousands |
Total |
Shares of Beneficial Interest, $1.00 Par |
Capital Contributed in Excess of Par |
Accumulated Other Comprehensive Loss |
Distributions in Excess of Net Income |
Non- controlling interest |
Series B Preferred Stock |
Series B Preferred Stock
Preferred Shares $.01 par
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Series B Preferred Stock
Distributions in Excess of Net Income
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Series C Preferred Stock |
Series C Preferred Stock
Preferred Shares $.01 par
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Series C Preferred Stock
Distributions in Excess of Net Income
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Series D Preferred Stock |
Series D Preferred Stock
Preferred Shares $.01 par
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Series D Preferred Stock
Distributions in Excess of Net Income
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| Beginning balance at Dec. 31, 2019 | $ 427,425 | $ 77,550 | $ 1,766,883 | $ (12,556) | $ (1,408,352) | $ 3,746 | $ 35 | $ 69 | $ 50 | ||||||
| Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||||||||||||
| Net loss | (13,549) | (13,033) | (516) | ||||||||||||
| Other comprehensive income (loss) | (19,746) | (19,240) | (506) | ||||||||||||
| Shares issued under employee compensation plan, net of shares retired | (42) | 1,290 | (1,332) | ||||||||||||
| Amortization of deferred compensation | 1,624 | 1,624 | |||||||||||||
| Dividends paid to common shareholders | (16,492) | (16,492) | |||||||||||||
| Dividends paid to preferred shareholders | $ (1,591) | $ (1,591) | $ (3,105) | $ (3,105) | $ (2,148) | $ (2,148) | |||||||||
| Noncontrolling interests: | |||||||||||||||
| Distributions paid to Operating Partnership unit holders | (411) | (411) | |||||||||||||
| Ending balance at Mar. 31, 2020 | 371,965 | 78,840 | 1,767,175 | (31,796) | (1,444,721) | 2,313 | 35 | 69 | 50 | ||||||
| Beginning balance at Dec. 31, 2020 | 126,940 | 79,537 | 1,771,777 | (20,620) | (1,699,638) | (4,270) | 35 | 69 | 50 | ||||||
| Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||||||||||||
| Net loss | (43,980) | (42,746) | (1,234) | ||||||||||||
| Other comprehensive income (loss) | 2,604 | 2,540 | 64 | ||||||||||||
| Shares issued under employee compensation plan, net of shares retired | (647) | (277) | (370) | ||||||||||||
| Amortization of deferred compensation | 1,321 | 1,321 | |||||||||||||
| Ending balance at Mar. 31, 2021 | $ 86,238 | $ 79,260 | $ 1,772,728 | $ (18,080) | $ (1,742,384) | $ (5,440) | $ 35 | $ 69 | $ 50 |
CONSOLIDATED STATEMENTS OF EQUITY (Parenthetical) - $ / shares |
3 Months Ended | ||
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Mar. 31, 2020 |
Mar. 31, 2021 |
Dec. 31, 2020 |
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| Common stock, dividend per share paid (in dollars per share) | $ 0.21 | ||
| Distributions paid to Operating Partnership unit holders | 0.21 | ||
| Preferred shares, par value (in dollars per share) | 0.01 | $ 0.01 | |
| Common stock, par value (in dollars per share) | 1.00 | 1.00 | $ 1.00 |
| Series B Preferred Stock | |||
| Preferred stock, dividends per share paid (in dollars per share) | 0.4609 | ||
| Preferred shares, par value (in dollars per share) | 0.01 | 0.01 | 0.01 |
| Series C Preferred Stock | |||
| Preferred stock, dividends per share paid (in dollars per share) | 0.45 | ||
| Preferred shares, par value (in dollars per share) | 0.01 | 0.01 | 0.01 |
| Series D Preferred Stock | |||
| Preferred stock, dividends per share paid (in dollars per share) | 0.4297 | ||
| Preferred shares, par value (in dollars per share) | $ 0.01 | $ 0.01 | $ 0.01 |
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) - USD ($) $ in Thousands |
3 Months Ended | |
|---|---|---|
Mar. 31, 2021 |
Mar. 31, 2020 |
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| Cash flows from operating activities: | ||
| Net loss | $ (43,980) | $ (13,549) |
| Adjustments to reconcile net loss to net cash provided by operating activities: | ||
| Depreciation | 28,149 | 28,263 |
| Amortization | 2,141 | 2,994 |
| Straight-line rent adjustments | 6 | (886) |
| Amortization of deferred compensation | 1,321 | 1,624 |
| Paid-in-kind interest | 11,514 | 0 |
| Gain on hedge ineffectiveness | (1,303) | 0 |
| Gain on sales of interests in real estate and non-operating real estate, net | 0 | (1,916) |
| Equity in loss (income) of partnerships | 3,433 | (819) |
| Cash distributions from partnerships | 0 | 845 |
| Net change in other assets | 18,805 | 11,674 |
| Net change in other liabilities | (3,860) | (13,836) |
| Net cash provided by operating activities | 16,226 | 14,394 |
| Cash flows from investing activities: | ||
| Distribution of refinancing proceeds from equity method investee | 0 | 8,003 |
| Investments in real estate improvements | (1,928) | (2,414) |
| Additions to construction in progress | (1,029) | (20,157) |
| Investments in partnerships | (2) | (9,346) |
| Capitalized leasing costs | 0 | (164) |
| Additions to leasehold improvements and corporate fixed assets | (7) | (4,714) |
| Net cash used in investing activities | (2,966) | (28,792) |
| Cash flows from financing activities: | ||
| Net borrowings under the Restructured Revolver | 0 | 34,000 |
| Repayments of finance lease liabilities | (170) | (157) |
| Principal installments on mortgage loans | (9,505) | (3,475) |
| Payment of deferred financing costs | (253) | (212) |
| Value of shares of beneficial interest issued | 0 | 424 |
| Dividends paid to common shareholders | 0 | (16,492) |
| Dividends paid to preferred shareholders | 0 | (6,844) |
| Distributions paid to Operating Partnership unit holders and noncontrolling interest | 0 | (411) |
| Value of shares retired under equity incentive plans, net of shares issued | (647) | (466) |
| Net cash (used in) provided by financing activities | (10,575) | 6,367 |
| Net change in cash, cash equivalents, and restricted cash | 2,685 | (8,031) |
| Cash, cash equivalents, and restricted cash, beginning of period | 51,231 | 19,629 |
| Cash, cash equivalents, and restricted cash, end of period | $ 53,916 | $ 11,598 |
Basis of Presentation |
3 Months Ended |
|---|---|
Mar. 31, 2021 | |
| Accounting Policies [Abstract] | |
| Basis of Presentation |
1. BASIS OF PRESENTATION
Nature of Operations
Pennsylvania Real Estate Investment Trust (“PREIT” or the “Company”) prepared the accompanying unaudited consolidated financial statements pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) have been condensed or omitted pursuant to such rules and regulations, although we believe that the included disclosures are adequate to make the information presented not misleading. Our unaudited consolidated financial statements should be read in conjunction with the audited financial statements and the notes thereto included in PREIT’s Annual Report on Form 10-K for the year ended December 31, 2020. In our opinion, all adjustments, consisting only of normal recurring adjustments, necessary to present fairly our consolidated financial position, the consolidated results of our operations, consolidated statements of comprehensive loss, consolidated statements of equity and our consolidated statements of cash flows are included. The results of operations for the interim periods presented are not necessarily indicative of the results for the full year.
PREIT, a Pennsylvania business trust founded in 1960 and one of the first equity real estate investment trusts (“REITs”) in the United States, has a primary investment focus on retail shopping malls located in the eastern half of the United States, primarily in the Mid-Atlantic region. As of March 31, 2021, our portfolio consists of a total of 26 properties operating in nine states, including 20 shopping malls, five other retail properties and one development property. The property in our portfolio that is classified as under development does not currently have any activity occurring.
We hold our interest in our portfolio of properties through our operating partnership, PREIT Associates, L.P. (“PREIT Associates” or the “Operating Partnership”). We are the sole general partner of the Operating Partnership and, as of March 31, 2021, we held a 97.6% controlling interest in the Operating Partnership and consolidated it for reporting purposes. The presentation of consolidated financial statements does not itself imply that the assets of any consolidated entity (including any special-purpose entity formed for a particular project) are available to pay the liabilities of any other consolidated entity, or that the liabilities of any consolidated entity (including any special-purpose entity formed for a particular project) are obligations of any other consolidated entity.
Pursuant to the terms of the partnership agreement of the Operating Partnership, each of the limited partners has the right to redeem such partner’s units of limited partnership interest in the Operating Partnership (“OP Units”) for cash or, at our election, we may acquire such OP Units in exchange for our common shares on a one-for-one basis, in some cases beginning one year following the respective issue date of the OP Units and in other cases immediately. If all of the outstanding OP Units held by limited partners had been redeemed for cash as of March 31, 2021, the total amount that would have been distributed would have been $3.8 million, which is calculated using our March 31, 2021 closing share price on the New York Stock Exchange (the “NYSE”) of $1.92 multiplied by the number of outstanding OP Units held by limited partners, which was 1,975,928 as of March 31, 2021. The current terms of our credit agreements prohibit the Company from acquiring whole share OP Units for cash and, as such, any whole share OP Units presented for redemption will be redeemed for shares. Partial share OP Unit redemptions will be redeemed for cash.
We provide management, leasing and real estate development services through two of our subsidiaries: PREIT Services, LLC (“PREIT Services”), which generally develops and manages properties that we consolidate for financial reporting purposes, and PREIT-RUBIN, Inc. (“PRI”), which generally develops and manages properties that we do not consolidate for financial reporting purposes, including properties owned by partnerships in which we own an interest, and properties that are owned by third parties in which we do not have an interest. PREIT Services and PRI are consolidated. PRI is a taxable REIT subsidiary, as defined by federal tax laws, which means that it is able to offer an expanded menu of services to tenants without jeopardizing our continuing qualification as a REIT under federal tax law.
We evaluate operating results and allocate resources on a property-by-property basis, and do not distinguish or evaluate our consolidated operations on a geographic basis. Due to the nature of our operating properties, which involve retail shopping, dining, entertainment and certain non-traditional tenant operations, we have concluded that our individual properties have similar economic characteristics and meet all other aggregation criteria. Accordingly, we have aggregated our individual properties into one reportable segment. In addition, no single tenant accounts for 10% or more of consolidated revenue, and none of our properties are located outside the United States. Financial Restructuring On October 7, 2020, the Company and certain of the Company’s wholly owned direct and indirect subsidiaries (collectively, the “Company Parties”) entered into a Restructuring Support Agreement (the “RSA”), which contemplated agreed-upon terms for a financial restructuring of the then-existing debt and certain other obligations of the Company Parties (collectively with the following events, the “Financial Restructuring”). The RSA was amended on October 16, 2020, and again on October 23, 2020, to, among other things, extend the date by which the Company Parties were required to commence the solicitation of votes on their joint prepackaged chapter 11 plan of reorganization (the “Plan”) and, thereafter, the voluntary chapter 11 cases. On November 1, 2020, the Company and the other Company Parties under the RSA (the “Debtors”) filed their respective voluntary petitions under chapter 11 of title 11 of the United States Code, 11 U.S.C. §§ 101-1532 (the “Bankruptcy Code”) in the United States Bankruptcy Court for the District of Delaware (the “Bankruptcy Court”), commencing the chapter 11 cases to confirm and consummate the Plan in order to effectuate the Debtors’ financial restructuring. The Debtors’ chapter 11 cases were jointly administered for procedural convenience under the caption In re Pennsylvania Real Estate Investment Trust, et al., Case No. 20-12737 (KBO). Under the Plan, the Debtors would be recapitalized and their debt maturities extended. The Debtors continued to operate their businesses as debtors in possession under the jurisdiction of the Bankruptcy Court and in accordance with the applicable provisions of the Bankruptcy Code and orders of the Bankruptcy Court. On November 30, 2020, the Bankruptcy Court entered an order (the “Confirmation Order”), confirming the Joint Prepackaged Chapter 11 Plan of Reorganization of Pennsylvania Real Estate Investment Trust and Certain of Its Direct and Indirect Subsidiaries (with Additional Technical Modifications As of November 20, 2020) (the “Confirmed Plan”). On December 10, 2020 (the “Effective Date”), each condition precedent to consummation of the Confirmed Plan, enumerated in Section 8.2 thereof, was satisfied or waived in accordance with the Confirmed Plan and the Confirmation Order, and therefore the Effective Date occurred and the Debtors emerged from bankruptcy. On the Effective Date, the Company entered into the credit agreements, which are described in Note 4. The final decree closing the bankruptcy case was entered by the Bankruptcy Court on March 11, 2021.
COVID-19 Related Risks and Uncertainties The COVID-19 global pandemic that began in early 2020 has adversely impacted and continues to impact our business, financial condition, liquidity and operating results, as well as our tenants’ businesses. The prolonged and increased spread of COVID-19 has also led to unprecedented global economic disruption and volatility in financial markets. Some of our tenants’ financial health and business viability have been adversely impacted and their creditworthiness has deteriorated. We anticipate that our future business, financial condition, liquidity and results of operations, including in 2021 and potentially in future periods, will continue to be materially impacted by the COVID-19 pandemic. It remains highly uncertain how long the global pandemic, economic challenges and restrictions on day-to-day life and business operations will last based on the emergence of new strains of the virus and the current virus spread rate in the United States, which have resulted in a number of jurisdictions that previously relaxed restrictions implementing new or renewed restrictions. Given these factors, so long as the lingering effects of COVID-19 remain, the virus may continue to impact us or our tenants, or our ability or the ability of our tenants to resume more normal operations. COVID-19 closures of our properties began on March 12, 2020 and continued through the reopening of our last property on July 3, 2020. These closures impacted most of our properties for the full second quarter of 2020 with traffic and tenant reopenings increasing through the third and fourth quarters of 2020. New or renewed restrictions in the jurisdictions where our properties are located may be implemented in response to evolving conditions and overall uncertainty about the timing and widespread availability, acceptance, and efficacy of vaccines, including in response to new variants. As such, as the pandemic continues and potentially intensifies or we experience resurgences, it is possible that additional closures will occur. During the mall closure period in the second quarter of 2020, the Company furloughed a significant portion of its property and corporate employee base and later made permanent headcount reductions, which contributed to decreased general and administrative expenses in the third and fourth quarters of 2020. All of our properties have remained open since July 3, 2020 and are employing safety and sanitation measures designed to address the risks posed by COVID-19, with some of our tenants still operating at reduced capacity. The significance of COVID-19 on our business, however, will continue to depend on, among other things, the extent and duration of the pandemic, the severity of the disease and the number of people infected with the virus, the timing and widespread availability, acceptance, and efficacy of vaccines, further effects on the economy of the pandemic and of the measures taken by governmental authorities and other third parties restricting daily activities and the length of time that such measures remain in place or are renewed, implementation of governmental programs to assist businesses and consumers impacted by the COVID-19 pandemic, and the effect of any relaxation of current restrictions, all of which could vary by geographic region in which our properties are located. In the first quarter of 2021, we experienced further uncertainty as to whether government authorities will maintain the relaxation of current restrictions on businesses in the regions in which our properties are located, if these restrictions have been relaxed at all, and whether government authorities will issue recommendations or impose requirements on landlords like us to further enhance health and safety protocols, or whether we will voluntarily adopt any of these requirements ourselves, which could result in increased operating costs and demands on our property management teams to ensure compliance with any of these requirements.
Fair Value
Fair value accounting applies to reported balances that are required or permitted to be measured at fair value under existing accounting pronouncements. Fair value measurements are determined based on the assumptions that market participants would use in pricing the asset or liability. As a basis for considering market participant assumptions in fair value measurements, these accounting requirements establish a fair value hierarchy that distinguishes between market participant assumptions based on market data obtained from sources independent of the reporting entity (observable inputs that are classified within Levels 1 and 2 of the hierarchy) and the reporting entity’s own assumptions about market participant assumptions (unobservable inputs classified within Level 3 of the hierarchy).
Level 1 inputs utilize quoted prices (unadjusted) in active markets for identical assets or liabilities that we have the ability to access. Level 2 inputs are inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 inputs might include quoted prices for similar assets and liabilities in active markets, as well as inputs that are observable for the asset or liability (other than quoted prices), such as interest rates, foreign exchange rates, and yield curves that are observable at commonly quoted intervals. Level 3 inputs are unobservable inputs for the asset or liability, and are typically based on an entity’s own assumptions, as there is little, if any, related market activity. In instances where the determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level input that is significant to the fair value measurement in its entirety. Our assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability. We utilize the fair value hierarchy in our accounting for derivatives (Level 2) and financial instruments (Level 2) and in our reviews for impairment of real estate assets (Level 3) and goodwill (Level 3).
Impairment of Assets Real estate investments and related intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the property might not be recoverable, which is referred to as a “triggering event.” The ongoing impact of COVID-19 on the economy and market conditions, together with the resulting closures of our properties and the delayed and/or limited reopening of some tenants was deemed to be a triggering event as of June 30, 2020, September 30, 2020 and December 31, 2020, which led to impairment reviews and assessment of the undiscounted future cash flows for each of the respective quarters of 2020. During the first quarter of 2021, certain of our properties had triggering events due to various indicators of impairment, however, we did not identify any impairments based on our assessment of the undiscounted future cash flows. In connection with our review of our long-lived assets for impairment, we utilize qualitative and quantitative factors in order to estimate fair value. The significant qualitative factors that we use include age and condition of the property, market conditions in the property’s trade area, competition with other shopping centers within the property’s trade area and the creditworthiness and performance of the property’s tenants. The significant quantitative factors that we use include historical and forecasted financial and operating information relating to the property, such as net operating income, estimated holding periods, occupancy statistics, vacancy projections and tenants’ sales levels. If there is a triggering event in relation to a property to be held and used, we will estimate the aggregate future cash flows, net of estimated capital expenditures, to be generated by the property, undiscounted and without interest charges. In addition, this estimate may consider a probability weighted cash flow estimation approach when alternative courses of action to recover the carrying amount of a long-lived asset are under consideration or when a range of possible values is estimated. The determination of undiscounted cash flows requires significant estimates by our management, including the expected course of action at the balance sheet date that would lead to such cash flows. Subsequent changes in estimated undiscounted cash flows arising from changes in the anticipated action to be taken with respect to the property could affect the determination of whether an impairment exists, and the effects of such changes could materially affect our net income. If the estimated undiscounted cash flows are less than the carrying value of the property, the carrying value is written down to its fair value. We intend to hold and operate our properties long-term, which reduces the likelihood that our carrying value is not recoverable. A shortened holding period would increase the likelihood that the carrying value is not recoverable. Assessment of our ability to recover certain lease-related costs must be made when we have a reason to believe that a tenant might not be able to perform under the terms of the lease as originally expected. This requires us to make estimates as to the recoverability of such costs. An other-than-temporary impairment of an investment in an unconsolidated joint venture is recognized when the carrying value of the investment is not considered recoverable based on evaluation of the severity and duration of the decline in value. To the extent impairment has occurred, the excess carrying value of the asset over its estimated fair value is recorded as a reduction to income. Share-Based Compensation On March 31, 2021, the Company approved the 2021-2023 Equity Award Program design (the “Program”). Having approved the Program, the Company made long term incentive plan awards in the form of performance-based restricted share units (“PSUs”) and time-based restricted share units (“RSUs”). The grants of PSUs and RSUs were made pursuant to the Company’s Amended and Restated 2018 Equity Incentive Plan (as amended, the “2018 Equity Incentive Plan”), as amended by the Plan Amendment (defined below). On March 31, 2021, the Board approved the first amendment to the 2018 Equity Incentive Plan (“Plan Amendment”), which permits, among other clarifying changes, that restricted stock units granted under the 2018 Equity Incentive Plan may be made subject to vesting restrictions other than performance goals (i.e., RSUs). As a result of the Plan Amendment and as incorporated into the awards made under the Program settlement of RSUs or PSUs may be made in cash or shares, as determined by the Executive Compensation and Human Resources Committee (the “Committee”) of the Board of Trustees. On March 31, 2021, the Company granted 1,406,123 RSUs and 1,523,432 PSUs to its employees. Under the Program, the number of common shares to be issued by the Company with respect to the PSUs, if any, depends on the Company’s achievement of certain specified operating performance measures and a modification based on total shareholder return (“TSR”) for the three-year period beginning January 1, 2021 and ending on the earlier of December 31, 2023 or the date of a change in control of the Company (the “Measurement Period”). The preliminary number of common shares to be issued by the Company with respect to the PSUs awarded is based on a multiple determined by achievement of certain specified operating performance measures during the Measurement Period. These performance measures, the core mall total occupancy and the corporate debt yield, are each weighted 50%. The Committee approved minimum, target and maximum performance levels for both measures. For all participants, the minimum performance level will have a 0.5 multiplier, the target performance level will have a 1.0 multiplier and the maximum performance level will have a 2.0 multiplier. The preliminary number of common shares to be issued by the Company as determined under the operating performance goals will be adjusted, upwards or downwards, depending on the Company’s TSR performance over the Measurement Period relative to the TSR performance of other real estate investment trusts comprising a leading index of retail real estate investment trusts. Dividends, if any, on the Company’s common shares are deemed to be paid with respect to PSUs and credited to the PSU accounts and applied to “acquire” more PSUs at the 20-day average closing price per common share ending on the dividend payment date. With respect to the portion of the long-term incentive awards made in the form of RSUs, the RSUs generally will vest in three equal annual installments for all grants except director grants and two equal installments for the Company’s directors commencing on March 31, 2022, subject to continued employment. During the period that the RSUs have not vested, the holder will have no rights as a shareholder with respect to the RSUs; however, dividends, if any, on the Company’s common shares are deemed to be paid with respect to RSUs and credited to the RSU accounts and applied to “acquire” more RSUs at the 20-day average closing price per common share ending on the dividend payment date. New Accounting Developments In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides optional guidance for a limited period of time to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting for contracts, hedging relationships, and other transactions that reference the London Interbank Offered Rate (“LIBOR”). Companies may generally elect to apply the guidance for periods that include March 12, 2020 through December 31, 2022. In January 2021, the FASB issued ASU 2021-01 to provide additional guidance around Topic 848 primarily as it relates to the ASU’s effect on derivative contracts. The Company is evaluating the anticipated impact of this standard on its condensed consolidated financial statements as well as timing of adoption.
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Real Estate Activities |
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| Real Estate [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Real Estate Activities |
2. REAL ESTATE ACTIVITIES
Investments in real estate as of March 31, 2021 and December 31, 2020 were comprised of the following:
Capitalization of Costs
The following table summarizes our capitalized interest, compensation, including commissions, and real estate taxes for the three months ended March 31, 2021 and 2020:
Dispositions Valley View Mall Derecognition In August 2020, a court order assigned a receiver to operate Valley View Mall in La Crosse, Wisconsin on behalf of the lender of the mortgage loan secured by the property. Although we have not yet conveyed the property because foreclosure proceedings are ongoing, we no longer control or operate the property as a result of court order assigning the receiver. In September 2020, a court order was issued to conduct a foreclosure sale of the property and as a result we have no further operating liabilities from the property. As a result of our loss of control of the property, we derecognized the property and recorded an offsetting contract asset and recognized a gain on derecognition of property of $8.1 million in the consolidated statement of operations for the year ended December 31, 2020. The contract asset is included in deferred costs and other assets, net in the consolidated balance sheets as of March 31, 2021 and December 31, 2020. The mortgage principal balance was $27.2 million at March 31, 2021 and December 31, 2020, which we will continue to recognize until the foreclosure process is completed. The derecognition of Valley View Mall and its related assets was a non-cash conversion of assets, which had no impact on the Company’s cash flows. |
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Investments in Partnerships |
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| Investments in Partnerships |
3. INVESTMENTS IN PARTNERSHIPS
The following table presents summarized financial information of the equity investments in our unconsolidated partnerships as of March 31, 2021 and December 31, 2020:
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We record distributions from our equity investments using the nature of the distribution approach.
The following table summarizes our share of equity in (loss) income of partnerships for the three months ended March 31, 2021 and 2020:
(1) Net of capitalized interest expense of $103 and $1,091 for the three months ended March 31, 2021 and 2020, respectively. Fashion District Philadelphia FDP Loan Agreement PM Gallery LP, a Delaware limited partnership and joint venture entity owned indirectly by us and The Macerich Company (“Macerich”), previously entered into a $250.0 million term loan in January 2018 (as amended in July 2019 to increase the total maximum potential borrowings to $350.0 million) to fund the ongoing redevelopment of Fashion District Philadelphia and to repay capital contributions to the venture previously made by the partners. A total of $51.0 million was drawn during the third quarter of 2019 and we received aggregate distributions of $25.0 million as our share of the draws. On December 10, 2020, PM Gallery LP, together with certain other subsidiaries owned indirectly by us and Macerich (including the fee and leasehold owners of the properties that are part of the Fashion District Philadelphia project), entered into an Amended and Restated Term Loan Agreement (the “FDP Loan Agreement”). In connection with the execution of the FDP Loan Agreement, a $100.0 million principal payment was made (and funded indirectly by Macerich, the “Partnership Loan”) to pay down the existing loan, reducing the outstanding principal under the FDP Loan Agreement from $301.0 million to $201.0 million. The joint venture must repay the Partnership Loan plus 15% accrued interest to Macerich, in its capacity as the lender, prior to the resumption of 50/50 cash distributions to the Company and its joint venture partner. The FDP Loan Agreement provides for (i) a maturity date of January 22, 2023, with the potential for a extension upon the borrowers’ satisfaction of certain conditions, (ii) an interest rate at the borrowers’ option with respect to each advance of either (A) the Base Rate (defined as the highest of (a) the Prime Rate, (b) the Federal Funds Rate plus 0.50%, and (c) the LIBOR Market Index Rate plus 1.00%) plus 2.50% or (B) LIBOR for the applicable period plus 3.50%, (iii) a full recourse guarantee of 50% of the borrowers’ obligations by PREIT Associates, L.P., on a several basis, (iv) a full recourse guarantee of certain of the borrowers’ obligations by The Macerich Partnership, L.P., up to a maximum of $50.0 million, on a several basis, (v) a pledge of the equity interests of certain indirect subsidiaries of PREIT and Macerich, as well as of PREIT-RUBIN, Inc. and one of its subsidiaries, that have a direct or indirect ownership interest in the borrowers, (vi) a non-recourse carve-out guaranty and a hazardous materials indemnity by each of PREIT Associates, L.P. and The Macerich Partnership, L.P., and (vii) mortgages of the borrowers’ fee and leasehold interests in the properties that are part of the Fashion District Philadelphia project and certain other properties. The FDP Loan Agreement contains certain covenants typical for loans of its type.
Joint Venture In connection with the execution of the FDP Loan Agreement, the governing structure of PM Gallery LP was modified such that, effective as of January 1, 2021, Macerich is responsible for the entity’s operations and, subject to limited exceptions, controls major decisions. The Company considered the changes to the governing structure of PM Gallery LP and determined the investment qualifies as a variable interest entity and will continue to be accounted for under the equity method of accounting. Our maximum exposure to losses is limited to the extent of our investment, which is a 50% ownership. Mortgage Loan Activity During the three months ended March 31, 2021, the Company’s unconsolidated subsidiary received an extension of its mortgage securing Pavilion at Market East for an additional three months to May 2021. |
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Financing Activity |
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| Financing Activity |
4. FINANCING ACTIVITY
Credit Agreements On December 10, 2020 we entered into two secured credit agreements (collectively, as amended, the “Credit Agreements”): (a) an Amended and Restated First Lien Credit Agreement (the “First Lien Credit Agreement”) with Wells Fargo Bank, National Association (“Wells Fargo Bank”) and the other financial institutions signatory thereto and their assignees, for secured loan facilities consisting of: (i) a secured first lien revolving credit facility allowing for borrowings up to $130.0 million, including a sub-facility for letters of credit to be issued thereunder in an aggregate stated amount of up to $10.0 million (collectively, the “First Lien Revolving Facility”), and (ii) a $384.5 million secured first lien term loan facility (the “First Lien Term Loan Facility”), and (b) a Second Lien Credit Agreement (the “Second Lien Credit Agreement”), as amended February 8, 2021 with Wells Fargo Bank and the other financial institutions signatory thereto and their assignees for a $535.2 million secured second lien term loan facility (the “Second Lien Term Loan Facility”). The Credit Agreements mature in December 2022. The First Lien Term Loan Facility and the Second Lien Term Loan Facility are collectively referred to as the “Term Loans.” The Credit Agreements refinanced our previously existing secured term loan under the Credit Agreement dated as of August 11, 2020 (as amended, the “Bridge Credit Agreement”), our Term Loan Agreement entered into on January 8, 2014 (as amended, the “7-Year Term Loan”), and our 2018 Amended and Restated Credit Agreement entered into on May 24, 2018 (as amended, the “2018 Credit Agreement” and collectively with the Bridge Credit Agreement and the 7-Year Term Loan, the “Restructured Credit Agreements”). Upon our entry into the Credit Agreements, the Bridge Credit Agreement, the 7-Year Term Loan and the 2018 Credit Agreement were cancelled. As of March 31, 2021, we had borrowed $933.6 million under the Term Loans and $54.8 million under the First Lien Revolving Facility. The carrying value of the Term Loans on our consolidated balance sheet as of March 31, 2021 is net of $11.9 million of unamortized debt issuance costs. The maximum amount that was available to us under the First Lien Revolving Facility as of March 31, 2021 was $75.2 million. On April 13, 2021, we entered into Agency Resignation, Appointment, Acceptance and Waiver Agreements pursuant to which Wells Fargo Bank resigned as Administrative Agent and Wilmington Savings Fund Society, FSB was appointed successor Administrative Agent under the First Lien Credit Agreement, the Second Lien Credit Agreement and, in each case, the related loan documents. There is currently no successor letter of credit issuer under the First Lien Revolving Facility, accordingly, the Company cannot currently access the letters of credit sub-facility. Interest expense and deferred financing fee amortization related to the Credit Agreements and the Restructured Credit Agreements for the three months ended March 31, 2021 and 2020 were as follows:
Our obligations under the Credit Agreements are guaranteed by certain of our subsidiaries. Our obligations under the Credit Agreements and the guaranties are secured by mortgages and deeds of trust on a portfolio of 12 of our subsidiaries’ properties, including nine malls and three additional parcels. The obligations are further secured by a lien on substantially all of our personal property pursuant to collateral agreements and a pledge of substantially all of the equity interests held by us and the guarantors, pursuant to pledge agreements, in each case subject to limited exceptions. The Credit Agreements each provide for a maturity of December 2022 (the “Maturity Date”), subject to a extension to December 2023 at the borrowers’ option, subject to (i) minimum liquidity of $35.0 million, (ii) a minimum corporate debt yield of 8.0%, (iii) a maximum loan-to-value ratio of 105% for the total first lien and second lien loans and letters of credit and the Borrowing Base Properties as determined by an appraisal and (iv) no default or event of default existing and our representations and warranties being true in all material respects. The loans under the Credit Agreements are repayable in full on the Maturity Date, subject to mandatory prepayment provisions in the event of certain events including asset sales, incurrence of indebtedness, issuances of equity and receipt of casualty insurance proceeds. The terms of our Credit Agreements place restrictions on, among other things, and subject to certain exceptions, our ability to make certain restricted payments (including payments of dividends), make certain types of investments and acquisitions, issue redeemable securities, incur additional indebtedness, incur liens on our assets, enter into agreements with a negative pledge, make certain intercompany transfers, merge, consolidate, or sell our assets or the equity interests in our subsidiaries, amend our organizational documents or material contracts, enter into certain transactions with affiliates, or enter into derivatives contracts. Additionally, if we receive net cash proceeds from certain capital events (including equity issuances), we are required to prepay loans under our Credit Agreements. In addition, the Credit Agreements contain cross-default provisions that trigger an event of default if we fail to make certain payments or otherwise fail to comply with our obligations with respect to certain of our other indebtedness. First Lien Credit Agreement Amounts borrowed under the First Lien Credit Agreement may be either Base Rate Loans or LIBOR Loans. Base Rate Loans bear interest at the highest of (a) the Prime Rate, (b) the Federal Funds Rate plus 0.50% and (c) the LIBOR Market Index Rate plus 1.0%, provided that the Base Rate will not be less than 1.50% per annum, in each case plus (w) for revolving loans, 2.50% per annum, and (x) for term loans, 4.74% per annum. LIBOR Loans bear interest at LIBOR plus (y) for revolving loans, 3.50% per annum, and (z) for term loans, 5.74% per annum, in each case, provided that LIBOR will not be less than 0.50% per annum. Interest is due to be paid in cash on the last day of each applicable interest period (with rolling 30-day interest periods) and on the Maturity Date. We are required to pay certain fees to the administrative agent for the account of the lenders in connection with the First Lien Credit Agreement, including an unused fee for the account of the revolving lenders, which will accrue (i) 0.35% per annum on the daily amount of the unused revolving commitments when that amount is greater than or equal to 50% of the aggregate amount of revolving commitments, and (ii) 0.25% when that amount is less than 50% of the aggregate amount of revolving commitments. Accrued and unpaid unused fees will be payable quarterly in arrears during the term of the First Lien Credit Agreement and on the Revolving Termination Date (or any earlier date of termination of the revolving commitments or reduction of the revolving commitments to zero). Letters of credit and the proceeds of revolving loans may be used (i) to refinance existing indebtedness under the Bridge Credit Agreement, (ii) for working capital and general corporate purposes (subject to certain exceptions set forth in the First Lien Credit Agreement, including limitations on investments in non-Borrowing Base Properties), and (iii) to fund professional fee payments and other fees and expenses subject to the provisions of the Plan and related confirmation order and for other uses permitted by the provisions of the First Lien Credit Agreement, Plan and confirmation order, in each case consistent with an approved annual business plan. We may terminate or reduce the amount of the revolving commitments at any time and from time to time without penalty or premium, subject to the terms of the First Lien Credit Agreement. The First Lien Credit Agreement contains, among other restrictions, certain additional affirmative and negative covenants and other terms, many of which substantially align with those in the Second Lien Credit Agreement and are summarized below under “Similar Terms of the Credit Agreements.” Second Lien Credit Agreement Amounts borrowed under the Second Lien Credit Agreement may be either Base Rate Loans or LIBOR Loans. Base Rate Loans bear interest at the highest of (a) the Prime Rate, (b) the Federal Funds Rate plus 0.50% and (c) the LIBOR Market Index Rate plus 1.0%, provided that the Base Rate will not be less than 1.50% per annum, in each case plus 7.00% per annum. LIBOR Loans bear interest at LIBOR plus 8.00% per annum, provided that LIBOR will not be less than 0.50% per annum. Interest is due to be paid in kind on the last day of each applicable interest period (with rolling 30-day interest periods) by adding the accrued and unpaid amount thereof to the principal balance of the loans under the Second Lien Credit Agreement and then accruing interest on the increased principal amount (provided that after the discharge of our Senior Debt Obligations, interest will be paid in cash). We are required to pay certain fees to the administrative agent for the account of the lenders in connection with the Second Lien Credit Agreement. The proceeds of loans under the Second Lien Credit Agreement may only be used to refinance existing indebtedness under the 2018 Credit Agreement and the 7-Year Term Loan. The Second Lien Credit Agreement contains, among other restrictions, certain additional affirmative and negative covenants and other terms, many of which substantially align with those in the First Lien Credit Agreement and are summarized below under “Similar Terms of the Credit Agreements.” On February 8, 2021, the Company entered into the first amendment to the Second Lien Credit Agreement (“First Amendment”). The First Amendment provided for elimination of approximately $5.3 million of the disputed default interest that was capitalized into the principal balance of the Second Lien Term Loan Facility on the effective date thereof, reducing the outstanding principal amount of loans outstanding under the Second Lien Credit Agreement, retroactively, as of December 10, 2020, to $535.2 million. The First Amendment also eliminated the disputed PIK interest that was capitalized through the date of the amendment. Similar Terms of the Credit Agreements Each of the Credit Agreements contains certain affirmative and negative covenants and other provisions, as described in detail below, which substantially align with those contained in the other Credit Agreements. Covenants Each of the Credit Agreements contains, among other restrictions, certain affirmative and negative covenants, including, without limitation, requirements that we:
Each of the Credit Agreements also limits our ability, subject to certain exceptions, to make certain restricted payments (including payments of dividends and voluntary prepayments of certain indebtedness which includes, with respect to the First Lien Credit Agreement, voluntary prepayments under the Second Lien Credit Agreement), make certain types of investments and acquisitions, issue redeemable securities, incur additional indebtedness, incur liens on our assets, enter into agreements with a negative pledge, make certain intercompany transfers, merge, consolidate or sell all or substantially all of our assets or the equity interests in our subsidiaries, amend our organizational documents or material contracts, enter into transactions with affiliates, or enter into derivatives contracts. We are also prohibited from selling certain properties unless certain conditions are satisfied with respect to the terms of the sale agreement for such property or, in the case of Borrowing Base Properties, payment of certain release prices. The First Lien Credit Agreement and, after our Senior Debt Obligations are discharged, the Second Lien Credit Agreement, each prohibit us from (i) entering into Major Leases, (ii) assigning leases, (iii) discounting any rent under leases where the leased premises is at least 7,500 square feet at a Borrowing Base Property and the discounted amount is more than $750,000 and more than 25% of the aggregate contractual base rent payable over the initial term (not including any extension options), (iv) collecting rent in advance, (v) terminating or modifying the terms of any Major Lease or releasing or discharging tenants from any obligations thereunder, (vi) consenting to a tenant’s assignment or subletting of a Major Lease, or (vii) subordinating any lease to any other deed of trust, mortgage, deed to secure debt or encumbrance, other than the mortgages already encumbering the applicable Borrowing Base Property and the mortgages entered into in connection with the other Credit Agreement. Under the First Lien Credit Agreement, and under the Second Lien Credit Agreement after the First Lien Termination Date, any amounts equal to or greater than $2.5 million but less than $3.5 million received by or on behalf of a guarantor in consideration of any termination or modification of a lease (or the release or discharge of a tenant) are subject to restrictions on use, and such amounts that are equal to or greater than $3.5 million must be applied to reduce our outstanding obligations under the applicable Credit Agreement. As of March 31, 2021, we were in compliance with all financial covenants under the Credit Agreements, several of which only come into effect on June 30, 2021. Restructured Credit Agreements Prior to completion of the Financial Restructuring, we had entered into three credit agreements: (1) the 2018 Credit Agreement, which included (a) the $375.0 million 2018 Revolving Facility (“Restructured Revolver”), and (b) the $300.0 million 2018 Term Loan Facility, (2) the $250.0 million 2014 7-Year Term Loan, and (3) the Bridge Credit Agreement. Throughout 2020, we entered into various amendments to the Restructured Credit Agreements. On August 11, 2020, we entered into the Bridge Credit Agreement which provided for up to $30.0 million of additional borrowings and an original maturity date of September 30, 2020. On September 30, 2020, we amended our Restructured Credit Agreements to, among other things, extend the maturity date of the Bridge Credit Agreement until October 31, 2020 and to provide for the ability to request additional commitments of up to $25.0 million under our Bridge Credit Agreement. The September 2020 amendments also eliminated the minimum liquidity requirement under each of the Restructured Credit Agreements. We also amended the Bridge Credit Agreement on October 16, 2020 to, among other things, increase the aggregate amount of commitments under the Bridge Credit Agreement by $25.0 million. As of November 1, 2020, we had borrowed $590.0 million available under the Restructured Credit Agreements, including $55.0 million under our Bridge Credit Agreement and the full $375.0 million under the 2018 Revolving Facility. The Restructured Credit Agreements contained certain affirmative and negative covenants, several of which were amended on March 30, 2020. Pursuant to amendments dated July 27, 2020, some of those covenants were suspended for the duration of the suspension period, as extended by the September 30, 2020 amendments. As such, the Restructured Credit Agreements, as amended, restricted our ability to declare and pay dividends on our common shares and preferred shares for the duration of the Suspension Period. The filing of the chapter 11 cases constituted an event of default under the Restructured Credit Agreements. Upon our entry into the Credit Agreements, the Bridge Credit Agreement, the 7-Year Term Loan and the 2018 Credit Agreement were cancelled. Consolidated Mortgage Loans The estimated fair values of our consolidated mortgage loans based on year-end interest rates and market conditions at March 31, 2021 and December 31, 2020 were as follows:
The consolidated mortgage loans contain various customary default provisions. As of March 31, 2021, we were not in default on any of the consolidated mortgage loans, except for our mortgage secured by Valley View Mall.
Mortgage Loan Activity Woodland Amendment On February 8, 2021, we entered into an amendment to our mortgage loan secured by the Woodland Mall in Grand Rapids, Michigan, which provides for an extension of the maturity date until December 10, 2021, with an option to extend an additional year if certain criteria are met. Among other things, the amendment also (i) reduces the cap on guarantor liability for PREIT Associates, L.P. to $10.0 million; (ii) restricts the lenders from exercising their rights and remedies under the guaranty until December 10, 2022, unless there is a bankruptcy filing with respect to the borrowers or guarantor; (iii) adjusts the interest rate; (iv) provides for the pledge of additional collateral as security for the borrowers’ obligations (including the anchor parcel at Woodland Mall which was released as collateral from our senior secured credit facilities); and (v) requires the borrowers to pay to the lenders a $5.0 million remargin payment. The Company capitalized $0.3 million of lender fees as additional debt issuance costs in connection with the amendment. Forbearance Agreements During 2020, we executed forbearance and loan modification agreements for Cherry Hill Mall, Cumberland Mall, Dartmouth Mall, Francis Scott Key Mall, Viewmont Mall, and Woodland Mall. These arrangements allowed us to defer principal payments, and in some cases interest as well, between May and August 2020 depending on the terms of each agreement. At the end of the deferral period, repayment of deferred amounts spanned from four to six months. The repayment periods ranged from August 2020 through February 2021 pursuant to the terms of the specific agreements. Certain of these forbearance and loan modification agreements also imposed certain additional informational reporting requirements during the applicable modification periods. As of March 31, 2021, we had repaid all principal and interest deferrals. Valley View Mall In the second quarter of 2020, we received a notice of transfer of servicing for the mortgage loan secured by Valley View Mall, which had a $27.3 million balance as of June 30, 2020. Subsequently, we failed to make the June 2020 monthly payment and our subsidiary that is the borrower under the mortgage also received a notice of default on the mortgage from the lender. Additionally, we did not pay the balloon payment of $27.3 million due at maturity on July 1, 2020. A foreclosure notice was filed and operations of the property were assigned to a receiver in August 2020. See Note 2 for further detail. Note Payable In April 2020, in light of the impact of COVID-19 on our business and limited capital resources, we applied for and received proceeds from a potentially forgivable loan in the amount of $4.5 million under the Paycheck Protection Program (PPP) of the Coronavirus Aid, Relief, and Economic Security (CARES) Act. We entered into a note payable with our lender bank (“Note Payable”). The Note Payable will mature on April 15, 2022. Based on the CARES Act and the Note Payable, all payments of both principal and interest will be deferred until at least August 2021. The Note Payable accrues interest at a rate of 1.00% per annum, and the interest will continue to accrue throughout the period the Note Payable is outstanding, or the forgiveness date. All or a portion of PPP loans are eligible for forgiveness pursuant to program guidelines to the extent the proceeds are used for qualifying purposes within a period following the loan funding. The proceeds are included in “Accrued expenses and other liabilities” in our consolidated balance sheets. In April 2021 we submitted our forgiveness application.
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Cash Flow Information |
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| Supplemental Cash Flow Elements [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||
| Cash Flow Information |
5. CASH FLOW INFORMATION Cash paid for interest was $16.3 million and $14.9 million for the three months ended March 31, 2021 and 2020, respectively, net of amounts capitalized of $0.1 million and $0.9 million, respectively. In our statement of cash flows, we report cash flows on our revolving facilities on a net basis. We had no borrowings or repayments on our First Lien Revolving Facility for the three months ended March 31, 2021. Aggregate borrowings on our Restructured Revolver were $34.0 million for the three months ended March 31, 2020 with no paydowns. Accrued construction costs increased by $0.3 million and decreased by $5.3 million for the three months ended March 31, 2021 and 2020, respectively, representing non-cash changes in investment in real estate and construction in progress. The following table provides a summary of cash, cash equivalents, and restricted cash reported within the statement of cash flows as of March 31, 2021 and 2020.
Our restricted cash consists of cash held in escrow by banks for real estate taxes and other purposes. |
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Derivatives |
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| Derivative Instruments And Hedging Activities Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Derivatives |
6. DERIVATIVES
In the normal course of business, we are exposed to financial market risks, including interest rate risk on our interest bearing liabilities. We attempt to limit these risks by following established risk management policies, procedures and strategies, including the use of financial instruments such as derivatives. We do not use financial instruments for trading or speculative purposes. Cash Flow Hedges of Interest Rate Risk For derivatives that have been designated and that qualify as cash flow hedges of interest rate risk, the gain or loss on the derivative is recorded in “Accumulated other comprehensive (loss) income” and subsequently reclassified into “Interest expense, net” in the same periods during which the hedged transaction affects earnings. Through December 10, 2020, all of our derivatives were designated and qualified as cash flow hedges of interest rate risk. On December 10, 2020 as a result of the Financial Restructuring, we de-designated seven of our interest rate swaps which were previously designated cash flow hedges against the 2018 Credit Facility and 7-year Term Loan, as the occurrence of the hedged forecasted transactions was no longer probable during the hedged time period due to the Financial Restructuring as described in Note 1. As such, the Company accelerated the reclassification of a portion of the amounts in other comprehensive (loss) income to earnings which resulted in a loss of $2.8 million that was recorded within interest expense, net in the consolidated statement of operations. Additionally, on December 10, 2020, the Company voluntarily de-designated the remaining thirteen interest swaps that were also previously designated as cash flow hedges against the 2018 Credit Facility and 7-year Term Loan. Upon de-designation, the accumulated other comprehensive (loss) income balance of each of these de-designated derivatives will be separately reclassified to earnings as the originally hedged forecasted transactions affect earnings. Through December 10, 2020, the changes in fair value of the derivatives were recorded to accumulated other comprehensive (loss) income in the consolidated balance sheets. On December 22, 2020, we re-designated nine interest rate swaps with a notional amount of $375.0 million as cash flow hedges of interest rate risk against the First Lien Term Loan Facility. These interest rate swaps qualified for hedge accounting treatment with changes in the fair value of the derivatives recorded through accumulated other comprehensive (loss) income. During the three months ended March 31, 2021 we had three designated swaps mature. As of March 31, 2021, we had ten total derivatives which were designated as cash flow hedges. We recognize all derivatives at fair value as either assets or liabilities in the accompanying consolidated balance sheets. Our derivative assets are recorded in “Deferred costs and other assets” and our derivative liabilities are recorded in “Fair value of derivative instruments.” Over the next twelve months we estimate that $10.3 million will be reclassified as an increase to interest expense. The recognition of these amounts could be accelerated in the event that we repay amounts outstanding on the debt instruments and do not replace them with new borrowings. Non-designated Hedges Derivatives not designated as hedges are not speculative; they are also used to manage the Company’s exposure to interest rate movements and other identified risks but do not meet the strict hedge accounting requirements. For swaps that were not re-designated subsequent to December 10, 2020, changes in the fair value of derivatives are recorded directly in earnings as interest expense in the consolidated statement of operations. During the three months ended March 31, 2021 we had four non-designated swaps mature. As of March 31, 2021, we had seven total derivatives which were not designated in hedging relationships. Interest Rate Swaps As of March 31, 2021, we had interest rate swap agreements designated in qualifying hedging relationships outstanding with a weighted average base interest rate of 2.57% on a notional amount of $439.8 million, maturing on various dates through May 2023. As of March 31, 2021, our non-designated swaps outstanding with a weighted average base interest rate of 1.85% on a notional amount of $175.0 million, maturing in December 2021. We originally entered into these interest rate swap agreements in order to hedge the interest payments associated with our issuances of variable interest rate long term debt. The interest rate swap agreements are net settled monthly. The following table summarizes the terms and estimated fair values of our interest rate swap derivative instruments as of March 31, 2021 and December 31, 2020 based on the year they mature. The notional values provide an indication of the extent of our involvement in these instruments, but do not represent exposure to credit, interest rate or market risks.
The tables below present the effect of derivative financial instruments on accumulated other comprehensive (loss) income and on our consolidated statements of operations for the three months ended March 31, 2021 and 2020:
The impact of our non-designated swaps resulted in a loss of approximately $40 thousand for the three months ended March 31, 2021, which is recognized in interest expense, net in the consolidated statement of operations. Credit-Risk-Related Contingent Features We have agreements with some of our derivative counterparties that contain a provision pursuant to which, if our entity that originated such derivative instruments defaults on any of its indebtedness, including default where repayment of the indebtedness has not been accelerated by the lender, then we could also be declared to be in default on our derivative obligations. As of March 31, 2021, we were not in default on any of our derivative obligations. We have an agreement with a derivative counterparty that incorporates the loan covenant provisions of our loan agreement with a lender affiliated with the derivative counterparty. Failure to comply with the loan covenant provisions would result in our being in default on any derivative instrument obligations covered by the agreement. As of March 31, 2021, the fair value of derivatives in a liability position, which excludes accrued interest but includes any adjustment for nonperformance risk related to these agreements, was $19.4 million. If we had breached any of the default provisions in these agreements as of March 31, 2021, we might have been required to settle our obligations under the agreements at their termination value (including accrued interest) of $21.6 million. We had not breached any of these provisions as of March 31, 2021. |
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Leases |
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| Leases |
7. LEASES As Lessee We have entered into ground leases for portions of the land at Springfield Town Center and Plymouth Meeting Mall. We have also entered into an office lease for our headquarters location, as well as vehicle, solar panel and equipment leases as a lessee. The initial terms of these agreements generally range from three to 40 years, with certain agreements containing extension options for up to an additional 60 years. Upon lease execution, the Company measures a liability for the present value of future lease payments over the noncancelable period of the lease and any renewal option period we are reasonably certain of exercising. Certain agreements require that we pay a portion of reimbursable expenses such as CAM, utilities, insurance and real estate taxes. These payments are not included in the calculation of the lease liability and are presented as variable lease costs.
Our leases do not provide a readily determinable implicit interest rate; therefore, we estimate our incremental borrowing rate to calculate the present value of remaining lease payments. In determining our incremental borrowing rate, we considered the lease term, market interest rates and estimates regarding our implied credit rating using market data with adjustments to determine an appropriate incremental borrowing rate. The following table presents additional information pertaining to the Company’s leases:
Other information related to leases as of and for the three months ended March 31, 2021 and 2020 are as follows:
Future payments against lease liabilities as of March 31, 2021 are as follows:
As Lessor
As of March 31, 2021, the fixed contractual lease payments, including minimum rents and fixed CAM amounts, to be received over the next five years pursuant to the terms of noncancelable operating leases with initial terms greater than one year are included in the table below. The amounts presented assume that no leases are renewed and no renewal options are exercised. Additionally, the table does not include variable lease payments that may be received under certain leases for percentage rents or the reimbursement of operating costs, such as common area expenses, utilities, insurance and real estate taxes. These variable lease payments are recognized in the period when the applicable expenditures are incurred or, in the case of percentage rents, when the sales data is made available.
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Commitments and Contingencies |
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Mar. 31, 2021 | |
| Commitments And Contingencies Disclosure [Abstract] | |
| Commitments and Contingencies |
8. COMMITMENTS AND CONTINGENCIES
Contractual Obligations
As of March 31, 2021, we had unaccrued contractual and other commitments related to our capital improvement projects and development projects of $9.4 million, including $4.8 million of commitments related to the redevelopment of Fashion District Philadelphia, in the form of tenant allowances and contracts with general service providers and other professional service providers. For purposes of this disclosure, the contractual obligations and other commitments related to Fashion District Philadelphia are included at 100% of the obligation and not at our 50% ownership share. Preferred Dividend Arrearages Dividends on the Series B, Series C and Series D preferred shares are cumulative and therefore will continue to accrue at an annual rate of $1.8436 per share, $1.80 per share and $1.7188 per share, respectively. As of March 31, 2021, the cumulative amount of unpaid dividends on our issued and outstanding preferred shares totaled $20.5 million. This consisted of unpaid dividends per share on the Series B, Series C and Series D preferred shares of $1.38 per share, $1.35 per share and $1.29 per share, respectively. Property Damage from Natural and Other Disasters During the three months ended March 31, 2020, Cherry Hill Mall in Cherry Hill, New Jersey experienced a power outage due to the failure of an underground high voltage cable, which required the use of backup generator power. We recorded net costs of approximately $0.6 million during the three months ended March 31, 2020 as a result of the power outage and subsequently received recoveries of $0.6 million in April 2020. |
Basis of Presentation (Policies) |
3 Months Ended |
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Mar. 31, 2021 | |
| Accounting Policies [Abstract] | |
| Nature of Operations |
Nature of Operations
Pennsylvania Real Estate Investment Trust (“PREIT” or the “Company”) prepared the accompanying unaudited consolidated financial statements pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) have been condensed or omitted pursuant to such rules and regulations, although we believe that the included disclosures are adequate to make the information presented not misleading. Our unaudited consolidated financial statements should be read in conjunction with the audited financial statements and the notes thereto included in PREIT’s Annual Report on Form 10-K for the year ended December 31, 2020. In our opinion, all adjustments, consisting only of normal recurring adjustments, necessary to present fairly our consolidated financial position, the consolidated results of our operations, consolidated statements of comprehensive loss, consolidated statements of equity and our consolidated statements of cash flows are included. The results of operations for the interim periods presented are not necessarily indicative of the results for the full year.
PREIT, a Pennsylvania business trust founded in 1960 and one of the first equity real estate investment trusts (“REITs”) in the United States, has a primary investment focus on retail shopping malls located in the eastern half of the United States, primarily in the Mid-Atlantic region. As of March 31, 2021, our portfolio consists of a total of 26 properties operating in nine states, including 20 shopping malls, five other retail properties and one development property. The property in our portfolio that is classified as under development does not currently have any activity occurring.
We hold our interest in our portfolio of properties through our operating partnership, PREIT Associates, L.P. (“PREIT Associates” or the “Operating Partnership”). We are the sole general partner of the Operating Partnership and, as of March 31, 2021, we held a 97.6% controlling interest in the Operating Partnership and consolidated it for reporting purposes. The presentation of consolidated financial statements does not itself imply that the assets of any consolidated entity (including any special-purpose entity formed for a particular project) are available to pay the liabilities of any other consolidated entity, or that the liabilities of any consolidated entity (including any special-purpose entity formed for a particular project) are obligations of any other consolidated entity.
Pursuant to the terms of the partnership agreement of the Operating Partnership, each of the limited partners has the right to redeem such partner’s units of limited partnership interest in the Operating Partnership (“OP Units”) for cash or, at our election, we may acquire such OP Units in exchange for our common shares on a one-for-one basis, in some cases beginning one year following the respective issue date of the OP Units and in other cases immediately. If all of the outstanding OP Units held by limited partners had been redeemed for cash as of March 31, 2021, the total amount that would have been distributed would have been $3.8 million, which is calculated using our March 31, 2021 closing share price on the New York Stock Exchange (the “NYSE”) of $1.92 multiplied by the number of outstanding OP Units held by limited partners, which was 1,975,928 as of March 31, 2021. The current terms of our credit agreements prohibit the Company from acquiring whole share OP Units for cash and, as such, any whole share OP Units presented for redemption will be redeemed for shares. Partial share OP Unit redemptions will be redeemed for cash.
We provide management, leasing and real estate development services through two of our subsidiaries: PREIT Services, LLC (“PREIT Services”), which generally develops and manages properties that we consolidate for financial reporting purposes, and PREIT-RUBIN, Inc. (“PRI”), which generally develops and manages properties that we do not consolidate for financial reporting purposes, including properties owned by partnerships in which we own an interest, and properties that are owned by third parties in which we do not have an interest. PREIT Services and PRI are consolidated. PRI is a taxable REIT subsidiary, as defined by federal tax laws, which means that it is able to offer an expanded menu of services to tenants without jeopardizing our continuing qualification as a REIT under federal tax law.
We evaluate operating results and allocate resources on a property-by-property basis, and do not distinguish or evaluate our consolidated operations on a geographic basis. Due to the nature of our operating properties, which involve retail shopping, dining, entertainment and certain non-traditional tenant operations, we have concluded that our individual properties have similar economic characteristics and meet all other aggregation criteria. Accordingly, we have aggregated our individual properties into one reportable segment. In addition, no single tenant accounts for 10% or more of consolidated revenue, and none of our properties are located outside the United States. |
| Financial Restructuring |
Financial Restructuring On October 7, 2020, the Company and certain of the Company’s wholly owned direct and indirect subsidiaries (collectively, the “Company Parties”) entered into a Restructuring Support Agreement (the “RSA”), which contemplated agreed-upon terms for a financial restructuring of the then-existing debt and certain other obligations of the Company Parties (collectively with the following events, the “Financial Restructuring”). The RSA was amended on October 16, 2020, and again on October 23, 2020, to, among other things, extend the date by which the Company Parties were required to commence the solicitation of votes on their joint prepackaged chapter 11 plan of reorganization (the “Plan”) and, thereafter, the voluntary chapter 11 cases. On November 1, 2020, the Company and the other Company Parties under the RSA (the “Debtors”) filed their respective voluntary petitions under chapter 11 of title 11 of the United States Code, 11 U.S.C. §§ 101-1532 (the “Bankruptcy Code”) in the United States Bankruptcy Court for the District of Delaware (the “Bankruptcy Court”), commencing the chapter 11 cases to confirm and consummate the Plan in order to effectuate the Debtors’ financial restructuring. The Debtors’ chapter 11 cases were jointly administered for procedural convenience under the caption In re Pennsylvania Real Estate Investment Trust, et al., Case No. 20-12737 (KBO). Under the Plan, the Debtors would be recapitalized and their debt maturities extended. The Debtors continued to operate their businesses as debtors in possession under the jurisdiction of the Bankruptcy Court and in accordance with the applicable provisions of the Bankruptcy Code and orders of the Bankruptcy Court. On November 30, 2020, the Bankruptcy Court entered an order (the “Confirmation Order”), confirming the Joint Prepackaged Chapter 11 Plan of Reorganization of Pennsylvania Real Estate Investment Trust and Certain of Its Direct and Indirect Subsidiaries (with Additional Technical Modifications As of November 20, 2020) (the “Confirmed Plan”). On December 10, 2020 (the “Effective Date”), each condition precedent to consummation of the Confirmed Plan, enumerated in Section 8.2 thereof, was satisfied or waived in accordance with the Confirmed Plan and the Confirmation Order, and therefore the Effective Date occurred and the Debtors emerged from bankruptcy. On the Effective Date, the Company entered into the credit agreements, which are described in Note 4. The final decree closing the bankruptcy case was entered by the Bankruptcy Court on March 11, 2021. |
| COVID-19 Related Risks and Uncertainties |
COVID-19 Related Risks and Uncertainties The COVID-19 global pandemic that began in early 2020 has adversely impacted and continues to impact our business, financial condition, liquidity and operating results, as well as our tenants’ businesses. The prolonged and increased spread of COVID-19 has also led to unprecedented global economic disruption and volatility in financial markets. Some of our tenants’ financial health and business viability have been adversely impacted and their creditworthiness has deteriorated. We anticipate that our future business, financial condition, liquidity and results of operations, including in 2021 and potentially in future periods, will continue to be materially impacted by the COVID-19 pandemic. It remains highly uncertain how long the global pandemic, economic challenges and restrictions on day-to-day life and business operations will last based on the emergence of new strains of the virus and the current virus spread rate in the United States, which have resulted in a number of jurisdictions that previously relaxed restrictions implementing new or renewed restrictions. Given these factors, so long as the lingering effects of COVID-19 remain, the virus may continue to impact us or our tenants, or our ability or the ability of our tenants to resume more normal operations. COVID-19 closures of our properties began on March 12, 2020 and continued through the reopening of our last property on July 3, 2020. These closures impacted most of our properties for the full second quarter of 2020 with traffic and tenant reopenings increasing through the third and fourth quarters of 2020. New or renewed restrictions in the jurisdictions where our properties are located may be implemented in response to evolving conditions and overall uncertainty about the timing and widespread availability, acceptance, and efficacy of vaccines, including in response to new variants. As such, as the pandemic continues and potentially intensifies or we experience resurgences, it is possible that additional closures will occur. During the mall closure period in the second quarter of 2020, the Company furloughed a significant portion of its property and corporate employee base and later made permanent headcount reductions, which contributed to decreased general and administrative expenses in the third and fourth quarters of 2020. All of our properties have remained open since July 3, 2020 and are employing safety and sanitation measures designed to address the risks posed by COVID-19, with some of our tenants still operating at reduced capacity. The significance of COVID-19 on our business, however, will continue to depend on, among other things, the extent and duration of the pandemic, the severity of the disease and the number of people infected with the virus, the timing and widespread availability, acceptance, and efficacy of vaccines, further effects on the economy of the pandemic and of the measures taken by governmental authorities and other third parties restricting daily activities and the length of time that such measures remain in place or are renewed, implementation of governmental programs to assist businesses and consumers impacted by the COVID-19 pandemic, and the effect of any relaxation of current restrictions, all of which could vary by geographic region in which our properties are located. In the first quarter of 2021, we experienced further uncertainty as to whether government authorities will maintain the relaxation of current restrictions on businesses in the regions in which our properties are located, if these restrictions have been relaxed at all, and whether government authorities will issue recommendations or impose requirements on landlords like us to further enhance health and safety protocols, or whether we will voluntarily adopt any of these requirements ourselves, which could result in increased operating costs and demands on our property management teams to ensure compliance with any of these requirements. |
| Fair Value |
Fair Value
Fair value accounting applies to reported balances that are required or permitted to be measured at fair value under existing accounting pronouncements. Fair value measurements are determined based on the assumptions that market participants would use in pricing the asset or liability. As a basis for considering market participant assumptions in fair value measurements, these accounting requirements establish a fair value hierarchy that distinguishes between market participant assumptions based on market data obtained from sources independent of the reporting entity (observable inputs that are classified within Levels 1 and 2 of the hierarchy) and the reporting entity’s own assumptions about market participant assumptions (unobservable inputs classified within Level 3 of the hierarchy).
Level 1 inputs utilize quoted prices (unadjusted) in active markets for identical assets or liabilities that we have the ability to access. Level 2 inputs are inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 inputs might include quoted prices for similar assets and liabilities in active markets, as well as inputs that are observable for the asset or liability (other than quoted prices), such as interest rates, foreign exchange rates, and yield curves that are observable at commonly quoted intervals. Level 3 inputs are unobservable inputs for the asset or liability, and are typically based on an entity’s own assumptions, as there is little, if any, related market activity. In instances where the determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level input that is significant to the fair value measurement in its entirety. Our assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability. We utilize the fair value hierarchy in our accounting for derivatives (Level 2) and financial instruments (Level 2) and in our reviews for impairment of real estate assets (Level 3) and goodwill (Level 3). |
| Impairment of Assets |
Impairment of Assets Real estate investments and related intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the property might not be recoverable, which is referred to as a “triggering event.” The ongoing impact of COVID-19 on the economy and market conditions, together with the resulting closures of our properties and the delayed and/or limited reopening of some tenants was deemed to be a triggering event as of June 30, 2020, September 30, 2020 and December 31, 2020, which led to impairment reviews and assessment of the undiscounted future cash flows for each of the respective quarters of 2020. During the first quarter of 2021, certain of our properties had triggering events due to various indicators of impairment, however, we did not identify any impairments based on our assessment of the undiscounted future cash flows. In connection with our review of our long-lived assets for impairment, we utilize qualitative and quantitative factors in order to estimate fair value. The significant qualitative factors that we use include age and condition of the property, market conditions in the property’s trade area, competition with other shopping centers within the property’s trade area and the creditworthiness and performance of the property’s tenants. The significant quantitative factors that we use include historical and forecasted financial and operating information relating to the property, such as net operating income, estimated holding periods, occupancy statistics, vacancy projections and tenants’ sales levels. If there is a triggering event in relation to a property to be held and used, we will estimate the aggregate future cash flows, net of estimated capital expenditures, to be generated by the property, undiscounted and without interest charges. In addition, this estimate may consider a probability weighted cash flow estimation approach when alternative courses of action to recover the carrying amount of a long-lived asset are under consideration or when a range of possible values is estimated. The determination of undiscounted cash flows requires significant estimates by our management, including the expected course of action at the balance sheet date that would lead to such cash flows. Subsequent changes in estimated undiscounted cash flows arising from changes in the anticipated action to be taken with respect to the property could affect the determination of whether an impairment exists, and the effects of such changes could materially affect our net income. If the estimated undiscounted cash flows are less than the carrying value of the property, the carrying value is written down to its fair value. We intend to hold and operate our properties long-term, which reduces the likelihood that our carrying value is not recoverable. A shortened holding period would increase the likelihood that the carrying value is not recoverable. Assessment of our ability to recover certain lease-related costs must be made when we have a reason to believe that a tenant might not be able to perform under the terms of the lease as originally expected. This requires us to make estimates as to the recoverability of such costs. An other-than-temporary impairment of an investment in an unconsolidated joint venture is recognized when the carrying value of the investment is not considered recoverable based on evaluation of the severity and duration of the decline in value. To the extent impairment has occurred, the excess carrying value of the asset over its estimated fair value is recorded as a reduction to income. |
| Share-Based Compensation |
Share-Based Compensation On March 31, 2021, the Company approved the 2021-2023 Equity Award Program design (the “Program”). Having approved the Program, the Company made long term incentive plan awards in the form of performance-based restricted share units (“PSUs”) and time-based restricted share units (“RSUs”). The grants of PSUs and RSUs were made pursuant to the Company’s Amended and Restated 2018 Equity Incentive Plan (as amended, the “2018 Equity Incentive Plan”), as amended by the Plan Amendment (defined below). On March 31, 2021, the Board approved the first amendment to the 2018 Equity Incentive Plan (“Plan Amendment”), which permits, among other clarifying changes, that restricted stock units granted under the 2018 Equity Incentive Plan may be made subject to vesting restrictions other than performance goals (i.e., RSUs). As a result of the Plan Amendment and as incorporated into the awards made under the Program settlement of RSUs or PSUs may be made in cash or shares, as determined by the Executive Compensation and Human Resources Committee (the “Committee”) of the Board of Trustees. On March 31, 2021, the Company granted 1,406,123 RSUs and 1,523,432 PSUs to its employees. Under the Program, the number of common shares to be issued by the Company with respect to the PSUs, if any, depends on the Company’s achievement of certain specified operating performance measures and a modification based on total shareholder return (“TSR”) for the three-year period beginning January 1, 2021 and ending on the earlier of December 31, 2023 or the date of a change in control of the Company (the “Measurement Period”). The preliminary number of common shares to be issued by the Company with respect to the PSUs awarded is based on a multiple determined by achievement of certain specified operating performance measures during the Measurement Period. These performance measures, the core mall total occupancy and the corporate debt yield, are each weighted 50%. The Committee approved minimum, target and maximum performance levels for both measures. For all participants, the minimum performance level will have a 0.5 multiplier, the target performance level will have a 1.0 multiplier and the maximum performance level will have a 2.0 multiplier. The preliminary number of common shares to be issued by the Company as determined under the operating performance goals will be adjusted, upwards or downwards, depending on the Company’s TSR performance over the Measurement Period relative to the TSR performance of other real estate investment trusts comprising a leading index of retail real estate investment trusts. Dividends, if any, on the Company’s common shares are deemed to be paid with respect to PSUs and credited to the PSU accounts and applied to “acquire” more PSUs at the 20-day average closing price per common share ending on the dividend payment date. With respect to the portion of the long-term incentive awards made in the form of RSUs, the RSUs generally will vest in three equal annual installments for all grants except director grants and two equal installments for the Company’s directors commencing on March 31, 2022, subject to continued employment. During the period that the RSUs have not vested, the holder will have no rights as a shareholder with respect to the RSUs; however, dividends, if any, on the Company’s common shares are deemed to be paid with respect to RSUs and credited to the RSU accounts and applied to “acquire” more RSUs at the 20-day average closing price per common share ending on the dividend payment date. |
| New Accounting Developments |
New Accounting Developments In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides optional guidance for a limited period of time to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting for contracts, hedging relationships, and other transactions that reference the London Interbank Offered Rate (“LIBOR”). Companies may generally elect to apply the guidance for periods that include March 12, 2020 through December 31, 2022. In January 2021, the FASB issued ASU 2021-01 to provide additional guidance around Topic 848 primarily as it relates to the ASU’s effect on derivative contracts. The Company is evaluating the anticipated impact of this standard on its condensed consolidated financial statements as well as timing of adoption. |
Real Estate Activities (Tables) |
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| Investments in Real Estate |
Investments in real estate as of March 31, 2021 and December 31, 2020 were comprised of the following:
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| Real Estate Capitalized Costs |
The following table summarizes our capitalized interest, compensation, including commissions, and real estate taxes for the three months ended March 31, 2021 and 2020:
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Investments in Partnerships (Tables) |
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| Equity Method Investments And Joint Ventures [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Summary of Equity Investments |
The following table presents summarized financial information of the equity investments in our unconsolidated partnerships as of March 31, 2021 and December 31, 2020:
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| Summary of Share of Equity in (Loss) Income of Partnerships |
The following table summarizes our share of equity in (loss) income of partnerships for the three months ended March 31, 2021 and 2020:
(1) Net of capitalized interest expense of $103 and $1,091 for the three months ended March 31, 2021 and 2020, respectively. |
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Financing Activity (Tables) |
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| Schedule Of Credit Facility Interest Expense and Deferred Financing Fee Amortization |
Interest expense and deferred financing fee amortization related to the Credit Agreements and the Restructured Credit Agreements for the three months ended March 31, 2021 and 2020 were as follows:
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| Carrying and Fair Values of Mortgage Loans |
The estimated fair values of our consolidated mortgage loans based on year-end interest rates and market conditions at March 31, 2021 and December 31, 2020 were as follows:
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Cash Flow Information (Tables) |
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| Summary of Cash, Cash Equivalents, and Restricted Cash Reported within Statement of Cash Flows |
The following table provides a summary of cash, cash equivalents, and restricted cash reported within the statement of cash flows as of March 31, 2021 and 2020.
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Derivatives (Tables) |
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| Fair Value of Derivative Instruments |
The following table summarizes the terms and estimated fair values of our interest rate swap derivative instruments as of March 31, 2021 and December 31, 2020 based on the year they mature. The notional values provide an indication of the extent of our involvement in these instruments, but do not represent exposure to credit, interest rate or market risks.
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| Effect of Our Derivative Financial Instruments on Our Consolidated Statements of Operations |
The tables below present the effect of derivative financial instruments on accumulated other comprehensive (loss) income and on our consolidated statements of operations for the three months ended March 31, 2021 and 2020:
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Leases (Tables) |
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| Leases [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Lease, Cost |
The following table presents additional information pertaining to the Company’s leases:
|
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| Supplemental Cash Flows and Terms |
Other information related to leases as of and for the three months ended March 31, 2021 and 2020 are as follows:
|
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| Future Minimum Payments Against Lease Liabilities Maturity |
Future payments against lease liabilities as of March 31, 2021 are as follows:
|
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| Lessor, Operating Lease, Payments to be Received, Maturity |
As of March 31, 2021, the fixed contractual lease payments, including minimum rents and fixed CAM amounts, to be received over the next five years pursuant to the terms of noncancelable operating leases with initial terms greater than one year are included in the table below. The amounts presented assume that no leases are renewed and no renewal options are exercised. Additionally, the table does not include variable lease payments that may be received under certain leases for percentage rents or the reimbursement of operating costs, such as common area expenses, utilities, insurance and real estate taxes. These variable lease payments are recognized in the period when the applicable expenditures are incurred or, in the case of percentage rents, when the sales data is made available.
|
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Basis of Presentation - Nature of Operations (Details) $ / shares in Units, $ in Millions |
3 Months Ended |
|---|---|
|
Mar. 31, 2021
USD ($)
Property
State
subsidiary
Segment
$ / shares
shares
| |
| Real Estate Properties [Line Items] | |
| Number of real estate properties | 26 |
| Number of states in which entity operates | State | 9 |
| Common stock, conversion ratio | 1 |
| Period of conversion | 1 year |
| Redeemable noncontrolling interest, equity, other, fair value | $ | $ 3.8 |
| Share price (in dollars per share) | $ / shares | $ 1.92 |
| Limited partners' capital account, units outstanding (in shares) | shares | 1,975,928 |
| Number of subsidiaries | subsidiary | 2 |
| Number of reportable segments | Segment | 1 |
| Percentage of consolidated revenue having no single tenant | 10.00% |
| PREIT Associates, L.P. - Operating Partnership | |
| Real Estate Properties [Line Items] | |
| Interest in the Operating Partnership | 97.60% |
| Mall | |
| Real Estate Properties [Line Items] | |
| Number of real estate properties | 20 |
| Other Retail Properties | |
| Real Estate Properties [Line Items] | |
| Number of real estate properties | 5 |
| Development Properties | |
| Real Estate Properties [Line Items] | |
| Number of real estate properties | 1 |
Basis of Presentation - Share-Based Compensation (Details) - 2018 Equity Incentive Plan shares in Thousands |
3 Months Ended |
|---|---|
|
Mar. 31, 2021
shares
| |
| RSUs | |
| Real Estate Properties [Line Items] | |
| Number of shares, Granted | 1,406,123 |
| PSUs | |
| Real Estate Properties [Line Items] | |
| Number of shares, Granted | 1,523,432 |
| Average closing price per common share period | 20 days |
| PSUs | Core Mall Occupancy | |
| Real Estate Properties [Line Items] | |
| Performance measures vesting period | 3 years |
| Performance measures weighted average | 50.00% |
| PSUs | Corporate Debt Yield | |
| Real Estate Properties [Line Items] | |
| Performance measures vesting period | 3 years |
| Performance measures weighted average | 50.00% |
Real Estate Activities - Investments in Real Estate (Detail) - USD ($) $ in Thousands |
Mar. 31, 2021 |
Dec. 31, 2020 |
|---|---|---|
| Real Estate [Abstract] | ||
| Buildings, improvements and construction in progress | $ 2,760,021 | $ 2,757,234 |
| Land, including land held for development | 463,132 | 463,103 |
| Total investments in real estate | 3,223,153 | 3,220,337 |
| Accumulated depreciation | (1,336,228) | (1,308,427) |
| Net investments in real estate | $ 1,886,925 | $ 1,911,910 |
Real Estate Activities - Summary of Capitalized Salaries, Commissions and Benefits, Real Estate Taxes and Interest (Detail) - USD ($) $ in Thousands |
3 Months Ended | |
|---|---|---|
Mar. 31, 2021 |
Mar. 31, 2020 |
|
| Interest | Development/Redevelopment Activities: | ||
| Real Estate Capitalized Costs [Line Items] | ||
| Real estate capitalized cost | $ 130 | $ 910 |
| Compensation | Development/Redevelopment Activities: | ||
| Real Estate Capitalized Costs [Line Items] | ||
| Real estate capitalized cost | 37 | 344 |
| Real estate taxes | Development/Redevelopment Activities: | ||
| Real Estate Capitalized Costs [Line Items] | ||
| Real estate capitalized cost | $ 29 | 197 |
| Compensation, including commissions(1) | Leasing Activities: | ||
| Real Estate Capitalized Costs [Line Items] | ||
| Real estate capitalized cost | $ 164 | |
Real Estate Activities - Dispositions (Details) - USD ($) $ in Thousands |
12 Months Ended | |
|---|---|---|
Dec. 31, 2020 |
Mar. 31, 2021 |
|
| Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | ||
| Mortgage loans payable, net | $ 884,503 | $ 874,926 |
| Gain on derecognition of property | 8,100 | |
| Valley View Mall | Mortgage Loan | ||
| Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | ||
| Mortgage loans payable, net | $ 27,200 | $ 27,200 |
Investments in Partnerships - Summary of Equity Investments (Details) - USD ($) $ in Thousands |
Mar. 31, 2021 |
Dec. 31, 2020 |
|---|---|---|
| Investments in real estate, at cost: | ||
| Operating properties | $ 814,056 | $ 824,328 |
| Construction in progress | 33,319 | 20,632 |
| Total investments in real estate | 847,375 | 844,960 |
| Accumulated depreciation | (230,320) | (224,641) |
| Net investments in real estate | 617,055 | 620,319 |
| Cash and cash equivalents | 34,698 | 28,060 |
| Deferred costs and other assets, net | 155,057 | 161,465 |
| Total assets | 806,810 | 809,844 |
| LIABILITIES AND PARTNERS’ INVESTMENT: | ||
| Mortgage loans payable, net | 488,803 | 491,119 |
| FDP Term Loan, net | 201,000 | 201,000 |
| Partnership Loan | 106,066 | 100,000 |
| Other liabilities | 133,396 | 132,715 |
| Total liabilities | 929,265 | 924,834 |
| Net investment | (122,455) | (114,990) |
| Partners’ share | (62,672) | (59,080) |
| PREIT’s share | (59,783) | (55,910) |
| Excess investment | 6,333 | 6,390 |
| Net investments and advances | (53,450) | (49,520) |
| Investment in partnerships, at equity | 21,597 | 27,066 |
| Distributions in excess of partnership investments | $ (75,047) | $ (76,586) |
Investments in Partnerships - Summary of Share of Equity in (Loss) Income of Partnerships (Details) - USD ($) $ in Thousands |
3 Months Ended | |
|---|---|---|
Mar. 31, 2021 |
Mar. 31, 2020 |
|
| Equity Method Investments And Joint Ventures [Abstract] | ||
| Real estate revenue | $ 24,900 | $ 27,200 |
| Expenses: | ||
| Property operating and other expenses | (13,739) | (11,229) |
| Interest expense | (10,704) | (6,360) |
| Depreciation and amortization | (6,930) | (7,617) |
| Total expenses | (31,373) | (25,206) |
| Net (loss) income | (6,473) | 1,994 |
| Less: Partners’ share | 3,096 | (1,178) |
| PREIT’s share | (3,377) | 816 |
| Amortization of excess investment | (56) | 3 |
| Equity in (loss) income of partnerships | $ (3,433) | $ 819 |
Investments in Partnerships - Summary of Share of Equity in (Loss) Income of Partnerships (Parenthetical) (Details) - USD ($) $ in Thousands |
3 Months Ended | |
|---|---|---|
Mar. 31, 2021 |
Mar. 31, 2020 |
|
| Equity Method Investments And Joint Ventures [Abstract] | ||
| Capitalized interest expense | $ 103 | $ 1,091 |
Investments in Partnerships - FDP Loan Agreement (Details) - USD ($) $ in Thousands |
3 Months Ended | |||||
|---|---|---|---|---|---|---|
Dec. 10, 2020 |
Mar. 31, 2021 |
Mar. 31, 2020 |
Sep. 30, 2019 |
Jul. 31, 2019 |
Jan. 31, 2018 |
|
| Schedule Of Equity Method Investments [Line Items] | ||||||
| Distribution of financing proceeds from equity method investee | $ 0 | $ 8,003 | ||||
| FDP Loan Agreement | ||||||
| Schedule Of Equity Method Investments [Line Items] | ||||||
| Long-term debt | $ 350,000 | $ 250,000 | ||||
| Proceeds from (Repayments of) Long-term debt and capital securities | $ 51,000 | |||||
| Distribution of financing proceeds from equity method investee | $ 25,000 | |||||
| Debt instrument, maturity date | Jan. 22, 2023 | |||||
| Debt instrument extension term | 1 year | |||||
| Debt, variable interest rate | 2.50% | |||||
| Percentage of full recourse guarantee | 50.00% | |||||
| Full recourse guarantee amount | $ 50,000 | |||||
| FDP Loan Agreement | Federal Funds Rate | ||||||
| Schedule Of Equity Method Investments [Line Items] | ||||||
| Debt, variable interest rate | 0.50% | |||||
| FDP Loan Agreement | LIBOR Market Index Rate | ||||||
| Schedule Of Equity Method Investments [Line Items] | ||||||
| Debt, variable interest rate | 1.00% | |||||
| FDP Loan Agreement | LIBOR | ||||||
| Schedule Of Equity Method Investments [Line Items] | ||||||
| Debt, variable interest rate | 3.50% | |||||
| FDP Loan Agreement | Partnership Loan | ||||||
| Schedule Of Equity Method Investments [Line Items] | ||||||
| Principal payment | $ 100,000 | |||||
| Outstanding principal | $ 301,000 | $ 201,000 | ||||
| Accrued interest percentage | 15.00% | |||||
| Cash distributions description | 50/50 cash distributions to the Company and its joint venture partner | |||||
Financing Activity - Credit Agreements (Details) |
3 Months Ended | 9 Months Ended | ||||||||
|---|---|---|---|---|---|---|---|---|---|---|
Oct. 01, 2021 |
Jun. 30, 2021 |
Feb. 08, 2021
USD ($)
|
Dec. 10, 2020
USD ($)
Agreement
|
Oct. 16, 2020
USD ($)
|
Sep. 30, 2021 |
Mar. 31, 2021
USD ($)
ft²
Property
Award
|
Sep. 30, 2020 |
Dec. 31, 2020
USD ($)
|
Nov. 01, 2020
USD ($)
|
|
| Debt Instrument [Line Items] | ||||||||||
| Outstanding line of credit | $ 54,830,000 | $ 54,830,000 | ||||||||
| Amounts equal to greater than termination or modification of lease | 2,500,000 | |||||||||
| Maximum | ||||||||||
| Debt Instrument [Line Items] | ||||||||||
| Amounts received on behalf of guarantor in consideration of termination or modification of lease. | $ 3,500,000 | |||||||||
| Minimum | ||||||||||
| Debt Instrument [Line Items] | ||||||||||
| Leased premises | ft² | 7,500 | |||||||||
| Debt instrument discounted amount | $ 750,000 | |||||||||
| Percentage of aggregate contractual base rent | 25.00% | |||||||||
| Outstanding obligations | $ 3,500,000 | |||||||||
| Unsecured Debt | ||||||||||
| Debt Instrument [Line Items] | ||||||||||
| Debt issuance costs, line of credit arrangements | $ 11,900,000 | |||||||||
| First Lien Credit Agreement Base Rate Loans | Federal Funds Rate | ||||||||||
| Debt Instrument [Line Items] | ||||||||||
| Debt, variable interest rate | 0.50% | |||||||||
| First Lien Credit Agreement Base Rate Loans | LIBOR Market Index Rate | ||||||||||
| Debt Instrument [Line Items] | ||||||||||
| Debt, variable interest rate | 1.00% | |||||||||
| First Lien Credit Agreement Base Rate Loans | Base Rate | ||||||||||
| Debt Instrument [Line Items] | ||||||||||
| Debt, variable interest rate | 1.50% | |||||||||
| Second Lien Credit Agreement Base Rate Loans | Federal Funds Rate | ||||||||||
| Debt Instrument [Line Items] | ||||||||||
| Debt, variable interest rate | 0.50% | |||||||||
| Second Lien Credit Agreement Base Rate Loans | LIBOR Market Index Rate | ||||||||||
| Debt Instrument [Line Items] | ||||||||||
| Debt, variable interest rate | 1.00% | |||||||||
| Second Lien Credit Agreement Base Rate Loans | Base Rate | ||||||||||
| Debt Instrument [Line Items] | ||||||||||
| Debt, variable interest rate | 1.50% | |||||||||
| Debt instrument interest rate | 7.00% | |||||||||
| Second Lien Credit Agreement LIBOR Loans | Maximum | ||||||||||
| Debt Instrument [Line Items] | ||||||||||
| Debt, variable interest rate | 0.50% | |||||||||
| Second Lien Credit Agreement LIBOR Loans | LIBOR | ||||||||||
| Debt Instrument [Line Items] | ||||||||||
| Debt, variable interest rate | 8.00% | |||||||||
| Credit Agreements | ||||||||||
| Debt Instrument [Line Items] | ||||||||||
| Number of credit agreements | 2 | 3 | ||||||||
| Debt instrument maturity period | 2022-12 | 2022-12 | ||||||||
| Debt instrument, payment terms | 2 years | |||||||||
| Number of properties | Property | 12 | |||||||||
| Number of malls | Property | 9 | |||||||||
| Number of additional parcels | Property | 3 | |||||||||
| Debt instrument extension term | 1 year | |||||||||
| Debt instrument extended maturity period | 2023-12 | |||||||||
| Debt instrument minimum liquidity | $ 35,000,000.0 | |||||||||
| Percentage of minimum corporate debt yield | 8.00% | |||||||||
| Percentage of maximum loan to value ratio | 105.00% | |||||||||
| Debt Instrument, restrictive covenants | The Credit Agreements each provide for a two-year maturity of December 2022 (the “Maturity Date”), subject to a one-year extension to December 2023 at the borrowers’ option, subject to (i) minimum liquidity of $35.0 million, (ii) a minimum corporate debt yield of 8.0%, (iii) a maximum loan-to-value ratio of 105% for the total first lien and second lien loans and letters of credit and the Borrowing Base Properties as determined by an appraisal and (iv) no default or event of default existing and our representations and warranties being true in all material respects. The loans under the Credit Agreements are repayable in full on the Maturity Date, subject to mandatory prepayment provisions in the event of certain events including asset sales, incurrence of indebtedness, issuances of equity and receipt of casualty insurance proceeds. The terms of our Credit Agreements place restrictions on, among other things, and subject to certain exceptions, our ability to make certain restricted payments (including payments of dividends), make certain types of investments and acquisitions, issue redeemable securities, incur additional indebtedness, incur liens on our assets, enter into agreements with a negative pledge, make certain intercompany transfers, merge, consolidate, or sell our assets or the equity interests in our subsidiaries, amend our organizational documents or material contracts, enter into certain transactions with affiliates, or enter into derivatives contracts. Additionally, if we receive net cash proceeds from certain capital events (including equity issuances), we are required to prepay loans under our Credit Agreements. In addition, the Credit Agreements contain cross-default provisions that trigger an event of default if we fail to make certain payments or otherwise fail to comply with our obligations with respect to certain of our other indebtedness. | |||||||||
| Minimum liquidity comprised of unrestricted cash held in certain deposit accounts subject to control agreements | $ 25,000,000.0 | |||||||||
| Maximum certain other deposit account not subject to control agreement | 5,000,000.0 | |||||||||
| Maximum cash not retain in property level accounts held by subsidiaries | $ 6,500,000 | |||||||||
| Credit Agreements | Forecast | ||||||||||
| Debt Instrument [Line Items] | ||||||||||
| Percentage of minimum corporate debt yield | 7.25% | 6.50% | ||||||||
| Percentage of minimum senior debt yield | 11.35% | |||||||||
| Credit Agreements | Term Loans | ||||||||||
| Debt Instrument [Line Items] | ||||||||||
| Debt instrument, payment terms | 7 years | |||||||||
| Outstanding borrowings | $ 933,600,000 | $ 590,000,000.0 | ||||||||
| Credit Agreements | First Lien Revolving Facility | ||||||||||
| Debt Instrument [Line Items] | ||||||||||
| Outstanding line of credit | 54,800,000 | |||||||||
| Remaining borrowing capacity | 75,200,000 | |||||||||
| Credit Agreements | 2018 Revolving Facility | ||||||||||
| Debt Instrument [Line Items] | ||||||||||
| Maximum borrowing | $ 375,000,000.0 | |||||||||
| Debt instrument, payment terms | 7 years | |||||||||
| Outstanding line of credit | 375,000,000.0 | |||||||||
| Credit Agreements | A2018 Term Loan Facility | ||||||||||
| Debt Instrument [Line Items] | ||||||||||
| Maximum borrowing | $ 300,000,000.0 | |||||||||
| Credit Agreements | A2014 Seven Year Term Loan | ||||||||||
| Debt Instrument [Line Items] | ||||||||||
| Maximum borrowing | 250,000,000.0 | |||||||||
| Credit Agreements | Bridge Facility | ||||||||||
| Debt Instrument [Line Items] | ||||||||||
| Maximum borrowing | $ 30,000,000.0 | |||||||||
| Outstanding line of credit | $ 55,000,000.0 | |||||||||
| Debt instrument, maturity date | Oct. 31, 2020 | |||||||||
| Ability request additional commitment amount | $ 25,000,000.0 | |||||||||
| Increase in aggregate amount of commitments | $ 25,000,000.0 | |||||||||
| Secured First Lien Revolving Credit Facility | ||||||||||
| Debt Instrument [Line Items] | ||||||||||
| Maximum borrowing | $ 130,000,000.0 | |||||||||
| Letter of Credit | ||||||||||
| Debt Instrument [Line Items] | ||||||||||
| Maximum borrowing | 10,000,000.0 | |||||||||
| First Lien Term Loan Facility | ||||||||||
| Debt Instrument [Line Items] | ||||||||||
| Maximum borrowing | 384,500,000 | |||||||||
| Second Lien Term Loan Facility | ||||||||||
| Debt Instrument [Line Items] | ||||||||||
| Maximum borrowing | $ 535,200,000 | |||||||||
| 7-Year Term Loan | ||||||||||
| Debt Instrument [Line Items] | ||||||||||
| Loan agreement entered date | Jan. 08, 2014 | |||||||||
| Debt instrument, payment terms | 7 years | |||||||||
| Bridge Credit Agreement | ||||||||||
| Debt Instrument [Line Items] | ||||||||||
| Loan agreement entered date | Aug. 11, 2020 | |||||||||
| Two Thousand Eighteen Amended And Restated Credit Agreement | ||||||||||
| Debt Instrument [Line Items] | ||||||||||
| Loan agreement entered date | May 24, 2018 | |||||||||
| 2018 Credit Agreement | ||||||||||
| Debt Instrument [Line Items] | ||||||||||
| Debt instrument, payment terms | 7 years | |||||||||
| Revolving Loans | ||||||||||
| Debt Instrument [Line Items] | ||||||||||
| Debt, variable interest rate | 2.50% | |||||||||
| Revolving Loans | LIBOR | ||||||||||
| Debt Instrument [Line Items] | ||||||||||
| Debt, variable interest rate | 3.50% | |||||||||
| First Lien Credit Agreement | ||||||||||
| Debt Instrument [Line Items] | ||||||||||
| Days of interest period | 30 days | |||||||||
| Percentage of amount greater than equal to 50% of aggregate amount of revolving commitments | 0.35% | |||||||||
| Percentage of daily amount of unused revolving commitments | 50.00% | |||||||||
| Percentage of amount less than 50% of aggregate amount of revolving commitments | 0.25% | |||||||||
| Debt instrument, variable rate description | Amounts borrowed under the First Lien Credit Agreement may be either Base Rate Loans or LIBOR Loans. Base Rate Loans bear interest at the highest of (a) the Prime Rate, (b) the Federal Funds Rate plus 0.50% and (c) the LIBOR Market Index Rate plus 1.0%, provided that the Base Rate will not be less than 1.50% per annum, in each case plus (w) for revolving loans, 2.50% per annum, and (x) for term loans, 4.74% per annum. LIBOR Loans bear interest at LIBOR plus (y) for revolving loans, 3.50% per annum, and (z) for term loans, 5.74% per annum, in each case, provided that LIBOR will not be less than 0.50% per annum. Interest is due to be paid in cash on the last day of each applicable interest period (with rolling 30-day interest periods) and on the Maturity Date. We are required to pay certain fees to the administrative agent for the account of the lenders in connection with the First Lien Credit Agreement, including an unused fee for the account of the revolving lenders, which will accrue (i) 0.35% per annum on the daily amount of the unused revolving commitments when that amount is greater than or equal to 50% of the aggregate amount of revolving commitments, and (ii) 0.25% when that amount is less than 50% of the aggregate amount of revolving commitments. Accrued and unpaid unused fees will be payable quarterly in arrears during the term of the First Lien Credit Agreement and on the Revolving Termination Date (or any earlier date of termination of the revolving commitments or reduction of the revolving commitments to zero). | |||||||||
| First Lien Credit Agreement | LIBOR | Maximum | ||||||||||
| Debt Instrument [Line Items] | ||||||||||
| Debt, variable interest rate | 0.50% | |||||||||
| First Lien Credit Agreement | Term Loans | ||||||||||
| Debt Instrument [Line Items] | ||||||||||
| Debt, variable interest rate | 4.74% | |||||||||
| First Lien Credit Agreement | Term Loans | LIBOR | ||||||||||
| Debt Instrument [Line Items] | ||||||||||
| Debt, variable interest rate | 5.74% | |||||||||
| Second Lien Credit Agreement | ||||||||||
| Debt Instrument [Line Items] | ||||||||||
| Debt instrument, payment terms | 7 years | |||||||||
| Days of interest period | 30 days | |||||||||
| Debt instrument, variable rate description | Amounts borrowed under the Second Lien Credit Agreement may be either Base Rate Loans or LIBOR Loans. Base Rate Loans bear interest at the highest of (a) the Prime Rate, (b) the Federal Funds Rate plus 0.50% and (c) the LIBOR Market Index Rate plus 1.0%, provided that the Base Rate will not be less than 1.50% per annum, in each case plus 7.00% per annum. LIBOR Loans bear interest at LIBOR plus 8.00% per annum, provided that LIBOR will not be less than 0.50% per annum. Interest is due to be paid in kind on the last day of each applicable interest period (with rolling 30-day interest periods) by adding the accrued and unpaid amount thereof to the principal balance of the loans under the Second Lien Credit Agreement and then accruing interest on the increased principal amount (provided that after the discharge of our Senior Debt Obligations, interest will be paid in cash). We are required to pay certain fees to the administrative agent for the account of the lenders in connection with the Second Lien Credit Agreement. | |||||||||
| First Amendment | ||||||||||
| Debt Instrument [Line Items] | ||||||||||
| Debt instrument waiver of default interest | $ 5,300,000 | |||||||||
| Principal amount of loans outstanding | $ 535,200,000 | |||||||||
Financing Activity - Interest Expense and Deferred Financing Amortization (Details) - Credit Agreements and Restructured Credit Agreements - USD ($) $ in Thousands |
3 Months Ended | |
|---|---|---|
Mar. 31, 2021 |
Mar. 31, 2020 |
|
| 2018 Revolving Facility | ||
| Debt Instrument [Line Items] | ||
| Interest expense | $ 548 | $ 2,483 |
| Deferred financing amortization | 299 | 274 |
| Term Loans | ||
| Debt Instrument [Line Items] | ||
| Interest expense | 20,421 | 5,506 |
| Deferred financing amortization | $ 1,780 | $ 191 |
Financing Activity - Interest Expense and Deferred Financing Amortization (Parenthetical) (Details) $ in Millions |
3 Months Ended |
|---|---|
|
Mar. 31, 2021
USD ($)
| |
| Credit Agreements and Restructured Credit Agreements | Second lien Term Loans | |
| Debt Instrument [Line Items] | |
| Interest expense | $ 11.5 |
Financing Activity - Carrying and Fair Values of Mortgage Loans (Details) - USD ($) $ in Thousands |
Mar. 31, 2021 |
Dec. 31, 2020 |
|---|---|---|
| Debt Instrument [Line Items] | ||
| Mortgage loans, carrying value | $ 874,926 | $ 884,503 |
| Carrying Value | Mortgage Loan | ||
| Debt Instrument [Line Items] | ||
| Mortgage loans, carrying value | 874,900 | 884,500 |
| Fair Value | Mortgage Loan | ||
| Debt Instrument [Line Items] | ||
| Mortgage loans, fair value | $ 852,600 | $ 873,200 |
Financing Activity - Carrying and Fair Values of Mortgage Loans (Parenthetical) (Details) - USD ($) $ in Millions |
Mar. 31, 2021 |
Dec. 31, 2020 |
|---|---|---|
| Mortgage Loan | ||
| Debt Instrument [Line Items] | ||
| Debt issuance costs, line of credit arrangements | $ 1.1 | $ 1.0 |
Financing Activity - Other Mortgage Loan Activity (Details) - USD ($) $ in Thousands |
3 Months Ended | ||
|---|---|---|---|
Jun. 30, 2020 |
Mar. 31, 2021 |
Dec. 31, 2020 |
|
| Debt Instrument [Line Items] | |||
| Mortgage loans payable, net | $ 874,926 | $ 884,503 | |
| Valley View Mall | Mortgage Loan | |||
| Debt Instrument [Line Items] | |||
| Mortgage loans payable, net | $ 27,200 | $ 27,200 | |
| Valley View Mall | Mortgage Loan | Commercial Real Estate | |||
| Debt Instrument [Line Items] | |||
| Mortgage loans payable, net | $ 27,300 | ||
| Mortgage loans, balloon payment not paid | $ 27,300 | ||
| Debt instrument, maturity date | Jul. 01, 2020 |
Financing Activity - Note Payable (Details) - Paycheck Protection Program of Coronavirus Aid, Relief, and Economic Security (CARES) Act - Note Payable $ in Millions |
1 Months Ended |
|---|---|
|
Apr. 30, 2020
USD ($)
| |
| Debt Instrument [Line Items] | |
| Proceeds from note payable | $ 4.5 |
| Debt instrument, maturity date | Apr. 15, 2022 |
| Note payable, deferred payment period | 2021-08 |
| Note payable, interest rate | 1.00% |
| Note payable, loan forgiveness term | 168 days |
Cash Flow Information - Additional Information (Detail) - USD ($) |
3 Months Ended | |
|---|---|---|
Mar. 31, 2021 |
Mar. 31, 2020 |
|
| Other Significant Noncash Transactions [Line Items] | ||
| Cash paid for interest | $ 16,300,000 | $ 14,900,000 |
| Net of capitalized interest | 100,000 | 900,000 |
| Increase (decrease) in accrued construction costs | 300,000 | $ (5,300,000) |
| First Lien Revolving Facility | ||
| Other Significant Noncash Transactions [Line Items] | ||
| Line of credit facilities gross borrowings | 0 | |
| Line of credit facilities gross repayments | 0 | |
| Restructured Revolver | ||
| Other Significant Noncash Transactions [Line Items] | ||
| Line of credit facilities gross borrowings | 34,000,000.0 | |
| Line of credit facilities gross repayments | $ 0 | |
Cash Flow Information - Summary of Cash, Cash Equivalents, and Restricted Cash Reported within Statement of Cash Flows (Details) - USD ($) $ in Thousands |
Mar. 31, 2021 |
Dec. 31, 2020 |
Mar. 31, 2020 |
Dec. 31, 2019 |
|---|---|---|---|---|
| Cash And Cash Equivalents [Abstract] | ||||
| Cash and cash equivalents | $ 44,637 | $ 43,309 | $ 5,351 | |
| Restricted cash included in other assets | 9,279 | 6,247 | ||
| Total cash, cash equivalents, and restricted cash shown in the statement of cash flows | $ 53,916 | $ 51,231 | $ 11,598 | $ 19,629 |
Derivatives - Additional Information (Details) $ in Thousands |
3 Months Ended | |||
|---|---|---|---|---|
|
Dec. 22, 2020
USD ($)
DerivativeInstrument
|
Dec. 10, 2020
USD ($)
DerivativeInstrument
|
Mar. 31, 2021
USD ($)
DerivativeInstrument
|
Mar. 31, 2020
USD ($)
|
|
| Derivative Instruments [Line Items] | ||||
| Number of designated interest rate swaps from cash flow hedges | DerivativeInstrument | 9 | |||
| Derivative, notional amount | $ 614,800 | |||
| Number of derivatives designated as swaps mature | DerivativeInstrument | 3 | |||
| Number of derivatives designated as cash flow hedges | DerivativeInstrument | 10 | |||
| Estimate increase to interest expense | $ 10,300 | |||
| Number of interest rate swaps mature not re-designated | DerivativeInstrument | 4 | |||
| Number of interest rate swaps from cash flow hedges not re-designated | DerivativeInstrument | 7 | |||
| Weighted average interest rate | 2.36% | |||
| Amount of gain or (loss) reclassified from accumulated other comprehensive income into interest expense | $ 2,400 | $ 400 | ||
| Interest rate derivative liabilities, at fair value | 19,400 | |||
| Derivative asset, fair value, gross liability | 21,600 | |||
| Non-Designated Swaps | ||||
| Derivative Instruments [Line Items] | ||||
| Amount of gain or (loss) reclassified from accumulated other comprehensive income into interest expense | (40) | |||
| Interest Rate Swap | ||||
| Derivative Instruments [Line Items] | ||||
| Derivative, notional amount | $ 375,000 | $ 439,800 | ||
| Weighted average interest rate | 2.57% | |||
| Interest Rate Non-Designated Hedges Swaps 2021 Maturity | ||||
| Derivative Instruments [Line Items] | ||||
| Derivative, notional amount | $ 175,000 | |||
| Weighted average interest rate | 1.85% | |||
| Credit Agreements | ||||
| Derivative Instruments [Line Items] | ||||
| Debt instrument, payment terms | 2 years | |||
| Credit Agreements | Term Loans | ||||
| Derivative Instruments [Line Items] | ||||
| Debt instrument, payment terms | 7 years | |||
| Number of de-designated interest rate swaps from cash flow hedges as a result of financial restructuring | DerivativeInstrument | 7 | |||
| Loss recorded within interest expense due to reclassification of amounts in other comprehensive (loss) income to earnings | $ 2,800 | |||
| Number of voluntarily de-designated interest rate swaps from cash flow hedges | DerivativeInstrument | 13 | |||
Derivatives - Fair Value of Derivative Instruments (Details) - USD ($) $ in Millions |
Mar. 31, 2021 |
Dec. 31, 2020 |
|---|---|---|
| Derivative Instruments, Gain (Loss) [Line Items] | ||
| Aggregate Notional Value | $ 614.8 | |
| Aggregate Fair Value | $ (19.4) | $ (23.3) |
| Weighted Average Interest Rate | 2.36% | |
| Interest Rate Swaps 2021 Maturity | ||
| Derivative Instruments, Gain (Loss) [Line Items] | ||
| Aggregate Notional Value | $ 139.8 | |
| Aggregate Fair Value | $ (2.1) | (3.0) |
| Weighted Average Interest Rate | 2.29% | |
| Interest Rate Swaps 2023 Maturity | ||
| Derivative Instruments, Gain (Loss) [Line Items] | ||
| Aggregate Notional Value | $ 300.0 | |
| Aggregate Fair Value | $ (15.1) | (17.2) |
| Weighted Average Interest Rate | 2.70% | |
| Interest Rate Non-Designated Hedges Swaps 2021 Maturity | ||
| Derivative Instruments, Gain (Loss) [Line Items] | ||
| Aggregate Notional Value | $ 175.0 | |
| Aggregate Fair Value | $ (2.2) | $ (3.1) |
| Weighted Average Interest Rate | 1.85% |
Derivatives - Effect of Our Derivative Financial Instruments on Our Consolidated Statements of Operations (Details) - USD ($) $ in Thousands |
3 Months Ended | |
|---|---|---|
Mar. 31, 2021 |
Mar. 31, 2020 |
|
| Derivative Instruments And Hedging Activities Disclosure [Abstract] | ||
| Amount of Gain or (Loss) Recognized in Other Comprehensive Income on Derivative Instruments | $ 200 | $ (20,100) |
| Amount of Gain or (Loss) Reclassified from Accumulated Other Comprehensive Income into Interest Expense | 2,400 | 400 |
| Interest Expense | $ (30,731) | $ (16,858) |
Leases - As Lessee (Details) |
3 Months Ended |
|---|---|
Mar. 31, 2021 | |
| New Accounting Pronouncements Or Change In Accounting Principle [Line Items] | |
| Lessee, operating lease, renewal term | 60 years |
| Lessee, Operating Lease, Existence of Option to Extend | true |
| Lessor, Operating Lease, Existence of Option to Extend | false |
| Minimum [Member] | |
| New Accounting Pronouncements Or Change In Accounting Principle [Line Items] | |
| Lessee, operating lease, term of contract | 3 years |
| Maximum | |
| New Accounting Pronouncements Or Change In Accounting Principle [Line Items] | |
| Lessee, operating lease, term of contract | 40 years |
Leases - Lease Costs (Details) - USD ($) $ in Thousands |
3 Months Ended | |
|---|---|---|
Mar. 31, 2021 |
Mar. 31, 2020 |
|
| New Accounting Pronouncements Or Change In Accounting Principle [Line Items] | ||
| Amortization of right-of-use assets | $ 202 | $ 204 |
| Interest on lease liabilities | 63 | 79 |
| Operating lease costs | 747 | 778 |
| Variable lease costs | 108 | 86 |
| Total lease costs | 1,120 | 1,147 |
| Solar Panel Leases | ||
| New Accounting Pronouncements Or Change In Accounting Principle [Line Items] | ||
| Amortization of right-of-use assets | 202 | 204 |
| Interest on lease liabilities | 63 | 79 |
| Total lease costs | 265 | 283 |
| Ground Leases | ||
| New Accounting Pronouncements Or Change In Accounting Principle [Line Items] | ||
| Operating lease costs | 436 | 436 |
| Variable lease costs | 45 | 43 |
| Total lease costs | 481 | 479 |
| Office, equipment, and vehicle leases | ||
| New Accounting Pronouncements Or Change In Accounting Principle [Line Items] | ||
| Operating lease costs | 311 | 342 |
| Variable lease costs | 63 | 43 |
| Total lease costs | $ 374 | $ 385 |
Leases - Supplemental Cash Flows and Terms (Details) - USD ($) $ in Thousands |
3 Months Ended | |
|---|---|---|
Mar. 31, 2021 |
Mar. 31, 2020 |
|
| Leases [Abstract] | ||
| Operating cash flows used for finance leases | $ 63 | $ 70 |
| Operating cash flows used for operating leases | 552 | 492 |
| Financing cash flows used for finance leases | $ 184 | $ 173 |
| Weighted average remaining lease term-finance leases (months) | 83 months | 95 months |
| Weighted average remaining lease term-operating leases (months) | 296 months | 306 months |
| Weighted average discount rate-finance leases | 4.35% | 4.37% |
| Weighted average discount rate-operating leases | 6.44% | 6.43% |
Leases - Future Payments Against Lease Liabilities Maturity (Details) $ in Thousands |
Mar. 31, 2021
USD ($)
|
|---|---|
| Finance leases | |
| Reminder of fiscal year | $ 742 |
| Next fiscal Year or Year 1 | 988 |
| Second fiscal year or year 2 | 983 |
| Third fiscal year or year 3 | 949 |
| Fourth fiscal year or year 4 | 929 |
| Thereafter | 2,072 |
| Total undiscounted lease payments | 6,663 |
| Less imputed interest | (920) |
| Total lease liabilities | 5,743 |
| Operating leases | |
| Reminder of fiscal year | 1,992 |
| Next fiscal Year or Year 1 | 2,560 |
| Second fiscal year or year 2 | 2,514 |
| Third fiscal year or year 3 | 2,429 |
| Fourth fiscal year or year 4 | 2,341 |
| Thereafter | 51,138 |
| Total undiscounted lease payments | 62,974 |
| Less imputed interest | (32,948) |
| Total lease liabilities | $ 30,026 |
| Operating Lease, Liability, Statement of Financial Position [Extensible List] | pei:AccruedExpenseAndOtherLiabilitiesMember |
| Total | |
| Reminder of fiscal year | $ 2,734 |
| Next fiscal Year or Year 1 | 3,548 |
| Second fiscal year or year 2 | 3,497 |
| Third fiscal year or year 3 | 3,378 |
| Fourth fiscal year or year 4 | 3,270 |
| Thereafter | 53,210 |
| Total undiscounted lease payments | 69,637 |
| Less imputed interest | (33,868) |
| Total lease liabilities | $ 35,769 |
Leases - Lessor Payments to be Received, Maturity (Details) $ in Thousands |
Mar. 31, 2021
USD ($)
|
|---|---|
| Leases [Abstract] | |
| April 1 to December 31, 2021 | $ 141,799 |
| 2022 | 173,559 |
| 2023 | 153,082 |
| 2024 | 130,665 |
| 2025 | 104,533 |
| Thereafter | 283,669 |
| Total payments to be received | $ 987,307 |
Commitments and Contingencies - Contractual Obligations (Details) $ in Millions |
3 Months Ended |
|---|---|
|
Mar. 31, 2021
USD ($)
| |
| Fashion District Philadelphia | |
| Other Commitments [Line Items] | |
| Unaccrued contractual obligation and other commitments | $ 4.8 |
| Percentage of contractual obligation | 100.00% |
| Ownership percentage | 50.00% |
| Construction in Progress | |
| Other Commitments [Line Items] | |
| Unaccrued contractual obligation and other commitments | $ 9.4 |
Commitments and Contingencies - Preferred Dividend Arrearages (Details) $ / shares in Units, $ in Millions |
3 Months Ended |
|---|---|
|
Mar. 31, 2021
USD ($)
$ / shares
| |
| Other Commitments [Line Items] | |
| Cumulative amount of unpaid dividends on preferred stock | $ | $ 20.5 |
| Series B Preferred Stock | |
| Other Commitments [Line Items] | |
| Preferred stock annual dividend rate | $ 1.8436 |
| Unpaid dividends per share on preferred stock | 1.38 |
| Series C Preferred Stock | |
| Other Commitments [Line Items] | |
| Preferred stock annual dividend rate | 1.80 |
| Unpaid dividends per share on preferred stock | 1.35 |
| Series D Preferred Stock | |
| Other Commitments [Line Items] | |
| Preferred stock annual dividend rate | 1.7188 |
| Unpaid dividends per share on preferred stock | $ 1.29 |
Commitments and Contingencies - Property Damage from Natural and Other Disaster (Details) - Cherry Hill Mall in Cherry Hill, New Jersey - USD ($) $ in Millions |
1 Months Ended | 3 Months Ended |
|---|---|---|
Apr. 30, 2020 |
Mar. 31, 2021 |
|
| Loss Contingencies [Line Items] | ||
| Net cost | $ 0.6 | |
| Business interruption recoveries | $ 0.6 |