Seeking Alpha
We cover over 5K calls/quarter
Profile| Send Message|
( followers)  

Pennsylvania Real Estate Investment Trust (NYSE:PEI)

Q1 2009 Earnings Call

April 30, 2009; 3:00 pm ET

Executives

Ron Rubin - Chairman & Chief Executive Officer

Ed Glickman - President & Chief Operating Officer

Bob McCadden - Chief Financial Officer & Executive Vice President

Joe Coradino - President

Garth Russell - KCSA Strategic Communications

Analysts

Quentin Velleley - Citigroup

Nathan Isbee - Stifel Nicolaus

Andrew McCulloch - Green Street Advisors

Mike Mueller - JP Morgan

Operator

Good afternoon ladies and gentlemen. Thank you standing by. Welcome to the Pennsylvania Real Estate Investment Trust, first quarter 2009 earnings call. During today’s presentation all parties will be in a listen-only mode. Following the presentation, the conference will be open for questions. (Operator Instructions)

I would now like to turn the conference over to Garth Russell at KCSA, Strategic Communications.

Garth Russel

Thank you, Brandy. Before turning the call over to management for their opening remarks, I want to read the forward-looking statements. This conference call will contain certain forward-looking statements within the meaning of the federal securities laws. Forward-looking statements relate to expectations, beliefs, projections, future plans, strategies, anticipated events, trends and other matters that are not historical facts.

These forward-looking statements reflect PREIT’s current views about future events 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.

PREIT’s business might be affected by uncertainties affecting real estate business generally, as well as specific factors discussed in the documents previously filed with the Securities and Exchange Commission and in particular PREIT’s annual report on Form 10-K for the year ended December 31, 2008. PREIT does not intend to update or revise any forward-looking statements to reflect new information, future events or otherwise

It is now my pleasure to turn the call over to Ron Rubin, Chairman and Chief Executive Officer of PREIT.

Ron Rubin

Thank you very much you both and welcome to Pennsylvania Real Estate Investment Trust’s 2009 first quarter conference call. Joining me on the call today are Ed Glickman, our President; Bob McCadden, CFO and Joe Coradino, President of our Management Company and Head of our retail operations. Also in the room today are Vice Chairman George Rubin and General Counsel, Bruce Goldman.

Today we will discuss our first quarter results, the status of our current projects and our expectations for the remainder of 2009. After we conclude our remarks, the call will be open for your questions.

The company is experiencing the effects of the current economic downturn and its corresponding impact on consumer spending. Many of the retailers in our portfolio are experiencing challenging times and this has affected our results. Where a tenant can push transactions off or secure rent relief, they will. Although there is little doubt that the new look and feel of our REIT development properties has captured their attention.

As Joe Coradino will discuss in greater detail, the recent openings of Nordstrom and some wonderful restaurants at the Cherry Hill Mall, have excited shoppers and retailers in Southern New Jersey. So the two should the opening tomorrow at the lifestyle wing at Plymouth Meeting Mall, where Anne Taylor Loft, Chico’s, Cold Water Creek and Joseph Bank will join the roster of new restaurants and mall tenants. At these and at our other redevelopment properties, we are hoping to capture a larger share of regional consumer spending when the economy improves.

As Ed Glickman will discuss in greater detail, we are working to address near term and longer term liquidity and capital allocation issues. We are working on specific property financings and ventures to provide for the successful completion of our development and redevelopment projects.

We are also in active discussions regarding the renewal of our credit facility, which comes due in March 2010. As I have noted in previous calls, while the economic environment has been difficult, the fundamentals of our basic business have not changed. Our management team is focused, working to meet company capital needs, also to complete our redevelopment and development projects and to place stores in service.

We can improve our NOI to generate positive leasing spreads where possible. Although we expect reduced attendance in Las Vegas, we still expect to be busy at the ICSC Spring Convention next month. We are pleased with the improvements we have made to our properties where we believe we have improved the shopping experience and created new opportunities for retailers. We hope to do some business there. As always, we will continue to focus on creating long term value for our shareholders and we look forward to seeing some of you at our annual meeting on May 28.

With that, I’ll turn the call over to Ed Glickman.

Ed Glickman

Thanks Ron. The beginning of 2009 has been a challenging period for PREIT. To the positive we have made significant strides towards the completion of our redevelopment at Cherry Hill, Plymouth Meeting, Voorhees Town Center and the gallery at Market East.

The warm reception that these projects have received proves that even in 2009 the American consumer is still responsive to the beautiful physical environments and compelling value propositions that we strive to create. Joe Coradino will give you the details in a few minutes.

The positive impact that these successful projects have had on our operating performance has been mitigated by the widely reported decline in the overall retail environment and the resultant impact on store performance. These trends can be seen in a declining comp store sales from $356 a foot to $340 per square foot.

While we attribute this decline to general economic conditions, as we discussed last quarter, one factor that is unique to PREIT is our ongoing redevelopment efforts and the construction activities underway at a number of our assets. Consistent with the decline in sale performance, PREITs real estates revenue have declined 1.1% due to reduced occupancy from store closings.

Our retail portfolio weighted average total occupancy declined by 30 basis points to 89%. The majority of the store closings that have occurred have been part of tenant bankruptcies. Further within the bankruptcy category, the majority of our closures have been due to complete merchant liquidation.

To address these closing we have been working to backfill the vacancies. For example, we have signed leases with Loft, a moderately priced women’s ready to wear concept with ten locations from the bankruptcy. We expect that they will open during the first week of May. To date, we have been able to sign leases for approximately 10% of the total space impacted by bankruptcies and we are in negotiation with tenants for an additional 20% of that space.

In addition to working to improve occupancy, we are focused on keeping existing merchants in place. As has been the case recently, we have executed several short term renewals. Of the 139 non-anchor renewals executed this quarter, 73 have lease terms less than three years. This has occurred for a number of reasons. First, we have saw that in a number of cases to maintain flexibility in light of our redevelopment program.

Secondly, we want to reduce the risk for both the company and the merchant in agreeing to stay open in a difficult environment. To this end we have been successful with pre-leasing spreads at a positive 190 basis point increase over expiring rents on 376,500 square feet of non-anchor renewals. We have executed or are in advance stages of negotiation for 82% of our 2009 non-anchor renewals.

The company has been approached for rent relief by a number of tenants. These requests have been reviewed on a case-by-case basis. Many of these requests are recent and the impact on NOI has been limited in the first quarter. Requests that have been approved have generally been conditioned on typical modifications to tenant leases in favor of PREIT. The economic result to the improved request will impact both revenue and expense recovery during the balance of 2009.

We have also felt the changing retail environment in our diminished ability to recover property expenses. Expense recoveries have declined due to lower occupancy levels and lower recovery margins on new and renewal leases. To counter this trend, we continue to look for ways to cut expenses at the property.

Due to factors already mentioned, our Q1 same-store NOI is down 6.4%. This is a significant decrease on an absolute basis, but well within the bounds of the performance range we expected. Again, as all of our redevelopment assets are same-store, this result represents the addition of the NOI from new space coming on line mitigated by bankruptcy driven store closures.

At the same time as our NOI has been reduced, we have seen an increase in interest and depreciation expense as we continue to bring our construction and progress into service. Our reported interest expense has also been increased as a result of changes in the accounting for convertible bonds, as well as the reclassification of certain land assets that we hold out of the active development category, requiring us to expense formally capitalized interest that’s incurred.

Our increased net loss for the quarter reflects the impact of these additional expenses layered over the decline in NOI. The reclassification of our land holdings reflects a broader movement by the company to cut back our development and redevelopment activities. However, we have continued to work on projects that are either in the final stages of development and redevelop.

At the beginning of the year, we faced capital expenditures of approximately $150 million to complete our work-in-progress on these remaining projects. In the first quarter, we funded approximately $60 million of construction, leaving approximately $90 million to go. Though the remaining availability on our line of credit, supplemented by operating cash flow and proceeds from mortgage financings already underway, we expect to be able to fund the completion of these projects.

In recognition of the fact that we will be operating with scaled back development or redevelopment and acquisition activities we have cut back our G&A expenditures and reduced headcount at the properties as well as the home office. Our operational focus in the near future will be the completion of our current project and the intensive asset management of our existing portfolio.

We believe that we have planned and executed compelling shopping environments that are being well received by our customers. Now we need to operate these properties at an ever increasing level of efficiency to keep occupancy costs down while maintaining the high levels of service expected by our merchants and customers. With the capital investments that we have made and our continuing focus on operational excellence, we are preparing a baseline against which we can experience significant growth during the next cycle.

From a financial perspective, we are focused on providing liquidity for the completion of our projects and to meet the ongoing working capital needs of the company. We have reduced our dividend and cut expenses conserving capital for operations. We have entered into discussions with our agent bank regarding the upcoming maturity of our credit facility.

At this point while these discussions are at an early stage, we can report that they have been constructive. We have also had discussions with potential joint venture partners, but those discussions are also at an early stage and we have nothing to report at this time. We remain firm in our belief that we have pursued the appropriate real estate strategy for our assets and that our portfolio activities will create value over the long term.

Bob McCadden will now give you more details on our financial performance.

Bob McCadden

Thank you, Ed. Let me turn directly to our operating results. Net loss for the first quarter was $11 million or $0.28 per diluted share. FFO for the quarter was $29.3 million, or $0.71 per share. Since our last call in January, we purchased $2.1 million of our exchangeable notes and recorded a $1.3 million gain, which was included in our 2009 earnings guidance.

Same store NOI compared to the prior year is down $4.6 million. The key drivers of this decrease are a $1.3 million decrease in base rents which includes minimum rents, revenues from tenants paying a percentage of sales in lieu of minimum rents, and specialty leasing revenues.

Our revenues include the positive contribution from new stores that have opened since last year at our redevelopment properties, offset by lost revenues from store closings, principally from tenants that declared bankruptcy in 2008 and liquidated either during the second half of last year or early 2009. Tenants included in the March 2008 occupancy but no longer operating, totals approximately 600,000 square feet. Also impacting base rents are lower revenues from tenants paying co-tenancy rents, primarily at properties where we have vacant anchors.

Percentage rent is down approximately $646,000 compared to last year as a result of lower tenant sales and lease renewals with higher break points. Lease termination income was down $367,000 as compared to the prior year. Real estate taxes increased by $2 million reflecting an increase in snow removal and other operating expenses, higher property tax rates and increased assessment of certain of our properties.

Overall expense recovery rates fell from 90.3% to 86.3% due to a combination of higher vacancy levels, more tenants paying percentage sales in lieu of minimum rent and extras or cam expense caps. Bad debt expense was approximately $340,000 higher than last year. For the quarter, bad debt was 1.1% of real estate revenues compared to 0.8% last year.

All of our retail properties except Monroe marketplace, which opened in the fourth quarter 2008, are included in our same-store operating results. G&A expenses, abandoned project costs and others expenses were down by about $2.1 million for the quarter, reflecting our emphasis on cost management in the current year. Last year’s quarter included approximately $800,000 of write-offs related to certain ground-up development projects that were canceled because of economic conditions.

Interest expense increased as a result of placing completed projects in this service since the end of last year’s quarter. In addition we ceased capitalizing interest on certain projects. This increase was partially offset by lower interest rates on our outstanding debt balances which decreased by 23 basis points to 4.4%. On a GAAP basis, our average rate also fell by 23 basis points to 4.78%.

Effective January 1, we were required to change how we account for exchangeable notes. The new rules require us to bifurcate the debt and equity components of the notes and apply the change retroactively to the May 2007 issuance date. Our FFO and net income for the March 2008 period have been reduced by approximately $0.02 a share from the amounts previously reported.

Depreciation and amortization expense was higher due to assets that were placed in the service over the past year. During the first quarter, we commissioned approximately $106 million from our redevelopment and development projects. Since the beginning of 2008 we have put into service almost $290 million of assets.

During the quarter, we repaid the $15.7 million mortgage loan of Palmer Park Mall and closed the $16.3 million loan on our newly built New River Valley Center. At the end of the quarter we had outstanding debt of $2.786 billion, an increase of $41 million from December 31. At the end of the quarter, 80% of our debt was fixed.

Page 29 of our supplemental reporting package includes selected debt ratios for our credit facility and term loan. At the end of the quarter our leverage ratio was approximately 54.2%. We do expect our leverage ratio will approach 55% by or shortly after the end of the second quarter and exceed that level by the end of the year.

As a reminder, our loan covenants permit our leverage ratio to exceed 65% for two quarters as long as we stay below 70%. We are reaffirming our 2009 guidance and expect to report a net loss between $1.15 per share and $1.35 per share. We expect our FFO per diluted share to be in the range of $2.75 to $2.95.

Now, I will turn the call over to Joe Coradino.

Joe Coradino

Thanks Bob. We continue to move forward with our plan to create compelling shopping environments as we complete construction in the redevelopments. In spite of managing through a challenging economic cycle, the first quarter saw several noteworthy accomplishments. We continue to make construction and leasing progress on the three major redevelopments in the Philadelphia metropolitan area. The March 27 opening of Nordstrom, marked a tremendous milestone for the transformation at Cherry Hill Mall, which was constructed in 1961.

Our shoppers have been extremely responsive to the new Nordstrom, providing the emphasis for them to exceed their projections consistently since their opening. The shopping experience has been dramatically elevated with the introduction of architecturally distinctive elements such as an expansive grand court highlighted by Italian mosaic tile, water features, glass block and accent lighting.

We believe the success of the redevelopment demonstrates alignment of the property’s retail offerings with the market’s demand for better quality merchandise. In addition to Nordstrom, we celebrated the grand opening of two signature restaurants during the quarter. Maggiano’s opened their 16,000 square foot restaurant on March 2 and Seasons 52 opened as scheduled on March 23. Both restaurants opened to great fanfare drawing overflow crowds.

The restaurant’s offerings at the property will be complete when Capital Grill and California Pizza Kitchen open in the second and third quarter, respectively. Five additional tenants, Coach, Johnston Murphy, Steve Madden, Brighton Collectibles and Back Stage Couture have opened in a new mall addition leading to Nordstrom. In addition, we opened J. Crew during the first quarter.

Also during the quarter, we executed eight new leases for Cherry Hill, including (Inaudible) and Urban Outfitters. As we discussed on last quarter’s call, construction of the 12,700 square foot Urban Outfitters store is underway for an expected opening in July.

Tenants representing 66% of the expansion areas have opened and another 18% of the planned expansion portion of this project is either leased or in active negotiation. Tomorrow our Plymouth Meeting Mall will celebrate the grand opening of four of our lifestyle tenants. Ann Taylor Loft, Chico’s, Coldwater Creek, and Jos. A. Banks. Last week the two level, 23,000 square foot Crazy City opened.

During the quarter we signed a lease with Ali Shoes, the fifth tenant to occupy space in the lifestyle area. With Whole Foods opening in November, we will have achieved our goal of differentiating the property through the addition of unique shops, dining and entertainment components, and a new prototype natural and organic grocer. Tenants representing 83% of the planned expansion portion of this project is either leased or in active negotiations.

At Voorhees Town Center where we have recently received an award from the Delaware Valley Smart Growth Alliance and received the Regional Land Use Project of the Year award from the Delaware Valley Regional Planning Commission, we have made tremendous progress in the construction of the resilient salon and spa, which includes a premier aveta spa, beauty school and retail outlet. The first floor salon opened last week and the second floor training facility is expected to open in May.

Interest in the residential component of the project has been strong. In addition to signed leases in hand, our partners received approximately 2,000 contacts via their website. They expect a significant conversion on these contacts when the first building is ready for occupancy in mid-May, concurrent with the clubhouse and rental center.

The balance of the buildings will come online in phases starting mid-summer through fall of 2009. The parking and roadways for the mixed use portion of the property are complete, and the boulevard is open. In light of our focus to secure best of breed local and regional tenants for this property, we are finalizing a lease for a 20,000 square feet local restaurant and marketplace, and we’re also finalizing a lease for a 13,000 square foot athletic facility and have acquired an additional liquor license in anticipation of securing another locally recognized restaurant to anchor the other end of the boulevard.

Tenants representing just over 50% of the planned expansion portion of this project are either leased or in active negotiations.

During the quarter we opened an 81,000 square foot Burlington Coat Factory at Cumberland Mall. The construction continues on their location of Wiregrass Commons, which is scheduled to open in the third quarter of this year. The replacement of Value City at Francis Scott Key with a Value City Furniture and DSW will be completed in the second quarter when DSW opens for business on May 7. At 801 Market Street, a property we own continuous with the gallery, we’ve received a certificate of occupancy for the building’s demolition and core and shell work which was completed in March of 2009.

Tenant fit-out work for the 224,000 square foot commonwealth at PA office on floors four, five, and six began in late 2008 and is progressing quickly for a phased move-in starting this summer in advance of the planned October 2009 commencement. Upon completion, the building will be one of the few buildings in the country that have achieved both historical certification and silver lead certification.

We’re poised to take advantage of an improvement in the economy, and to that end we have been working on conceptual planning and entitlements for additional phases of redevelopment at several of our key assets. We are prepared for the upcoming Las Vegas ICSC convention and in light of the anticipated reduced attendance, where we intend to capitalize on the momentum generated by our recently completed redevelopments.

While many retailers have significantly curtailed open to buys, we’re encouraged by our meeting roster, with approximately 100 appointments scheduled to date. In addition to our increased focus on tenant retention and cultivation of local and regional merchants, we are focused on new and expanding retail concepts and believe our redevelopment assets will serve as the platform to advance these relationships.

With that, we’re now ready for questions.

Question-and-Answer Session

Operator

(Operator Instructions) And our first question comes from the line of Quentin Velleley with Citigroup; please go ahead.

Quentin Velleley - Citigroup

Hi, guys. I’m just wondering, I know you said by the end of the year you might be about 65% on the debt to gross asset value. What kind of decline in NOI would be required to breach the debt to gross asset value or the minimum debt yield covenant in the near term?

Bob McCadden

Well, the NOI is capitalized at 7.5% to be term in gross asset value. So I don’t have the numbers off the top of my head, but you could probably do a computation based on the information we provided to you.

Quentin Velleley - Citigroup

Sure and with the debt yield is that a quarterly yield or is that the last 12 months?

Bob McCadden

That’s a trailing 12 months.

Quentin Velleley - Citigroup

Just with your same store NOI which is down more than 6%, I think your guidance was a decline of 1% to 3%; are you assuming in guidance that you have quite a bit of lease up of that vacant space? I’m just wondering if you can reconcile the difference.

Bob McCadden

It’s a combination of a number of things. Obviously, as Joe mentioned, the grand opening of the four lifestyle tenants at Plymouth Meeting tomorrow morning. We opened at the very end of March much of the Cherry Hill redevelopment, so we didn’t really have any benefit in the first quarter, of additional GLA that is, in effect programmed in and subject to existing lease commitments.

So that’s really the basis for our view that we’ll continue to see improvement in our same store NOI as the year progresses and we also have the balance of Voorhees Town Center schedules over the next half of this year and into 2010. So we have other existing commitments as well as the additional deals that Ed talked about, backfilling some of the B. Moss vacancy.

Quentin Velleley – Citigroup

And just the last question, with the discussions that you’re in for the extension of the credit facility and the term loan, I’m just wondering whether those discussions involve and preference on the lender’s behalf or asset files or potential rising of equity.

Bob McCadden

At this point, we’re in the early stages of those discussions.

Quentin Velleley – Citigroup

No comments there?

Bob McCadden

No comment.

Quentin Velleley – Citigroup

Okay, thanks guys.

Operator

Thank you. Our next question comes from the line of Nathan Isbee with Stifel Nicolaus. Please go ahead.

Nathan Isbee - Stifel Nicolaus

Yes hi, good afternoon. You had spoken about as part of your way of approaching this economic slowdown is controlling expenses and I know you talked about increased snow removal costs, but you still saw a $2 million increase year-over-year in your real estate costs. Could you talk about how much you have taken out increased taxes and with the snow removal costs, what have you been able to cut out of your budgets?

Bob McCadden

Well, currently we have cut down substantially on people. We’ve had a reduction in force at the home office, and it also carried over into the properties. We have been working significantly to look at each part of our expense budget and cut it down. It’s a work in progress. Many of our expenses are controlled under contracts, but where possible we’re attempting to reopen those discussions.

Nathan Isbee - Stifel Nicolaus

Okay. The Whole Foods at Plymouth Meeting, can you just talk about the status? Whole Foods has pulled out of a number of projects over the last year and what gives you confidence they’re still opening?

Joe Coradino

Sure this is Joe Coradino. Whole Foods, the landlord work is complete. Whole Foods has submitted 100% drawings and on April 3 was the actual date, they’re expecting approvals from the township on or about May 15, which will mark and shortly thereafter their commencement of construction and they’re opening in November.

Nathan Isbee - Stifel Nicolaus

Okay thanks, and then just getting back to the whole de-leveraging issue, where do you stand on your dividend? Are you still projecting $1.16 to be your minimum payout for the year and why you wouldn’t go to stock at this point?

Ron Rubin

We revisit the dividend at each quarter, and we’ll look at in the quarter when we get to that point. We have not made any decision one way or the other.

Nathan Isbee - Stifel Nicolaus

Okay, very good. Thank you.

Operator

Our next question is from the line of Jim Sullivan with Green Street Advisers; please go ahead.

Andrew McCulloch - Green Street Advisors

Hi, guys this is actually Andrew here with Jim. Ed, I had a question, you mentioned selling assets as a source of liquidity. Is this core assets, regional mall properties, kind of what you’re thinking there?

Ed Glickman

We’ve had discussions with a number of parties and there hasn’t been one particular theme that has arisen that I could comment on, but I would say there are a number of investors that are interested and so there’s an investment across the strip of that. There are some that are interested in cherry picking and there are some that are just interested in corporate level investment. So it’s really all over the map.

Andrew McCulloch - Green Street Advisors

Then in terms of pricing, have you guys talked internally about what you’d be comfortable with, and would you share that?

Ron Rubin

No and no.

Andrew McCulloch - Green Street Advisors

Then lastly, with the stock up significantly from its recent lows, does issuing equity to solve the liquidity issues enter in the conversation at all.

Ron Rubin

Even though the stock is up from its recent lows, it’s still fairly low in our view, and our preference would be to look at the assets as a source of liquidity rather than at the company and that’s been our first motivation, so that’s the path that we’re taking. We’ve entered into some discussions regarding the sale of some assets. We’ve entered into joint venture discussions. I think those would be our primary focus, but as you said earlier, we haven’t ruled anything out at this point.

Andrew McCulloch - Green Street Advisors

Okay that’s helpful, thanks.

Operator

(Operator instructions) Our next question comes from the line of Mike Mueller with JP Morgan; please go ahead.

Mike Mueller - JP Morgan

Yes hi. Going back to the prior dividend question, when you said you reevaluate it every quarter, were you talking about the level of the dividend or just going to a stock dividend at this point?

Ron Rubin

Mike, obviously our focus is providing enough liquidity for the company to finish its projects and to provide working capital. We’ve clearly cut back on our expectations regarding redevelopment and development expenditures in the future. We’re focused solely on the less than a handful of assets that we’ve been working on for awhile and are attempting to bring to completion.

We’re looking to fund that liquidity requirement from a number of different sources, including the balance from the line of credit, we’re looking at free cash flow from operations and beyond that, we’re looking for mortgage finance where available.

Now, these days, you can’t count on any particular source of capital and depending upon how those funding sources go forward in providing us with the amount of cash we need to finish our development projects, that will obviously impact on our feelings about the dividend, the form of the dividend, the amount of the dividend and what not, but in today’s market this is a day-to-day, minute-to-minute thought process and not one that we’re prepared to commit to at this point.

Mike Mueller - JP Morgan

So you still don’t see the stock dividend that’s like low hanging fruit? It’s further down the line terms of priority if you can knock the other things out?

Ron Rubin

Well, I think we’ve discussed and I’ve discussed with a number of folks down the line, our feelings about stock dividend. You can contrast the stock dividend with obviously raising equity and the capital markets or infusing equity into a joint venture transaction. I mean obviously there’s nothing that we would not considering.

Mike Mueller - JP Morgan

In terms of the asset sales, JVs, and I understand there’s not a lot you can say, but can you give us some sort of a timeframe when we may begin to hear some stuff in terms of how it’s evolving? Does it seem like something could materialize maybe in the summer? Is it really back end loaded in the year; any clarification at this point?

Ron Rubin

Well, as much as we would like to be in a position of having something to say, these are in today’s environment endless conversations, and we continue to pursue discussions with a number of different sources, as well as we’ve had discussions on selling some assets, but I think many of the folks on the other side of the table are constantly evaluating the environment and trying to figure out where the world is and it just makes for protracted discussions.

Mike Mueller - JP Morgan

Okay, and last question on the operating side, you brought up ICSC. I think you said about 100 meetings lined up, is there a way to cut those 100 meetings up into two buckets; one where it’s dealing with renewals and existing space and getting tenants who are going out looking for new space. Is there a big difference there in terms of the two buckets?

Ron Rubin

I think I will respond to that question this way. First off, we usually, we said this year about 44 people with ICSC; we are going to be sending about 15 people this year. We wouldn’t send anybody to dot I’s and cross T’s and work on sort of gross renewals. The intention is to send people out there to attempt to do business. As we pointed out in the presentation, some retailers, particularly the ones that are expanding, are pretty excited about the redevelopments.

If you haven’t seen Cherry Hill, you should take a look at it. If you haven’t seen Plymouth or Voorhees, you should take a look at it and they are pretty exciting projects and they’re pretty compelling to retailers.

Mike Mueller - JP Morgan

Thank you.

Operator

(Operator Instructions) And we have a follow-up question from the line of Quinton with Citi.

Quentin Velleley – Citigroup

It’s actually Manny here with Quinton. Had a question for you on your comment on co-tenancy; I was hoping you could give us more details on what happened there and how those leases were structured.

Ron Rubin

The co-tenancy revenue adjustments I referred to, really a handful, a couple of properties where essentially we’ve had anchors vacant for a couple of years, and it’s hard on a call to describe a typical co-tenancy clause, because they really run the full spectrum of features and elements, but these are largely resulting from the fact that an anchor remained vacant for more than a stipulated period and we do have as Joe mentioned Burlington Coat opening in Cumberland shortly. We have a couple other anchors for opening right at this year and once this anchors open, at least in those cases that will largely satisfy the co-tenancy exception.

Quentin Velleley – Citigroup

So the adjustments are largely temporary and the people come back once the new anchor is open?

Ron Rubin

I think for the most part the ones we’re currently experiencing are of a temporary nature.

Quentin Velleley – Citigroup

Okay, and another question, so many of your peers have mentioned that they’re seeing more renewals to short term leasing, kind of one to two year. I’m wondering if you are seeing the same and to what magnitude.

Ron Rubin

Yes, we are seeing an increase in short-term leasing. In some cases that’s motivated by us as well as by the tenant, particularly with some of our redevelopments, we don’t want to bargain away our futures. We mentioned in the earlier part of the call that of the 139 non-anchor renewals executed this quarter, 73 had lease terms less than three years.

Quentin Velleley – Citigroup

Thanks, guys.

Operator

Thank you. And at this time there are no further questions. I would like to turn the call back over to Ron Rubin for any closing remarks.

Ron Rubin

Thank you very much. Obviously we appreciate your interest in our company and as we said, these are difficult times in the economy and in the retail end of the business which is a big part of our company. We want you to know that our focus is there; our people are focused on accomplishing our objectives in our redevelopment projects and our existing projects, and as good things happen, hopefully we’ll keep you advised. Thank you again for your interest.

Operator

Thank you. Ladies and gentlemen, this concludes the Pennsylvania Real Estate Investment Trust first quarter 2009 earnings conference call. Thank you for your participation in the call.

Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited.

THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY'S CONFERENCE CALL, CONFERENCE PRESENTATION OR OTHER AUDIO PRESENTATION, AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE AUDIO PRESENTATIONS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S AUDIO PRESENTATION ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS.

If you have any additional questions about our online transcripts, please contact us at: transcripts@seekingalpha.com. Thank you!

Source: Pennsylvania Real Estate Investment Trust Q1 2009 Earnings Call Transcript
This Transcript
All Transcripts