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PREIT pays down $82M of debt through asset sales, excess cash

Vacant Retail Building with For Sale Real Estate Sign

Feverpitched/iStock via Getty Images

Pennsylvania REIT (NYSE:PEI), also known as PREIT, said Tuesday it paid down debt by $82M through June 30, 2022, by using asset sale proceeds and excess cash from operations.

The REIT recently sold the Moorestown Mall

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Comments (29)

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I think it has a 50% chance of going up back to 50-60 dollars and from there much higher if things really work out. They have 94% occupancy I think with all leases signed which is pretty impressive actually. All anchors stores are occupied except for 1.This will continue to feed traffic into malls without them having to spend to much to redevelop. And just my personal opinion but shopping malls I am visiting are much busier than they used to be pre-covid,and malls are becoming more and more fun. I visited a mall today that used to be moribund on sundays pre-covid almost dead specially in the summer, and it was very busy, with lots of fun things to do and many families visiting. So you work the EBITDA on one side going up, and keep selling stuff and lower debt on the other side, and lo and behold the company survives. I will be honest I just bought 1000 shares last week, and I will not buy more, it is risky, but I think the market is mispricing the odds here, equity is valued at 0 practically, but the odds are not as bad as that. I think the biggest risk is if the USA goes into a deep recession, then our money will be lost, but if we avert that deep recession I think we will make a killing here.
@YellowRabbit Can you explain why the common shares are trading higher than the preferred shares? It is my understanding that the common will not receive any dividends until the preferred shares cumulative dividends have been paid (2 years dividends totaling $3.44 for the D shares and $3.69 for the B shares). If PEI survives the preferred shares should return an 11 to 12 bagger, which would the equivalent of $46 to $50 for the common. TIA
Robbadob profile picture
As far as the preferred shares have fallen, the common has fallen way more. There was the reverse split of 15 for 1 earlier this year, so a share of PEI pre-reverse split is now worth about 28 cents.

Depending upon your assumptions, there could be considerable value here. For example, apply the 6.5% cap rate they got on recent sales against total projected NOI and you will get a figure significantly greater than total debt plus preferred liquidation preference. I do not stand behind those assumptions and I believe that even if the actual value of the assets exceeds the liabilities, it is unlikely to be realized due to PEI's poor financial situation.

The most likely scenario is that PEI will end up in bankruptcy and will survive but the common and preferred will be almost entirely wiped out with ownership almost entirely being transferred to the debt holders.
@Robbadob I also believe that the market value of the properties exceed the carrying value, the question is by how much. The assets held for sale at 3/31 were $42.4M and the 1st quarter transcript discusses between $109M and $275M of targeted sales. If the $109M is the correct amount, there would be about at $57M gain. IMHO PEI needs the larger amount to significantly reduce its debt to survive.
TraderJoeZ profile picture
Will we see a rebound in the equity? Or is this down the drain
When are we seeing the dilution ?
@ayaskanti im hoping there was some during the reverse split run up. Which is still years too late.
Caffeine profile picture
It says paid down $82 million and has $56 million executed POS and more in the pipeline. So $82 million is done and gone
TigerMoney profile picture
Wonder if their preferred will ever amount to anything....??

I would like to see the really important number - how much debt is left that needs to be paid to make refinancing possible.
Justin Cool profile picture
If they sell property what will they have to provide revenue?
@Justin Cool the vacant land parcels weren’t producing any revenue. Some of the other properties were but we will have to wait to see what the actual numbers look like.
The wording is a bit confusing. Did they actually pay down that much debt already or did they simply allocate money including planned “future” sales to go towards paying that much down?

Makes a big difference in what the upcoming earnings report will look like.
Robbadob profile picture
@Mr Nobodi
"As part of its debt reduction plan, the Company has applied asset sale proceeds and excess cash from operations to pay down debt by $82 million through June 30, 2022. "

So, paid off $82 million thru June 30; more to come.
Adam Levine-Weinberg CFA profile picture
@Robbadob Eh, maybe. It seems like there's a lot of wordsmithing going on here. Has PREIT actually reduced debt by $82 million? Or has it used asset sale proceeds and cash from operations to repay $82 million of mortgage and term loan debt? Those might sound the same, but the 2nd lien debt and FDP partnership loan are together accruing about $15 million of PIK interest each quarter. (I.e. the combined principal of those two loans has increased by about $30 million YTD.)
@Adam Levine-Weinberg CFA
I think it is your second option. At least this is how read this.
Will you write an update on PEI after Q2?

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