PREIT Comments on Land & Buildings' Press Release

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Oct 20, 2014, 10:07 ET

PHILADELPHIA, Oct. 20, 2014 /PRNewswire/ -- Pennsylvania Real Estate Investment Trust (PREIT/NYSE: PEI) today issued the following statement in response to the press release issued by Land & Buildings:

PREIT welcomes and values the opinions of all shareholders, and is open to input that may help advance the goal of enhancing shareholder value. The PREIT Board of Trustees and management team continually review the Company's strategic priorities and opportunities, and periodically assess a variety of strategic options.

While it is the Company's policy not to comment on specific discussions with shareholders, we note that we have had numerous discussions with representatives of Land & Buildings and have thoroughly reviewed a previous proposal from Land & Buildings, which recommended that PREIT sell a pool of assets into a liquidating trust. We have determined that such a strategy would not achieve optimal execution price or be value enhancing; furthermore, a liquidating trust would have significant leverage, liquidity, operating and cash flow implications, and would not be in the best interest of all shareholders.

We appreciate Land & Buildings' ideas and agree that our portfolio quality is misunderstood. We have continued to make progress in executing a transformation through strategic divestitures of non-core assets. However, we disagree with the implementation of a disposition program in a manner which would entail a tremendous amount of execution risk for the Company and potentially destroy shareholder value.

While we will continue to evaluate Land & Buildings' most recent proposal that PREIT should immediately divest 17 properties, we believe it is similarly flawed, and we have provided this initial feedback to Land & Buildings. We noted specific issues with respect to Land & Buildings' proposal, including, but not limited to: the number of assets that should be sold, certain problematic leverage, liquidity and operating implications, credit complications, and considerable transaction costs and other expenses. Most notably, at this time, we believe that the immediate sale or spin-off of certain assets would not result in a valuation uplift and enhanced value for shareholders. We are confident that the continued execution of our strategy to dispose of selected assets in a deliberate and orderly manner, while strategically enhancing our other properties, is the best way to deliver long-term value.

While we respect Land & Buildings' views, PREIT remains focused on executing its strategic plan to create sustainable long-term value. The PREIT Board and management team have created significant value for shareholders, and as demonstrated by its track record, PREIT will take action when it is the right time and the right thing to do for shareholders. Notable recent accomplishments include:

Successfully improved portfolio quality by selling, or executing agreements to sell, 12 assets totaling $400 million;
Formed a strategic joint venture with The Macerich Company to redevelop The Gallery, thus reducing the Company's financial and development risk associated with the project;
Enhanced operational performance, highlighted by same store NOI increase of 2.7% in 2013 and 3.0% in the second quarter of 2014;
Implemented remerchandising and redevelopment plans to drive NOI and sales growth;
Created growth opportunities for shareholders while mitigating construction, development and financial risks through our pursuit and structuring of The Gallery and Springfield Town Center opportunities;
Reduced debt over $500 million in two years to strengthen our balance sheet and enhance financial flexibility, resulting in total company leverage, defined as liabilities to gross asset value, below 50%;
Increased the percentage of independent Trustees to 87% and expanded the Board's public company expertise;
Increased the dividend by 33% over the last two years; and
Made notable progress on the leasing and management of Springfield Town Center, resulting in returns in excess of our initial underwriting and anticipated occupancy levels over 90% at the end of 2015.

Taken together, these actions have significantly improved PREIT's valuation and led to multiple expansion, improved the company's trading relative to NAV and resulted in three year total shareholder returns that are significantly greater than those delivered by the MSCI US REIT Index or the S&P 500 Index.

The Board and management team are committed to enhancing value for shareholders and have the right plan to continue doing so.

About Pennsylvania Real Estate Investment Trust
PREIT is a real estate investment trust specializing in the ownership and management of differentiated retail shopping malls designed to fit the dynamic communities they serve. Founded in 1960 as Pennsylvania Real Estate Investment Trust, the Company owns and operates over 30 million square feet of space in properties in 12 states in the eastern half of the United States with concentration in the Mid-Atlantic region and Greater Philadelphia. PREIT is headquartered in Philadelphia, Pennsylvania, and is publicly traded on the NYSE under the symbol PEI. Information about the Company can be found at www.preit.com or on Twitter or LinkedIn.

Forward Looking Statements

This press release contains certain "forward-looking statements" within the meaning of the federal securities laws. Forward-looking statements relate to expectations, beliefs, projections, future plans, strategies, anticipated events, trends and other matters that are not historical facts. These forward-looking statements reflect our current views about future events, achievements or results and are subject to risks, uncertainties and changes in circumstances that might cause future events, achievements or results to differ materially from those expressed or implied by the forward-looking statements. In particular, our business might be materially and adversely affected by uncertainties affecting real estate businesses generally as well as the following, among other factors: our substantial debt, stated value of preferred shares and our high leverage ratio; constraining leverage, interest and tangible net worth covenants under our 2013 Revolving Facility, our 2014 Term Loans and Letter of Credit; potential losses on impairment of certain long-lived assets, such as real estate, or of intangible assets, such as goodwill, including such losses that we might be required to record in connection with any dispositions of assets; changes to our corporate management team and any resulting modifications to our business strategies; our ability to refinance our existing indebtedness when it matures, on favorable terms or at all; our ability to raise capital, including through the issuance of equity or equity-related securities if market conditions are favorable, through joint ventures or other partnerships, through sales of properties or interests in properties, or through other actions; our ability to identify and execute on suitable acquisition opportunities and to integrate acquired properties into our portfolio; our partnerships and joint ventures with third parties to acquire or develop properties; our short- and long-term liquidity position; current economic conditions and their effect on employment, consumer confidence and spending and the corresponding effects on tenant business performance, prospects, solvency and leasing decisions and on our cash flows, and the value and potential impairment of our properties; general economic, financial and political conditions, including credit market conditions, changes in interest rates or unemployment; changes in the retail industry, including consolidation and store closings, particularly among anchor tenants; the effects of online shopping and other uses of technology on our retail tenants; our ability to sell properties that we seek to dispose of or our ability to obtain estimated sale prices; our ability to maintain and increase property occupancy, sales and rental rates, in light of the relatively high number of leases that have expired or are expiring in the next two years; acts of violence at malls, including our properties, or at other similar spaces, and the potential effect on traffic and sales; increases in operating costs that cannot be passed on to tenants; risks relating to development and redevelopment activities; concentration of our properties in the Mid-Atlantic region; changes in local market conditions, such as the supply of or demand for retail space, or other competitive factors; and potential dilution from any capital raising transactions. Additional factors that might cause future events, achievements or results to differ materially from those expressed or implied by our forward-looking statements include those discussed in our most recent Annual Report on Form 10-K and in any subsequent Quarterly Report on Form 10-Q in the section entitled "Item 1A. Risk Factors." We do not intend to update or revise any forward-looking statements to reflect new information, future events or otherwise.

CONTACT: INVESTORS
Heather Crowell
VP, Corporate Communications and Investor Relations
(215) 454-1241
[email protected]

CONTACT: MEDIA
Meaghan Repko / Andrew Siegel / Jonathan Keehner
Joele Frank, Wilkinson Brimmer Katcher
(212) 355-4449

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SOURCE PREIT