PEI Stock Tanks as Earnings Fall Short of the Mark

PEI Stock

PEI stock is tanking today after Pennsylvania Real Estate Investment Trust (PREIT) (NYSE:PEI) reported its fourth-quarter earnings, which fell short of expectations.

The REIT, which is one of the oldest in the US and primarily focuses on investing in shopping centers in the Mid-Atlantic states, reported funds from operations of US$26.7 million, or 34 cents per share, compared with the average estimate of 40 cents per share, according to Zacks. Funds from operations is a key metric in the REIT industry, as it takes net income and adds back items such as depreciation and amortization. PREIT also reported a loss of US$21.7 million, or 29 cents per share, leading PEI stock to sink nearly 25% today.

As a result of the missed earnings, Pennsylvania Real Estate Investment Trust is anticipating that it won’t meet certain financial covenants due in 2020. The company said it is in advanced talks with its lenders to modify the terms of its covenants in order to ensure it is compliant until at least the end of September and expects further discussions with lenders to modify terms of debt agreements on a long-term basis. PEI shares are currently trading for $2.65.

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In an effort to improve its balance sheet, PREIT has also reached agreements for the sale of assets to the value of US$312.6 million, which includes the sale-leaseback of five properties for US$153.6 million, the sale of land parcels for a multifamily development to the amount of US$125.3 million, US$29.9 million related to operating outparcel sales, and US$3.75 million related to the sale of land for hotel development. The poor earnings and asset divestiture have driven PEI stock to an 11-year low.

Joseph F. Coradino, Chairman and Chief Executive Officer of Pennsylvania Real Estate Investment Trust, said, “As we look into 2020, we are beginning to believe that industry headwinds are moderating and the strategic initiatives underway at PREIT will drive growth and value creation.”

While shopping center REITs may be struggling as consumers increasingly flock to e-commerce, cannabis REITs are soaring as the pot industry struggles to pay for its new facilities due to underwhelming revenue.

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