But, because the REIT acquired so many properties at once, primarily through its November 2003 acquisition of Crown American, Glickman said it was necessary to step up the pace in order to bring gains. "We realize redevelopment will have a short-term negative impact on occupancy . . . and an interim fall-off in income."
Net income fell 31.2% to $5.5 million during the quarter, down from $8 million in the same quarter a year ago. Net operating income reached $69.5 million, up 2% from $68.1 million, while same store net operating income decreased by 2.4% compared with the same quarter of 2004. Occupancy in the portfolio at June 30 this year was 91.2%, compared with 92.3% at the same time a year ago.
PREIT detailed a more than $200-million redevelopment investment that is underway and expected to reach completion by year-end 2007. "Our redevelopment and remerchandising activities gathered momentum during the second quarter and are continuing," said Ronald Rubin, chairman and CEO, during the call. He announced that Whole Foods will open at Plymouth Meeting Mall, calling it representative of "the creative strategies we are employing to enhance the value of our retail assets."
Barnes & Nobel, Borders, Dick's Sporting Goods and Best Buy along with new restaurants are taking space throughout the portfolio, Rubin said, "creating a platform for other types of lifestyle tenants. By adding new types of tenants and generating synergies at our properties, we intend to give shoppers more reasons to come to our malls, to stay at them longer and buy more from our merchants."
In addition to "stepping up the pace of redevelopment," Rubin said, PREIT is also acquiring land adjacent to some existing properties in order to add new tenants.
Among the most costly and significant of the investments is the estimated $53-million phase I redevelopment at Plymouth Meeting Mall. It includes a lifestyle addition anchored by Whole Foods and up to six "upscale themed" restaurants on outparcels. This is scheduled for completion in fourth quarter 2007.
At an investment cost and timetable yet to be determined, Echelon Mall in Voorhees, NJ, big box retailers will replace closed department stores. A phase I, $40-million investment at Cherry Hill Mall in New Jersey calls for creation of a "Bistro Row" along with remerchandising of existing retail. This is expected to reach completion in first quarter 2007.
At a cost of $34.7 million, Regal Cinema at New River Valley Mall in Christiansburg, VA will relocate to an outparcel with Red Robin restaurant and an in-line sporting goods store. A ground-up power center is being added, and its completion is scheduled for first quarter 2006.
By the end of this year, the $25.7-million redevelopment of Patrick Henry Mall in Newport News, VA is expected to be complete. It includes the consolidation of two Dillard's units into a single larger one and conversion of the former Dillard's space into a lifestyle addition. Tenants in the addition are Borders, Dick's Sporting Goods, Red Robin, Victoria's Secret and Bath & Body Works.
The other five malls undergoing redevelopment, each at an investment of $11.5 million or less, are: Lycoming Mall in Pennsdale, PA; Valley View Mall in LaCrosse, WI; Francis Scott Key Mall in Frederick, MD; South Mall in Allentown, PA and the Plaza at Magnolia in Florence, SC, where the ground-up development of an adjacent parcel for a power center is taking place.
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