A chief culprit was a third-quarter 2005 gain of $11.8 million from sales or real estate, versus just $1.6 million from sales in the most recent quarter. Funds from operations also slid to $32.5 million, down from $36.3 million in third quarter 2005. However, net operating income from properties rose to $72.5 million, a 5.5%-increase compared with NOI of $68.7 million in third-quarter 2005.
"Our results were in line with expectations," said Ron Rubin, chairman and CEO, during a conference call. "We are making solid progress on our current redevelopment projects." He cited Nordstrom's commitment to Cherry Hill Mall, a 110,000-sf lifestyle expansion at Lehigh Valley Mall, and the ongoing transformation of Echelon Mall, which was "the most distressed asset in our portfolio," into a mixed-use town center.
The portfolio's occupancy fell to 89.9% as of Sept. 30, down from 91.8% a year ago, primarily because of the acquisition of three vacant Strawbridge's. Tenants have already committed to two of them, said Joseph Coradino, president of PREIT Services.
As a sign of the benefits of redevelopment activity, average sales per sf in the portfolio reached $351, compared with an average of $338 per sf in third quarter 2005. "The number of our malls with sales of greater than $400 per sf has increased from seven at the end of September 2005 to nine," he added.
Asked if there were plans to dispose of any lower performing assets, Rubin said, "at present, it appears to us that lower performing assets are not selling at attractive rates. We're looking at the possibility of redeveloping even those. We're seeing if there's opportunity."
Shares of PEI stock closed at $41.01 a share on the NYSE on Nov. 2 following the conference call. The 52-week high of $44.53 a share was reached on October 19 this year, and the 52-week low of $35.24 a share occurred on Nov. 15, 2005.
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