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Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
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Good morning. My name is Chris, and I will be your conference operator today. At this time, I would like to welcome everyone to the PREIT Third Quarter 2022 Earnings Call. All lines have been placed on mute to prevent any background noise.
Thank you. Heather Crowell, you may begin.
Thank you. Good morning. And thank you all for joining us for PREIT’s third quarter 2022 earnings call. During this call, we will make certain forward-looking statements within the meaning of federal securities laws. These statements relate to expectations, beliefs, projections, trends and other matters that are not historical facts and are subject to risks and uncertainties that might affect future events or results.
Descriptions of these risks are set forth in the company’s SEC filings. Statements that PREIT makes today might be accurate only as of today, November 8, 2022, and PREIT makes no undertaking to update any such statements.
Also, certain non-GAAP measures will be discussed. PREIT has included reconciliations of such measures to the comparable GAAP measures in its earnings release and other documents filed with the SEC.
We continue to partner with Say Technologies to offer an opportunity for any shareholder to ask questions of management. During this call, management will answer questions received over this Q&A platform. We thank our investor base for their continued engagement in this process.
Members of management on the call today are Joe Coradino, PREIT’s Chairman and CEO; and Mario Ventresca, CFO. Joe?
Thank you, Heather and good morning everyone. As we shared here today, we're in a significantly improved position as compared to last quarter. We've now executed on the sale of over $110 million in assets, paid down a $148 million in debt, sent notice electing the extension of our credit facility maturity date and satisfied the recently margin requirement on Fashion District Philadelphia.
Add to this, we have a pipeline of over $130 million in assets that are under agreement and many in the final stages in negotiations while we are exploring opportunities to raise an additional $125 million in capital.
As we look at realizing everything in process, in addition to the work we've done pairing the portfolio, replacing department stores, diversifying our tenant mix, we sit here in a position where we have created a portfolio of high-quality assets that are delivering strong sales in markets that have high barriers to entry where we have overtaken the competition.
Our success in asset dispositions and qualifying for our credit facility extension are a function of our laser-sharp focus on operational performance, where we have outperformed our peers in many quarters. We generated strong same-store NOI results tied to significant occupancy gains following last year's record leasing activity. As occupancy increases, we're seeing a shift in pricing power, as evidenced by our improved renewal spreads.
We've been at the forefront of selling assets that didn't meet reasonable growth profile. We have proactively replaced anchors so that we don't just sit with vacant boxes throughout our portfolio. We've added critical elements to the mix, dining every form of retail, including formats less found in malls. We have grocery anchors in third of our malls. 12% of our portfolio is off-price and fast fashion, we have two medical facility anchors and 14% of the portfolio is dining and entertainment.
So we have distinguished our portfolio from traditional malls as we continue to evolve our properties to sit at the intersection of life and commerce, taking key steps to broaden customer appeal, enhancing the value of our assets.
Moorestown Mall is a great example of reshaping our traditional mall assets that are in competitive retail environments. The mall offers a true community hub complete with dining, entertainment, fitness offerings, including Planet Fitness and Orangetheory Fitness, a value retail collection, including HomeSense, Sierra, Five Below and Michaels and now under construction, our Cooper University Health Care and a 375-unit apartment complex. Keep in mind, these are replacing a vacant Sears and underutilized land.
At Springfield Town Center, construction or LEGO Discovery Center is underway with an opening expected next year. The first of its new prototype in the United States, this is a key step in transforming the property into a vibrant multiuse hub, creating the preeminent family entertainment destination in the DC market. In addition to the upcoming opening of LEGO, the proposed apartment and hotel developments will strengthen the properties appeal to customers and prospective tenants.
The strength of Cherry Hill Malls brand continues to gain momentum, leading our portfolio and securing new tenants. In addition to the earlier openings of first Warby Parker and Mark Kane, we've executed leases for other first-to-portfolio tenants, Levi's, Psycho Bunny and Adidas, with sales over $900 per square foot these new tenants continue to cement the property status among the most elite malls in the country.
At Willow Grove Park, construction is underway for Tilted 10, bringing a family entertainment center featuring laser tech, bowling, mini golf, virtual reality, pinball and over 200 games and attractions to the property. Through three quarters of the year, heading into what is predicted to be a robust holiday season, same-store NOI, FFO, occupancy, leasing spreads are strong. Sales are above pre-pandemic levels. Our tenant mix is healthier than in years past, and we have a pipeline of nearly $7 million of revenue that is signed but not yet open.
With occupancy stabilizing and strong sales, we believe we can further drive rents, enhancing portfolio value.
Now it's worth taking a moment to understand where we are through the lens of where we came from. We laid out a strategy to markedly improve the quality of the portfolio to make it bulletproof disposing the properties in secondary and tertiary markets to improve our operating results and our balance sheet, and we did that.
Next, we had to confront a wave of department store consolidation. We did that, arguably better than anyone else. We replaced and re-merchandized 19 department stores into 40 tenants began to incorporate apartments, hotels, medical facilities and grocers while completing major redevelopments positioning the company for significant growth.
Then we were confronted with an unanticipated pandemic, that required quick decisive action to manage the impacts on all of our stakeholders, including restructuring our debt, embarking on a material asset sale program and continuously improving our results. We did that, too.
Now we find ourselves facing economic upheaval, rising rates, inflation, a constrained financing environment. Having said all of that, we've dramatically improved the portfolio in high barrier-to-entry markets that are irreplaceable. And our plan, and I repeat and our plan is to spend the coming year exploring all possible options available to the company as our credit facility matures, including refinancing, merger, sale, joint ventures, selling high-quality assets and more. Remember, we've successfully met every challenge and our intention is to conclude this challenge saying, we did that.
Now I'll turn it over to Mario to provide further insight into our performance and accomplishments.
Thanks, Joe. We continue to see strong business fundamentals in the third quarter, while at the same time, monitoring the evolving economic environment. Liquidity is tracking ahead of our original business plan at $113 million, and we delivered a third quarter same-store NOI increase, excluding lease terminations of 3.3% and 3.5% year-to-date.
Leasing volume is strong and compares favorably to 2019. During the third quarter, we executed new leases for 28% more square footage than in the third quarter of 2019. And this quarter, we executed renewal leases, covering 75% more gross leasable area than in the third quarter of 2019. Year-to-date, leasing volume has exceeded 2019 by 23%, building upon last year's phenomenal new leasing activity that has driven substantial increases in occupancy.
During the quarter, we signed 375,000 square feet of new and renewal leases. We currently have a pipeline of 300,000 square feet signed for future occupancy, representing approximately $7 million in annualized future rents. This morning, we reported third quarter 2022 NAREIT FFO and FFO as adjusted of negative $1.13 per share. For the nine-month period, NAREIT FFO was $0.38 per share and FFO as adjusted was negative $0.30 per share.
The primary drivers of the variance to 2021 actuals for the third quarter were, a decrease in G&A expenses of $3.5 million, primarily driven by a decrease in people costs, interest expense increased by $4.3 million due to higher interest rates and an increase in the second lien term loan and FDP partnership loan balances, same-store NOI increased by $1.5 million, but was offset by a decrease of $1.2 million in non-same-store NOI, following the sale of our interest in Gloucester Premium Outlets and a decrease of $700,000 in lease termination revenue.
The gain on sale of $1.8 million from the sale of the Sears tire and battery at Moorestown positively impacted the third quarter of 2022. Same-store NOI, excluding lease termination revenues, was 3.3% higher than in the comparable 2021 quarter and increased 3.5% on a year-to-date basis. This was driven primarily by increased rents strong tenant sales performance and common area revenues.
Core Mall sales were $598 per square foot, excluding Cumberland, which compares favorably to pre-pandemic sales of $539 per square foot. Some other noteworthy achievements for the quarter, Core Mall occupancy was 94.4% versus 89.6% at the end of the third quarter of 2021. This was an improvement of 480 basis point. Core Mall in-line occupancy was 91.4%, a 310-basis point improvement over the third quarter of 2021 and a sequential improvement of 90 basis points.
Total leased occupancy, which captures the volume of our leasing pipeline, is exceptional at 95.6%, and renewal spreads showed marked improvement at 8.7%. This reflects our best quarter since the fourth quarter of 2017.
As Joe discussed, we have an active few months -- we've had an active few months of asset sales, and during the quarter, notice the extension of our credit facility maturity dates has been issued to our lending group. Specifically, we ended the second quarter the initial measurement point for the credit facility extension with a corporate debt yield well above the 8% minimum requirement and our third-party appraisals for the borrowing base properties indicated a loan to value significantly below the 105% maximum. We also achieved liquidity well in excess of the $35 million minimum requirement.
As we look forward, we continue to be focused on generating organic revenue growth while selling assets opportunistically to reduce debt and interest expense with the goal of driving earnings growth in the future. We are pleased that we have made real progress this quarter, submitting notice for our extension, extending our mortgage on Cherry Hill and accelerating our asset sales program.
With that, we'll now move to the questions that we've received previously.
Thank you. The first question is, does the leasing environment continue to be strong and our inquiries and signed leases increasing with each passing month, how are the lease rates holding up, especially considering inflation?
As we noted in our prepared remarks, we have 300,000 square feet of new leases executed for future openings which will generate $7 million of additional annual revenue. Regarding lease rates, our leasing spreads this quarter were the highest in over four years. We're excited to open stores with many new to portfolio tenants, including Box Lunch, Lovisa, Rosen Remington, JD Sports and more.
The next question is, what's the projection for 2024?
Yeah. While we haven't released guidance, our operating momentum does continue to be strong, and we have a pipeline of $7 million of lease revenue signed, but not yet open.
Thank you. Next question, when will you discuss reinstating dividend?
As we've previously discussed, our credit facility currently prohibits paying dividends unless it is required to maintain REIT status.
As a shareholder who purchased common shares in PREIT prior to the pandemic, I'm counting on management to avoid further trip to court supervised restructuring. If needed, we'll presell additional malls to further reduce debt, as painful as that may be.
As we noted, we will conclude submission of our documentation for our as-of-right credit facility extension, which will become effective on December 10. During the coming year, we will be exploring all possible options available to the company as our credit facility matures, including refinancing, merger, sale, joint ventures, selling high-quality assets and other initiatives.
Have rising interest rates made it more difficult for you to negotiate new loans or extensions of existing loans. How much do you expect annual interest payments will increase with higher rates on new loan agreements?
Well, we think the financing challenges that all real estate owners are experiencing is related to more than just interest rates. We see tighter underwriting standards, valuation uncertainty and negative undertones regarding certain sectors have led to virtually frozen credit markets.
That being said, we're hopeful that some of the factors at play are temporary, including the political uncertainty, and that the path forward will improve underlying today's election. We're optimistic that factors impacting credit markets will ease in the next few weeks, yielding a more variable lending environment.
Okay. With the current high interest rate environment, has it been harder to find buyers for your properties? Also, has the selling price of properties been lower than expected because of the higher rates?
Just last week, we completed the sale of Cumberland Mall for $45 million, which allowed us not only to repay the property mortgage that seeds to reduce our credit facility balance. We continue to have a strong pipeline of asset sales with $130 million under contract. We're at the final stages of negotiation.
That concludes the question-and-answer period. And I think we'll turn it over to Joe for closing.
Yeah. With that, thank you, Heather, thank you, Mario, and thank you all for participating on the call today. Just to reiterate, our plan is to spend the coming year, exploring all possible options available to the company as our credit facility matures, including refinancing, merger, sale, joint ventures, we're selling high-quality assets and more. Again, thank you all for participating today.
Ladies and gentlemen, this concludes today's conference call. Thank you for participating, and you may now disconnect.