PREIT, the owner of the former Gallery Mall, the Cherry Hill Mall and 19 others malls, has received a $4.5 million forgivable loan from the federal Paycheck Protection Program and is being permitted to put off payment of $11.6 million in property taxes, as it seeks to stay afloat amid the coronavirus pandemic.
PREIT, or the Pennsylvania Real Estate Investment Trust, disclosed the loan Thursday in its report on its earnings during the first three months of the year. The money is from the $659 billion federal program to help small businesses cope with the damage of coronavirus.
The real estate tax deferrals, meanwhile, were among a raft of measures undertaken by the Philadelphia-based company to help it weather the continued closure of most of its 21 malls to comply with virus-fighting government regulations.
Other steps include a $25 million cut in capital spending, a reduction in the dividend paid to investors, and forbearance deals reached with some of its lenders, it said.
“Our headquarters and a significant number of our properties are located in COVID-19 hotspots,” PREIT chief executive Joseph F. Coradino said in a conference call with analysts to discuss the results. “The COVID-19 pandemic impacted the quarter and will impact our industry into the future.”
Shares of the company closed at $1.18 on the New York Stock Exchange on Thursday, down almost 8% from the previous day. The firm reported a loss of $13.5 million for the three months that ended March 31.
PREIT and other mall owners, whose survival had already been threatened by the growth of e-commerce, have been hit hard by government-ordered business closures aimed at preventing people from gathering during the health crisis.
PREIT owns the former Gallery at Market East mall in Center City, now known as Fashion District Philadelphia, the Willow Grove Park mall and Plymouth Meeting Mall in the Pennsylvania suburbs and the Cherry Hill Mall, Moorestown Mall and Cumberland Mall in South Jersey.
“Many of our tenants opted not to pay [rent] during the initial closure period,” Coradino said. After negotiating deferrals with tenants, 45% of rents for April and May are expected to be collected by the end of this year, with 90% expected by the end of 2021, he said.
As of Friday, four of its malls will have reopened with the lifting of closure orders in their surrounding areas, Coradino said. Among them are Magnolia Mall in Florence, S.C., and Jacksonville Mall in Jacksonville, N.C., he said.
Coradino said he aims for the company’s remaining malls to be open with some restrictions by late June.
All of its malls’ anchor tenants, including J.C. Penney, which recently filed for bankruptcy, and downsizing retailers such as Macy’s, have told PREIT that they plan to resume business when permitted, Coradino said.
PREIT did not identify the properties for which it was granted real estate tax deferrals. NJ.com reported earlier this month that the company had asked New Jersey Gov. Phil Murphy for help delaying paying taxes at properties in that state.
A New Jersey government spokesperson had no immediate comment on whether deferrals had been granted. A Philadelphia city spokesperson did not immediately know whether any tax relief had been granted at the Fashion District mall.
Regarding the Small Business Administration PPP loan, meanwhile, PREIT acknowledged Thursday that it could could be “audited or reviewed as a result of applying for forgiveness."
The PPP program, which was authorized by the federal coronavirus relief bill signed in March, allocated $349 billion in forgivable loans for firms with fewer than 500 workers to pay their employees during the health crisis. An additional $310 billion was made available through later legislation.
But many smaller businesses have struggled to borrow from the program, while larger companies have used loopholes in the law to collect hundreds of millions of dollars of the forgivable debt.
Revised federal guidelines released late last month discourage publicly traded companies from tapping the program, because they can raise operating funds through other means. The stance was intended to pressure such companies to return loans they have been granted so others can use the cash.
Companies including Philadelphia hotel operator Hersha Hospitality Trust and restaurant chains Ruth’s Hospitality Group — owner of Ruth’s Chris Steak House — and the Shake Shack Inc. have said they would return their grants.
PREIT said retaining its loan came with some risk.
“If we were to be audited and receive an adverse finding in such audit, we could be required to return the full amount of the PPP loan, which could ... potentially subject us to additional fines and penalties,” it wrote. "Such audit or review could result in the diversion of management’s time and attention, and legal and reputational costs.”