A $200 million splurge on Cherry Hill Mall during the depths of the last recession, when cash was poured into a full-blown renovation while many Americans were clinging to every last dime, appears to be paying off four years later, according to financial disclosures Tuesday by its owner, Pennsylvania Real Estate Investment Trust.
Sales per square foot at the mall reached an all-time high of $623 during the quarter that ended March 31, executives of Center City-based PREIT told investors, and a plan to refinance the property this summer could generate yet another payday for the crown retail jewel of Ronald Rubin's real estate empire by helping to pay down $2.3 billion in debt.
News of the planned refinancing, and the company's desire to sell five of its least desirable malls beyond Philadelphia, came during PREIT's first earnings call with investors since announcing a month ago that Rubin would step down in June as chief executive and be succeeded by protégé Joseph Coradino. Rubin will stay on as executive chairman.
The milestone at Cherry Hill was the high point of a mixed story Tuesday, as profitability continued to suffer at the company, which owns a mix of higher- and lower-end malls and shopping centers throughout the mid-Atlantic region.
Officials reported a net loss of $10 million for the quarter, or 18 cents per share — an improvement over a $14.3 million loss, or 27 cents per share, the same period a year earlier, but a loss nonetheless.
Some of PREIT's Philadelphia-area malls where it has invested handsomely to turn things around recorded flat or declining sales per square foot at non-anchor stores vs. levels of a year earlier. Redevelopment projects have not yet fully paid off at Willow Grove Park, Moorestown Mall, and Plymouth Meeting Mall.
A crop of new restaurants and a new movie theater in Moorestown, catalyzed by the recent approval of liquor licenses for the mall, are on the horizon. So is a still-undisclosed plan to revitalize the Gallery at Market East, in which PREIT has enlisted Mayor Nutter as a pitchman to attract retailers.
A Nordstrom Rack will open at Willow Grove "in the coming weeks," and a J.C. Penney in the fall, said president Ed Glickman. And work is ongoing for the planned summer move by the company that owns The Inquirer to the former Strawbridge & Clothier building attached to the Gallery.
"Our plan has been working," Coradino told investment analysts.
Cherry Hill's resurgence is striking. Four years ago, construction crews gutted, chopped and rebuilt portions of it, adding what was then only the region's second Nordstrom department store, plus several restaurants and an expanded wing for additional tenants.
Sales per square foot were $463 during the early months of 2008, and they dipped to a low of $401 per square foot as of March 31, 2009, reflecting the toll of the ongoing redevelopment, said company spokesman Shawn Southard.
The redevelopment at Cherry Hill, Plymouth Meeting, and the former Echelon Mall in Voorhees, had been planned well before the stock market crash of 2008. Nordstrom finally opened its doors at Cherry Hill in March 2009 and unemployment was soaring. Business for retailers across the country was so bad it spawned a spate of bankruptcies, including that of mall behemoth General Growth Properties Inc., which filed for Chapter 11 protection in April of that year.
In 2010, with credit markets tight, investors anxiously waited as Rubin and his team pulled off an eleventh-hour renewal of $670 million in credit that was coming due. The deal, ultimately, staved off a feared default that could have led to bankruptcy.
Executives have made paying down debt a priority. PREIT said Tuesday it was seeking to sell five malls ranked among its worst performers, including Phillipsburg Mall and Chambersburg Mall.
Just under $2 billion of PREIT's $2.3 billion in debt is tied to properties it owns. Cherry Hill has $230 million in mortgage loans coming due in October.
With that mall's value continuing to grow, the company is confident a refinancing will yield a pile of excess cash that would be applied toward paying down $137 million in debt, Southard said.