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Pennsylvania Real Estate Investment Trust (PEI) |
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WIKI ANALYSIS
Company Overview
Pennsylvania Real Estate Investment Trust (NYSE:PEI) is a REIT that owns, manages, develops, and leases shopping malls and power centers. Currently, PEI owns 55 properties primarily in the Mid-Atlantic region. Recently, PEI has faced lower property occupancy rates as a result of the economic recession. Additionally, PEI has benefited from low interest rates as a result of the economic recession since it holds a significant amount of floating rate debt.
Business Growth
In FY2010, PEI reported revenues of $450 million, up from $448 million the previous year. [1] This growth was due to PEI's acquisition of large format retailers which serve as anchors to their properties. PEI also increased non-anchor occupancy by 260 Basis Point (BPS) in FY2010.
Trends and Forces
Low Interest Rates Benefit PEI's Floating Rate Debt
PEI, like all other Real Estate Investment Trust (REIT), is a highly leveraged company, and incur significant Interest Expense each year. PEI has a floating rate debt of approximately $55 million, which means that interest rate on this debt moves with the current market interest rate. Interest Rates have decreased as a result of the economic recession, which benefits PEI's floating debt, reducing interest rate expense.
Lower Discretionary Spending Depress Property Occupancy
Due to the recent U.S. Economic Cycles recession, consumers have less Discretionary spending, which has caused many companies to go out of business or close down store locations. This has caused Occupancy Rate to decrease in shopping malls, adversely affecting revenues for REITs such as PEI. Lower occupancy rates implies fewer tenants and lower rental income for PEI. As U.S. consumers recover from the economic recession, their Consumer confidence/Bears will increase and mall occupancy should follow.
Competition
Pennsylvania Real Estate Investment Trust competes with other Real Estate Investment Trust (REIT) that that owns, manages, develops, and leases shopping malls and power centers.
- Cedar Shopping Centers (CDR) is a Real Estate Investment Trust (REIT) that focuses on the operation and development of supermarket-anchored shopping centers. Cedar's portfolio comprises of 119 properties in the mid-Atlantic and Northeast states.[2]
- Acadia Realty Trust (AKR) is a Real Estate Investment Trust (REIT) that focsues on the acquisition and redevelopment of retail properties, including neighborhood and community shopping centers. Acadia's portfolio comprises of 79 properties located in the Northeast, Mid-Atlantic and Midwestern states.[3]
- Simon Property Group (SPG) is a Real Estate Investment Trust (REIT) that focuses on regional malls and lifestyle centers, with key brands Premium Outlets and The Mills. Its portfolio comprises of 338 properties all over the United States. [4]
References
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