1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
__________
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported) August 1, 1994
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Pennsylvania Real Estate Investment Trust
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(Exact Name of Registrant as Specified in Charter)
Pennsylvania 1-6300 23-6216339
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(State or Other Jurisdiction (Commission (IRS Employer
of Incorporation) File Number) Identification No.)
455 Pennsylvania Avenue, Suite 135, Ft. Washington, Pennsylvania 19034
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (215) 542-9250
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- - -----------------------------------------------------------------------
(Former Name or Former Address, if Changed Since Last Report)
2
Item 2. Acquisition or Disposition of Assets.
Registrant on August 1, 1994 purchased from Pembroke
Associates Limited Partnership, a Wisconsin limited partnership
("Seller"), The Palms of Pembroke Apartments, a 348-unit garden
apartment community, in Pembroke Pines, Broward County, Florida,
for $20,496,500. The purchase price was allocated $20,096,500
for the real property and $400,000 for the personal property. In
addition, closing costs, brokers fees and other expenses paid by
Registrant aggregated approximately $1,039,000 after
apportionments. The purchase was pursuant to a Purchase and Sale
Agreement dated May 9, 1994 as amended on June 28, 1994 by and
between the Trustees of Registrant and Seller. (The Purchase and
Sale Agreement and Amendment No. 1 to the Purchase and Sale
Agreement are attached hereto as Exhibit 10.7 and made a part
hereof.) There is no relationship between any Trustee, officer
or affiliate of the Registrant and any partner of the Seller.
Registrant paid cash for the apartment complex,
borrowing all the required proceeds from two banks. The
borrowing totaled $21,583,000, which included the purchase price,
closing costs, 1994 real estate taxes and miscellaneous expenses
incurred or to be incurred in connection with the acquisition.
Of the amount borrowed, $15,000,000 was from Meridian Bank, a
Pennsylvania banking corporation, Philadelphia, Pennsylvania at
the per annum rate equal to Meridian's National Commercial Rate
for a term of one year or such later date as may be established
by written agreement; and the balance of $6,583,000 was from
CoreStates Bank, N.A., a national banking association,
Philadelphia, Pennsylvania pursuant to an unsecured revolving
credit loan agreement at CoreStates' Prime Rate for a term of the
earlier of one year or three days after the closing by Registrant
of an offering of its equity securities. Both loans are general
obligations of Registrant.
Registrant anticipates spending an additional $500,000 for
installation of washers and dryers in the individual apartments,
an entry gate for controlled access, enhancements to the
landscaping and general refurbishing.
Location: The property is located on 24.5 acres on
Palms Boulevard, midway between Interstate 75 and the Florida
Turnpike. It is approximately one mile east of the Pembroke
Lakes Regional Mall and adjacent to a public park.
Description: The Palms of Pembroke was constructed in
1988 and consists of 31 two and three story buildings of concrete
block and wood frame construction, with pitched roofs and a
stucco exterior. The apartments are a mix of one, two and three
bedroom units, ranging in size from 568 to 1,159 square feet.
Some of the two and three bedroom units are townhouses. Tenants
have the use of a club house, swimming pool, jacuzzi, fitness
center and laundry facilities, all of which are part of the
premises. Of the 348 apartment units, 112 units have either canal
or lake view.
Taxes: In 1993 the ad valorem property taxes with
maximum discount were $325,684 and the 1993 personal property
taxes with maximum discount were $14,934.
Mortgage Payable: The property is unencumbered by debt.
3
Occupancy Percentage and Rentals: The following table
sets forth the number and types of apartment units, square
footage without balconies and the current renewal rent.
Sq. Ft. Per Unit Current Renewal
Number of Units Unit Type (without Balconies) Rent
24 Small 1 Bedroom 568 $ 600
1 Bath
48 1 Bedroom 1 Bath 660 645
48 1 Bedroom 1 Bath, 830 695
Den (or 2 Bedroom
1 Bath)
104 2 Bedroom 2 Bath 958 775
102 2 Bedroom 2.5 Bath 1,075 835
(Townhouse)
22 3 Bedroom 2.5 Bath 1,159 1,025
--- (Townhouse)
Average 919 767
Club House 3,942
348 Aggregate Sq. Ft. 323,874
===
The apartments are generally rented for a term of one
year and then automatically renew on a month-to-month basis. At
July 31, 1994 there were seven vacancies, for an occupancy rate
of 98%, 50 notices of intention to vacate and 22 applications for
units at the complex, leaving 35 (10%) units to lease.
Competition: There are numerous apartment complexes in
the immediate vicinity of The Palms of Pembroke, some of which
have been constructed within the past three years. Of the
competing apartment complexes, some have monthly rents which are
higher and some have monthly rents which are lower. Registrant
believes that the area in which The Palms of Pembroke is located
is where 50% of Broward County's population growth is expected to
occur through the year 2000.
Environmental: Registrant had a Phase I environmental
study performed prior to its acquisition of The Palms of Pembroke.
The property was also tested for Radon gas, which was found in 84
of the ground floor units. Registrant will perform additional
tests in an effort to determine if the level of Radon gas is
within federal and state guidelines. Radon is a naturally
occurring radioactive gas that, when it has accumulated in a
building in sufficient quantities, may present health risks to
persons who are exposed to it over time.
Management Arrangement: The apartment complex will be
managed by employees of the Registrant.
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Item 7. Financial Statements, Pro Forma Financial Information
and Exhibits
(a) Financial Statements
(3) The Palms of Pembroke - Statements of Revenues
and Certain Expenses as of the Year Ended
August 31, 1993 and the Nine-Month Period
Ended May 31, 1994 (unaudited) Together with
Auditors' Report.
(b) Pro Forma Financial Information
1. Unaudited Pro Forma Consolidating
Balance Sheet as of May 31, 1994 and
Consolidating Statements of Operations for
the Year Ended August 31, 1993 and the
Nine-Month Period Ended May 31, 1994.
(c) Exhibits
10.7 Purchase and Sale Agreement between
Robert G. Rogers and Jonathan B. Weller, as Trustees, and on
behalf of all other Trustees of the Pennsylvania Real Estate
Investment Trust and Pembroke Associates Limited Partnership
dated May 9, 1994 (without exhibits); and Amendment No. 1 to
Purchase and Sale Agreement between Robert G. Rogers and Jonathan
B. Weller, as Trustees, and on behalf of all other Trustees of
the Pennsylvania Real Estate Investment Trust and Pembroke
Associates Limited Partnership dated June 28, 1994.
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Item 7.(a) Financial Statements (3)
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PENNSYLVANIA REAL ESTATE INVESTMENT TRUST
THE PALMS OF PEMBROKE
STATEMENTS OF REVENUES AND CERTAIN EXPENSES
AS OF THE YEAR ENDED AUGUST 31, 1993, AND THE
NINE-MONTH PERIOD ENDED MAY 31, 1994 (UNAUDITED)
TOGETHER WITH AUDITORS' REPORT
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REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Pennsylvania Real Estate Investment Trust:
We have audited the accompanying statement of revenues and certain
expenses of The Palms of Pembroke for the year ended August 31, 1993.
This financial statement is the responsibility of The Palms of Pembroke's
management. Our responsibility is to express an opinion on this financial
statement based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statement
is free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statement. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audit provides
a reasonable basis for our opinion.
As described in Note 1, the accompanying statement of revenue and certain
expenses was prepared for the purpose of complying with the rules and
regulations of the Securities and Exchange Commission and is not intended
to be a complete presentation of The Palms of Pembroke's revenues
and expenses.
In our opinion, the financial statement referred to above presents fairly,
in all material respects, the revenues and certain expenses of The Palms
of Pembroke for the year ended August 31, 1993, in conformity with
generally accepted accounting principles.
ARTHUR ANDERSEN & CO.
Philadelphia, Pa.,
August 5, 1994
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THE PALMS OF PEMBROKE
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STATEMENTS OF REVENUES AND CERTAIN EXPENSES (NOTE 1)
----------------------------------------------------
Year Ended Nine-Month
August 31, Period Ended
1993 May 31, 1994
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(Unaudited)
REVENUES:
Rental income $ 2,799,119 $2,242,054
Miscellaneous income 166,413 134,507
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Total revenues 2,965,532 2,376,561
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CERTAIN EXPENSES:
Real estate and personal property taxes 340,618 266,662
Repairs and maintenance 279,528 246,381
Property management and administration 75,616 59,099
Insurance 32,407 31,130
Utilities 128,458 107,201
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Total certain expenses 856,627 710,473
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REVENUES IN EXCESS OF CERTAIN EXPENSES $ 2,108,905 $1,666,088
=========== ==========
The accompanying note is an integral part of these statements.
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THE PALMS OF PEMBROKE
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NOTE TO STATEMENTS OF REVENUES AND CERTAIN EXPENSES
----------------------------------------------------
1. BASIS OF PRESENTATION:
- - -------------------------
The statements of revenues and certain expenses reflect the operations of
The Palms of Pembroke (the "Property"), a 348-unit apartment complex
located in Pembroke Pines, Florida. The Property was acquired by Pennsylvania
Real Estate Investment Trust (the "Trust") from unaffiliated parties on
August 1, 1994.
The accompanying statements of revenues and certain expenses, in accordance
with certain rules and regulations of the Securities and Exchange Commission,
exclude certain expenses such as interest, depreciation and amortization, and
other costs not directly related to the future operations of the Property that
may not be comparable to the expenses expected to be incurred by the Trust in
the proposed future operations of the Property.
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Item 7.(b) PRO FORMA FINANCIAL INFORMATION(1)
- - ---------------------------------------------
The following Pro Forma Consolidating Balance Sheet as of May 31, 1994, and
the Pro Forma Consolidating Statements of Operations for the year ended
August 31, 1993, and the nine-month period ended May 31, 1994, have been
prepared to reflect the acquisition transaction and the adjustments
described in the accompanying notes. The pro forma financial information is
based on the historical financial statements and should be read in conjunction
with the notes and management's assumptions thereto. The Pro Forma
Consolidating Balance Sheet was prepared as if the acquisition transaction
occurred on May 31, 1994. The pro forma financial information is unaudited
and not necessarily indicative of the consolidated results which actually
would have occurred if the acquisition transaction had been consummated at the
beginning of fiscal year 1993, nor does it purport to represent the future
financial position and results of operations from future periods.
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PENNSYLVANIA REAL ESTATE INVESTMENT TRUST
-----------------------------------------
PRO FORMA CONSOLIDATING BALANCE SHEET
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AS OF MAY 31, 1994
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(unaudited)
Pennsylvania
Real Estate
Pennsylvania Investment
Real Estate The Trust
Investment Trust Acquisition Consolidated
Historical (Note 2) Pro Forma
---------------- ------------- ------------
ASSETS:
INVESTMENTS IN REAL ESTATE, at cost:
Apartment buildings $ 94,214,969 $21,535,800 (A) $115,750,769
Industrial properties 5,078,024 5,078,024
Shopping centers and retail stores 32,276,128 32,276,128
------------ ----------- ------------
Total investments in real estate 131,569,121 21,535,800 153,104,921
Less- Accumulated depreciation 32,768,165 32,768,165
------------ ----------- ------------
98,800,956 21,535,800 120,336,756
INVESTMENTS IN PARTNERSHIPS AND JOINT
VENTURES, AT EQUITY 15,970,944 15,970,944
ADVANCES TO PARTNERSHIPS AND JOINT VENTURES 2,304,413 2,304,413
NOTES RECEIVABLE 1,648,796 1,648,796
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118,725,109 21,535,800 140,260,909
LESS- Allowance for possible losses 1,680,000 1,680,000
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117,045,109 21,535,800 138,580,909
OTHER ASSETS:
Cash and cash equivalents 1,694,588 1,694,588
U.S. Treasury obligations, at cost 1,257,833 1,257,833
Rents and sundry receivables 351,869 351,869
Prepaid real estate taxes and expenses 3,178,985 47,200 (A) 3,226,185
------------ ----------- ------------
$123,528,384 $21,583,000 $145,111,384
============ =========== ============
The accompanying notes and management's assumptions are an integral part of this statement.
(Continued)
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PENNSYLVANIA REAL ESTATE INVESTMENT TRUST
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PRO FORMA CONSOLIDATING BALANCE SHEET
-------------------------------------
AS OF MAY 31, 1994
------------------
(unaudited)
(Continued)
Pennsylvania
Real Estate
Pennsylvania Investment
Real Estate The Trust
Investment Trust Acquisition Consolidated
Historical (Note 2) Pro Forma
---------------- ------------- ------------
LIABILITIES AND BENEFICIARIES' EQUITY:
Mortgage notes payable $ 44,184,656 $44,184,656
Bank loans payable 14,553,205 $ 21,583,000 (A) 36,136,205
Tenants' deposits and deferred rents 841,844 841,844
Accrued pension and retirement benefits 1,085,657 1,085,657
Accrued expenses and other liabilities 2,122,247 2,122,247
Minority interest in consolidated partnership 363,913 363,913
Beneficiaries' equity 60,376,862 60,376,862
------------ ------------ ------------
$123,528,384 $ 21,583,000 $145,111,384
============ ============ ============
The accompanying notes and management's assumptions are an integral part of this statement.
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PENNSYLVANIA REAL ESTATE INVESTMENT TRUST
-----------------------------------------
PRO FORMA CONSOLIDATING STATEMENTS OF OPERATIONS
------------------------------------------------
FOR THE YEAR ENDED AUGUST 31, 1993
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(Unaudited)
Pennsylvania
Real Estate The Palms of Pro Forma
Investment Trust Pembroke Adjustments Total
---------------- ------------ ----------- -----------
REVENUES:
Gross revenues from real estate $21,083,218 $2,965,532 $ $24,048,750
Interest and other income 541,453 541,453
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Total revenues 21,624,671 2,965,532 24,590,203
----------- ---------- --------- -----------
EXPENSES:
Property operating expenses 8,958,769 856,627 9,815,396
Depreciation and amortization 2,783,646 426,000(a) 3,209,646
General and administrative expenses 1,873,214 1,873,214
Mortgage and bank loan interest 2,222,253 1,295,000(b) 3,517,253
Provision for losses on investments 320,000 320,000
----------- ---------- --------- -----------
Total expenses 16,157,882 856,627 1,721,000 18,735,509
----------- ---------- --------- -----------
Income before minority interest, equity in income of
partnerships and joint ventures and gains on sales
of interests in real estate 5,466,789 2,108,905 (1,721,000) 5,854,694
MINORITY INTEREST (91,537) (91,537)
EQUITY IN INCOME OF PARTNERSHIPS AND
JOINT VENTURES 4,749,825 4,749,825
GAINS ON SALES OF INTERESTS IN REAL ESTATE 3,875,414 3,875,414
----------- ---------- --------- -----------
NET INCOME $14,000,491 $2,108,905 $(1,721,000) $14,388,396
----------- ---------- --------- -----------
NET INCOME PER SHARE $ 1.62 $ 1.66
----------- -----------
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING 8,643,223 8,643,223
----------- -----------
The accompanying notes and management's assumptions are an integral part of this statement.
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PENNSYLVANIA REAL ESTATE INVESTMENT TRUST
-----------------------------------------
PRO FORMA CONSOLIDATING STATEMENTS OF OPERATIONS
------------------------------------------------
FOR THE NINE-MONTH PERIOD ENDED MAY 31, 1994
--------------------------------------------
(Unaudited)
Pennsylvania
Real Estate The Palms of Pro Forma
Investment Trust Pembroke Adjustments Total
---------------- ------------ ----------- -----------
REVENUES:
Gross revenues from real estate $20,065,528 $2,376,561 $ $22,442,089
Interest and other income 202,403 202,403
----------- ---------- --------- -----------
Total revenues 20,267,931 2,376,561 22,644,492
----------- ---------- --------- -----------
EXPENSES:
Property operating expenses 8,402,600 710,473 9,113,073
Depreciation and amortization 2,557,986 320,000(a) 2,877,986
General and administrative expenses 1,789,948 1,789,948
Mortgage and bank loan interest 2,825,089 998,000(b) 3,823,089
Provision for losses on investments 240,000 240,000
----------- ---------- --------- -----------
Total expenses 15,815,623 710,473 1,318,000 17,844,096
----------- ---------- --------- -----------
Income before minority interest, equity in income of
partnerships and joint ventures and gains on sales
of interests in real estate 4,452,308 1,666,088 (1,318,000) 4,800,396
MINORITY INTEREST (170,897) (170,897)
EQUITY IN INCOME OF PARTNERSHIPS AND
JOINT VENTURES 3,629,138 3,629,138
GAINS ON SALES OF INTERESTS IN REAL ESTATE 12,329,707 12,329,707
----------- ---------- --------- -----------
NET INCOME $20,240,256 $1,666,088 $(1,318,000) $20,588,344
----------- ---------- --------- -----------
NET INCOME PER SHARE $ 2.34 $ 2.38
----------- -----------
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING 8,661,786 8,661,786
----------- -----------
The accompanying notes and management's assumptions are an integral part of this statement.
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PENNSYLVANIA REAL ESTATE INVESTMENT TRUST
-----------------------------------------
NOTES AND MANAGEMENT'S ASSUMPTIONS
----------------------------------
TO UNAUDITED PRO FORMA
----------------------
CONSOLIDATING FINANCIAL STATEMENTS
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1. BASIS OF PRESENTATION
---------------------
Pennsylvania Real Estate Investment Trust ("the Trust") acquired The Palms
of Pembroke (the "Property"), a 348-unit apartment complex located in
Pembroke Pines, Florida, for a purchase price of $21,535,800. The Trust
acquired the Property by borrowing all of the required purchase price and
$47,200 of additional funding for certain escrows from two lenders.
The accompanying unaudited pro forma consolidating balance sheet is
presented as if the acquisition transaction occurred on May 31, 1994.
The accompanying unaudited pro forma consolidated statements of
operations are presented as if the acquisition transaction had been
made as of September 1, 1992.
These pro forma financial statements should be read in conjunction with the
historical financial statements and notes thereto as of August 31, 1993.
In management's opinion, all adjustments necessary to reflect the effects
of the acquisition of the Property by the Trust have been made.
The unaudited pro forma consolidated financial statements are not
necessarily indicative of the actual financial position at May 31,
1994, or what the actual results of operations of the Trust would have
been assuming the acquisition of the Property had been completed as of
September 1, 1992, nor are they indicative of the results of operations
for future periods.
2. ADJUSTMENTS TO PRO FORMA CONSOLIDATING BALANCE SHEET
----------------------------------------------------
(A) To reflect the acquisition of the Property for $21,535,800 and the
funding of certain escrows for $47,200 and the related $21,583,000 of
bank debt obtained to finance these amounts.
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3. ADJUSTMENTS TO PRO FORMA CONSOLIDATING STATEMENTS OF OPERATIONS
---------------------------------------------------------------
Nine-Month
Period
Year Ended Ended
August 31, May 31,
1993 1994
---------- ----------
(a) To reflect the increase in depreciation
expense from the Property over a
40-year useful life $ 426,000 $ 320,000
---------- ---------
(b) To reflect an increase in interest
expense related to the $21,583,000
of new bank borrowings, at the prime
rate, for the acquisition of the
Property $1,295,000 $ 998,000
---------- ---------
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Signatures
Pursuant to the requirements of the Securities Exchange Act
of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned hereunto duly authorized.
Pennsylvania Real Estate Investment Trust
Date: August 11, 1994 /s/ Dante J. Massimini
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Dante J. Massimini, Vice President-Finance
and Treasurer