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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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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) November 10, 1994
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)
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Item 2. Acquisition or Disposition of Assets.
Registrant on November 10, 1994 purchased from ARBERN INVESTORS VI, L.P.,
each a Delaware limited partnership ("Arbern VI"), and ARBERN INVESTORS VIII,
L.P., each a Delaware limited partnership ("Arbern VIII") ("Arbern VI and Arbern
VIII are collectively referred to herein as "Seller"), the Boca Palms
Apartments, a 522 unit apartment complex in Boca Raton, Palm Beach County,
Florida for $31,999,000, of which $30,899,000 was allocated to the real estate
and $1,100,000 to the personal property. The apartment complex consists of a
Phase I (226 units), the purchase price of which was $9,055,653 and a Phase II
(296 units), the purchase price of which was $22,943,347. Phase I was sold by
Arbern VI and Phase II was sold by Arbern VIII. In addition, closing costs,
brokers' fees and other expenses paid by Registrant aggregated approximately
$497,150 after apportionments.
The purchase was pursuant to two Agreements of Sale, both dated September
24, 1994 and both amended on November 4, 1994 by and between Robert G. Rogers
and Jonathan B. Weller, as Trustees, and on behalf of all other Trustees of
Registrant and Arbern VI and Arbern VIII, as applicable. The Agreement of Sale
for Phase II was further amended on November 9, 1994. (The Agreement of Sale and
Amendment No. 1 for Phase I are attached hereto as Exhibit 10.8 and made a part
hereof; and the Agreement of Sale and Amendment No. 1 and Amendment No. 2 for
Phase II are attached hereto as Exhibit 10.9 and made a part hereof.) There is
no relationship between any Trustee, officer or affiliate of the Registrant and
any known partner of the Seller.
Registrant paid cash of $31,899,000 and issued two zero coupon notes with a
total present value of $100,000 and future value in thirty years of $1,700,000
for the apartment complex, borrowing all the required proceeds from CoreStates
Bank, N.A., a national banking association, as agent. The borrowing totaled
$32,500,000, 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, $32,000,000 is secured by real estate
other than the Boca Palms Apartments complex with the balance of $500,000
unsecured. The loan agreement provides that the loan shall bear interest at
Registrant's option, at (i) the Prime Rate or the federal funds effective rate
plus 0.5% or (ii) Adjusted LIBOR plus 2.0%. The scheduled maturity date of the
loan is the earlier of (1) November 10, 1995 or (2) one business day after
Registrant's receipt of the net proceeds from an offering of its equity
securities. Both loans are general obligations of Registrant. The average
accreted interest during the first 10 years on the zero coupon notes is $16,619
per year.
Registrant anticipates spending an additional $2,100,000 for closing
costs, landscaping, new leasing models, apartment upgrades, and other
enhancements to the public areas of the apartment complex over the next year.
Location: The Boca Palms Apartments are located on a 35 acre site
south of the Palmetto Parkway on Route 441; 22573 Southwest 66th Avenue, Boca
Raton, Palm Beach County, Florida 33428.
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Description: Phase I of the apartment complex, consisting of 226 units in
seven buildings. One hundred eighty-four units were completed in the mid-1970s
and were renovated approximately in the late 1980s and 42 units were constructed
in 1990. Phase II of the apartment complex, consisting of 296 units in
twenty-five buildings, was constructed between 1990 and 1993. The amenities
include three community centers, three swimming pools, four lakes and four
tennis courts. The complex contains approximately 597,000 square feet of
leasable space with the buildings being of masonry construction.
Taxes: The estimated 1994 property taxes, including solid waste authority
fees, for Phase I are $167,180 and for Phase II are $304,265 and the estimated
personal property taxes for Phase I are $5,630 and for Phase II are $7,250.
Mortgage Payable: The property is unencumbered by debt.
Occupancy Percentage and Rentals: The following table sets forth the number
and types of apartment units, square footage (without porches and balconies) per
unit and the current renewal rent.
Sq. Ft. Per Unit
Number of (without Porches Current
Units Unit Type and Balconies) Renewal Rent
- --------- --------- ---------------- -------------
8 Phase I Villas - 1 Bedroom 1 Bath 932 $ 750
88 Phase I Towers - 1 Bedroom 1-1/2 Bath 1,000 645
52 Phase II - 1 Bedroom 1 Bath 932 755
32 Phase II - 1 Bedroom 2 Bath Den 1,130 842
8 Phase I Villas - 2 Bedroom 2 Bath 1,130 845
96 Phase I Towers - 2 Bedroom 2 Bath 1,200 765
12 Phase I Villas - 2 Bedroom 2-1/2 Bath TH 1,600 1,010
52 Phase II - 2 Bedroom 2 Bath 1,112 872
28 Phase II - 2 Bedroom 2 Bath 1,130 872
8 Phase II - 2 Bedroom 2-1/2 Bath TH 1,586 1,055
8 Phase II - 2 Bedroom 2-1/2 Bath TH 1,565 1,055
8 Phase I Villas - 3 Bedroom 2 Bath 1,509 1,010
6 Phase I Villas - 3 Bedroom 2 Bath 1,690 1,090
32 Phase II - 3 Bedroom 2 Bath 1,376 995
52 Phase II - 3 Bedroom 2 Bath 1,509 1,050
8 Phase II - 3 Bedroom 2 Bath 1,627 1,135
8 Phase II - 3 Bedroom 2 Bath 1,593 1,135
16 Phase II - 3 Bedroom 2-1/2 Bath TH 1,565 1,075
257 Carports
522 Total Number of Units
Average Rent 851
Aggregate Sq. Ft. 1,214
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The apartments are generally rented for a term of one year and then
automatically renew on a month-to-month basis. The occupancy rate was 93% on
November 10, 1994.
Competition: There are numerous apartment and condominium complexes in the
immediate vicinity of Boca Palms Apartments, a few of which have been
constructed within the past five years. Of the competing apartment complexes,
some have monthly rents which are higher and some have monthly rents which are
lower. The population in the area in which Boca Palms Apartments is located is
expected to grow by 22% through 1999.
Environmental: Registrant had a Phase I environmental study performed prior
to its acquisition of Boca Palms Apartments. The property was also tested for
Radon gas. Registrant will perform additional tests in an effort to determine if
the level of Radon gas is within federal and state guidelines. If Radon is found
to be above the federal and state guidelines, Registrant will remediate the
Radon. 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 the
Registrant.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
(a) Financial Statements
(3) Boca Palms Apartments - Statement of Revenues and Certain
Expenses as of the Year Ended August 31, 1994
(b) Pro Forma Financial Information
(1) Pro Forma Consolidating Balance Sheet as of August 31,
1994 and Consolidating Statement of Operations for the
Year Ended August 31, 1994 (unaudited).
(c) Exhibits
10.8 Agreement of Sale (Phase I) 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 Arbern Investors VI, L.P., each a Delaware
limited partnership, dated September 24, 1994 (without exhibits).
Amendment No. 1 to Purchase and Sale Agreement (Phase I) 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 Arbern
Investors VI, L.P., each a Delaware limited partnership, dated November 4, 1994.
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10.9 Agreement of Sale (Phase II) 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 Arbern Investors VIII, L.P., each a Delaware
limited partnership, dated September 24, 1994 (without exhibits).
Amendment No. 1 to Purchase and Sale Agreement (Phase II) 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 Arbern
Investors VIII, L.P., each a Delaware limited partnership, dated November 4,
1994.
Amendment No. 2 to Purchase and Sale Agreement (Phase II) 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 Arbern
Investors VIII, L.P., each a Delaware limited partnership, dated November 9,
1994.
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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: November 22, 1994 s/Jeffrey A. Linn
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Jeffrey A. Linn, Vice President for
Acquisitions and Secretary
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PENNSYLVANIA REAL ESTATE INVESTMENT TRUST
BOCA PALMS APARTMENTS
STATEMENT OF REVENUES AND CERTAIN EXPENSES
AS OF THE YEAR ENDED AUGUST 31, 1994
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
Boca Palms Apartments for the year ended August 31, 1994. This financial
statement is the responsibility of Boca Palms Apartments' 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 revenues 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 Boca Palms Apartments' revenues and expenses.
In our opinion, the financial statement referred to above presents fairly, in
all material respects, the revenues and certain expenses of Boca Palms
Apartments for the year ended August 31, 1994, in conformity with generally
accepted accounting principles.
ARTHUR ANDERSEN LLP
Philadelphia, Pa.,
November 10, 1994
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BOCA PALMS APARTMENTS
STATEMENT OF REVENUES AND CERTAIN EXPENSES (NOTE 1)
FOR THE YEAR ENDED AUGUST 31, 1994
REVENUES:
Rental income $ 4,570,938
Miscellaneous income 186,258
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Total revenues 4,757,196
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CERTAIN EXPENSES:
Real estate and personal property taxes 484,729
Repairs and maintenance 428,164
Property management and administration 585,612
Insurance 143,138
Utilities 291,546
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Total certain expenses 1,933,189
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REVENUES IN EXCESS OF CERTAIN EXPENSES $ 2,824,007
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The accompanying note is an integral part of this statement.
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BOCA PALMS APARTMENTS
NOTE TO STATEMENT OF REVENUES AND CERTAIN EXPENSES
1. BASIS OF PRESENTATION:
The statement of revenues and certain expenses (the "financial statement")
reflects the operations of Boca Palms Apartments (the "Property"), a 522-unit
apartment complex located in Boca Raton, Florida. The last phase of development
in the apartment complex, which consists of 296 units, was started in 1990 and
was completed during the year ended August 31, 1994. As a result, certain
portions of the units were still in the lease-up phase during several months in
the year ended August 31, 1994. The Property was acquired by Pennsylvania Real
Estate Investment Trust (the "Trust") from unaffiliated parties on November 10,
1994.
The accompanying financial statement, prepared in accordance with certain rules
and regulations of the Securities and Exchange Commission, excludes 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. Certain information and footnote disclosures
normally included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted pursuant to those
rules and regulations, although the Trust believes that the disclosures made are
adequate to make the information presented not misleading.
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Item 7.(b) PRO FORMA FINANCIAL INFORMATION (1)
The following Pro Forma Consolidating Balance Sheet as of August 31, 1994, and
the Pro Forma Consolidating Statements of Operations for the year ended August
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 August 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 1994, nor does it purport to represent the future
financial position and results of operations for future periods.
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PENNSYLVANIA REAL ESTATE INVESTMENT TRUST
PRO FORMA CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE YEAR ENDED AUGUST 31, 1994
(Unaudited)
Pennsylvania
Real Estate Boca Palms Pro Forma
Investment Trust Apartments Adjustments Total
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REVENUES:
Gross revenues from real estate $ 27,640,000 $ 4,757,196 $ -- $ 32,397,196
Interest and other income 274,000 -- -- 274,000
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Total revenues 27,914,000 4,757,196 -- 32,671,196
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EXPENSES:
Property operating expenses 11,758,000 1,933,189 -- 13,691,180
Depreciation and amortization 3,541,000 -- 693,000 (a) 4,234,000
General and administrative expenses 2,528,000 -- -- 2,528,000
Mortgage and bank loan interest 4,162,000 -- 2,659,000 (b) 6,821,000
Provision for losses on investments 1,795,000 -- -- 1,795,000
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Total expenses 23,784,000 1,933,189 3,352,000 29,069,189
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Income before minority interest, equity in income of
partnerships and joint ventures and gains on sales 4,130,000 2,824,007 (3,352,000) 3,602,007
of interests in real estate
MINORITY INTEREST (221,000) -- -- (221,000)
EQUITY IN INCOME OF PARTNERSHIPS AND 4,416,000 -- -- 4,416,000
JOINT VENTURES
GAINS ON SALES OF INTERESTS IN REAL ESTATE 12,362,000 -- -- 12,362,000
---------------- -------------- -------------- --------------
NET INCOME $ 20,687,000 $ 2,824,007 $ (3,352,000) $ 20,159,007
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NET INCOME PER SHARE $ 2.39 $ 2.33
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WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING $ 8,663,646 $ 8,663,646
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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 BALANCE SHEET
AS OF AUGUST 31, 1994
(Unaudited)
Pennsylvania
Pennsylvania Real Estate
Real Estate The Investment Trust
Investment Trust Acquisition Consolidated
Historical (Note 2) Pro Forma
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ASSETS
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INVESTMENTS IN REAL ESTATE, at cost:
Apartment buildings $ 116,918,000 $ 32,500,000(A) $ 149,418,000
Industrial properties 5,078,000 -- 5,078,000
Shopping centers and retail stores 32,285,000 -- 32,285,000
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Total investments in real estate 154,281,000 32,500,000 186,781,000
Less- Accumulated depreciation 33,735,000 -- 33,735,000
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120,546,000 32,500,000 153,046,000
INVESTMENTS IN PARTNERSHIPS AND JOINT 15,225,000 -- 15,225,000
VENTURES, AT EQUITY
ADVANCES TO PARTNERSHIPS AND JOINT VENTURES 2,418,000 -- 2,418,000
NOTES RECEIVABLE 1,649,000 -- 1,649,000
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139,838,000 32,500,000 172,338,000
LESS- Allowance for possible losses 3,235,000 -- 3,235,000
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136,603,000 32,500,000 169,103,000
OTHER ASSETS:
Cash and cash equivalents 2,152,000 -- 2,152,000
U.S. Treasury obligations, at cost -- -- --
Rents and sundry receivables 328,000 -- 328,000
Prepaid real estate taxes and expenses 3,412,000 -- 3,412,000
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$ 142,495,000 $ 32,500,000 $ 174,995,000
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The accompanying notes and management's assumptions are an
integral part of this statement.
(Continued)
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PENNSYLVANIA REAL ESTATE INVESTMENT TRUST
PRO FORMA CONSOLIDATING BALANCE SHEET
AS OF AUGUST 31, 1994
(Unaudited)
(Continued)
Pennsylvania
Pennsylvania Real Estate
Real Estate The Investment Trust
Investment Trust Acquisition Consolidated
Historical (Note 2) Pro Forma
--------------- --------------- ----------------
LIABILITIES AND BENEFICIARIES' EQUITY:
Mortgage notes payable $ 44,019,000 $ 32,500,000 (A) $ 76,519,000
Bank loans payable 36,136,000 -- 36,136,000
Tenants' deposits and deferred rents 1,214,000 -- 1,214,000
Accrued pension and retirement benefits 1,084,000 -- 1,084,000
Accrued expenses and other liabilities 2,886,000 -- 2,886,000
Minority interest in consolidated partnership 408,000 -- 408,000
Beneficiaries' equity 56,748,000 -- 56,748,000
---------------- --------------- ---------------
$ 142,495,000 $ 32,500,000 $ 174,995,000
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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
1. BASIS OF PRESENTATION:
Pennsylvania Real Estate Investment Trust ("the Trust") acquired Boca Palms
Apartments (the "Property"), a 522-unit apartment complex located in Boca Raton,
Florida, for a purchase price of $32,500,000, which included closing and other
costs of approximately $500,000 and $100,000 of two zero coupon notes which are
due to the seller in thirty years in the amount of $1,700,000. Interest expense
related to these notes will be accreted over the thirty-year period at an
interest rate of 9.56%. The last phase of development in the apartment complex,
which consists of 296 units, was started in 1990 and was completed during the
year ended August 31, 1994. As a result, certain portions of the units were
still in the lease-up phase during several months in the year ended August 31,
1994. The Trust acquired the Property by borrowing the $32,500,000 required
purchase price from a financial institution.
The accompanying unaudited pro forma consolidating balance sheet is presented as
if the acquisition transaction occurred on August 31, 1994.
The accompanying unaudited pro forma consolidated statement of operations is
presented as if the acquisition transaction had been made as of September 1,
1993.
These pro forma financial statements should be read in conjunction with the
historical financial statements and notes thereto as of August 31, 1994. 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 as of August 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, 1993, 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 approximately $32,500,000 and
the related $32,500,000 of bank debt obtained to finance these amounts.
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3. ADJUSTMENTS TO PRO FORMA CONSOLIDATING STATEMENT OF OPERATIONS
Year Ended
August 31,
1994
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(a) To reflect the increase in depreciation expense
from the Property over a 40-year useful life
for the buildings and a 10-year useful life for
the personal property $ 693,000
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(b) To reflect an increase in interest expense
related to the $32,500,000 of new debt
(at LIBOR plus 2% or 8.15%) and the
$100,000 zero coupon notes (at 9.56%)
for the acquisition of the Property $ 2,659,000
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