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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
[X] Quarterly Report Pursuant To Section 13 or 15(d) of the Securities Exchange
Act Of 1934
For the quarterly period ended November 30, 1994
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[ ] Transition Report Pursuant To Section 13 or 15(d) Of The Securities Exchange
Act Of 1934
For the transition period from ______________________ to _______________________
Commission File Number 1-6300
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Pennsylvania Real Estate Investment Trust
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(Exact name of registrant as specified in its charter)
Pennsylvania 23-6216339
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
455 Pennsylvania Avenue, Suite 135, Ft. Washington, PA 19034
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(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code (215) 542-9250
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N/A
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(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 of 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the last 90 days. Yes /X/ No / /
Indicate the number of share outstanding of each of the issuer's classes of
common stock, as of the close of the period covered by this report (applicable
only to corporate issuers).
Shares of beneficial interest outstanding at November 30, 1994: 8,669,848
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This report includes a total of 11 pages.
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PENNSYLVANIA REAL ESTATE INVESTMENT TRUST
CONTENTS
Page
----
Part I. Financial Information
Financial Statements (Unaudited):
Consolidated Balance Sheets--November 30, 1994
and August 31, 1994 (Audited) 1-2
Consolidated Statements of Income--Three Months
Ended November 30, 1994 and 1993 3
Consolidated Statements of Cash Flows--Three Months
Ended November 30, 1994 and 1993 4
Notes to Consolidated Financial Statements 5-7
Management's Discussion and Analysis of Financial
Condition and Results of Operations 8-9
Part II. Other Information
Item 4 (Items 1 through 3--not applicable) 10
Item 5 10-11
Item 6 11
Signatures 12
Part I. Financial Information
Item 1. Financial Statements
PENNSYLVANIA REAL ESTATE INVESTMENT TRUST
CONSOLIDATED BALANCE SHEETS
ASSETS
November 30, August 31,
1994 1994
------------ ------------
(Unaudited)
INVESTMENTS IN REAL ESTATE, at cost:
Apartment buildings $150,732,000 $116,918,000
Industrial properties 5,078,000 5,078,000
Shopping centers and retail stores 32,305,000 32,285,000
------------ ------------
Total investments in real estate 188,115,000 154,281,000
Less- Accumulated depreciation 34,876,000 33,735,000
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153,239,000 120,546,000
INVESTMENTS IN PARTNERSHIPS AND
JOINT VENTURES, at equity (Note 2) 15,303,000 15,225,000
ADVANCES TO PARTNERSHIPS AND 2,921,000 2,418,000
JOINT VENTURES (Note 2)
NOTES RECEIVABLE 1,649,000 1,649,000
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173,112,000 139,838,000
LESS- Allowance for possible losses 3,153,000 3,235,000
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169,959,000 136,603,000
OTHER ASSETS:
Cash and cash equivalents 2,011,000 2,152,000
Rents and sundry receivables 321,000 328,000
Prepaid real estate taxes and expenses 3,617,000 3,412,000
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$175,908,000 $142,495,000
============ ============
The accompanying notes are an integral part of these statements.
PENNSYLVANIA REAL ESTATE INVESTMENT TRUST
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND BENEFICIARIES' EQUITY
November 30, August 31,
1994 1994
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(Unaudited)
LIABILITIES:
Mortgage notes payable $ 43,861,000 $ 44,019,000
Bank loans payable 70,163,000 36,136,000
Tenants' deposits and deferred rents 1,374,000 1,214,000
Accrued pension and retirement benefits 1,104,000 1,084,000
Accrued expenses and other liabilities 2,925,000 2,886,000
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119,427,000 85,339,000
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MINORITY INTEREST IN CONSOLIDATED 462,000 408,000
PARTNERSHIP (Note 2) ------------ ------------
COMMITMENTS AND CONTINGENCIES (Note 5)
BENEFICIARIES' EQUITY (Note 3):
Shares of beneficial interest, $1 par;
authorized, unlimited; issued and
outstanding 8,669,848 shares at
November 30, 1994 and August 31, 1994
Capital contributed in excess of par 8,670,000 8,670,000
Distributions in excess of net income 53,039,000 53,039,000
Undistributed net income (5,690,000) (4,961,000)
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56,019,000 56,748,000
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$175,908,000 $142,495,000
============ ============
The accompanying notes are an integral part of these statements.
PENNSYLVANIA REAL ESTATE INVESTMENT TRUST
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three Months Ended
November 30
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1994 1993
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REVENUES:
Gross revenues from real estate $8,513,000 $ 6,406,000
Interest and other income 42,000 74,000
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8,555,000 6,480,000
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EXPENSES:
Property operating expenses 3,370,000 2,670,000
Depreciation and amortization 1,154,000 788,000
General and administrative expenses 671,000 497,000
Mortgage and bank loan interest 1,760,000 845,000
Provision for losses on investments -- 80,000
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6,955,000 4,880,000
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Income before minority interest, equity in
income of partnerships and joint ventures
and gains on sales of interests in real estate 1,600,000 1,600,000
MINORITY INTEREST (61,000) (61,000)
EQUITY IN INCOME OF PARTNERSHIPS
AND JOINT VENTURES (Note 2) 1,806,000 1,418,000
GAINS ON SALES OF INTERESTS IN
REAL ESTATE -- 12,223,000
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NET INCOME $3,345,000 $15,180,000
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NET INCOME PER SHARE $.39 $1.75
=========== ===========
WEIGHTED AVERAGE NUMBER
OF SHARES OUTSTANDING 8,669,848 8,652,973
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The accompanying notes are an integral part of these statements.
PENNSYLVANIA REAL ESTATE INVESTMENT TRUST
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended
November 30
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1994 1993
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(Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 3,345,000 $ 15,180,000
Adjustments to reconcile net income to
net cash provided by operating activities-
Minority interest in income of
consolidated partnership 61,000 61,000
Depreciation and amortization 1,154,000 789,000
Gains on sales of interests in real estate -- (12,223,000)
Increase (decrease) in provision for losses
on investments (82,000) 80,000
Change in assets and liabilities-
Rents and sundry receivables 7,000 (24,000)
Prepaid real estate taxes and expenses (217,000) 427,000
Accrued pension and retirement benefits 20,000 7,000
Accrued expenses and other liabilities 39,000 (56,000)
Tenants' deposits and deferred rents 159,000 (66,000)
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Net cash provided by operating activities 4,486,000 4,175,000
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CASH FLOWS FROM INVESTING ACTIVITIES:
Investments in wholly owned real estate (33,834,000) (1,039,000)
Investments in partnerships and joint ventures (45,000) (28,000)
Cash proceeds from sales of real estate investments -- 14,540,000
Increase in advances to partnerships and joint ventures (502,000) (84,000)
Cash distributions from (contributions to) partnerships
and joint ventures in excess of equity in income (34,000) 559,000
Cash distributions to minority partners (6,000) (6,000)
Decrease in notes receivable -- 6,000
Decrease in U.S. Treasury obligations -- 18,000
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Net cash provided by (used in) investing activities (34,421,000) 13,966,000
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CASH FLOW FROM FINANCING ACTIVITIES:
Principal installments on mortgage notes payable (158,000) (117,000)
Proceeds from bank loans payable 34,027,000 --
Repayment of bank loans payable -- (14,300,000)
Shares of beneficial interest issued -- 120,000
Distributions paid to beneficiaries (4,075,000) (3,895,000)
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Net cash provided by (used in) financing activities 29,794,000 (18,192,000)
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NET DECREASE IN CASH AND CASH EQUIVALENTS (141,000) (51,000)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 2,152,000 1,462,000
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CASH AND CASH EQUIVALENTS, END OF PERIOD $ 2,011,000 $ 1,411,000
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The accompanying notes are an integral part of these statements.
PENNSYLVANIA REAL ESTATE INVESTMENT TRUST
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED NOVEMBER 30, 1994 AND 1993
1. BASIS OF PRESENTATION:
The consolidated financial statements have been prepared by the Registrant,
without audit, pursuant to the rules and regulations of the Securities and
Exchange Commission. 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 such rules and
regulations, although the Registrant believes that the disclosures are adequate
to make the information presented not misleading. It is suggested that these
consolidated financial statements be read in conjunction with the audited
financial statements and the notes thereto included in the Registrant's latest
annual report on Form 10-K. In the opinion of the Registrant, all adjustments
and eliminations, consisting only of normal recurring adjustments, necessary to
present fairly the consolidated financial position of the Registrant as of
November 30, 1994 and August 31, 1994, the consolidated results of its
operations and cash flows for the three months ended November 30, 1994 and 1993,
have been included. The results of operations for such interim periods are not
necessarily indicative of the results for the full year.
2. INVESTMENTS IN PARTNERSHIPS AND JOINT VENTURES:
The following presents summarized financial information as to the Registrant's
investments in 28 partnerships and joint ventures at November 30, 1994 and
August 31, 1994, and the Registrant's equity in income for the three months
ended November 30, 1994 and 1993:
November 30, August 31,
ASSETS 1994 1994
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(Unaudited)
Investments in real estate, at cost:
Apartment buildings $102,588,000 $102,395,000
Industrial property 1,237,000 1,237,000
Shopping centers and retail stores 126,464,000 122,248,000
Land held for development 7,051,000 7,051,000
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Total investments in real estate 237,340,000 232,931,000
Less- accumulated depreciation 65,146,000 63,639,000
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172,194,000 169,292,000
Cash and cash equivalents 4,337,000 3,566,000
Other assets 4,325,000 5,454,000
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Total assets 180,856,000 178,312,000
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LIABILITIES
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Mortgage notes payable 132,987,000 131,002,000
Bank loans payable 12,025,000 11,928,000
Due to the Trust 2,921,000 2,418,000
Other liabilities 4,533,000 4,729,000
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Total liabilities 152,466,000 150,077,000
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Net equity 28,390,000 28,235,000
Partners' share (13,087,000) (13,010,000)
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Investment in partnerships and joint ventures $ 15,303,000 $ 15,225,000
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EQUITY IN INCOME OF PARTNERSHIPS AND JOINT VENTURES
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Three Months Ended
November 30
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1994 1993
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(Unaudited)
Gross revenues from real estate $13,066,000 $13,267,000
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Expenses:
Property operating expenses 4,879,000 5,151,000
Mortgage and bank loan interest 3,005,000 3,525,000
Depreciation and amortization 1,560,000 1,740,000
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9,444,000 10,416,000
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3,622,000 2,851,000
Partners' share (1,816,000) (1,433,000)
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Equity in income of partnerships and joint ventures $ 1,806,000 $ 1,418,000
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One partnership in which the Registrant is a general partner, and has control as
provided in the partnership agreement, has been consolidated for financial
statement presentation. All of the assets and liabilities are included in the
consolidated financial statements at 100%. The minority partner's interest is
35%.
3. DISTRIBUTIONS:
The per share amount declared at the date of this report and the per share
amount declared in the comparable period in fiscal 1994 for distribution are as
follows:
Amount
Per
Date Declared Record Date Payment Date Share
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December 15, 1994 January 31, 1995 February 15, 1995 $.47
December 15, 1993 January 31, 1994 February 15, 1994 $.47
4. CASH FLOW INFORMATION:
Cash paid for interest was $1,629,000 and $762,000 for the three months ended
November 30, 1994 and 1993, respectively.
5. COMMITMENTS AND CONTINGENCIES:
Environmental matters have arisen at certain properties in which the Registrant
has an interest for which reserves have previously been established. During the
three months ended November 30, 1994, the Registrant advanced funds totaling
$193,000 which were recorded against the previously established reserves.
The Registrant has been named as a defendant in a suit brought by persons and
their affiliates who are partners of the Registrant in three partnerships. The
Registrant is vigorously defending the suit and has denied the plaintiffs'
allegations. The Registrant also believes that it has viable claims against
certain of the same partners (or their affiliates) which it is asserting. As the
pleadings are not yet closed and discovery is still in the preliminary stages,
it is not possible to judge the ultimate outcome of these suits at this time.
However, Management does not believe that resolution of these matters will have
a material effect on the Registrant's financial condition or results of
operations.
PENNSYLVANIA REAL ESTATE INVESTMENT TRUST
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Liquidity and Capital Resources
In November 1994, the Registrant obtained a $110,000,000 revolving credit and
acquisition facility from four commercial banks. Of the total amount,
$78,000,000 is a 30-month unsecured revolving credit facility which replaces a
one-year credit line totaling $55,000,000. The remaining $32,000,000 is a
one-year secured borrowing which was advanced to acquire Boca Palms Apartments
discussed below. Both credit facilities permit the Registrant to select interest
rates based on Prime or LIBOR plus 1.85% for the unsecured line or LIBOR plus 2%
for the secured facility. The weighted average interest rate on these borrowings
was 7.70% at November 30, 1994 and 7.75% as of the date of this filing. As of
November 30, 1994, the Registrant has borrowed $80,794,000 ($70,163,000 directly
by the Registrant and $10,631,000 through partnerships and joint ventures in
which the Registrant has an interest).
In November 1994, the Registrant acquired a 522-unit apartment complex in Boca
Raton, Florida for approximately $32,000,000. The Registrant anticipates
spending an additional $1,500,000 for enhancements to the units and the
community. This acquisition was financed through the $32 million secured
borrowing. Any additional amounts required will be funded from the Registrant's
unsecured revolving credit facility.
Funds from operations increased to $5,217,000 from $4,651,000 for the three
months ended November 30, 1994, as compared to the same three months in 1993.
Funds from operations do not represent cash generated from operations as defined
by generally accepted accounting principles (GAAP) and is not necessarily
indicative of cash available to fund cash needs.
Results of Operations
Net income for the three-month period ended November 30, 1994, before gains on
sales of interests in real estate, increased to $3,345,000 from $2,957,000 for
the comparable period in 1993. In the 1994 period, no interests in real estate
were sold as compared to the 1993 period which included gains on sales of
interests in real estate totaling $12,223,000.
Gross revenues from real estate increased to $8,513,000 from $6,406,000
primarily due to revenues of $266,000 from Boca Palms Apartments, which was
acquired in November 1994; $548,000 from Hidden Lakes Apartments, acquired in
February 1994; $790,000 from Palms of Pembroke acquired in August 1994; and
$480,000 from Mandarin Corners Shopping Center, which became a wholly owned
property in February 1994.
Principally as a result of these acquisitions, operating expenses for wholly
owned properties increased to $3,370,000 from $2,670,000, depreciation and
amortization increased to $1,154,000 from $788,000 and mortgage and bank loan
interest increased to $1,760,000 from $845,000.
Interest and other income decreased to $42,000 from $74,000 due to maturing of
invested Treasury obligations.
For the three months ended November 30, 1994, $82,000 was charged against the
allowance for possible losses. No additional provision is considered necessary
at this time.
General and administrative expenses increased to $671,000 from $497,000, due to
the addition of management and administrative personnel and an increase in
professional fees.
Equity in income of partnerships and joint ventures increased to $1,806,000 from
$1,418,000, primarily due to improved performance of apartments and a lease
termination fee received from a shopping center tenant in the amount of
$220,000.
Part II. Other Information
Item 4. Submission of Matters to a Vote of Security Holders
On December 15, 1994, the Registrant held its Annual Meeting of Holders of
Certificates of Beneficial Interest (Shareholders) pursuant to a notice dated
November 16, 1994. Accompanying the notice was a Proxy Statement that solicited
proxies pursuant to Regulation 14 under the Securities Exchange Act of 1934, as
amended. Definitive copy of the notice, Proxy Statement and the proxy were filed
with the Securities and Exchange Commission on November 16, 1994.
The four trustees (William R. Dimeling, Jack Farber, Robert G. Rogers and
Jonathan B. Weller) who were nominated for re-election and whose names appeared
in the Proxy Statement were all elected by receipt of the affirmative vote of
Shareholders who held more than 98.4% of the 6,621,511 Certificates of
Beneficial Interest (Shares) voting either by proxy or in person on the election
of trustees at the Annual Meeting. In addition to the four trustees who were
elected at the Annual Meeting, there are five trustees (Sylvan M. Cohen, Robert
Freedman, Lee H. Javitch, Samuel J. Korman and Jeffrey P. Orleans) whose terms
did not expire. These nine individuals constitute the Registrant's entire Board
of Trustees.
At the Annual Meeting, the Shareholders approved a proposal for the adoption of
amendments to and restatement of the Trust's 1990 Incentive and Nonqualified
Stock Option Plan (1990 Plan), increasing the number of Shares available for
option from 200,000 to 400,000 and expanding and clarifying other provisions set
forth in the 1990 Plan. A total of 5,979,690 Shares were voted in favor of the
1990 Plan proposal; 511,862 Shares were voted against the 1990 Plan proposal;
and 129,959 Shares abstained from the vote.
At the Annual Meeting, the Shareholders also approved a proposal for the
adoption of the Trust's 1993 Jonathan B. Weller Nonqualified Stock Option Plan
(1993 Plan), relating to 100,000 Shares. A total of 5,944,976 Shares were voted
in favor of the 1993 Plan proposal; 548,006 Shares were voted against the 1993
Plan proposal; and 128,529 Shares abstained from the vote.
Item 5. Other Information
On December 15, 1994, the Executive Compensation and Human Resources Committee,
which consists entirely of outside Trustees, granted, under Registrant's Amended
and Restated 1990 Incentive and Nonqualified Stock Option Plan, to the following
officers of Registrant, options to purchase the number of Registrant's shares
set forth beside their name at the exercise price of $18.00 per share, the
closing price of Registrant's shares on the American Stock Exchange on that
date.
Sylvan M. Cohen Chairman and Chief Executive Officer 20,000
Jonathan B. Weller President and Chief Operating Officer 35,000
Robert G. Rogers Executive Vice President 10,000
Dante J. Massimini Senior Vice President--Finance and Treasurer 10,000
Jeffrey A. Linn Senior Vice President--Acquisitions and
Secretary 15,000
Raymond J. Trost Vice President--Asset Management 3,000
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits--None
(b) Reports on Form 8-K--The Registrant filed a Current Report on
Form 8-K dated November 10, 1994. The
following items were reported therein:
Item 2--Acquisition or Disposition of
Assets.
Item 7--Financial Statements, Pro Forma
Financial Information and Exhibits.
The following financial statements were filed under Item 7:
(1) Boca Palms Apartments--Statement of Revenues and Certain
Expenses as of the Year Ended August 31, 1994.
(2) Pro Forma Consolidating Balance Sheet as of August 31, 1994 and
Consolidating Statement of Operations for the Year Ended August
31, 1994 (unaudited).
PENNSYLVANIA REAL ESTATE INVESTMENT TRUST
SIGNATURE OF REGISTRANT
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 on its behalf by the undersigned thereunto duly authorized.
PENNSYLVANIA REAL ESTATE INVESTMENT TRUST
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Registrant
By /s/ Jonathan B. Weller
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Jonathan B. Weller,
President and Chief Operating Officer
By /s/ Dante J. Massimini
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Dante J. Massimini,
Senior Vice-President and Treasurer
Date: January 12, 1995