1
_______________________________________________________________________________
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 February 28, 1995
[ ] 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
--------------------------------------------------------
Pennsylvania Real Estate Investment Trust
(Exact name of registrant as specified in its charter)
Pennsylvania 23-6216339
State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
455 Pennsylvania Avenue, Suite 135, Ft. Washington, PA 19034
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code (215) 542-9250
----------------------------
N/A
(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 shares 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 February 28, 1995: 8,669,848
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
This report includes a total of 12 pages.
______________________________________________________________________________
2
PENNSYLVANIA REAL ESTATE INVESTMENT TRUST
CONTENTS
Page
Part I. Financial Information
Financial Statements (Unaudited):
Consolidated Balance Sheets--February 28, 1995
and August 31, 1994 (Audited) 1-2
Consolidated Statements of Income--Three and Six Months
Ended February 28, 1995 and 1994 3
Consolidated Statements of Cash Flows--Six Months Ended
February 28, 1995 and 1994 4
Notes to Unaudited Consolidated Financial Statements 5-7
Management's Discussion and Analysis of Financial
Condition and Results of Operations 8
Part II. Other Information
Item 5 (Items 1 through 4--not applicable) 11
Item 6 11
Signatures 12
3
Part I. Financial Information
Item 1. Financial Statements
PENNSYLVANIA REAL ESTATE INVESTMENT TRUST
CONSOLIDATED BALANCE SHEETS
ASSETS
February 28, August 31,
1995 1994
------------- -------------
(Unaudited)
INVESTMENTS IN REAL ESTATE, at cost:
Apartment buildings $ 152,219,000 $ 116,918,000
Industrial properties 5,078,000 5,078,000
Shopping centers and retail stores 32,342,000 32,285,000
Land (Note 6) 3,590,000 --
------------- -------------
Total investments in real estate 193,229,000 154,281,000
Less- Accumulated depreciation 36,152,000 33,735,000
------------- -------------
157,077,000 120,546,000
INVESTMENTS IN PARTNERSHIPS AND
JOINT VENTURES, at equity (Note 2) 16,504,000 15,225,000
ADVANCES TO PARTNERSHIPS AND
JOINT VENTURES, at equity (Note 2) 2,141,000 2,418,000
NOTES RECEIVABLE 1,649,000 1,649,000
------------- -------------
177,371,000 139,838,000
LESS- Allowance for possible losses 3,041,000 3,235,000
------------- -------------
174,330,000 136,603,000
OTHER ASSETS:
Cash and cash equivalents 1,737,000 2,152,000
Rents and sundry receivables 411,000 328,000
Deferred costs, prepaid real estate
taxes and expenses, net 4,090,000 3,412,000
------------- -------------
$ 180,568,000 $ 142,495,000
============= =============
The accompanying notes are an integral part of these statements.
4
PENNSYLVANIA REAL ESTATE INVESTMENT TRUST
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND BENEFICIARIES' EQUITY
February 28, August 31,
1995 1994
------------ ------------
(Unaudited)
LIABILITIES:
Mortgage notes payable $ 43,659,000 $ 44,019,000
Bank loans payable (Note 6) 76,118,000 36,136,000
Tenants' deposits and deferred rents 1,274,000 1,214,000
Accrued pension and retirement benefits 1,116,000 1,084,000
Accrued expenses and other liabilities 3,101,000 2,886,000
------------ ------------
125,268,000 85,339,000
------------ ------------
MINORITY INTEREST IN CONSOLIDATED PARTNERSHIP
(Note 2) 524,000 408,000
------------ ------------
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 February 28, 1995 and August 31, 1994 8,670,000 8,670,000
Capital contributed in excess of par 53,039,000 53,039,000
Distributions in excess of net income (6,933,000) (4,961,000)
------------ ------------
54,776,000 56,748,000
------------ ------------
$180,568,000 $142,495,000
============ ============
The accompanying notes are an integral part of these statements.
5
PENNSYLVANIA REAL ESTATE INVESTMENT TRUST
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three Months Ended Six Months Ended
February 28, February 28,
------------------------ ------------------------
1995 1994 1995 1994
----------- ----------- ----------- -----------
REVENUES:
Gross revenues from real estate $ 9,503,000 $ 6,461,000 $18,016,000 $12,868,000
Interest and other income 45,000 64,000 88,000 137,000
----------- ----------- ----------- -----------
9,548,000 6,525,000 18,104,000 13,005,000
----------- ----------- ----------- -----------
EXPENSES:
Property operating expenses 3,834,000 2,757,000 7,204,000 5,426,000
Depreciation and amortization 1,343,000 832,000 2,497,000 1,620,000
General and administrative expenses 774,000 597,000 1,445,000 1,095,000
Mortgage and bank loan interest 2,253,000 838,000 4,013,000 1,683,000
Provision for losses on investments -- 80,000 -- 160,000
----------- ----------- ----------- -----------
8,204,000 5,104,000 15,159,000 9,984,000
----------- ----------- ----------- -----------
Income before minority interest, equity in
income of partnerships and joint ventures
and gains on sales of interests in real estate 1,344,000 1,421,000 2,945,000 3,021,000
MINORITY INTEREST (68,000) (66,000) (129,000) (127,000)
EQUITY IN INCOME OF PARTNERSHIPS
AND JOINT VENTURES (Note 2) 1,437,000 1,256,000 3,242,000 2,674,000
GAINS ON SALES OF INTERESTS IN
REAL ESTATE (Note 2) 119,000 107,000 119,000 12,330,000
----------- ----------- ----------- -----------
NET INCOME $ 2,832,000 $ 2,718,000 $ 6,177,000 $17,898,000
=========== =========== =========== ===========
NET INCOME PER SHARE $ 0.33 $ 0.31 $ 0.71 $ 2.07
=========== =========== =========== ===========
WEIGHTED AVERAGE NUMBER
OF SHARES OUTSTANDING 8,669,848 8,663,286 8,669,848 8,658,330
=========== =========== =========== ===========
The accompanying notes are an integral part of these statements.
6
PENNSYLVANIA REAL ESTATE INVESTMENT TRUST
CONSOLIDATED STATEMENTS OF CASH FLOWS
Six Months Ended
February 28,
----------------------------
1995 1994
------------- -------------
(Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 6,177,000 $ 17,898,000
Adjustments to reconcile net income to
net cash provided by operating activities-
Minority interest in income of
consolidated partnership 129,000 127,000
Depreciation and amortization 2,497,000 1,620,000
Gains on sales of interests in real estate (119,000) (12,330,000)
(Decrease) increase in provision for losses on investments (194,000) 160,000
Change in assets and liabilities-
Rents and sundry receivables (82,000) (16,000)
Deferred costs, prepaid real estate taxes and expenses (752,000) 517,000
Accrued pension and retirement benefits 32,000 12,000
Accrued expenses and other liabilities 190,000 186,000
Tenants' deposits and deferred rents 60,000 (73,000)
------------- -------------
Net cash provided by operating activities 7,938,000 8,101,000
------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Investments in wholly owned real estate (35,358,000) (13,784,000)
Investments in partnerships and joint ventures (164,000) (105,000)
Cash proceeds from sales of real estate investments -- 14,540,000
Increase in advances to partnerships and joint ventures (475,000) (166,000)
Cash (distributions to) contributions from partnerships and
joint ventures in excess of equity in income (11,000) 1,135,000
Cash distributions to minority partners (13,000) (13,000)
Decrease in notes receivable -- 7,000
Decrease in U.S. Treasury obligations -- 1,323,000
------------- -------------
Net cash (used in) provided by investing activities (36,021,000) 2,937,000
------------- -------------
CASH FLOW FROM FINANCING ACTIVITIES:
Principal installments on mortgage notes payable (359,000) (272,000)
Increase in bank loans payable 36,177,000 14,553,000
Repayment of bank loans payable -- (14,300,000)
Repayment of mortgage notes payable -- (2,165,000)
Shares of beneficial interest issued -- 330,000
Distributions paid to beneficiaries (8,150,000) (7,970,000)
------------- -------------
Net cash provided by (used in) financing activities 27,668,000 (9,824,000)
------------- -------------
NET (DECREASE) INCREASE IN CASH
AND CASH EQUIVALENTS (415,000) 1,214,000
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 2,152,000 1,462,000
------------- -------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 1,737,000 $ 2,676,000
============= =============
The accompanying notes are an integral part of these statements.
7
PENNSYLVANIA REAL ESTATE INVESTMENT TRUST
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
SIX MONTHS ENDED FEBRUARY 28, 1995 AND 1994
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
February 28, 1995 and August 31, 1994, and the consolidated results of its
operations for the three and six months ended February 28, 1995 and 1994 and
cash flows for the six months ended February 28, 1995 and 1994, 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 information as to the Registrant's equity in
the assets and liabilities of the partnerships and joint ventures at February
28, 1995 and August 31, 1994, and the Registrant's equity in income for the
three and six months ended February 28, 1995 and 1994:
February 28, August 31,
ASSETS 1995 1994
------ -------------- --------------
(Unaudited)
Investments in real estate, at cost:
Apartment buildings $ 103,012,000 $ 102,395,000
Industrial property 1,237,000 1,237,000
Shopping centers and retail stores 131,287,000 122,248,000
Land 4,446,000 7,051,000
-------------- --------------
Total investments in real estate 239,982,000 232,931,000
Less- Accumulated depreciation 66,727,000 63,639,000
-------------- --------------
173,255,000 169,292,000
Cash and cash equivalents 6,420,000 3,566,000
Other assets 3,387,000 5,454,000
-------------- --------------
Total assets 183,062,000 178,312,000
-------------- --------------
LIABILITIES AND EQUITY
----------------------
Mortgage notes payable 136,863,000 131,002,000
Bank loans payable 8,268,000 11,928,000
Due to the Trust 2,141,000 2,418,000
Other liabilities 4,978,000 4,729,000
-------------- --------------
Total liabilities 152,250,000 150,077,000
-------------- --------------
Net equity 30,812,000 28,235,000
Partners' share (14,308,000) (13,010,000)
-------------- --------------
Investments in partnerships and joint ventures $ 16,504,000 $ 15,225,000
============== ==============
8
EQUITY IN INCOME OF PARTNERSHIPS AND JOINT VENTURES
Three Months Ended Six Months Ended
February 28, February 28,
------------------------- -------------------------
1995 1994 1995 1994
----------- ----------- ----------- -----------
(Unaudited) (Unaudited)
Gross revenues from real estate $13,002,000 $12,881,000 $26,067,000 $26,147,000
----------- ----------- ----------- -----------
Expenses:
Property operating expenses 5,373,000 5,573,000 10,252,000 10,724,000
Mortgage and bank loan interest expenses 3,087,000 3,147,000 6,092,000 6,672,000
Depreciation and amortization 1,636,000 1,610,000 3,196,000 3,350,000
----------- ----------- ----------- -----------
10,096,000 10,330,000 19,540,000 20,746,000
----------- ----------- ----------- -----------
2,906,000 2,551,000 6,527,000 5,401,000
Partners' share (1,469,000) (1,295,000) (3,285,000) (2,727,000)
----------- ----------- ----------- -----------
Equity in income of partnerships
and joint ventures $ 1,437,000 $ 1,256,000 $ 3,242,000 $ 2,674,000
=========== =========== =========== ===========
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
-------------- -------------- ------------ -------
March 22, 1995 April 28, 1995 May 16, 1995 $.47
March 16, 1994 April 29, 1994 May 17, 1994 $.47
4. CASH FLOW INFORMATION:
Cash paid for interest was $2,145,000 and $751,000 for the three months ended
February 28, 1995 and 1994, and $3,774,000 and $1,513,000 for the six months
ended February 28, 1995 and 1994, 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- and six-month periods ended February 28, 1995, the Registrant advanced
funds totaling $43,000 and $236,000, respectively, which were recorded against
the previously established reserves.
9
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 adverse effect on the Registrant's financial condition or results of
operations.
6. NON-CASH TRANSACTIONS:
During the second quarter of fiscal 1995, the Registrant acquired a partner's
50% interest in a partnership. The Registrant's investment in partnerships and
joint ventures related to this investment was approximately $(300,000). The
Registrant eliminated this amount from its investment account and utilized the
partial purchase method to record the purchase of the previously non-controlled
portion at the partnership's cost with the balance recorded at the historical
carrying amounts of the property at the date of the transaction. As a result of
this transaction, the Registrant has reflected assets of approximately
$3,600,000 and liabilities of approximately $3,900,000 in the accompanying
consolidated balance sheet.
10
PENNSYLVANIA REAL ESTATE INVESTMENT TRUST
MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Liquidity and Capital Resources
Since November 30, 1994, the following events had an effect on Liquidity and
Capital Resources.
The Registrant invested $910,000 for improvements to recently acquired apartment
communities.
On December 31, 1994, the Registrant acquired a partner's 50% partnership
interest in land in Bucks County, PA. (see note 6 on page 9 of this report).
The Registrant has 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 and the remaining $32,000,000 is a one-year secured
borrowing which was advanced to acquire Boca Palms Apartments in Boca Raton, FL
in November 1994. 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 7.81% at February 28, 1995 and 7.93% as of the date of this
filing. As of February 28, 1995, the Registrant has borrowed $83,007,000
($76,118,000 directly by the Registrant and $6,889,000 through partnerships and
joint ventures in which the Registrant has an interest) under this facility.
In March 1995, the Registrant modified its $110,000,000 credit facility by
obtaining a $35,000,000 five-year term loan at a fixed rate of interest of 8.62%
for the first three years. The Registrant has the option of accepting a fixed or
floating rate for years four and five. This loan replaces the $32,000,000
floating rate loan which was due in November 1995. The balance of the revolving
credit facility of $75,000,000 of which $48,000,000 is outstanding has a
30-month term and matures in April 1997. In March 1995, the Registrant paid
$250,000 to purchase a three-year interest rate cap on $15,000,000 at a 30-day
LIBOR rate of 7.5%.
A partnership in which the Registrant has a 50% ownership interest has a
$3,700,000 mortgage note outstanding which matures in June 1995. The partnership
is currently pursuing refinancing of this obligation. Another partnership in
which the Registrant has a 50% ownership interest has a $16,150,000 mortgage
note outstanding which is subject to an interest rate reset in November 1995. In
the event the reset interest rate is not acceptable to the partnership, the
partnership will pursue refinancing of this obligation.
11
Funds from operations increased to $10,020,000 from $8,919,000 for the six
months ended February 28, 1995, as compared to the same six months in 1994.
Funds from operations, as defined by NAREIT, does 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
Three Month Periods Ended February 28, 1995 and 1994
Net income for the three month period ended February 28, 1995 before gains
on sales of interest in real estate, increased to $2,713,000 from $2,611,000
for the comparable period in 1994. In the 1995 period, the gain on the sale
of an interest in real estate was $119,000 as compared to $107,000 for the
1994 period.
Gross revenues from real estate increased to $9,503,000 from $6,461,000,
primarily due to revenues of $1,167,000 from Boca Palms Apartments, which
was acquired in November 1994; $524,000 from Hidden Lakes Apartments,
acquired in February 1994; $830,000 from Palms of Pembroke acquired in
August 1994; and $326,000 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 $3,834,000 from $2,757,000,
depreciation and amortization increased to $1,343,000 from $832,000 and
mortgage and bank loan interest increased to $2,253,000 from $838,000.
Interest and other income decreased to $45,000 from $64,000 due to maturing
of invested Treasury obligations.
For the three months ended February 28, 1995, $112,000 was charged against
the allowance for possible losses. No additional provision is considered
necessary at this time.
General and administrative expenses increased to $774,000 from $597,000, due
to the addition of management and administrative personnel and an increase
in professional fees and pension costs.
Equity in income of partnerships and joint ventures increased to $1,437,000
from $1,256,000 primarily due to improved performance of apartments and
shopping centers.
12
Six-Month Periods Ended February 28, 1995 and 1994
Net income for the six-month period ended February 28, 1995 before gains on
sales of interests in real estate, increased to $6,058,000 from $5,568,000
for the comparable period in 1994. In the 1995 period, the gain on the sale
of an interest in real estate was $119,000 as compared to the 1994 period
which included gains on sales of interests in real estate totaling
$12,330,000.
Gross revenues from real estate increased to $18,016,000 from $12,868,000,
primarily due to revenues of $1,433,000 from Boca Palms Apartments, which
was acquired in November 1994; $1,071,000 from Hidden Lakes Apartments,
acquired in February 1994; $1,621,000 from Palms of Pembroke acquired in
August 1994; and $806,000 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 $7,204,000 from $5,426,000,
depreciation and amortization increased to $2,497,000 from $1,620,000 and
mortgage and bank loan interest increased to $4,013,000 from $1,683,000.
Interest and other income decreased to $88,000 from $137,000 due to maturing
of invested Treasury obligations.
For the six months ended February 28, 1995, $194,000 was charged against the
allowance for possible losses. No additional provision is considered
necessary at this time.
General and administrative expenses increased to $1,445,000 from $1,095,000,
due to the addition of management and administrative personnel and an
increase in professional fees and pension costs.
Equity in income of partnerships and joint ventures increased to $3,242,000
from $2,674,000 primarily due to improved performance of apartments and
shopping centers including a lease termination fee received from a shopping
center tenant in the amount of $220,000 in the Registrant's first quarter.
13
Part II. Other Information
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits - (27.)--Financial Data Schedule (included in electronic
format only)
(b) Reports on Form 8-K - None
14
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
Registrant
By /s/ Jonathan B. Weller
--------------------------------------
Jonathan B. Weller,
President and Chief Operating Officer
By /s/ Dante J. Massimini
--------------------------------------
Dante J. Massimini,
Senior Vice-President and Treasurer
Date: April 14, 1995