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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, 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
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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 Identification No.)
incorporation or organization)
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
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 latest practicable date.
Shares of beneficial interest outstanding at January 2, 1996: 8,676,098
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, 1995
and August 31, 1995 (Audited) 1-2
Consolidated Statements of Income--Three Months
Ended November 30, 1995 and 1994 3
Consolidated Statements of Cash Flows--Three Months
Ended November 30, 1995 and 1994 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 6 (Items 1 through 5--not applicable) 10
Signatures 11
Part I. Financial Information
Item 1. Financial Statements
PENNSYLVANIA REAL ESTATE INVESTMENT TRUST
CONSOLIDATED BALANCE SHEETS
ASSETS
November 30, August 31,
1995 1995
----------------- ------------------
(Unaudited
INVESTMENTS IN REAL ESTATE, at cost:
Apartment buildings $ 155,951,000 $ 154,907,000
Industrial properties 5,078,000 5,078,000
Shopping centers and retail stores 30,491,000 32,354,000
------------------ ------------------
Total investments in real estate 191,520,000 192,339,000
Less- Accumulated depreciation 39,505,000 38,828,000
------------------ ------------------
152,015,000 153,511,000
LAND HELD FOR SALE 3,590,000 3,590,000
INVESTMENTS IN PARTNERSHIPS AND
JOINT VENTURES, at equity (Note 2) 17,172,000 17,439,000
ADVANCES TO PARTNERSHIPS AND
JOINT VENTURES (Note 2) 2,474,000 2,414,000
NOTES RECEIVABLE 1,649,000 1,649,000
------------------ ------------------
176,900,000 178,603,000
LESS- Allowance for possible losses 2,644,000 2,775,000
------------------ ------------------
174,256,000 175,828,000
OTHER ASSETS:
Cash and cash equivalents 1,452,000 1,098,000
Rents and sundry receivables 375,000 346,000
Prepaid real estate taxes and expenses 5,360,000 4,064,000
------------------ ------------------
$ 181,443,000 $ 181,336,000
================== ==================
The accompanying notes are an integral part of these statements.
-1-
PENNSYLVANIA REAL ESTATE INVESTMENT TRUST
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND BENEFICIARIES' EQUITY
November 30, August 31,
1995 1995
------------------ ------------------
(Unaudited)
LIABILITIES:
Mortgage notes payable $ 85,672,000 $ 78,198,000
Bank loans payable 39,138,000 44,320,000
Tenants' deposits and deferred rents 1,230,000 1,352,000
Accrued pension and retirement benefits 1,105,000 1,213,000
Accrued expenses and other liabilities 3,259,000 3,954,000
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130,404,000 129,037,000
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MINORITY INTEREST IN CONSOLIDATED
PARTNERSHIP (Note 2) 500,000 528,000
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COMMITMENTS AND CONTINGENCIES (Note 5)
BENEFICIARIES' EQUITY (Note 3):
Shares of beneficial interest, $1 par; authorized
unlimited; issued and outstanding 8,676,098
shares at November 30, 1995 and August 31, 1995 8,676,000 8,676,000
Capital contributed in excess of par 53,133,000 53,133,000
Distributions in excess of net income (11,270,000) (10,038,000)
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50,539,000 51,771,000
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$ 181,443,000 $ 181,336,000
================== ==================
The accompanying notes are an integral part of these statements.
-2-
PENNSYLVANIA REAL ESTATE INVESTMENT TRUST
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three Months Ended
November 30
------------------------------
1995 1994
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REVENUES:
Gross revenues from real estate $ 9,638,000 $ 8,513,000
Interest and other income 38,000 42,000
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9,676,000 8,555,000
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EXPENSES:
Property operating expenses 3,782,000 3,370,000
Depreciation and amortization 1,452,000 1,154,000
General and administrative expenses 671,000 671,000
Mortgage and bank loan interest 2,416,000 1,760,000
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8,321,000 6,955,000
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Income before minority interest and equity in
income of partnerships and joint ventures 1,355,000 1,600,000
MINORITY INTEREST (76,000) (61,000)
EQUITY IN INCOME OF PARTNERSHIPS AND
JOINT VENTURES (Note 2) 1,566,000 1,806,000
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NET INCOME $ 2,845,000 $ 3,345,000
============= ==============
NET INCOME PER SHARE $ .33 $ .39
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WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING 8,676,098 8,669,848
============= ==============
The accompanying notes are an integral part of these statements.
-3-
PENNSYLVANIA REAL ESTATE INVESTMENT TRUST
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended
November 30
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1995 1994
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(Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 2,845,000 $ 3,345,000
Adjustments to reconcile net income to net cash
provided by operating activities-
Minority interest in income of
consolidated partnership 76,000 61,000
Depreciation and amortization 1,452,000 1,154,000
Decrease in provision for losses on investments (132,000) (82,000)
Change in assets and liabilities-
Rents and sundry receivables (28,000) 7,000
Prepaid real estate taxes and expenses (728,000) (217,000)
Accrued pension and retirement benefits (108,000) 20,000
Accrued expenses and other liabilities (672,000) 39,000
Tenants' deposits and deferred rents (122,000) 159,000
----------------- -----------------
Net cash provided by operating activities 2,583,000 4,486,000
----------------- -----------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Investments in wholly owned real estate (1,044,000) (33,834,000)
Investments in partnerships and joint ventures (146,000) (45,000)
Increase in advances to partnerships and joint ventures (60,000) (502,000)
Cash distributions from (contributions to) partnerships
and joint ventures in excess of (less than) equity in income 569,000 (34,000)
Cash distributions to minority partners (102,000) (6,000)
----------------- -----------------
Net cash used in investing activities (783,000) (34,421,000)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Principal installments on mortgage notes payable (283,000) (158,000)
Proceeds from bank loans payable -- 34,027,000
Repayment of bank loans payable (5,182,000) --
Increase in mortgages payable 8,800,000 --
Payment of deferred financing costs (704,000) --
Distributions paid to beneficiaries (4,078,000) (4,075,000)
----------------- -----------------
Net cash provided by (used in) financing activities (1,447,000) 29,794,000
----------------- -----------------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 353,000 (141,000)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 1,099,000 2,152,000
----------------- -----------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 1,452,000 $ 2,011,000
================= =================
The accompanying notes are an integral part of these statements.
-4-
PENNSYLVANIA REAL ESTATE INVESTMENT TRUST
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED NOVEMBER 30, 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
November 30, 1995 and August 31, 1995, and the consolidated results of its
operations and cash flows for the three months ended November 30, 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 financial information as to the Registrant's
investments in 27 partnerships and joint ventures at November 30, 1995 and
August 31, 1995, and the Registrant's equity in income for the three months
ended November 30, 1995 and 1994:
-5-
November 30, August 31,
ASSETS 1995 1995
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(Unaudited)
Investments in real estate, at cost:
Apartment buildings $ 103,964,000 $ 103,683,000
Industrial property 1,250,000 1,250,000
Shopping centers and retail stores 134,994,000 132,597,000
Land held for development 4,445,000 4,445,000
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Total investments in real estate 244,653,000 241,975,000
Less- accumulated depreciation 72,243,000 69,918,000
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172,410,000 172,057,000
Cash and cash equivalents 7,260,000 7,303,000
Other assets 4,299,000 4,544,000
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Total assets 183,969,000 183,904,000
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LIABILITIES AND PARTNERS' EQUITY
--------------------------------
Mortgage notes payable 136,255,000 136,004,000
Bank loans payable 8,308,000 8,277,000
Due to the Trust 2,474,000 2,414,000
Other liabilities 4,949,000 4,571,000
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Total liabilities 151,986,000 151,266,000
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Total partners' equity 31,983,000 32,638,000
Partners' share (14,811,000) (15,199,000)
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Investment in partnerships and joint ventures $ 17,172,000 $ 17,439,000
================== ==================
EQUITY IN INCOME OF PARTNERSHIPS AND JOINT VENTURES
---------------------------------------------------
Three Months Ended
November 30
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1995 1994
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(Unaudited)
Gross revenues from real estate $ 13,065,000 $ 13,066,000
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Expenses:
Property operating expenses 4,992,000 4,879,000
Mortgage and bank loan interest 3,187,000 3,005,000
Depreciation and amortization 1,705,000 1,560,000
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9,884,000 9,444,000
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3,181,000 3,622,000
Partners' share (1,615,000) (1,816,000)
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Equity in income of partnerships and joint ventures $ 1,566,000 $ 1,806,000
================== ==================
-6-
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 of such partnership
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 1995 for distribution are as
follows:
Amount
Per
Date Declared Record Date Payment Date Share
- ------------------ ----------------- ------------------ -------
December 14, 1995 January 31, 1996 February 15, 1996 $.47
December 15, 1994 January 31, 1995 February 15, 1995 $.47
4. CASH FLOW INFORMATION:
Cash paid for interest was $2,455,000 and $1,629,000 for the three months ended
November 30, 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 months ended November 30, 1995, the Registrant expended funds totaling
$21,000 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.
-7-
PENNSYLVANIA REAL ESTATE INVESTMENT TRUST
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Liquidity and Capital Resources
In October 1995, a wholly-owned subsidiary of the Registrant completed a
financing of its 220-unit Shenandoah Village Apartment community in West Palm
Beach, Florida with the placement of $8.8 million in tax-exempt bonds issued by
the Housing Finance Authority of Palm Beach County, Florida. The bonds, which
are insured by Financial Security Assurance, Inc., carry an average annual
interest rate of 5.90%, are amortized over 30 years, and constitute long-term
indebtedness of the Registrant. The Registrant applied the net proceeds of the
financing of approximately $8 million to reduce the outstanding indebtedness
under its $75 million revolving credit facility.
Funds from operations decreased by $196,000 for the three months ended November
30, 1995, as compared to the same three months in 1994, primarily as a result of
a nonrecurring lease termination fee of $220,000 received in 1994. 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.
Three Months Ended
November 30
Funds from Operations(1) --------------------------------------
-------------------------- 1995 1994
------------------ ------------------
Net income $ 2,845,000 $ 3,345,000
Plus:
Depreciation and amortization-
Wholly owned and consolidated partnerships (2) 1,388,000 1,097,000
Unconsolidated partnerships and joint ventures 844,000 775,000
Less:
Depreciation of non-real estate assets (49,000) (39,000)
Amortization of deferred financing costs (70,000) (24,000)
------------------ ------------------
Funds from operations $ 4,958,000 $ 5,154,000
================== ==================
(1)Effective September 1, 1995, the Trust has implemented a revised definition
of funds from operations (FFO) based on recommendations recently adopted by the
National Association of Real Estate Investment Trusts, and has restated FFO for
1994 (with a downward adjustment for depreciation of non-real estate assets and
amortization of deferred financing costs) to conform with the revised
definition. FFO is defined as income before gains (losses) on investments and
extraordinary items (computed in accordance with generally accepted accounting
principles) plus real estate depreciation and similar adjustments for
unconsolidated joint ventures and less nonreal estate depreciation and
amortization of financing costs. FFO is not necessarily indicative of cash
available to fund cash needs.
(2)Net of minority interest of $64,000 in 1995 and $57,000 in 1994.
-8-
Net cash provided by operating activities decreased to $2,583,000 from
$4,486,000 for the three months ended November 30, 1995, as compared to the
three months ended November 30, 1994. The decrease is a result of liabilities
assumed in connection with the acquisition of Boca Palms Apartments in November
1994 of $867,000, which were funded by the seller at settlement and the
prepayment of real estate taxes and other expenses of $484,000 for Boca Palms
Apartments for the three months ended November 30, 1995.
Results of Operations
Net income for the three-month period ended November 30, 1995, decreased to
$2,845,000 from $3,345,000 for the comparable period in 1994, primarily as a
result of a $220,000 nonrecurring lease termination fee in 1994 and $299,000 of
additional depreciation expense in 1995.
Gross revenues from real estate increased to $9,638,000 from $8,513,000
primarily due to revenues of $904,000 from Boca Palms Apartments, which was
acquired in November 1994.
Principally as a result of the Boca Palms Apartment acquisition, operating
expenses for wholly owned properties increased to $3,782,000 from $3,370,000,
depreciation and amortization increased to $1,452,000 from $1,154,000, and
mortgage and bank loan interest increased to $2,416,000 from $1,760,000.
For the three months ended November 30, 1995, $131,000 in respect of carrying
charges for land held primarily for re-sale was charged against the allowance
for possible losses. No increase in such allowance is considered necessary at
this time.
Equity in income of partnerships and joint ventures decreased to $1,566,000 from
$1,806,000, primarily due to a nonrecurring lease termination fee received from
a shopping center tenant in the first quarter of 1994 in the amount of $220,000.
-9-
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits--(27)--Financial Data Schedule (included in electronic
filing format)
(b) Reports on Form 8-K--None
-10-
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 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 16, 1996